Tate v. Sanders

ROY, C. — This is a proceeding to quiet title brought in the circuit court of the city of St. Louis. The petition alleges that the plaintiff is the owner subject to a deed of trust given to secure the payment of $12,500 and interest to Deacon & Lambert, trustees, who are made parties. The defendant Sanders answered and by counterclaim sought to have the title of plaintiff and the deed of trust to Deacon & Lambert rdeclared invalid. The trial court held that the deed of trust was valid and — 194 — that the title of Tate was subject to that deed of trust; and subject to a judgment lien held by the defendant Sanders who has appealed. In 1885, Clemens Place in St. Louis was laid out and the plat filed with building restrictions providing that not more than one dwelling should be erected on any one lot therein. Those restrictions, by their own terms, were to expire August 2, 1905. On January 4, 1901, one Davidson conveyed to Charles Dixon lot 55 in Clemens Place. Ella Manning was the real purchaser. In making the purchase she acted through her agent, M. P'. Hynson, who used Dixoñasa“ straw man. ’ ’ Dixon was an employee of Hynson and insolvent, and was used by Hynson as a straw man in many transactions in which Mrs. Manning was the real owner, and in other transactions in which other parties were the real owners. Dixon, for a small consideration would take the record title to property in his own name, though he had no real interest therein. He would then execute deeds of trust on the property or convey it just as Hynson might desire. Dixon would execute “safety deeds” in blank as to the grantee, dates and even as to the description of the property and deliver them to Hynson to be used in any way he chose. Mrs. Manning fully understood that Dixon was being used in that way by Hynson in buying and selling property for her. The deed from Davidson to Dixon was recorded February 7, 1901. On January 22, 1901, Dixon executed to Mrs. Manning a safety deed for the property, which deed was kept from the record by Hynson and Mrs. Manning with the intention that it should not be recorded until the end of the Sanders litigation hereafter explained, and with the further intention that Dixon should appear to the world as the record owner of the property until the end of such litigation. That deed was never recorded and was subsequently lost. — 195 — On February 7, 1901, Hynson closed a deal by which Nicholls & Ritter loaned $10,000 on the property, for which Dixon executed a note and deed of trust. At that time Nicholls & Ritter knew that the money was loaned to be used in the erection of a double flat building on the lot. As soon as it became apparent that such building was to be erected the appellant herein, Sanders, and others who severally owned lots in Clemens Place adjacent to the lot in controversy, on February 18, 1901, began a suit, without bond, praying for three different kinds of relief; first, an injunction to prevent the erection of the flats as in violation of the building restrictions; second, a decree ordering the removal of the flats fin the event of their erection pending the litigation; third, damages for the breach of said restrictions. In that suit Dixon, Hynson and the contractor, Hunter, were made defendants. Notice of lis pendens in said suit was filed in the recorder’s office on February 26,1901, and on the same day Sanders served notice in the form of a letter to the defendants in that suit and to G. R. Manning, the husband of Mrs. Manning, and to Nichols and Ritter, telling them of the institution and purposes of that suit and warning them against the erection of such building. All of the money loaned by Nichols & Ritter on that deed of trust was paid over by them in closing the loan on dates beginning August 2, 1901, and ending November 13, 1901. Of that money the sum of $1545 went to pay a prior lien on the property. The flats were finished sometime in 1901, at a cost of $13,000. Mrs. Manning testified that she bought and built on the property as an investment and that she gave Hynson no authority to sell it. On February 1, 1902, Dixon and his wife executed two safety deeds to Mrs. Manning, conveying the property in controversy, and differing only in a recital not — 196 — material to this discussion. Both these deeds were intentionally withheld from record by Hynson and Mrs. Manning, until one was recorded as hereafter stated. On February 3,1902, a decree was entered in Sanders v. Dixon et al., ordering the flats to be torn down, and a great deal of newspaper notoriety was given to the fact. An appeal was taken to the St. Louis Court of Appeals, and an appeal bond was given. On October 17, 1905, the Court of Appeals reversed the decree of the