Connor v. Wahl

• Citation: 161 N.E. 306,330 Ill. 136
• Decision Date: 21 April 1928
• Docket Number: No. 17335.,17335.
• Parties: CONNOR et ux. v. WAHL et al.
• Court: Supreme Court of Illinois

330 Ill. 136

161 N.E. 306

CONNOR et ux.

v.WAHL et al.

No. 17335.

Supreme Court of Illinois.

April 21, 1928.

Commissioners' Opinion.

Error to Appellate Court, fourth District, on Appeal from the City Court of East St. Louis; William F. Borders, Judge.

Suit by William Connor and wife against Robert E. Wahl and wife, in which Adam Eitzenhefer filed a cross-bill, and which was consolidated with suit by E. F. Voightlander against Robert E. Wahl and wife. Decree of foreclosure and determining priorities of liens under trust deeds of city court was reversed by the Appellate Court and remanded, with directions, and plaintiffs bring certiorari.

Reversed, and decree of city court affirmed.

Heard, C. J., and Farmer, J., dissenting.

D. E. Keefe and H. G. Miller, both of East St. Louis, for plaintiffs in error.

C. E. Pope and H. F. Driemeyer, both of East St. Louis, for defendant in error Eitzenhefer.

PARTLOW, C.

This case comes to this court on a petition for certiorari to review a judgment of the Appellate Court for the Fourth District, reversing a decree of the city court of East St. Louis in favor of plaintiffs in error in a mortgage foreclosure proceeding.

The facts are undisputed and are substantially as follows: Robert E. Wahl and Myra Wahl, his wife, were the owners of certain real property here involved, and made application to John W. Renshaw's Sons, a real estate firm of East St. Louis, for a loan. On May 16, 1914, the Wahls executed to Henry T. Renshaw, trustee, their promissory note, and a trust deed securing the same, for $1,700, due in three years, with interest at 6 per cent. The note and trust deed were delivered to Renshaw, who had the trust deed recorded. Later, during the same year, Renshaw indorsed the note and sold it and delivered the trust deed to Adam Eitzenhefer, who has since retained title thereto and had possession thereof. No written assignment of the trust deed was executed or recorded, and no notice of such assignment was given to the Wahls. The Wahls paid to Renshaw the interest due on the note until its maturity, and he paid the same to Eitzenhefer. After the note became due, Renshaw continued to pay interest thereon to Eitzenhefer until the Renshaw firm failed, in August, 1922, but no part of the principal has been paid. When this loan, which we shall designate as No. 1, came due, in 1917, the Wahls, who were not aware of the sale and delivery of the note and trust deed, gave to Renshaw a new note for $1,700, secured by a trust deed to Renshaw as trustee. This loan No. 2 was given for the express purpose of renewing loan No. 1, and Renshaw, without the knowledge of Eitzenhefer, after maturity, entered upon the public record a marginal release of the trust deed under loan No. 1. The trust deed under loan No. 2 was recorded, and during October, 1917, Renshaw sold this note and trust deed to E. F. Voightlander, who paid him the full amount of the note and has since retained title to and possession of the papers under that loan. No written assignment thereof was executed or recorded, and no notice thereof was given the Wahls, who paid the interestto Renshaw upon loan No. 2 until May, 1922, and he paid the same to Voightlander, but no part of the principal has ever been paid. The money received by Renshaw for the sale of the note and trust deed under loan No. 2 was converted to his own use. Until 1922 Renshaw paid interest on loan No. 1 to Eitzenhefer and interest on loan No. 2 to Voightlander. During May, 1922, the Wahls, supposing that their first note and trust deed had been fully paid by the note and trust deed under loan No. 2 and that Renshaw still held the papers under the second loan, executed to Renshaw a third note for $1,700, secured by a trust deed on the same property, for the sole purpose of renewing loan No. 2. The note and trust deed as described in loan No. 1 were not taken up and delivered to the Wahls, nor were the note and trust deed taken up or canceled under loan No. 2. Renshaw entered on the record, after maturity, a marginal release of loan No. 2, without the knowledge of Voightlander, who was at that time the owner and holder of the note and trust deed under that loan. The trust deed under loan No. 3 was recorded, and, instead of using the note and trust deed under loan No. 3 for the purpose intended, Renshaw, during July, 1922, sold and assigned that note and trust deed to William and Nellie Connor, plaintiffs in error here, and they took a written assignment thereof from Renshaw and placed the same of record. At the time they purchased that note and trust deed, they relied upon a certificate of title which showed that the prior trust deeds designated herein as Nos. 1 and 2 had been released.

