Brueggestradt v. Ludwig

Mr. Presiding Justice "Windes, after making the above statement, delivered the opinion of the court. A thorough examination of the master’s report, the exceptions thereto, and the evidence, in the light of counsels’arguments, lead us to the conclusion the master’s report, that there was no fraud in reference to the two trust deeds sought to be foreclosed, is not sustained by the evidence, and that the findings of fact made by the chancellor, the substance of which is contained in the statement preceding this opinion, are in the main correct, and also that the decree, except as will be stated infra, is correct. The finding of the deor.ee that Ludwig, in making and entering into the agreement with appellant and Haerther, by which the South Dakota farm was conveyed to him, “ acted without the advice of counsel,” is not, in our opinion, sustained by the evidence. We think the evidence shows that he acted in disregard of the advice of his counsel, and because of his necessities, and by reason of the fraudulent, oppressive and unconscionable conduct of appellant and Haerther toward him. The finding of the decree that the incumbrance on the South Dakota farm bore interest at eight per cent per annum, and that there was due and unpaid $32 interest thereon on February 26,1895, and that $525 is a reasonable sum to be paid by appellant to Ludwig on account of said incumbrance and interest, when Ludwig should return the legal title of said farm to appellant, is not sustained by the evidence, except as to the sum of $400, the amount of said incumbrance, and for that amount only in the event the legal title of said farm should be returned to appellant cleared of said incumbrance, as well as all other claims or liens thereon caused by Ludwig, or by any one who' held the title for Ludwig, up to the time of such reconveyance to appellant. The evidence shows that this land was conveyed to one J. A. Brenner, and the person holding the incumbrance on it was L. J. Brenner. There is no evidence that the incumbrance was ever paid by Ludwig, or by any one for him. The direction of the decree in this regard was therefore erroneous. ■ The direction of the decree that the receiver pay any surplus which might, on an accounting by him, be found in his hands in excess of $285 to Ludwig, does not seem to be based on any finding of fact by the master or the court, nor upon any evidence to which our attention has been 'directed, or which we have been able to discover in the record. Inasmuch, however, as in the view we take of the rights of appellant, he can have no interest in the funds in the receiver’s hands, and as no one else has complained of this part of the decree, we-see no reason why it- should be disturbed. : ■ • Prior to the submission of this cause, two motions were made, one on behalf of the appellee Thiel, and the other on behalf of the appellee Hartwell, suggesting diminutions of the record and asking leave to supply the same by filing supplemental records, which motions were reserved to the final hearing. These supplemental records relate solely to the respective mechanics’ liens claimed by these appellees. If we are correct in the conclusions we have reached, appellant has no interest in the allowance of these claims, no one else complains of them, and we, therefore, do not pass upon these motions. It is claimed that the chancellor erred in considering on the hearing of the master’s report certain depositions, being those of the witnesses Zarnecke, Hopkins and Meyers, taken at Bedfield, Dakota, becanse, it is said, they were not offered before, and were not considered, by the master. If the depositions were not offered before the master, and were not considered by him, it would have been error in the chancellor to consider them on the hearing of exceptions to the master’s report. The chancellor has no right, on the hearing of a master’s report, to consider any evidence not before the master. Prince v. Cutler, 69 Ill. 267-72; Cox v. Pierce, 120 Ill. 556-9. But, as shown in the statement above, the order of reference directed the master to consider all testimony, depositions and proofs theretofore taken in the cause. In the absence of an affirmative showing that the master disobeyed the order of reference, we will presume that he did his duty and obeyed the order. Moreover, it appears by a stipulation of counsel entered into before the master during the progress of the hearing, which refers to the testimony of these very witnesses, he thereby recognizes these depositions as being before the master.. Also, the master in his report says that considerable testimony was taken upon the question of the value of the South Dakota farm. The depositions of these three witnesses relate wholly to that subject, and there is not much testimony aside from these depbsitions relating to the value of this farm. We think appellant’s claim in this respect is not tenable. We are of opinion that the chancellor did not err in sustaining the exceptions of appellees to the rulings of the master, in rejecting the testimony-offered by them on November 30, 1397, because the copies of entries and records then offered related to the dealings between appellant and Iiaerther prior to October 22, 1894, which, if they were correct copies, as was offered to be shown by thé witness Cole, they