North American Trust Co. v. Lanier

Calhoon, J., delivered the opinion of the court. On March 22, 1887, Frank B. Lanier was the owner in fee simple of the lands in controversy, and on that date he borrowed $500 from L. N. Buck, to secure which, payable in five years, he presented a trust deed purporting to be signed and to be duly acknowledged by himself and his wife, Mary E. Lanier, before a justice of the peace, who has since died. The record appearing free from any incumbrances or liens, Mr. Buck furnished the $500. Mrs. Lanier; the appellee, testifies that she knew nothing of this loan; that her name to the deed is a forgery, which she “reckons’-’ was committed by her husband, Frank B. Lanier, who was not produced as a witness by either side. And she further testifies that the certificate of the justice of the peace that she acknowledged the instrument is false. The court below found in her favor on the facts, and we will not disturb the conclusion to which it arrived as to this. Mr. Buck, how — 427 — ever, was without any knowledge or suspicion of this fraud. Notwithstanding the fraud, inasmuch as the husband was the owner of the lands, the conveyance in trust was valid as to any excess over the homestead, and, of course, there passed to his assignees, immediate or remote, the same right he had to resort to such excess for satisfaction. A few weeks after this transaction, Mr. Buck discovered that there was a sum of about $500 unpaid by Mr. Lanier of the purchase money of the lands, which sum was a lien on them, and that a cancellation appearing on the record of this lien was false and fraudulent, and that this debt for unpaid purchase money was held by Mr. Ben Dart as guardian of some minors, -and so, for his own protection, Mr. Buck bought this debt, and .had the note for it assigned to.him. Thereupon he undertook to have it consolidated with the first note, and, pursuant to arrangement with Mr. Lanier, he was to mark ‘ ‘ satisfied ’ ’ on record of his trust deed, upon being furnished another to secure $1,000, this amount being made up of the original $500 debt to him and the $500 of the unpaid purchase money note he had bought. So Mr. Lanier brought or sent him another trust deed, with the same trustee for security, for the $1,000, with ten per cent, interest, payable five years after date, purporting to be signed by him and his wife, and purporting to be acknowledged by her and him before the same justice of the peace. This trust conveyance bears date May 21, 1887. Mrs. Lanier swears that she never signed or acknowledged this instrument, and the court below held accordingly, and we do not disturb this ruling. Mr. Buck believed the whole thing valid, and there was no circumstance to awaken his suspicions. In this attitude of the case, it is very clear that his trust deed was valid to the extent of the unpaid purchase money paid by him on all of the land and on the excess over the homestead for the remainder of his d.ebt. As to the unpaid purchase money, the note for which he was the assignee covered the whole land, and he canceled this security under the belief that his new trust deed securing — 428 — his new $1,000 debt covered the whole land, which it would have done if Mr. Lanier had not forged his wife’s signature. The vendor’s lien note is filed by complainant in evidence. Afterwards, and on December 31, 1887, Mr. Lanier conveyed the whole land to his wife, Mary E. Lanier'. She was a volunteer, pure and simple, and paid nothing for it, and so she took it charged with all the equities of Mr. Buck. Subsequently to this donation by him to his wife, Mr. Lanier wanted more money; and so he negotiated a loan of $2,100 from the Jarvis-Conklin Loan Company, and, in order to get it, presented a trust deed purporting to be signed and acknowledged by him and his wife. Mrs. Lanier swears that this is another forgery, and the court sustained her, and we do not disturb the decree as to this. This'instrument is of date January 1, 1890, to secure the note of the grantors, Lanier and wife, payable five years after date, interest payable semiannually, as shown by coupons, at 6 per cent, per annum, but the coupons to bear 10 per cent, after maturity, and the debt to-become due in full, at the option of the beneficiary, on any default, and Lanier and wife were to keep the taxes paid; and this covenant as to taxes is in both the Buck trust deeds, before mentioned. Out of this' $2,100 the Buck debt was wholly paid, and he marked it ‘£ satisfied ’ ’ on the record of *the trust deed which had been given to secure him his $1,000. This payment to Buck was required to clear the record title, and complainant holds the notes by Buck’s assignment to a bank, and the bank’s indorsement in blank. Default being made in interest payments on the $2,100, the land was sold by a substituted trustee, and conveyed to Murray F. Smith, Esq., who-was agent for the Jarvis-Conklin Company, and his bid was credited on the $2,100 note. This conveyance was of date October 3, 1891. On October 19, 1891, Smith conveyed the land to Beardsley and Gilbert, who on December 12, 1894, conveyed it to the Western Investment Company, which on March 1, 1897, conveyed it to appellant, who, on June 17,. — 429 — 1898, filed the original bill in this canse, praying the court to cancel certain tax conveyances, to be hereinafter referred to, as clouds, and praying to be put in possession of the lands. To this bill Frank B. Lanier made no appearance, and a decree pro confesso was taken against him. But she did answer, and set up that her numerous signatures to deeds and notes were frauds and forgeries, sets up homestead rights, relies on the gift conveyance by her husband to her of May 21, 1887, and relies on the tax titles. There was an amended bill, an answer and cross bill, a demurrer to the cross bill overruled, and then an answer to that, all of which we need notice no further than to say that the facts hereinbefore detailed and to be stated appear in appropriate pleadings. The tax titles set up by Mrs. Lanier are traced through three tax conveyances to one P. H. Feld, each of the same date (March 2, 1891), purporting to convey each separate parcel of what Mrs. Lanier avers to be the land in controversy, and next a conveyance from Feld to Gibson of date May 25, 1892, and finally a conveyance from Gibson of date November 