Ellis v. Sisson

Mr. Justice Sheldon, delivered the opinion of’the Court: The principal question which is here presented respects the priority of lien which has been given to the mortgage of T. B. Ellis to Waugh and H. B. Ellis, which Cable is seeking to have foreclosed. By the filing of his bill in 1861, the equities of T. B. Ellis became fixed, so as to prevent any subsequent assignees of the mortgages acquiring any rights thereunder superior to those of the respective mortgagees. Ellis has therefore to deal with the case, as respects Waugh, Sisson and Bath bun, alone, Sumner & Co. and Cable having acquired their respective interests subsequent to the filing of the bill by Ellis. And besides, under the decisions in this State, the assignee of a mortgage takes it subject to all equities in favor of the mortgagor. The written contract of September 30, 1858, entered into between T. B. Ellis of the first part, and Sisson and Bath-bun of the second part, was an agreement by the party of the first part “to sell, release and convey to the said parties of the second part, all his paid-in interest in the Bichland Grove steam mill, store and lands attached to the same, amounting to $10,000, more or less, as shall appear from authenticated bills rendered at the final closing up of this contract, which shall take place within three weeks from this date, when the said party of the first part shall make to the said parties of the second part, their heirs, executors, administrators or assigns, a good and sufficient deed of conveyance of all the lands, mills, house, and all other appurtenances of whatsoever kind, as set forth in a certain mortgage given by the said party of the first part to John M. Waugh and Henry B. Ellis, dated June 5, 1858, reference to which will fully explain boundaries, conditions, etc.; also for á certain mortgage given to John M. Waugh by said party of the first part for the payment of $1140 on five acres and appurtenances, etc., and to yield up to the said parties all of the aforesaid premises peaceably at the signing of this article, and the said parties of the second part agree with the said party of the first part that they will make over the balance, after deducting the amount held by Benjamin T. Sisson, $9280, and the said $10,000, more or less, paid in by the said party of the first part, and sold to John B. Bathbun (the said John B. Bathbun agreeing io pay to the said party of the first part the said sum of $10,000 at the expiration of seven years, secured by mortgage on the premises sold, and interest at ten per cent per annum, etc.) by mortgage on the premises, in the same manner and on the same or like terms as the said parties of second part may agree with the said John M. Waugh, and it is further agreed that all the parties named in this article shall deliver up all bonds, mortgages, deeds, receipts and papers of whatsoever kind, relating to their contract, so soon as the same is lawfully canceled,” etc. This contract, quite obscure in some of its provisions, we considered, and to some extent put an interpretation upon, in the former cases. We decided that T. B. Ellis had substantially performed all of his part of the agreement and was in no default. That the Sisson mortgage was satisfied by the contract of September 30, 1858; that it was a part of the purchase price of the property sold, and by that contract was to be canceled. We do not see why, by the terms of that contract, the same was not also true with respect to the Waugh and H. B. Ellis mortgage. Why it was not equally a part of the purchase price, and to be delivered up and canceled. By the terms of that contract, “all the parties named in this article shall deliver up all bonds, mortgages, deeds and receipts and papers, of whatsoever kind, relating to their contract, so soon as the same is lawfully canceled.” Although Waugh was not a party signing, he was a party named in the contract, and we think this mortgage of his was intended to be embraced in this comprehensive language. We think that the “ balance ” mentioned in the contract, “ after deducting the amount held by Benjamin T. Sisson, $9280, and the said $10,000, more or less, paid in by the said party of the first part and sold to John B. Bathbun,” which Sisson and Bathbun were to make over by mortgage on the premises, as they might agree with Waugh, meant the interest. of Waugh represented by this mortgage of his, for $14,989.54, thus implying that that mortgage was to be released, and the amount thereof to be resecured by another mortgage to be given by Sisson and Rathbun, as they should agree with Waugh. And we should before have held the same with regard to this mortgage that we did as to the Sisson mortgage, if the name of Waugh had been signed to that contract of September 30, 1858. For we said in the Sumner & Co. case that the contract seemed to contemplate that the mortgage to Waugh and Ellis was also to be canceled, but that not being parties to the agreement they could not be affected by it. And in the Cable case, “ it was doubtless the intention of the contract of September 30th that this latter mortgage (Waugh and Ellis), also, as well as the former (Sisson), should be canceled, so as to give T. B. Ellis a superior lien upon the property for the security of the payment of his paid-in interest, and for the carrying out of such intention, and being impressed with the justice of the claim of T. B. Ellis that he should have such security, we have anxiously sought for some satisfactory ground upon which we might rest the support of such a claim, but we have not been able to discover any.” And further on, “ the written contract of September 30,1858, was not signed by Waugh, and we can not hold him