Merrick v. Hulbert

Bailey, J. Some question is made as to the sufficiency of the proof of the payment of $4,000 claimed to have been made by Robert M. Douglas to Keogh, February 17, 1880. We think the evidence sufficient to show, prima, facie, that the payment was made as claimed. The evidence relied upon consists, mainly, of Keogh’s admission in the paper of that date, addressed by him to the trustee, authorizing and requesting a release of an undivided one half of the land from the lien of the trust deed. At that time the trust deed and notes were in Keogh’s hands, or if they had not then been redeemed by him from their pledge to Mrs. Decker as security for her loan to him, they were redeemed shortly after, and were returned to him and remained in his possession, or in that of his agent, until sold to the complainant several months afterward. But even while they were in Mrs. Decker’s hands, where they had been deposited as collateral to a loan of onlv $2,500, his interest in them was such that an admission by him of payment was so far an admission against his interest as to be admissible as evidence against an assignee of said papers, who obtained them from him after they had been redeemed and returned to his possession. The competency of such evidence in a case like this seems to be well settled. Thorp v. Goewey, 85 Ill. 611; Sandifer v. Hoard, 59 Id. 246; Williams v. Judy, 3 Gilm. 282. In some of the cases, it is true, an exception is made in favor of the assignees before maturity of negotiable paper. This exception grows out of the rule exempting such paper, while in the hands of a l>onafid& assignee before maturity, from the operaation of defenses existing between the original parties thereto. It can have no application, however, to suits upon non-negotiable choses in action. The present suit is not upon the notes which are negotiable, but upon the deed of trust, which is not; and we are therefore of the opinion that the admission of payment made by Keogh while he held the notes and deed of trust, though made prior to their maturity, is competent evidence against the complainant in this suit. Keogh’s admission was, in terms, that Robert M. Douglas, on the 17th day of February, 1880, paid him $4,000 to apply on said notes, and we find no evidence, either in the testimony of the witnesses or in the circumstances proved, which seems to us sufficient to rebut the evidence of payment furnished by such admission. Are the defendants in this suit in a position to avail themselves of said payment as a defense, pro tanto, to the deed of trust? The doctrine announced in Olds v. Cummings, 31 Ill. 188, and repeatedly reiterated in subsequent cases, that ai. assignee of a mortgage takes the same subject to the defenses in equity existing between mortgagor and mortgagee, is too well settled in this State to admit of controversy. As said in Haskell v. Brown, 65 Ill. 29, “ Where a resort is had to a court of equity to foreclose the mortgage, that court will let in any defense which would have been good against the mortgage in the hands of the mortgagee himself, and this regardless of the fact that the assignee of the note may have purchased it in good faith and before maturity.” This rule imposes no hardship on the complainant, since if he had desired to protect himself against latent equities, he could have inquired of the mortgagor before purchasing, whether there was any reason why the mortgage should not have been paid. The law imposed upon him the duty of making such inquiry, and charges him with knowledge of all such facts as he would in that manner have ascertained. It is perhaps needless to say, that a deed of trust stands on the same footing in this respect as a mortgage. If Keogh had been complainant, it would unquestionably have been the duty of the court to apply the payment made to him in reduction of the amounts of the deed of trust. The complainant stands in no better position, and, as against him, the defendants should have been given the benefit of such payment. To this extent the decree is erroneous. But we are of the opinion that the defendants are not entitled, as against the complainant, to an application of the money deposited in the bank by the trustee, as a payment on the deed of trust. There is no pretense that the complainant had any actual notice of such deposit, or of any agreement or arrangement between Keogh and the trustee, by virtue of which it is claimed such deposit was made. It clearly appears that it was not made until several months after the deed of trust and notes had been assigned to the complainant. It was of course then a matter which the complainant could not have ascertained by inquiry of either the maker of the deed of trust or any other party to the instrument at the time he purchased it, for it had not then taken place. Even if it was his duty to inquire of Keogh and the trustee to ascertain the existence of every equitable circumstance affecting the deed of trust, all he could have ascertained upon such inquiry would have been an arrangement between Keogh and the trustee, to which, so far as appears, the maker of the instrument was not a party, by which an attempt was made to substitute a mode of payment not provided for in the instrument itself. That was, in brief, an arrangement by which the trustee was to be allowed at any time to release the whole or any part of the premises, by paying the whole of the money or a portion corresponding to the part released, such payment to be made directly to Keogh, or by depositing the money in a bank and giving notice to him of such deposit. And it was further agreed that, in case Keogh sold the notes, he would do so subject to the same understanding, and arrange with the assignee for such release. How if this was a valid and binding agreement, enforceable against the complainant as well as against Keogh, a question which we shall not attempt to decide, it was by fair construction an agreement by which, in case of an assignment of the notes, Keogh was to arrange for a substitution of the assignee for himself, so that the payment stipulated for should be made to the assignee, or in case of a deposit of the money in a bank, that the notice of such deposit should be given to the assignee. Ho claim is made that any notice of the deposit was given to the complainant, and therefore, by the very terms of the agreement, the payment was ineffectual, and no authority was obtained therefrom by the trustee to' release the deed of trust. Hor can it be said that the appellants are to be protected as innocent purchasers of the land. The release of the deed of trust and the conveyance to them were simultaneous acts. The deed of trust was of record so as to charge them with constructive notice up to the very instant of their purchase, and having notice of the existence of the deed of trust, they are chargeable with notice of the complainant’s rights under it. On this branch of the case we think the court below decided correctly, but for the error in refusing to allow the defendants the benefit of the $4,000 payment to Keogh, the decree will be reversed and the cause remanded for further proceedings. Decree reversed.