Rhodes v. Outcalt

• Decision Date: 31 August 1871
• Parties: ABRAHAM S. RHODES et al., Appellants, v. GEORGE W. OUTCALT AND THE MERCHANTS' BANK OF ST. LOUIS, Respondents.
• Court: Missouri Supreme Court

48 Mo. 367

ABRAHAM S. RHODES et al., Appellants,

v.GEORGE W. OUTCALT AND THE MERCHANTS' BANK OF ST. LOUIS, Respondents.

Supreme Court of Missouri.

August Term, 1871.

Appeal from Chariton Circuit Court.

Chas. A. Winslow, for appellants.

I. The principle contended for by the bank, that all the parties being creditors seeking a preference made their equities equal, and precluded the court from exercising its jurisdiction to disturb the title acquired by the bank, is not supported by any authority, and is directly in conflict with numerous decided cases directly in point. (White v. Wilson, 6 Blackf. 448; Chamberlain v. Thompson, 10 Conn. 243; Young v. Coleman et al., 43 Mo. 179.)

II. One of the principles for determining the priorities of equities is that a party taking with such notice of an equity takes subject to such equity. The deed of trust to Rhodes being prior in point of time, and the bank having purchased with notice of the mistake, the notice of the appellants was superior and should have been enforced. (Adams' Eq., 5th Am. ed., 306, 311-12; White v. Wilson, supra; Chamberlain v. Thompson, supra; Wilson v. Tizzard, 15 Iowa, 495; Steany v. Beach, 11 Ohio St. 283; Young v. Coleman et al.,supra.)

III. The bank purchased with full notice of the mistake in the deed of trust, having sufficient knowledge or information to put him on inquiry. Applegate is presumed to have made the necessary investigation, and will be held to have had actual notice of everything which the inquiry thus suggested would have disclosed if prosecuted with due diligence. He can only escape the consequences of actual notice by showing a diligent and unavailing inquiry, and the exhaustion of all the available sources of information suggested by his knowledge. And notice to Applegate is notice to the bank in this case. (Speck v. Riggin, 40 Mo. 405; LeNeve v. LeNeve, 2 L. C. Eq., 3d Am. ed., 152 et seq., and note; Williamson v. Brown, 15 N. Y. 534; Baker v. Bliss, 39 N. Y. 70; Allen v. McCalla, 25 Iowa, 482; First National Bank of St. Paul v. Com. Scott County, 14 Me. 77: O'Reilly v. Nicholson, 45 Mo. 165; Benoist v. Darby, 12 Mo. 196.)

Prewitt, for respondents.

I. There is no evidence in this case that the bank or its agents had any knowledge of any conveyance or intention or attempt to convey the lots in controversy by Outcalt to the plaintiffs. The bank having purchased and paid for them, and got the legal title without any notice of plaintiff's claim, has the best equity and the legal title. (2 L. C. Eq. 110.)

II. The petition contains no equity so far as appears therefrom. The conveyance to Rhodes was a voluntary conveyance without consideration, and raises no equity to correct a mistake against any one with or without notice. (1 Sto. Eq., § 164.)

III. The evidence shows that the bank has at least an equal equity with the plaintiffs, and has the legal title, and the court will not disturb it. A creditor who pays out nothing, but attempts to get a preference over another creditor by taking a mortgage, is not entitled to the aid of a court of equity. He can hold as against other creditors only what he actually gets. (2 Lead. Cas. Eq. 104-5, and cases cited.) He is not a purchaser for value.

IV. Whether we look at the petition (15 Mo. 272; Dougherty v. Mathews, 32 Mo. 520) or the testimony in the case, the question of notice is immaterial; the plaintiffs have no equity, and the decree ought to stand. (1 Sto. Eq., § 176; Young v. Coleman, 43 Mo. 185.)

CURRIER, Judge, delivered the opinion of the court.

This is a suit in equity brought to reform and correct an alleged mistake in the descriptive part of a deed of trust. The case shows that the defendant Outcalt, on the 22d of September, 1862, by his deed of trust of that date, undertook to convey to the plaintiff Rhodes, to secure debts then owing by him to the beneficiaries named in the deed, certain real estate situated in Brunswick, Chariton county, Missouri. The deed described the premises as “lots 10, 11 and 12, in block six, of the city of Brunswick.” These lots were not then owned by him, but he owned lots of the same numbers in block seven of said city, on which his then residence was situated. It was these latter lots that he intended to convey, as does not seem to be questioned. The mistake consisted in locating them in the wrong block--that is, in block 6 instead of block 7. Outcalt was at the same time largely indebted to the Merchants' Bank, one of the defendants herein. In 1863-4 the bank obtained several judgments against him upon these claims, amounting in the aggregate to some $18,000. These judgments remained unsatisfied, and the bank, on the 26th of March, 1868, sued out executions upon them, and caused levies to be made upon lots 10, 11 and 12, in block 7, as the property of Outcalt. The lots were subsequently duly advertised and sold by the sheriff, and the bank bid them in for a nominal sum.

The petition charges that the bank purchased the lots with notice of the deed of trust and of the alleged error therein, and consequently with notice of the plaintiff's title and claim. This the answer denies, and the first inquiry respects the matter of fact thus put in issue by the pleadings. The plaintiffs seek to affect the bank with notice by showing actual notice to its agent. A notice is regarded in law as actual when the party sought to be affected by it knows of the existence of the particular fact in question, or is conscious of having the means of knowing it, although he may not employ the means in his possession for the purpose of gaining further information. (Speck v. Riggin, 40 Mo. 405; Wh. & Tud. Lead. Cas. Eq., 3d Am. ed., 152.) “Actual notice,” says Selden, J., in Williamson v. Brown (15 N. Y. 359), “embraces all degrees and grades of evidence, from the most direct and positive proof to the slightest circumstance from which a jury would be warranted in inferring notice.” In the case last referred to, the rule is laid down that “where the purchaser has knowledge of any fact sufficient to put him upon inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser.” “This presumption,” as it is further held, “is a mere inference of fact, and may be repelled by proof that the purchaser failed to discover the prior right notwithstanding the exercise of due diligence on his part.” The evidence in the case at bar must be examined and applied in the light and under the guidance of these principles.

The evidence shows that William C. Applegate was the agent of the bank at Brunswick, and in charge of its business at that point; that prior to the execution sale, and a short time prior to the issue of said executions, he had an interview with John Knappenberger, who kept at Brunswick an abstract of all the records of conveyances of lands and town lots in the county of Chariton, in which Brunswick is situated. In the course of this interview it appeared that Applegate's attention had been called to the fact that the deed of trust to Rhodes did not cover the lots in block 7, which were owned by Outcalt, and that such fact was a subject of...