Wetzel v. Linnard

Opinion by W. D. Porter, J., The plaintiff’s bill alleged that she had been induced to execute a mortgage through fraud, misrepresentation and deception, and-prayed for a decree that the mortgage be delivered up and canceled. It is established by the findings of fact by the referee, approved by the court below “ that there was no fraudulent conduct, misrepresentation or deception on the part of the respondents, or any one representing them, with relation to the execution and delivery by the plaintiff of the bond and mortgage and declaration of no set-off mentioned in the bill.” This was a specific finding against the plaintiff upon the only allegation of fact contained in her bill, which would have entitled her to equitable relief. The learned referee, however, found as a fact, that the bond and mortgage were given in settlement of a criminal prosecution against one Theodore Loeffier, in which he was charged with the embezzlement of moneys received by him for his employers, Linnard & Gibbs. The bill contained no allegation of the invalidity of the securities upon this ground of illegality of consideration. There is nothing in the findings of fact by the referee, nor have we been able to discover any evidence which would warrant the suggestion that the parties to the alleged illegal agreement were other than Theresa Loeffier, upon the one side, and Linnard & Gibbs and their attorney, [508] upon the other. It is conclusively established by the findings of fact and the testimony, that if there was an agreement to compound a felony, the plaintiff in this proceeding was a party to that agreement. Had she, in her bill, alleged this illegal agreement as the ground upon which she was entitled to equi-. table relief, the bill must have been held bad upon demurrer. She would have been alleging her own illegal act as the foundation of her claim for relief, and the court must have refused her its aid: Nester v. Continental Brewing Company, 161 Pa. 473. The plaintiff, having elected to invoice the equitable jurisdiction of the court to strike down the mortgage, became the aggressor, and the burden was upon her to establish a case free from the taint of illegality. Having failed to establish the facts alleged in her bill, she is not entitled to consideration at the hands of a court of equity, upon the ground that she joined with others in violating the law. In such a case, parties must be left to determine their rights upon the law side of the court. The learned referee found that the mortgage was assigned by Linnard & Gibbs to Joseph H. Linnard, who was not a member of the firm, and, at the time of said assignment, January 18, 1893, Eugene T. Linnard, as agent for Joseph H. Linnard,' obtained for him a declaration of no defense or set-off, made by the mortgagor, Theresa Loeffler. He further found that Joseph H. Linnard had no notice or knowledge of the failure or illegality of the original consideration for the mortgage. It is true that Eugene T. Linnard, who acted as agent for Joseph Ii. Linnard, in the purchase of this mortgage, was the same person, who, according to the finding of the referee, had been a party to the original illegal agreement. The referee does not find, however, that, in the course of the business of the agency, any information was received by the agent which would affect his principal with constructive notice of the original illegal consideration. In negotiations of this character, the principal is only affected by the knowledge of the agent gained in the transaction in which he was employed: Houseman v. Girard Mutual Building & Loan Association, 81 Pa. 262; Langenheim v. Anschutz-Bradberry Company, 2 Pa. Superior Ct. 285. It is true, the bond and mortgage remained in the possession of Eugene T. Linnard, but he retained the papers merely as the agent of his brother who was a constructor in the United States [509] Navy, and traveled from place to place. The plaintiff was aware of this fact, for she accepted receipts for the interest upon the mortgage, in which it was expressly stated that the title to the security was in Joseph H. Linnard. The referee finds, as a fact, that Eugene T. Linnard had, at the time of his assignment, moneys in his possession for investment belonging to Joseph H. Linnard. The evidence would certainly have warranted a finding that Joseph H. Linnard had authorized the purchase of the security by his agent, and had received at the time of the transfer, a formal deed of assignment thereof; upon this point, however, the findings of the referee are silent. If Joseph H. Linnard authorized his agent to purchase this security, or to invest his money in the same, and the agent proceeded to execute this authority, and in doing so, demanded and received from the plaintiff a certificate of no defense for the protection of his principal, and, as agent, upon the faith of that certificate, closed the transaction, the plaintiff cannot now be heard to deny the validity of the mortgage to the prejudice of the innocent assignee. The mortgage being regular upon its face, and the plaintiff having solemnly declared that she had no defense thereto, — if upon the faith of that declaration, the money of the assignee was invested in the security, the investment is protected by the declaration of no set-off: Weaver v. Lynch, 25 Pa. 451; Hutchinson v. Gill, 91 Pa. 253; Griffiths v. Sears, 112 Pa. 523; Robertson v. Hay, 91 Pa. 242; Hayes’s Appeal 195 Pa. 177. The plaintiff was not entitled to equitable relief, since she must found her claim in her own illegal act. If the money of the assignee was invested in the mortgage, upon the faith of the declaration of the plaintiff that she had no defense against the claim, she cannot now be heard to assert the contrary. This question of fact can be determined upon the trial of the issue in a court of law. The decree is reversed. The bill is dismissed at the costs of the appellee.