as bound by that contract to discharge and release his mortgage, although we may strongly suspect there was a secret understanding to that effect.” The original bill filed by T. B. Ellis was founded on this written contract of September 30, 1858. The bill alleged “ that orator in September, 1858, was desirous of selling the said mill, store, lands and other prop- ■ erty, and on September 30, 1858, entered into a written contract with Waugh, Sisson and Rathbun for the purchase and sale thereof, by which said Waugh, Sisson and Rathbun purchased of orator all of said property, real and personal, remaining on hand at that time; and in consideration thereof Waugh, Sisson and Rathbun agreed to pay him the amount by him expended and paid out in and about the business of himself, of Waugh and Ellis, and of Waugh and Sisson, for machinery, goods, merchandise, etc., and in addition thereto to release orator from the notes and mortgage to Waugh and to Waugh and Ellis, and also from the mortgage to Sisson. That said contract was in writing, and a copy is attached. That said Waugh was intended to be and was equitably a party to said contract. That by said contract orator agreed to sell to said Waugh, Sisson and Rathbun all his paid-in interest in.the said steam mill, stock of goods, etc., and other property.” Thus showing the written contract of September 30, 1858, was the foundation of the bill. The difficulty before was, in granting relief to T. B. Ellis under a bill containing such allegations. There was no proof of such a joint written contract or of such a joint contract by Waugh, Sisson • and Rathbun, as alleged. The allegations and proofs did not agree. The amendment which has been made to the bill of Ellis, since the case was remanded, removes the difficulty which before existed. It sets up a separate verbal agreement on the part of Waugh to release his mortgage. The amended bill alleges that Waugh, as well as Ellis, was desirous to have some new arrangement made with regard to the property. That to effect this purpose, Waugh entered into negotiations with Sisson and Rathbun on the one side, and with Ellis on the other; that Waugh made representations to Ellis that he was about to form a partnership with Sisson and Rathbun, and pretended to be negotiating with Ellis for the purchase of the property for himself and Sisson and Rathbun, and thereby induced Ellis to believe that the sale afterwards agreed upon was a sale to Waugh, Sisson and Rathbun, thus explaining the reason which led him to make the statements he did in his bill and answer before filed. That the negotiations made by Wa-ugh resulted in a general plan, which, in short, was that Rathbun was to become the purchaser of Ellis’ paid-in interest in the property; that Sisson should release his mortgage and have its amount for his share; that Waugh should release Ellis from the payment of his notes and mortgage to Waugh and H. B. Ellis, and Waugh to have the store and personal property," together with a sum of money or property, making the whole equal in value to the balance due him upon said notes and mortgage, to be secured to him by Sisson and Bathbun, as they might thereafter agree with Waugh, but of the details of this part of the arrangement Ellis was not informed, and that Ellis should turn over all the personal property and execute a deed for the real estate to Sisson and Bathbun for the benefit of themselves and Waugh, as they had agreed among themselves. That for the purpose of carrying into effect this general plan, Waugh agreed with Ellis that if the latter would enter into and perform the agreement on his part to be made and performed, he, Waugh, would accept such performance .in satisfaction of Ellis’ indebtedness on his notes and mortgage to Waugh and H. B. Ellis and release the mortgage; that relying upon this agreement of Waugh, Ellis entered into the written contract of September 30, 1858, at the request of Waugh, and made the surrender of the property. That the written contract was but in part the execution of this general plan, and only expresses the manner in which such general plan was to be executed, so far as it was to be executed by Ellis, Sisson and Bathbun. If there was such a verbal agreement between Waugh and Ellis, as is now alleged, we can have no doubt that this indebtedness of Ellis to Waugh and H. B. Ellis was discharged by the entering into by Ellis and performance of this written contract, which we have found to have been substantially performed by him. The only inquiry, then, which remains is, whether Waugh did make such an agreement. As objection is taken to the testimony of Ellis on the last hearing, that it is not competent under the statute, being taken after the death of Waugh, we will advert only to such of the testimony of T. B. Ellis as was taken during the lifetime of Waugh. T. B. Ellis, in his testimony in 1867, states the contract substantially as he does now. He then said that Waugh made some offers, and witness told him the best he would do. That Waugh said he would see Sisson and Rathbun and let witness know what he could do. That they all, Waugh, Sisson and Rathbun, came down to the mill together, and they closed the trade that afternoon for the mill property. He said the mortgages of Sisson and Waugh were to be released. He states, it is true, the contract was in writing, and so it was, as far as Sisson and Rathbun were to be bound by it. He further said that Sisson and Rathbun were to carry Waugh’s interest in the concern without his name appearing; that Waugh’s interest was what remained after deducting the paid-in interest of Ellis and the Sisson mortgage. Sisson’s interest was to be the amount of his mortgage, Rathbun’s the paid-in interest