Green v. Rick

Opinion, Mr. Justice Clark : In Rick’s App., 105 Pa. 528, it was distinctly held, that the deed of trust executed March 16, 1878, by Magdalena Peiffer to John S. Rick, was a mere instrument of agency, and was therefore revocable at pleasure; that the deed of July 6, 1881, [June 30 ?] and notice thereof on July 12 following, was in effect a complete cancellation of that conveyance, and that all rights arising under the trust thereby ceased. It is true, the deed contained no express power of revocation, but, as it was in the nature of a letter of attorney only, it might be revoked at will. The proceeding by bill in equity was simply in enforcement of the rights accrued under the revocation; the decree of the court was an adjudication in form, of what did exist in fact. This being so, the bond in suit was on December 8,1883, properly payable to Magdalena Peiffer and not to John S. Rick, in whose name it was executed. The obligation upon which the money was payable was signed by A. G. Green, Joshua Keely, and Fannie Keely; it was a joint obligation; it secured the debt, not of any one, but of all the obligors together; the joint relation was voluntarily assumed and each owed to the other the exercise of good faith for their joint interest. All the obligors were principal debtors ; a confidential relation existed between them; each owed a duty to the other to disclose anything affecting the joint interest; and each represented the others, in matters relating to the payment and discharge of their joint liability. The deed to the building association was “under and subject ” to the lien of the mortgage and the conveyance in this form created a covenant on part of the grantee to indemnify the grantors against the mortgage debt: Davis’s App., 89 Pa. 272; Taylor v. Mayer, 93 Pa. 42. If the association failed to pay, and the mortgagors discharged the debt, any one [140] of them might receive the money on the indemnity and release the covenant. Albert Gf. Green, being the counsel for Rick, had actual knowledge of the revocation of the deed, of the notice to Rick, of the proceedings in equity, and of the decree; he knew that the money was of right payable to Mrs. Peiffer; he was present in person when the money was paid by the building association and was a party to the misapplication of it; it was his plain legal duty for his own interest, as well as for the protection of the others jointly bound with him in the bond, to disclose the facts which were peculiarly within his knowledge at the time of the payment. If he failed in the discharge of his duty in this respect, and either inadvertently or designedly permitted the money to be misapplied, his co-obligors must charge the consequences of this default to the party who made it. The reasonable rule of the law is, that one person is not to be prejudiced by the unauthorized acts and declarations of another; but there are exceptions to the rule, where there is a joint interest or liability between several voluntarily assumed; in such eases each will be presumed to act and speak for the whole: Clark v. Morrison, 25 Pa. 453. Thére is evidence also, notwithstanding the denial of the fact, from which the jury might well have found that the building association knew that the bond was held in trust for Magdalena Peiffer; that fact was plainly noted on the back of the bond", which was then and there present and actually' passed into the hands of the association at the time; but there is no evidence that they had any knowledge of the revocation of the trust. The doctrine of lis pendens we think is not applicable in this case. The building association did not buy the bond and mortgage; they bought the land, and the title to the land was not in litigation. The bill in equity controverted the title to the bond and mortgage, and in buying the land the rightful ownership of the mortgage upon it was not involved; its existence was admitted and the conveyance was under and subject to it. The whole doctrine of lis pendens, in this country, is said to be founded upon the opinion of Chancellor Kent in Murray v. Ballou, 1 Johns. Ch. 566: “The established rule, says the chancellor, is that a lis pendens, duly prosecuted and not col [141] lusive, is notice to a purchaser so as to affect and bind his interest by the decree, and the lis pendens begins from the service of the subpoena after the bill is filed. Where a purchase is made of property actually in litigation, pendente lite, upon a valuable consideration, and without express or implied notice, in point of fact, the purchaser is affected in the same manner as if he had such notice; and he will accordingly be bound by the judgment or decree in the suit: Story’s Eq. J., § 405. The principle applies generally, in suits brought in law or equity for the purpose of determining the title to real property : Hersey v. Turbett, 27 Pa. 418; but it is not confined to