Potter v. McDowell

• Decision Date: 31 October 1868
• Parties: JOHN D. POTTER, Appellant, v. GEO. W. MCDOWELL et al., Respondents.
• Court: Missouri Supreme Court

43 Mo. 93

JOHN D. POTTER, Appellant,

v.GEO. W. MCDOWELL et al., Respondents.

Supreme Court of Missouri.

October Term, 1868.

Appeal from St. Louis Circuit Court.

In reference to this case, see 31 Mo. 62; 40 Mo. 229, 591. For statement of facts pertinent to the case, see also opinion of the court.

Knox & Smith, for appellant.

Cline, Jamison & Day, and Glover & Shepley, for respondents.

I. The transfer of a note secured by a deed of trust carries with it the security as an incident, and the decisions all hold that there is no necessity of any separate assignment of the mortgage or deed of trust securing notes indorsed over, and equities are cut out on the mortgage the same as on the note which it secures. (Anderson v. Baumgartner, 27 Mo. 80; Thayer v. Campbell, 9 Mo. 277; Keyes v. Wood, 21 Verm. 331; 1 Hil. on Mortg. ch. 11, § 10; Chappell v. Allen, 38 Mo. 213; Croft v. Bunster, 9 Wis. 503; Dutton v. Ives, 5 Mich. 515; Martineau v. McCollum, 4 Chand. 153; Reeves v. Scully, Walk. Ch. 248.)

II. The defendants are in the position of mortgagees in good faith, without notice of any fraud in the transactions between McDowell and Stevens, and take a good title, to the extent of their interest in the notes, to the property in question. (Gen. Stat. 1865, p. 439, § 3; Knox v. Hunt, 18 Mo. 174; Fox v. Clark, 1 Walk., Mich., Ch. p. 535.) And it is well settled that a mortgagee is a purchaser to the extent of his interest in the premises, within the meaning of the term purchaser as used in the statute of fraudulent conveyances. (Ledyard v. Butler, 9 Paige Ch. 137, and numerous cases there cited.)

III. If it be true that these note holders are to be regarded as innocent and bona fide purchasers of the property in controversy, then the defendants have a priority of title so far as the recording of their deeds is concerned. Both the deed from McDowell to Stevens and the deed of trust from Stevens to McDowell were recorded before the property was sold by the sheriff to the plaintiff, and indeed before the rendering of any of the judgments by virtue of which the property was sold. And it has been decided that a bona fide purchaser of property who has failed to record his deed until after a judgment has been recovered against his vendor, but who records it prior to any sale under the judgment, can hold it against the person holding under the judgment. The purchaser of the property under the judgment in favor of a creditor is the first person to be affected with notice either actual or constructive, and the recording of the deed before the purchase is notice to him. (Davis v. Ownsby, 14 Mo. 170; Valentine v. Havener, 20 Mo. 133; Ledyard v. Butler, 9 Paige Ch. 136.)

BAKER, Judge, delivered the opinion of the court.

This is a suit to set aside a deed of trust, executed by A. J. L. Stevens to George W. McDowell and W. E. Tyler as trustees, to secure the payment of five promissory notes executed by said Stevens to John McDowell. The petition alleges that on the 31st day of March, 1858, John McDowell and wife, by their deed, conveyed to Andrew J. L. Stevens certain real estate on St. Ange street, in the city of St. Louis; that said John McDowell was, at that time, insolvent, and made said conveyance for the purpose of defrauding his creditors; that said deed has been annulled by a decree of the St. Louis Circuit Court; that at the time the deed was executed to said Stevens, in furtherance of said fraudulent purposes, he executed his five promissory notes to said John McDowell, each for $5,000, due respectively in one, two, three, four, and five years after date; that on the same day he executed to G. W. McDowell and W. E. Tyler, trustees of said John McDowell, a deed of trust of said property to secure the payment of said five notes, and that said deed of trust was fraudulently withheld from record until the 17th day of July, 1858. The petition further alleges that, on the 8th day of April, 1858, a firm of which the plaintiff was a member had a large claim against John McDowell, on which he instituted suit by attachment and attached said property, and on the next day caused said Stevens to be summoned as garnishee; that the note for $5,000, payable one year after date, was paid at maturity; that said John McDowell, for the purpose of defrauding his creditors, after the 9th day of April, aforesaid, assigned, as collateral security, one of said notes to W. H. Dorsett, one to James Pleasants, one to Henry Tyler, and one to Richard H. Stevens; that the said Stevens, Tyler, Pleasants, and W. D. Shumate as administrator of said Dorsett, still hold said notes. It is further alleged that said attachment suit was prosecuted to final judgment, and that an execution was issued on the same, on which, with other executions against said McDowell, said property was sold and was purchased by the plaintiff; that said deed from John McDowell to said Stevens has been canceled by a decree of the Circuit Court; that said notes are held by said defendants as collateral security only; that there was no extension of time or other consideration; that the transfer of said notes was not sufficient to pass any title to said property, or right to enforce their payment by virtue of said deed of trust; and that the defendants knew of said fraudulent acts and purposes of Stevens and McDowell before the notes were transferred to them.

The defendants answer separately, and all admit that they hold said notes respectively, as stated in the petition, and that they were received as collateral security for pre-existing liabilities, except the one indorsed to Tyler, which, it is averred, was taken in payment of a debt due to him from said McDowell; but they deny that the conveyance from McDowell to Stevens was made to defraud the creditors of McDowell, as well as all the other fraudulent acts and purposes charged in the petition, or that they had any knowledge of any such fraudulent purposes and acts when the notes were indorsed to them.

It appears from the evidence that the note indorsed to Tyler was received by him in payment of a claim due from...