11, 1893, to her and ‘ ‘ her children then living, ’ ’ and the children are parties to this cause. She relies on this and the three-years statute of limitations in favor of purchasers at tax sales. Now, it is plainly manifest that Mr. Buck, and all the parties in interest under him, at the time they became interested, were in absolute ignorance of all the frauds of F. B. Lanier which have been recited. Every action was had in the utmost good faith, under the belief, derived from the face of the records, that the instruments were duly signed and acknowledged by Mrs. Lanier. Now, if they had been genuine, it is too plain to discuss that Mr. Buck could not have been defeated as to the $500 vendor’s lien paid on the whole land, and as to the $500 after-wards loaned by him when Mr. Lanier was sole owner, by the tax title or anything else set up by Mrs. Lanier and her children that appears in this record, short of the statute of limita-, tions from the time of notice of the fraud. They were in pos — 430 — session, and remained so, charged with all the equities of Mr. Buck; and it was their duty to keep the taxes paid, and any purchase by them or for them of an outstanding tax title was-a mere extinguishment of it for the benefit of Buck’s equities, and for the benefit of all parties under and in privity with him. It is not to be tolerated that a party in possession as a mere volunteer by gift, may defeat a vendor’s lien, or a right of one to the excess over the homestead, by buying at tax sale, or from one who has bought at tax sale. A tenant in common, even out of possession, could not do this. Cohea v. Hemingway, 71 Miss., 22, s.c. 14 South., 734. And much less can it be done by volunteers in possession solely under the fraudulent-husband and father. This disposes of the tax title, and so we do not address ourselves to any inquiry as to whether the tax conveyances are or are not void on their face. But Mrs. Lanier goes even further in the effort to continue to enjoy the fruits of the monstrous frauds committed by her husband. Believing that the statute of limitation might save to her the plunder achieved by her husband’s unparalleled iniquity, she sets up the bar of the statute of limitations, and, aware that she could not show actual notice of the fraud, she endeavors to show constructive notice to start the running of the statute. In cases of fraud the cause of action “first accrues at, and not before, the time at which the fraud shall, or, with reasonable diligence might have been first known or discovered.'” Code, §§ 2731-2762. Plainly in the case at bar the statute of three years cuts no figure, as the debts were all evidenced by notes. The constructive notice on which Mrs. Lanier relies consists of a bill in equity (No. 2282 on the docket) filed in her name on June 3, 1892, against Beardsley & Gilbert, attacking the conveyance to Murray F. Smith, and his conveyance to Beardsley & Gilbert, as well as that from the substituted trustee under the first deed to secure the J[ar vis-Conklin Mortgage Company, on the ground that her husband or some one else had signed her name to the trust. — 431 — deed, and that her husband had got the money, and used it for “his own private ends and enjoyment.” About this bill, however, strangely enough, she swears as a witness in the case now at bar that she knew nothing, and that she never authorized it to be filed. Be this as it may, and if she can set up the six-years statute of limitations, which we do not decide, the facts do not sustain her in the contention that that bill was notice within that period. It could not be notice to Beardsley & .Gilbert until service of notice on them, or publication of notice to them as nonresidents, or actual notice of the pendency of the proceeding, of all which there is no pretense of proof. It is true it is shown that Murray F. Smith, Esq., out of whom the title had passed before the filing of bill No. 2282, which is apparently still pending, without any proceedings subsequent to the mere issuance of process, had notice of the bill and had agreed to answer it, but on account of pressure of business overlooked it; but it is nowhere shown that he had such notice within fourteen days after the process issued on it, which was June 3, 1892, and unless it was within that time, six years had not elapsed. But if the notice to him had been in time, it would not avail. He was not employed by Beardsley & Gilbert in that case. He was their counsel in Vicksburg to examine records and pass on titles, but it nowhere appears that he was. ever authorized to accept service of process for them'in any case. The doctrine of caveat emptor, of course, has no sort of application here. The chain of title shows purchasers innocent of any notice of the monstrous frauds, all in privity with Buck and clothed with all his equities, and parties in possession by gift must respond to them. They cannot avoid them and continue to enjoy a donation from the author of the fraud, or set up a tax title acquired by them while in possession. They took Frank B. Lanier’s title charged with all the duties he was charged with, and amenable to the compulsion of the same equities which he would be compelled to satisfy. They are not in the - category of innocent purchasers, whom the courts will — 432 — not be permitted to be damaged under the doctrine of subrogation. Bonner v. Lessley, 61 Miss., 393. The right of subrogation passes to innocent assignees in virtue of equity, and not of contract, and is of avail to them against all volunteers or mere donees. Neither Buck nor any subsequent holder of the paper would have touched it but for ignorance of the fraud. The case is reversed and remanded with directions to the court below to ascertain the amount, principal and interest, as the note runs of the debt for unpaid purchase money extinguished by Buck, and make the sum total a charge, with interest from date of payment by Jarvis-Conklin Mortgage Company, on all the land, and to ascertain likewise the sum total of principal and contract interest on the remainder of the §1,000 Buck note, and make it a charge, with interest from date of payment by Jarvis-Conklin Mortgage Company, on the land in excess of the homestead, the homestead to be allotted according to law. Otherwise, the final decree below is not disturbed. Affirmed in part and reversed in part.