Lennartz v. Quilty

Mr. Justice Win des delivered the opinion of the court. The principal question presented by this appeal is as to whether the appellant on the one part or the appellees on the other part, both claiming to be innocent parties, should suffer by reason of the wrong done by Popp and Bernhard Behrends in making and recording the .release of the Popp trust deed. The question is not without difficulty, but if we were right in the decision of Carey v. Rauguth, 82 Ill. App. 418-24, then this question must be determined in favor of the appellees. In that case we held that a building association mortgage or trust deed which, under the provisions of the statute, might be paid at any time, at the option of the maker, was the same as an ordinary incumbrance which had, by its terms, matured, so far as the rights of a subsequent innocent purchaser or incumbrancer who had paid his money in good faith, relying upon the record of a fraudulent release of such mortgage or trust deed are concerned. To the same effect also, in principle, is the case of Jummel v. Mann, 80 Ill. App. 288, 301, in which we held that a subsequent incumbrancer, who loaned his money in good faith and without notice of a previously matured incumbrance (so far as shown by the record, but which had in fact been extended by agreement between the holder and the mortgagor), relying upon the record of a fraudulent release thereof, should be protected. (Affirmed, 183 Ill. 523.) In that case the Supreme Court say: “ A trustee in deeds of trust of this kind has the power to release the lien so as to revest the legal title in the grantor, even though he does so without the consent of the cestui que trust, and in violation of the obligations of his trust.” In the case at bar Johanna Quilty purchased the premises in question, paying $2,GOO in cash and assuming the Schmidt incumbrance of $3,000, which was prior in point of date and record to appellant’s incumbrance, after having the title thereto examined by an attorney skilled in the law and practicing in the city of Chicago, who gave to her his written opinion that the title was good in Ñora Behrend, subject only to the Schmidt incumbrance and certain taxes, which opinion was based upon a merchantable abstract of title, in no way questioned, which showed that the Popp trust deed had been released of record on August 21, 1893, by the trustee therein named, which was some months prior to her purchase, and without any notice whatever that the note held by appellant had not in fact been paid. It is true that her attorney did not inquire of appellant as to the validity of the release by Popp, but that was not necessary, inasmuch as Popp had the right to release the trust deed at any time upon payment, and by its terms it was payable at any time. Under these circumstances Mrs. Quilty had the right to presume payment, and that Popp would not have made and delivered the release without the note was paid. In the Jummel case, supra, the Supreme Court say: “ We think the law is, that when the record shows that the release was executed after the indebtedness was past due, in the absence of all notice to the subsequent purchaser, he will be protected.” We think that appellant’s claim that because the trust deed securing her note provides that the trustee shall release when the note should be fully paid, was notice to Mrs. Quilty, which compelled her, at her peril, to inquire of appellant as to whether the note had been paid, is not tenable. It is held in the Jummel case, supra. in substance, that inasmuch as the legal title was vested in the trustee he had the power, although it was a.breach of his trust, to release the land before payment, and the subsequent purchaser was justified in “ acting upon the validity of the release, as against any holder of the old indebtedness, upon the presumption of payment arising from the fact that it was long past due.” We see no reason why the maker of this note, having the power as he did, by its terms, to pay it at any time, it may not be considered the same as an overdue note. So far as concerns the rights of the appellees in this case, we think it can make no difference whether Popp, as appellant’s counsel claims, had knowledge at the time he executed the release that the indebtedness to appellant had not been paid, and that he was acting without authority in executing such release. There can be no reasonable doubt from this record but that the release in question was in fact executed by Popp and placed upon record by him, and this being so, Mrs. Quilty had the right to rely upon what the record showed, viz., a declaration by Popp that appellant’s note had been paid. The lien of Schmidt, being in the first instance prior in point of date and record to appellant’s note and trust deed under the facts as alleged in the answer by Felsenthal, which we have seen were established by the proof, was in no way changed. The release of the first trust deed to Felsenthal did not change the lien in equity, as the new incumbrance was given in part payment of the first, and without notice of any claim of lien by appellant, and relying upon the record of the Popp release. In equity this first incumbrance will be kept alive, notwithstanding its release for the protection of the executors of Schmidt as to the new note of $2,700, and for the protection of the appellees, the Quiltys, as to the $300 paid by their ancestor on the first trust deed to Felsenthal. The claim of appellant’s counsel that the release made by Popp was never delivered, is not, in our opinion, supported by the evidence On the contrary, we think that the chancellor was justified in finding from the evidence that it had been duly delivered. The claim for appellant that the appellees, the Quiltys, have a remedy against the Behrends for the fraud, and on their warranties against incumbrances, against the attorney who examined the title for negligence, and against the estate of Popp for fraud in executing the release, may be assumed for the purposes of this case to be true, but that would not deprive them of protection as innocent purchasers, in good faith, having, by their mother, paid and agreed to pay the full value of the land in question, which is shown to have been worth in 1892, $5,600, and at the time of the trial probably $5,000. It is said that the court erred in admitting in evidence the abstract of title and the opinion of the attorney who examined the same, but we see no error in this regard, and counsel have cited no authority in support of the contention. We think the evidence was competent as tending to show good faith on the part of Mrs. Quilty, and that she took the usual and ordinary precautions to ascertain the condition of the title to the property she was purchasing. It is also said that the court erred in excluding the testimony of appellant on rebuttal. The only thing she was asked was whose note was the note secured by the trust deed sought to be foreclosed. The ownership of the note had already been proven in the case by the production by her counsel on the trial of the note which had been offered in evidence, and no question was made by the defense in that regard. It is unnecessary to pass upon the question as to whether she was a competent witness, under the statute, to contradict the testimony of Behrend, because ño offer of proof in that regard was made by or on behalf of appellant. Counsel for appellant did not indicate to the chancellor that he desired to examine appellant on any other point than as to ownership of the note, and the chancellor said: “ I will let you save any right you have on that matter.” Moreover, the exclusion of her evidence is unimportant for the reason that there is sufficient competent evidence in the record to sustain the decree, and what was testified to by Behrend is not necessary to an affirmance of the decree rendered. The decree of the Circuit Court is therefore affirmed.