English v. Lindley

Mr. Justice Carter delivered the opinion of the court: Section 30 of the act concerning conveyances (Hurd’s Stat. 1899, p. 408,) provides: “All deeds, mortgages and other instruments of writing which are authorized to be recorded, shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers, without notice; and all such deeds and title papers shall be adjudged void as to all such creditors and subsequent purchasers, without notice, until the same shall be filed for record.” Inasmuch as appellant’s deed of trust had not been filed for record when Lindley purchased the property and obtained and filed .for record his deed therefor, it became a matter of primary importance on the trial to determine whether or not Lindley, at the time of his purchase, had notice of appellant’s deed of trust, or whether he was a bona fide purchaser for value of said property, or was only acting for and on behalf of another who did have such notice. The appellant bases his right to maintain his bill, and therefore to a reversal of the judgment of the Appellate Court, on two grounds: First, that Lindley, when he purchased the plant of Brand, had notice that Brand had given the deed of trust on the same to appellant, or at least had knowledge of facts which were sufficient to have put him upon inquiry which would have enabled him to learn the truth; second, that Lindley was not a bona fide purchaser for value, but that he and Brand and Cannon fraudulently combined and confederated together to hinder, delay and defeat appellant and the owners of said §16,000 debt, secured by said deed of trust, in securing and collecting' their said debt, and to procure said electric light plant for said Danville company for greatly less than its true value, free from the lien of said deed of trust, and that said Danville company had notice, at the time, of the deed of trust to appellant. As to the first of said contentions, it is sufficient to say that the evidence failed to prove that Lindley had any notice or knowledge whatever of the existence of appellant’s deed of trust when he bought and became the owner of the property, or that he had notice or knowledge of any facts sufficient to put him upon any inquiry which he failed to make. . On his inquiry Brand told him there was nothing against the property but what the record showed, viz., the §3180 mortgage, and Lindley understood that he was buying the property subject to that mortgage. Lindley examined the records and found no other lien, and there is no proof that he knew that Brand was indebted to the First National Bank, or to appellant, in any sum. Indeed, appellant does not base his principal contention on this branch of the case. Before the trial of the case Brand had been arrested, imprisoned and fined, and when, or before, he was released he paid §6500 of the purchase money he obtained from Lindley, in part payment of the §16,000 secured by the deed of trust. He became a witness for appellant, but his testimony did not tend to prove notice to Lindley of said deed of trust, but the contrary, and whatever the business and confidential relations of Lindley with Cannon,. Penwell and Samuel, or others, may have been, a court would not be authorized therefrom, in the face of the positive testimony of Lindley, Cannon and others to the contrary, to find that Lindley had such notice. Besides, it could hardly be presumed that Lindley, who was a lawyer and knew the effect of notice to him of an unrecorded mortgage on the plant, would, with such notice, have paid so large a sum for it, — a sum which the evidence shows was very nearly, if not altogether, equivalent to its full value, subject to said mortgage of §3180. Nor can we find that the evidence sustains the other branch of the case, which must rest upon the claim that Lindley was in fact without notice of the deed of trust, but was a mere dummy in the transaction, employed by Cannon, Penwell and others, as representatives of said Danville company, to procure the plant, ostensibly for himself but in reality for said company, freed from the lien of appellant’s unrecorded deed of trust, and that the scheme was finally consummated by the conveyance from Lindley to said company. Aside from inferences which the appellant insists should be drawn from the events as they subsequently happened, and from the business and confidential relations of the persons mentioned, there is no evidence to sustain the contention of the appellant. Fraud cannot be presumed, but must be proved. Men who may be associated together in business, or as officers or members of one or more business corporations, are as free to deal with each other, and with others, as are men not so associated, without the imputation of having acted fraudulently, — unless, indeed, their relations are of a fiduciary character, where, as in some cases, their dealings may be held to be constructively fraudulent, even though there be no fraudulent intent. The clear preponderance of the evidence in this case is that Lindley did not buy the plant