of Ellis, and Waugh’s the balance. Waugh drew up the contract, and witnessed it. Waugh prepared a written release of the mortgage to himself and Henry B. Ellis, for Henry B. Ellis to sign, which he sent to him with a letter, by T. B. Ellis when the latter left for St. Louis to get the authenticated bills for his paid-in interest, with which he was to return within three weeks. On his return within the three weeks he brought this release signed by H. B. Ellis. Further, when the parties were about to disagree concerning the authenticated bills, Rathbun made the objection that Ellis could not give a good title. Ellis turned to Waugh and inquired if he could not, to which Waugh answered: “Yes, if I release.” Ellis then asked him if he was not going to release, to which Waugh replied he would if Ellis and Sisson and Rathbun would settle about the bills. Those facts indicate strongly that Waugh had made a verbal agreement to release the mortgage. Soon after the execution of the September 30, 1858, contract, in a conversation with Griffith, his book keeper, about it, "Waugh said that in drawing up the contract he had looked out for his own interest; that those who signed that contract did not know what they were doing. The witness Joseph Pitman testifies that a week or two before September 30, 1858, he went to Waugh to collect a claim he had against him, when Waugh told him he was about to buy in again in the store and mill, and said, “come back about such a time, and I think we will have it all arranged ; myself and Sisson and Dr. Bathbun are about buying in again; I think we will get it all straightened up.” He told the witness when to come back, and said if the trade was made he would pay the claim either in goods or money. Witness came at the time appointed. Ko one was then there but T. B. Ellis. After dinner Waugh, Sisson and Bathbun came together. In the presence of Sisson and Bathbun Waugh then told witness they were about making the trade, and he thought they would get through with it that afternoon in time for him and witness to settle. Pitman then tvent into the store where T. B. Ellis was, and told him what had been said. Waugh, Sisson and Bathbun then came into the store, and after talking a few minutes at the counter Waugh said, “ I will fix up the papers.” Pitman then followed Waugh to the desk and asked him if he was going to settle with him. Waugh then told Ellis to pay Pitman off in goods, and Ellis let him have the amount of §86.60 on the claim of witness, and the balance, §6.40, witness got at another time. This is attempted to be explained upon the pretence that Ellis sold the store to Waugh alone. But we before considered this pretension and the evidence bearing upon it, and held that the sale of the store was made to Sisson and Bath-bun, that the written contract said it was sold to them, and that must control, as being the best evidence. James B. Ellis testifies that Waugh told him he was a partner with Sisson and Bathbun; that they were carrying his interest, and that he told this to Sisson, who made no reply. The witness Cottenburg testifies that Waugh said he was a partner; that he had his property so fixed he could do business. And after the difficulty commenced, according to the testimoney of Lawhead, Waugh was living on the land, claiming to own it and working the coal upon it for his own benefit. It. B. Ellis testifies that Waugh was a silent partner with Sisson and Bathbun. These references, and others that might be 'made to the testimony, show that there was some sort of an arrangement outside the written contract existing between Waugh and Sisson and Bathbun, by which Waugh was in some way to have the benefit of Sisson and Bathbun’s purchase from Ellis. Sisson says, “ I merely took my interest back; that was the extent of my claim, and I was to have an interest in the whole property, to the extent of my claim, as shown by the mortgage.” And must we not believe, from the circumstances, that the case was the same with this other mortgage held by Waugh, and by his agreement ? Waugh testified that he supposed that the papers referred to in the contract as to be delivered up, meant all the papers held against T. B. Ellis on account of this property. He therefore understood the contract contemplated the surrender of his mortgage, and if he has participated in the enjoyment of the full benefit of the contract, it is but right that he should surrender the mortgage. Waugh appears ever to have been the central figure in the whole concern of this property, and to haVe been the prime actor in bringing about the arrangement which resulted in the written contract of September 30, 1858. The purpose of the transaction appears clearly enough to have been a change of the relation of Ellis toward the property from that of vendee to that of mortgagee,—to let Ellis out of the concern, just as if he had never purchased it, and to give him security for his paid-in interest. The making of the written contract of September 30,1858, seems to have been only one step in the carrying out of a scheme which we think had been devised by Waugh. That contract undoubtedly expresses all that was intended, so far as Ellis, Sisson and Rathbun were contracting parties with each other; but there were other agreements relating to the subject matter among the different parties interested, which that contract does not express. We are satisfied, from the evidence, that outside of this written contract there was a verbal agreement between Waugh and Ellis, to the purport that if Ellis would sell out to Sisson and Rathbun, he, Waugh, Avould accept such sale in satisfaction of the debt of Ellis to Waugh and H. B. Ellis. We think that, by virtue of this agreement, and