Fredonia National Bank v. Perrin

Opinion by Mr. Justice Mitchell, Though the transactions involved in these cases were somewhat complicated, the really essential facts may be stated in brief compass. Waterhouse was the owner of the premises in question, subject to the mortgages now in suit. There appears also to have been a prior mortgage to Pratt and Phillips with which we are not now concerned. In September, 1891, Water-house sold the timber on the mortgaged land to Collins the appellant. The price was paid by check and notes which were deposited by Waterhouse with Green the cashier of the Fredonia National Bank for collection, and were subsequently paid by appellant to that bank. At that time the land was being operated for oil, and by arrangement between the owner of the land and the holders of the notes secured by the mortgages, the proceeds of the oil were paid to Green to be applied to the reduction of the mortgages. The purchase money of the timber was handed over by Green to Waterhouse, and used in defraying the expenses of operating the land for oil. The appellant’s claim is that as his money, which he paid for the timber, was used for the expenses of operating and thereby increased the profits from the oil which went to the reduction of the mortgages, it should in equity be treated as if it had been applied directly to that purpose, and the timber thereby released from the lien of the mortgages, in accordance with the principle heretofore laid down in this case in Pratt v. Waterhouse, 158 Pa. 45, and Waterhouse v. Borden, 166 Pa. 177. [29] It is not contended by the appellant that there was any express agreement by Waterhouse, or Green, or the bank, to make such application of the proceeds of the timber. The duty to do so must arise if at all from the equity of the circumstances, and at this point we are met by the most unsatisfactory portion of the case, the character and extent of the trust held by Green in regard to the operations on the land and the application of the proceeds. All that the learned judge below was able to find on the subject was that there was “ some arrangement,” and he expressly says in his supplemental finding at the request of appellant, that “ there is no evidence of the agreement creating (the trust) nor who were the parties to it, nor what were its terms, except the statements of Green, as to his understanding of its import as affecting particular matters.” The absence of specific evidence on these matters is the appellant’s misfortune, for the burden of proving his case rested on him, and without information as to the parties, or the terms of the trust, no chancellor could safely sajr that the knowledge of Green, and of Borden one of the mortgagees, and their consent to the sale of the timber, raised any duty or any equity that the proceeds should be applied to the mortgages. In the legal aspect of the case the crucial fact is that the money belonged to Waterhouse, and unless a clear equity to the contrary be shown, his right to the control and disposition of it cannot be questioned. He was the owner of the land, in possession. He sold the timber, received the check and notes for it, and put them in the bank for collection merely. The money therefore was his. Appellant made no stipulation as to the application of it, for he bought without knowledge and without inquiry as to incumbrances. The mortgagees if they knew of the sale at all, did not interfere. They were not bound though they would have had a right to do so if they thought their security was being impaired. As already said there is no evidence of any such trust in Green as made it his duty to interfere. Waterhouse’s control therefore was absolute. He might have used it to pay his personal debts, or he might have directed it to be applied to the mortgages, but he did not do so and the fact that he used it for operating expenses on the land, standing as it does, by itself, is not sufficient to raise an equity which we can apply in relief of the appellant. It is a hard case for him, but it is the case of every [30] purchaser of a title subject to incumbrances against which he has not provided. It is hardly necessary to say that when this case was here before (166 Pa. 177) is was decided on the facts as they appeared in the affidavit of defense. On the trial the appellant failed to establish the principal averment that the proceeds of the timber were paid over to and received by the bank, and the case as now presented fails in its most important point. Judgment affirmed.