were competent and material evidence on the questions as to whether, prior to that date, appellant and Iiaerther had intimate business relations toward each other; that Haerther was indebted to appellant in a large amount, as far back as May 18,1893; that appellant knew that Haerther was habitually dishonest, and, whether, on October 22, 1894, appellant caused to be released0 certain incumbrances on Haerther’s real estate, then owned, or which had been owned by him. But having so ruled, we think the proper practice to have been pursued was to re-refer the cause to the master, with directions to admit the testimony of the witness Cole, when he could have been cross-examined and appellant would have had an opportunity, if he so desired, to offer evidence to disprove Cole’s testimony, or to explain, if he could, the several entries and records. The rules of the Superior Court, we think, contemplate such a practice as we have indicated, though, no doubt, they authorize the court to direct otherwise. Under the circumstances here shown, the offered evidence of the copies of the entries and records was not complete or competent, under the objections of appellant’s counsel, made at the time, that they were not certified, and there was no other proof of their genuineness and correctness, without the testimony of the witness Cole that they were true copies. The testimony of Cole was not taken, and therefore there was no proof before the chancellor that these purported copies were true copies of said entries and records. Some of the findings of the decree are, in part at least, based on this offered evidence, but if the evidence which was properly admitted was sufficient to sustain the decree of the court, the error was harmless. Dunn v. Berkshire, 175 Ill. 243. Appellant, on cross-examination, admitted that he gave the money to Haerther which he claims was the consideration for the purchase by him of the $2,000 note and trust deed, six months before October 22, 1891, and declined to swear that it was not paid to him twelve months before; said that he did not know exactly when it was. Also, when asked if he did not have trouble with Hearther about an l ___ amount which he claimed that Hearther owed him in the summer of 1891, said that he did not remember. He also said that he did not pay Hearther on October 22,1891. The witness Arenz testified that he was present when Ludwig told appellant that he, appellant, “ got the papers from Haerther by threats,” and that thereupon appellant told Ludwig he was not yet Amercanized, and put Ludwig out of appellant’s saloon. The witness ' Q-ibson testified that appellant told him “ that Haerther owed him (appellant) the money and he got this $2,000 trust deed because he did owe him the money,” and also that appellant said he obtained this note and trust deed “ in satisfaction of a debt that Haerther owed him.” We think the clear preponderance of the evidence, properly admitted, is that on and for a long time prior to October 22, 1891, Haerther was indebted to appellant to an amount exceeding $2,000, and that he received this note and trust deed from Haerther in part payment thereof, or as additional security for such indebtedness, and also that he knew that Haerther was not the owner of the note and trust deed, and had no right to dispose of them except for cash. Appellant therefore failed to prove that he obtained this note and trust deed upon the payment by him of $2,000 cash, in good faith and without notice of Ludwig’s rights, as he claimed to have done. It is claimed by appellant that this note and trust deed in his hands are not affected by any equities between Ludwig and Haerther—that Haerther was Ludwig’s agent to negotiate them, and as such agent transferred a good title to appellant, upon the theory that he is in the position of an original mortgagee, and cites in support of this com tention, Keohane v. Smith, 97 Ill. 156; McIntire v. Yates, 104 Ill. 491; R. R. v. Thompson, 103 Ill. 187, and other cases. These cases are not, in our opinion applicable, because he has not shown that he paid value or parted with any rights, and had constructive if not actual notice that Haerther had no right to dispose of the securities except for cash. Had he paid the cash to Haerther at the time, a different question would be presented. The further claim is also made that Ludwig, when notified of the transfer to appellant, recognized and ratified the validity of such transfer by promising to pay' the interest on the note, and that by the receipt of $135 from appellant, and the agreement of settlement pursuant to which he received the conveyance of the farm in South Dakota, and made and delivered the two notes and trust deeds of $225, in which was included the first interest note of $70, which became due on the $2,000 note, and by the arrest of.Haerther, which, it appears, was caused by Ludwig upon the charge of embezzlement, Ludwig is now estopped from alleging the invalidity of either of these trust deeds. We think this contention is answered by the findings of the court, which in our opinion are sustained by the evidence, that all these actions of Ludwig and transactions with him were induced by the fraudulent, oppressive and unconscionable conduct of appellant and Haerther toward Ludwig, and by his necessities and the stress of circumstances