the transfer of the property, which Avas made by T. B. Ellis, and the full enjoyment of it ever since by Sisson, Rathbun and Waugh among them, the notes and mortgage to Waugh and H. B. Ellis Avere satisfied; and as those to Sisson are also satisfied, that T. B. Ellis is entitled to a first lien upon the property for his paid-in interest. This necessarily subordinates the lien of Sumner & Co., giving them but the second lien for the amount of their claim. Since this case was last before this court Sumner & Co. have also amended their cross-bill by setting up that they have obtained title to the lands in controversy by virtue of a conveyance from one John C. Wharton. Wharton Avas an execution purchaser under an execution issued upon a judgment against T. B. Ellis rendered in 1871. Although the legal title then appeared to be in Ellis, it Avas but a naked legal title, the equitable interest being in Sisson and Rathbun, or Sisson, under the contract of September 30, 1858; and Ellis having tendered a conveyance Avhich had been refused to be received. The judgment and sale were long after this litigation had been commenced, and while it was pending, and the purchasers Avould be bound by the result of this suit as purchasers pendente lite. Ellis had no beneficial interest with respect to the land, other than having a vendor’s lien, or as mortgagee. There would be nothing in this regard which would be bound by the judgment or pass under execution sale. We have frequently.held a vendor’s lien not to be assignable; and in Delano v. Bennett, 90 Ill. 533, we held that a conveyance of a mortgagee’s interest in land, without an assignment of the debt, passed no title. It appears there was an indebtedness of Waugh to Sumner & Co.; that Sisson had assumed to pay this indebtedness, and that to indemnify Sisson on account thereof, Waugh gave to Sisson these notes of T. B. Ellis to Waugh and II. B. Ellis, and which Sisson held for some time. These notes, then, having, thus been placed in Sisson’s hands as a security to indemnify him against this indebtedness of Waugh to Sumner & Co., which Sisson, as surety for Waugh, had assumed to pay, it is contended that Sumner & Co., the principal creditors, are entitled to the full benefit of that security. It is ^sufficient to say, as to this, that it was not until after the contract of September 30, 1858, that the notes were thus placed in the hands of Sisson, and any equity of Sumner & Co. in the respect claimed, must be subject to the prior equity of Ellis to have the notes delivered up and canceled. It is further complained of on the part of Ellis, that the circuit court rendered a personal decree against Rathbun, in case of deficiency of the proceeds of the mill and lands, for only the amount of Ellis’ paid-in interest in the store, instead of for the full amount of the goods. This decree seems to be in accordance with the opinion of this court given on the rehearing before, and we think it now too late to call in question our former decision in this respect. The paid-in interest in the store was what the contract purported to sell, and the bill of Ellis prayed that the court, upon final hearing, might take an account and determine the amount of complainant’s paid-in interest in the store, and that a personal decree might be rendered against Sisson and Rathbun for the amount of such interest. So that the bill only seemed to have asked • a personal decree for the amount of the paid-in interest in the store, and not for the value of the goods. But the court only alloAved for this paid-in interest in the store, $53, for account books and a small freight bill. This sum appears to us to be too small. The goods invoiced at $4021.02, and the other personal property,$675,making in all $4769.02, and as this Avas all turned over unincumbered by Ellis to Sisson and Rathbun, and Ellis Avas to have security on Avhat AAras sold for his entire paid-in interest in mill as Avell as store, there seems no sufficient reason Avhy the personal decree against Rathbun, in respect to the goods, should not be for their value, had not Ellis in his bill limited the personal decree asked to his paid-in interest in the store. We do not see Iaoav the finding of the master that Ellis had AvithdraAvn from the store goods amounting to $2500, is supported. The goods invoiced May 5, 1858, Avhen Ellis took them, $3351.74, Avhile the same stock invoiced October 5, $4021.02. It is true, Ellis had sold to the amount of $2500, but it does not appear that he had 'withdrawn all this. The book accounts and notes taken for goods sold Avere turned over under the contract, and Ellis seems in the meantime to have added to the stock sufficient to make it more than it Avas when he purchased. And Ave do not perceive upon what evidence the master found that Ellis resold the goods for $3351.54. He sold his interest in the entire concern for Avhat he had invested in it, Avhich appears to have been $9866.63. It seems agreed this Avas the amount of the entire paid-in interest in mill and store. And the paid-in interest in the mill seems to have been $8000. What but the paid-in interest in the store does the difference between these two sums represent? We are not satisfied with the finding as to the amount of the paid-in interest in the store. We leave this matter of the amount of Ellis’ paid-in interest in the store open for further inquiry and determination in the circuit court. There appears to have been some taxes paid by' Sumner & Co. Whatever taxes they have paid should be first jreimbursed to them from the proceeds, with interest. The decree of the Appellate Court is reversed, and the cause remanded for further proceedings in conformity to this opinion. Decree reversed.