for the Danville company, but for himself, and that there was at the time no sugges.tion by Cannon, Lindley, or any one else, to the contrary. True, he borrowed the money from the Second National Bank, of which Cannon was president; but he transacted his banking business at that bank, and he made his check good in a few days after the purchase. He was known to Cannon, the secretary, and to Penwell, the president of the Danville company, as a trading man, with whom such purchases were not unusual; and even if they entertained the thought that their company might be able to purchase the property of him at a later period, that would not be sufficient to stamp the transaction with fraud, nor to lead to the conclusion that Lindley did not buy in good faith for himself, nor to render his title insecure for any i-eason. Then, again, on his part, he had as much right to buy with the intention to sell again at a profit as with intention to permanently operate the plant. It may well be that Cannon, as a stockholder in and secretary of said company, may have believed it to be beneficial to his interests and to the interest of said company, that Brand’s plant should pass into friendly rather than unfriendly hands, and so believing took an active part in the sale as he did. If so, we cannot adjudge the transaction fraudulent on that account. Law, as well as common sense, expects and allows men to act for their own interest where they are not acting in any trust relation. The claim is also made that, as showing notice or bad faith, or both, Lindley paid only a small part of the real value of the plant. This claim is not sustained by the evidence, but the weight of the evidence is that with the mortgage of $3180 resting on the property it was worth but very little, if anything, more than $12,500. Indeed, several witnesses of experience in establishing such plants testified that aside from the value of the real estate proper, all of the machinery and appliances could be furnished and put up new for $10,000, and the evidence showed that the real estate was worth from $3000 to $4000. It is also contended that, inasmuch as William P. Cannon, the secretary of the Danville company, had notice of appellant’s unrecorded deed of trust, it follows that the company had the same notice. This would doubtless be true if Cannon had purchased the property for said company, but the evidence shows that he was acting for Brand, at his request, to find him a purchaser, and having brought Lindley and Brand together, Lindley purchased for himself. It is not contended that Cannon acted as agent of Lindley so as to charge Lindley with notice. It certainly does not appear that in his negotiations between Brand and Lindley he was acting for or even within the scope of his authority from the Dan-ville company, or that said company ever ratified or had anything to do with the transactions between Brand and Lindley. We cannot, therefore, hold that Cannon’s knowledge was also the knowledge of the company. But if it were held that the Danville company had notice of appellant’s unrecorded deed of trust when Lindley purchased, still, if Lindley did not make the purchase for said company, but made it for himself without notice, his conveyance to the company conferred as good a title to it as he himself had, irrespective of the knowledge of the company, for the law is, that a purchaser from a grantee who obtained title in good faith and for value, without notice of prior equities, will be protected against such equities although he had notice thereof himself. Peck v. Arehart, 95 Ill. 113; Burton v. Perry, 146 id. 71; Jones on Mortgages, secs. 560, 582; 20 Am. & Eng. Ency. of Law, 589. Counsel for appellant concede the rule, but insist that all the persons who were acting in negotiating the sale by Brand, or in taking title from him, were acting in concert for and on behalf of the Danville company, and-that therefore the rule does not apply. The evidence, as before said, fails to sustain this branch of the case. As observed in Shinn v. Shinn, 91 Ill. 477: “Something more than suspicions are required to prove an allegation of fraud. The evidence must be clear and cogent, and must leave the mind well satisfied that the allegation is true.” That Brand acted fraudulently is not doubted, but his fraud cannot be imputed to his grantee who had no knowledge of it. The appellant, by withholding his deed of trust from the public records, put it in the power of Brand to commit a fraud on him, and he cannot be permitted to shift the loss caused by such fraud of Brand upon subsequent purchasers, without sufficient proof that they either participated in the fraud or had notice of it before the purchase. To thus protect the holders of such unrecorded liens at the expense of others who subsequently deal with the property would nullify the statute and impede the sale and transfer of real property. Finding no error the judgment of the Appellate Court must be affirmed. Judgment affirmed. Magruder, J., Cartwright and Hand, JJ., dissenting.