Barber v. Lyon

• Decision Date: 09 June 1863
• Citation: 15 Iowa 37
• Parties: BARBER v. LYON et al
• Court: Iowa Supreme Court

15 Iowa 37

BARBER v. LYON et al

Supreme Court of Iowa, Des Moines

June 9, 1863

[Syllabus Material]

Appeal from Johnson District Court.

BILL to foreclose a mortgage, given by John A. and Wm. N. Whitlock to complainant, upon certain real estate, of date February 12 1856. Lyon is a subsequent incumbrancer, by mortgage of June 19th, 1859. The cause was submitted to a referee appointed by the Court, upon the issues made by the bill, answers thereto cross-bill of Lyon and amended cross-bill, and answers thereto, who reported the following facts: That there was due complainant on his mortgage, $ 3,609.58; that on the 26th of April, 1855, complainant and the Whitlocks purchased of one Stover the land covered by the same liens, and for a balance of the purchase money, executed to said Stover their note and a mortgage on the same lands, which mortgage was never recorded. Stover afterwards sold and transferred this note and mortgage to one Evans. On the 12th of Februray, 1856, complainant conveyed to the Whitlocks his interest, being one undivided third, in the lands thus bought of Stover, and covered by the mortgage of April 26th, 1855, executing a deed of general warranty against incumbrances, &c. At the time that Lyon took his mortgage he was deceived and defrauded by William N. Whitlock, who represented and made him believe that there was but one lien upon the premises, to wit: the one to complainant, and he loaned his money with the understanding, expectation and belief that it would be applied to the satisfaction of complainant's debt, the only incumbrance of record on the premises. Whitlock represented himself as acting for complainant, and that the money would be at once applied on his mortgage. The money thus received from Lyon was, in fact, paid to Evans, the holder of the Stover mortgage, and in satisfaction of it. Barber was not in any way a party in fact to the transaction or representations by which the loan was made of Lyon and paid over to Evans. Lyon foreclosed his mortgage in 1859, but to that proceeding Barber was not a party. Under a special execution issued thereon, Lyon bought the premises in 1860, believing, until after that time, that Barber had been paid with the money borrowed of him by Whitlock. From the decree foreclosing complainant's mortgage and giving it priority over all other liens, Lyon appeals.

Affirmed.

Edmonds & Ransom for the appellee.

I. Whitlock, having obtained the money of Lyon by fraud, made himself a trustee, and Lyon may follow and reclaim it, or its representation, in whatever shape it may be found, as against the trustee, or any one but an innocent purchaser for value. Story's Eq. Jur., §§ 1255, 1258, 1265; Carey v. The Cincinnati and Chicago Railroad Company, 5 Iowa 368; Phelan v. Clark, 19 Conn. 421; Rogers v. Brant, 5 Gilm. 582; Currens v. Hart, Hardin, 37 ; Balgney v. Hamilton, 1 Amb. 413; Lane v. Dughton, Id., 409 ; Wallace v. Duffield, 2 S. & R, 521 ; Le Breton v. Pierce, 2 Allen (Mass.), 8; Lloyd v. Brewster, 4 Paige Ch., 537; Root v. French, 13 Wend. 570; Bank of America v. Pollock, 4 Ed. Ch., 215; Thompson v. Perkins, 3 Mason 232; Moffit v. McDonald, 11 Humph. 457 ; Heath v. West, 6 Foster 191; Carroll v. Rice, Walker Ch., 373 ; Cherry v. Newsom, 3 Yerg. 369 ; Hilliard Sales, 269; 2 Par. Cont., 277, notes q. and r.

II. A court of equity may, after the discharge of a bond and mortgage, substitute the person who takes it up, in the place of the mortgagee, and keep it alive. Garwood v. Eldridge, 1 Green (N. J.), 151.

Fairall & Boal for the appellee, reviewed the propositions and authorities cited by counsel for the appellant; and contended that Lyon cannot be subrogated to the rights of Evans citing Banta v. Gasmo, 1 Sand. Ch., 383; James v. Morey, 6 John Ch., 417; S. C., 2 Cow. 246; Murray v. Catlett, 4 G. Greene, 111; Marvin v. Vedder, 5 Cow. 671.

OPINION

WRIGHT, J.

Appellant does not claim that his mortgage of June, 1857, is entitled to precedence over complainant's, which is of date February 12th, 1856. The substance of his position is, that he was induced to part with his money by the fraudulent representations of Whitlock, that it would be applied in satisfaction of the only record lien upon the land, to wit the mortgage to Barber, that it was not thus applied, but that it was paid to Evans to satisfy a mortgage executed by complainant, as well as the Whitlocks, which mortgage was given to secure their joint and several debt, and that appellant should be subrogated to all the rights of Evans, and stand in the same position as he would if the mortgage had been assigned or transferred to him in consideration of the money thus advanced instead of satisfied and canceled. Or the argument may be stated thus: that as Whitlock obtained Lyon's money by deceit and fraud, he made himself a trustee of that money for Lyon, and whatever disposition he made of that fund, a Court of Equity will decree it to inure to Lyon's benefit; that he made himself such trustee by his own wrong, and that Lyon might, therefore, follow the fund or that which represents it, wherever found, as against the trustee, and all other persons except innocent purchasers for value.

A rule most equitable and just is, that if a conveyance is obtained by fraud, it is treated in a court of conscience as if never made. The fraudulent purchaser is treated as a mere trustee for the vendor who has been...