Leonard v. Shale

• Decision Date: 02 December 1915
• Citation: 181 S.W. 16,266 Mo. 123
• Parties: THEODORE C. LEONARD v. SOLOMON C. SHALE et al
• Court: Missouri Supreme Court

181 S.W. 16

266 Mo. 123

THEODORE C. LEONARD v. SOLOMON C. SHALE et al

Supreme Court of Missouri, First Division

December 2, 1915

Appeal from Buchanan Circuit Court. -- Hon. William D. Rusk, Judge.

Reversed (with directions).

C. W Meyer for appellants.

(1) The aid of a court of equity can not be invoked when a party has slept on his rights and influenced others to act in the confident belief that he has relinquished his claims. Pomeroy's Equity Jurisprudence (2 Ed.), secs. 418, 419; Landrum v. Bank, 63 Mo. 48; Schradski v Albright, 93 Mo. 48; Hughes v. McAlister, 15 Mo. 296. (2) Where a grantor has been guilty of negligence in having made, signed and acknowledged an instrument and in placing it where the grantee might, if so disposed, readily obtain wrongful possession of it and so be enabled to deceive and defraud innocent third persons, he will be estopped from setting up his title as against a bonafide purchaser for value under such deed. Jones on Mortgages (3 Ed.), sec. 604; Martindale on Conveyancing (2 Ed.), p. 189; Tisher v Beckwith, 30 Wis. 55; Gage v. Gage, 36 Mich. 229. (3) If the real owner of property allows it to stand recorded in the name of another by a title such as to pass the fee, he puts it in the power of that other to create a valid mortgage upon it. Snodgrass v. Emery, 66 Mo.App. 462; Lawrence v. Inv. Co., 51 Kan. 222; 27 Cyc. 1036; Hunter v. Buckner, 29 La. Ann. 604. (4) The deed of trust attacked by respondent in this case is good for the following reasons, in addition to the points urged above: (a) Where one is in possession of land and has a deed of record, the possession will be referred to his deed unless there are facts known to the purchaser indicating a different possessory right. Washburn on Real Property (4 Ed.), star p. 35. (b) A mortgagee of realty or the beneficiary in a deed of trust on realty is considered a purchaser thereof. Steadman v. Hayes, 80 Mo. 319; 27 Cyc. 1183. (c) A mortgagee will generally be justified in relying on an apparently legal title in his mortgagor, as shown by the records. 27 Cyc. 1036, 1183-5; State v. Mathews, 44 Kan. 596. (d) There is no evidence whatever that Shale, or anyone acting for him, knew of the claim of Leonard on the land when the deed of trust in suit was executed, and when the money was advanced on the strength of this security. (e) If a mortgage be made without consideration and is afterward negotiated, the price paid by the assignee becomes the consideration of the mortgage and makes it a valid security. Jones on Mortgages, sec. 788; Hosmer v. Campbell, 98 Ill. 572; Hanrion v. Hanrion, 84 P. 381; Verity v. Sternberger, 172 N.Y. 633. (f) Where one of two innocent parties must suffer, he who placed it within the power of the third party to commit the fraud, or he whose conduct caused the damage, must bear the loss. 2 Herman on Estoppel, secs. 766, 767; 16 Cyc. 773.

John S. Boyer and Vinton Pike for respondent.