actions involving title to realty. It is applicable in certain cases involving the title to closes in action, excepting commercial paper not due. In Diamond v. Lawrence Co., 37 Pa. 353, it was held, that the pendency of a suit between a county and a railroad company, in regard to bonds issued by the county in payment of its subscription to the stock of the company, is notice to all the world of the facts alleged in the pleadings therein. Also, in Murray v. Lylburn, 2 Johns. Ch. 441, the principle was held to apply to choses in action, as well as to real estate, and to entitle a cestui que trust, whose land had been fraudulently disposed of by the trustee during the pendency of a suit brought against him, not merely to the land itself, but to the mortgages or other securities taken for the purchase money, against purchasers or assignees claiming title thereto, as well as the assignments made whilst the suit was pending. If, therefore, Rick had sold this bond and mortgage to the building association, pending the proceedings on the bill in equity, the principle of lis pendens would apply without doubt; but we are not aware that the doctrine has ever been carried to cases where the party to be affected by it was not strictly a purchaser, pendente lite, of the property in litigation: See Wade on Notice, 360. In this case it was the land that was sold, not the mortgage, and it was the title to the latter only that was involved in the suit. There is another reason why lis pendens has no application here; those persons only are charged with notice or affected by lis pendens who purchase from parties to the suit: Stuyvesant v. Hone, 1 Sand. Ch. 419; Parks v. Jackson, 11 Wend. 442; Wade on Notice, 369, and other cases there cited. The land was conveyed to [142] the building association, not by Rick, but by the Keelys and ■Green who were not parties to the suit. The building association purchased the land subject to the mortgage, payment of which they assumed; they had a right to suppose, in the absence of any notice to the contrary, that the ownership of the mortgage was as it appeared upon the record; they paid the money in good faith upon this assumption ; they were innocent of the injury to Mrs. Peiffer and are entitled to protection. When one of two innocent persons must suffer loss by the default of a third person, if their rights are otherwise equal, that one should bear it, who put it into the power of the defaulter to inflict the loss. As between Magdalena Peiffer and the building association, who would both appear to be innocent parties, the loss, if one must be borne, should therefore fall on Mrs. Peiffer who originally placed Rick in a position to inflict it. The pendency of the proceedings on the bill gave no notice, imposed no duty, and restricted no right, which would subject the building association to the decree. In this condition of the case, the payment of the money discharged the mortgage and the security it afforded was lost. But upon what grounds shall the plaintiffs be decreed the right to judgment against the defendants in personam ? As to the defendants in this case, who knew, or must be assumed to have known of the revocation of this trust, there was no payment of this debt; payment to Rick was to them no payment at all. Although the mortgage may be discharged, the debt still remains, and the debtors by whose default the money miscarried are still liable for payment thereof. This suit is on the bond and we see no good reason why the judgment against the defendants should not be sustained. Where the lien of a mortgage is released or discharged, the debt which it was made to secure stands upon its own footing for the balance unpaid, as if no mortgage had ever existed. But whether the mortgage was discharged in this case was sought to be ascertained on the trial on the bond; the building association voluntarily came into court and asked leave to defend pro interesse suo; an issue was framed as between the plaintiff and the building .association involving the question of the good faith payment of the mortgage : defendants pleaded pay [143] ment and the entire matters at issue were submitted to the jury in the same trial. The verdict for plaintiff, although general in form, is equivalent to a verdict against the defendants for the amount of the bond, and against the building association, on the issue raised by the special pleas filed in their own behalf. We find no evidence which will justify the judgment against the building association on this issue. There is not the slightest evidence of notice on part of the association, nor is there any rule of law or of equity which, under the facts in this case, would restrict their rights to have this lien discharged. The judgment entered against the building association is therefore reversed, but the judgment against Albert G. Green, Joshua Keely and Fannie Keely, the defendants, is affirmed.