under which he was placed by reason thereof, amounting to moral duress. Brown v. Gaffney, 28 Ill. 149-58; Russell v. Southard, 12 How. (U. S.) 138; Montgomery v. Pickering, 116 Mass. 227-9. In the Brown case, supra, the court held that where the action of a creditor was oppressive and unconscionable, and intended to coerce the debtor, it called for the interposition of a court of equity to afford relief. In the Russell case, supra, it was held that where a debtor was in distress for money, and a stranger without funds or resources, his cop-sent to a sale of his property for a grossly inadequate consideration, at the dictation of a money lender who took advantage of the pressure of his wants, a court of equity would not consider a consent thus obtained was sufficient to fix the rights of the parties—that “ necessitious men are not, truly speaking, free men,” and that “ an unconscientious advantage, which ought not to be retained,” was sufficient to be shown to avoid such a purchase. In the Montgomery case, supra-, which is to the same effect in principle, it was also held that the original fraud was not cured nor waived, although the party defrauded subsequently made a deed conveying away her rights, under legal advice, with full knowledge of the original fraud and of her legal rights. In this connection it is also claimed that both the cross-bills of Mulholand and Ludwig show a complete ratification by Ludwig of the validity of the note and trust deed of $2,000, and a settlement of Ludwig’s claims against Ilaerther. These cross-bills set forth the facts substantially as found by the decree, which, as we have seen, when all taken together, do not amount in equity to a ratification or settlement which should bind Ludwig or estop him. It is also argued that as the master heard the witnesses, his findings ought to carry great weight—that he was in a better position to judge of the facts than the chancellor, and his findings should have the same weight which is accorded to the findings of a chancellor when the witnesses are heard in open court. While it is true that the master’s findings are entitled to great weight when he has heard the witnesses, it has not been held that they are entitled in an appellate tribunal to the same consideration as that of the chancellor when he has heard the witnesses. The master’s findings are only advisory to the chancellor. Fairbury, etc., Bd. v. Holly, 169 Ill. 12; Ennesser v. Hudek, Id. 494. The contention is made that appellees have been successful before the chancellor only upon the theory that, under the rule announced in Olds v. Cummings, 31 Ill. 188, and repeatedly followed in this State, appellant took the note and. trust deed of $2,000 subject to all equities between Ludwig and Haerther, and that this theory must fall because no such case is made by the pleadings. We do not think the rule in Olds v. Cummings need be invoked to sustain the decree, and are inclined to the opinion the rule of that case is not applicable here. Appellant may be considered as the original mortgagee, but can not prevail, because his money was not paid for the note and trust deed. He parted with nothing, and knew Hearther had no right to dispose of the securities except for cash, or should have known the circumstances within his knowledge being considered. It is also said the finding in the decree, that Haerther was appellant’s agent when he received t^e note and trust deed from Ludwig, is improper and can not stand because there is no such allegation in the pleadings—that it is not enough that the proof makes a good case if there is no allegation to which the proof may be applied. Ludwig’s cross-bill, as we have seen, substantially alleged the facts as found by the decree, and from those facts the conclusion follows that Haerther was appellant’s agent. It was not necessary that the pleadings in so many words should have a direct averment that Haerther was appellant’s agent. In the view we have taken of appellant’s claim, he is not interested in the mechanics’ liens nor in the judgment against Ludwig; no one else makes complaint thereof, and we therefore do not discuss the questions raised by appellant with reference to either of these liens. The other contentions made by counsel in their briefs, both as against and in support of the decree, have been given consideration, but we deem it unnecessary to refer to them specially; as none of them could effect the disposition of the case which we have made. The decree is affirmed in all respects, except as indicated with reference to the South Dakota farm and the payment to Ludwig of $.525 by reason of the incumbrance thereon, and interest, in which respects the decree is reversed, with directions to the Superior Oourt to modify it so that it shall direct a re-conveyance of the South Dakota farm to appellant, free and clear of all claims, liens and incumbrances done or suffered by F. Arenz or his grantees to the date of such conveyance, and the incumbrance of $400, within a time to be fixed, but before appellant shall be required to cancel and surrender said notes and trust deeds, and that appellant pay to Ludwig the sum of $400, the amount of said incumbrance, less-the sum of $155, due from Ludwig to appellant, simultaneously with such conveyance. ■ Affirmed in part and reversed ,in part, with directions.