(1) The issue in this case is eminently one of fact. The question of appellant's good faith is all that the case involves. The case is this: Respondent owned this land and at request of his brother, Dr. Leonard, sent a deed with Reed Huff's name written in it as a grantee in an envelope addressed to A. B. Huff, Reed's father, inclosing another envelope sealed and containing the deed and addressed to Dr. Leonard. A. B. Huff, who had consented to receive the package for Dr Leonard, opened both envelopes, and without the consent or knowledge of Dr. Leonard or respondent took the deed to the recorder's office and filed it for record. In a suit by respondent against Reed Huff, the deed was set aside and record cancelled because it had been obtained and recorded as above. (a) The deed never having been delivered, no title passed, and Shale acquired no right under the deed of trust unless respondent has estopped himself. Shale's position is that he is an innocent purchaser in good faith. The onus is on him. Stephenson v. Kilpatrick, 166 Mo. 268-9. (b) "There must be an intent to convey and the delivery of the deed for the purpose of vesting a present title in the grantee, and a deed deliverd without the consent of the grantor is of no more effect to pass title than if it were a forgery." Felix v. Patrick, 145 U.S. 329; Weddecombe v. Childers, 124 U.S. 405. "A deed which has been surreptitiously and fraudulently obtained from the grantor without his knowledge or consent does not, even as against a subsequent purchaser without notice, transfer his title." Devlin on Deeds, secs. 267, 322. "The deed 'in the eye' of the law as it lay in escrow was a mere scroll. Its wrongful and untimely delivery by the custodian must not be allowed to be of any efficacy." Bales v. Roberts, 189 Mo. 69. (c) The deed was not delivered in fact or form to Reed Huff. A. B. Huff was the conduit through whom the paper was to pass to respondent's agent, Dr. Leonard. A. B. Huff was in no sense the agent of Reed Huff to accept it, nor of respondent to deliver it. He was a thief and nothing else. R. S. 1909, sec. 4542. (2) To maintain estoppel in pais fraud is essential "either in the intention of the party estopped, or in the effect of the evidence, which he attempts to put up." Bales v. Perry, 51 Mo. 453; Hequembourg v. Edwards, 155 Mo. 522; Hill v. Epley, 31 Pa. St. 334. And "it necessarily follows, that the party who claims the benefit of an estoppel, must not only have been free from fraud in the transaction, but must have acted with good faith and reasonable diligence, otherwise no equity will arise in his favor." 2 Pom. Eq. Jur., par. 813. (3) The court must defer much in this case to the action of the trial court. The appellant was charged with participating in Huff's fraud; and was before the court in person and testified in his own behalf. His evidence ought not to satisfy this court; and much weaker must it have seemed to the trial judge, where his manner was observed. Short v. Taylor, 137 Mo. 525. Besides this case is of the kind where the degree of proof must be clear and unequivocal and the circumstances free from suspicion. Hennessy v. Murdock, 137 N.Y. 317; Chambers v. McCreeny, 106 F. 367; Willett v. Fistler, 18 Wall. 91; Gardner v. Weston, 18 Iowa 533; Moore v. Smith, 103 Mich. 387; Snyder v. Harris, 48 A. 331; Stafford v. Brown, 104 N.Y.S. 801; Conlon v. Mission, 79 N.Y.S. 406; Parker v. Parker, 63 A. 1094; Meier v. Blume, 80 Mo. 184; Hoppen v. Doty, 25 Wis. 591; Parker v. Foy, 43 Miss. 266; Eck v. Hatcher, 58 Mo. 241; Trester v. Pike, 62 N.W. 211. (4) Shale had the burden and has not shown that he was innocent by clear and satisfactory proof. (a) He admits that there was a "little talk" around the Exchange about the Huffs and Leonard and this land and he caught "up more or less of it." The talk must have been about stealing the deed, which Shale calls getting the land "at a bargain." It gave the Huffs a bad name about the Exchange, because they got and recorded the deed surreptitiously, not that they had overreached Leonard in a deal. Shale says the Huffs and Leonard were well known there. There would be no occasion for "talk," but for the way the deed was obtained. A. B. Huff obtained the deed and Reed Huff was discharged from the post office and both were leaving the place. The talk could not have been that their good luck was taking them away, when their notoriously bad repute was driving them away. (b) A. B. Huff says Shale and Reed Huff were acquainted while Shale says he only knew him by sight. If he was trying to help the Huffs cover this land he would wish his attitude toward them to appear to be that of a stranger; and his denial of an acquaintance with them ought to be construed as an admission from his standpoint that acquaintance with them spelled conspiracy to defraud Leonard. The court evidently believed they were acquainted as A. B. Huff states, and that Shale's denial was untrue, and made to evade the effect of intimacy with them. Machinatur ad circumveniendum. (c) Shale always has been friendly with the Huffs. He did not call Reed Huff as a witness, because his testimony would not be favorable to his cause, either as directly impeaching Shale or indirectly injuring it in the ordeal of cross-examination. In any view the inference is adverse. Ellis v. Gulf, 54 F. 481; Kirby v. Talmadge, 160 U.S. 383. Reed Huff lived at Garnett, Kansas, and A. B. Huff at Olathe. The one was as accessible as the other, and failure to produce Reed "creates the presumption that the testimony, if produced, would be unfavorable." Graves v. United States, 150 U.S. 121. Shale says he advised with his attorney and they "thought it would be a good idea to have his (A. B.'s) evidence. He was the party we made the loan to, and he knew the matter." The only matter about which his evidence could be desired was the fraud on Leonard. A. B. Huff says he negotiated the trade for the land, but did not tell what the trade was; and agrees "the land was never paid for" and that the deed was set aside -- as he would state it -- not as fraudulent, but "the decision was not clear." (d) Shale says he never talked with the Huffs before or after the pretended loan. When they defaulted, he made no effort to collect from Huff; never asked him to pay. Says he was never asked to prosecute Huff, but his attorney contradicts him as to that. When asked pointedly if he was not depending on collecting the money by means of the Leonard land and did not expect to collect of Huff, he answered, "Well, I don't know about that," and that he would have tried to collect the interest "if this had not been decided against us," and when Huff lost his case, he "knew then he would not pay." By the "us" he unconsciously associated himself intimately with the Huffs. His mind was hinged upon the original purpose to extract the...