The real estate firm of J. W. Renshaw's Sons failed during August, 1922, and finally went into bankruptcy. Thereafter the parties interested in the securities discovered the fraud and rascality of Henry T. Renshaw, and William and Nellie Connor filed a bill in the city court of East St. Louis to foreclose the trust deed under loan No. 3. Eitzenhefer filed a cross-bill to foreclose his trust deed under loan No. 1, and Voightlander filed an original bill to foreclose the trust deed under loan No. 2. The suits were consolidated and issues joined. The Wahls set up inter alia that the second note and trust deed were given for the purpose of taking up the tirst loan, and that the third note and trust deed were given to take up the second note and trust deed, and that none of them was used by Renshaw for the purpose for which they were delivered to him. Upon reference to the master, he filed his final report finding the facts substantially as heretofore stated, and recommended a decree for the foreclosure of the first trust deed, that the release thereof be set aside, and that the Connors and Voightlander bills be dismissed for want of equity. Objections were filed to the master's report, which were overruled and allowed to stand as exceptions. The court found the trust deed under loan No. 3 to be a first lien, the trust deed under loan No. 2 to be a second lien, and the trust deed under loan No. 1 to be a third lien, and ordered a sale of the property and a distribution of the proceeds accordingly. Eitzenhefer and the Wahls appealed to the Appellate Court for the Fourth District, where the decree was reversed and the cause remanded to the city court of East St. Louis, with directions to enter a decree foreclosing the first trust deed under loan No. 1 and dismissing the bills of Voightlander and the Connors. The Connors have brought the case here for review upon certiorari.

The principal question in dispute is as to the priority of liens as between the owners of the trust deeds and notes under loans Nos. 1, 2, and 3. The Connors contend they should have preference because they are bona fide purchasers of the note and trust deed under loan No. 3 without notice of any prior incumbrance upon the property, and because the written assignment to them of the trust deed was recorded and the other two assignments were not of record. They argue that they had a right to rely upon the record as disclosed by the certificate of title showing that the two trust deeds under loans Nos. 1 and 2 had been released. They refer to section 30 of the Conveyance Act (Smith-Hurd Rev. St. 1927, c. 30, § 29). The Wahls claim that plaintiffs in error took the assignment of the third trust deed and note subject to all defenses which existed between the Wahls and the trustee, that a fraud was committed by the trustee, and, as the trustee could not foreclose, therefore plaintiffs in error cannot foreclose.

In support of their contention, defendants in error cite Olds v. Cummings, 31 Ill. 188. In that case Cummings executed a note and mortgage to Preston, who assigned them to Olds who claimed the assignment was made before maturity. Olds filed a bill to foreclose the mortgage. Cummings filed an answer setting up usury against Preston, alleging that the note was assigned to Olds after maturity, that the assignment was colorable, only, and not bona fide, was made to prevent the defense of usury, and that the mortgagor could raise the question as against Olds as assignee. The trial court held that there was usury and that Olds had notice. Olds appealed to this court, and the decree was affirmed. This court held that it was not necessary to determine whether Olds was a bona fide purchaser before maturity; that choses in action, including mortgages, are not assignable either by the common law or under the statute; that the assignment of a promissory note secured by a mortgage carried with it the mortgage only in equity; that, where a person buys that which is not assignable at law, relying upon a court of chancery to protect and enforce his rights, he takes it subject to all the infirmities to which it would have been liable in the hands of the assignor; that under a bill to foreclose a mortgage the court will let in any defense which would have been good against the mortgagee, regardless of the fact that the assignee may have purchased the note in good faith and before maturity. It was also held that it is the duty of the purchaser of a mortgage to inquire of the mortgagor if there are any reasons why it should not be paid, but that he should not be required to inquire of the whole world to see if some one has a latent equity which might interfere with his purchase of the mortgage; that courts of equity in such cases will not be confined to legal forms and titles, but will look to the substantial, equitable rights of the parties and allow parties who have equitable rights to enforce those rights in their own names without regard to legal titles; that, while courts of equity will enforce equitable rights, they will do so with a scrupulous regard to the equitable rights of others, they will look into all the circumstances, and will not enforce the equitable right if it ought not to be enforced in the...