circuit court, in an opinion in which it was held that as the restrictions on the building rights in Clemens Place had expired, the flats should not be torn down, but that the damages sustained by the plaintiffs therein should be assessed and judgment given therefor. The mandate was filed in the trial court November 1, 1905. In May, 1905, Dixon was intending to leave St. Louis, and he and his wife attached their signatures to four ordinary printed blank forms of warranty deeds, which were not filled up in any respect except as to the signatures, and those blanks were left with Hynson to be used by him as he saw proper. Dixon testified that Hynson had no authority to use those blanks for any property which Dixon had previously deeded. In October, 1905, after the reversal of the case of Sanders v. Dixon, Hynson and the plaintiff, contriving to defeat any judgment that might thereafter be rendered for damages in that case, made an arrangement by which Tate was to become the owner of the property for a consideration of $12,500. In order to close that deal, Hynson took one of the blank forms of deeds which had been signed by Dixon and his wife, and filled it up so as to make it in form a deed of conveyance from Dixon and wife to one Louis F. Verneuil, dated and purporting to be acknowledged before Hynson as notary public, November 9, 1905, and filed for — 197 — record November 10, 1905. Verneuil was a straw man for Tate. There was much controversy at the trial as to whether the blank on which that deed was written was one which was signed by Dixon and his wife. Sanders contended that it was not. The deed and two others which are conceded to have the genuine signatures of Dixon and wife are before this court for examination and comparison. It is, conceded that Dixon did not acknowledge that deed before Hynson at the time stated in the certificate of acknowledgment. The full amount paid by Tate to Hynson for the property over and above encumbrances was $1914.84. Tate had possession of the property from November, 1905, to November, 1907, when a receiver was appointed. On November 10, 1905, a deed of trust was executed on the property by Verneuil to secure $1000 to John T. Killoren, Jr., which was recorded November 11, 1905. That deed of trust was-in fraud of Tate’s creditors, and was held by Tate. No money was ever loaned on it. On November 9, 1905, a safety deed was executed by Verneuil for the property with the name of the grantee blank and delivered to Tate, but it was not recorded. About November 4, 1905, Tate procured from the Title Guaranty Trust Company a certificate of title to the property which contained the following in reference to the suit of Sanders v. Dixon et al.: “Notice of suit filed February 18, 1900. “Attachment Book 3, page 421: Lon Sanders and Ida L. Sanders, his wife, Norman Brown, Jesse B. Mellor, James K. Brugler, A. T. Hollister and William H. Danforth, for themselves and others similarly interested, v. Charles Dixón, M. P. Hynson and James W. Hunter. Affects lot 55 of Clemens Place in city block 3864 west, purposes of same being to enforce certain restrictions, etc. — 198 — ‘ ‘ Suit under above notice was filed in circuit court February 18, 1901, case No. 20160. “February 3, 1902, decree for plaintiffs. “March 25*, 1902, appeal allowed to St. Louis Court of Appeals. “November 1, 1905, reversed and remanded.' “Mandate and opinion filed.” In January, 1906, preliminary to making the loan of $12,500 by Deacon & Lambert, application was made to the title company for a certificate of title and they issued an original certificate which was silent as to the notice of lis pendens in the suit of Sanders v. Dixon et al. It showed two deeds of trust prior to. the one for $12,500'. They were the $10,000 and the $1000 deeds of trust above mentioned, and also showed various special tax liens. During the examination of Mr. Rohan of the title company he testified as follows: “ ‘We also examined for this special case when we made the examination in January, 1906. We made an examination of the conditions of that case in January, 1906.’ “The court sustains an objection as to whether the witness noted the fact of that examination in his abstract at that time, and Sanders excepts. “The court sustains an objection to Sanders’s offer to prove by the witness that there was no change in the condition of the case of Sanders v. Dixon between the time the witness made his report in November, 1905, and the time he made his report in January, 1906, and Sanders excepts. “ ‘We issued a certificate January 27, 1906. That was an original certificate. I d:o not know what had become of the preceding certificate at that time. “ ‘In a continuation we take the original certificate and attach to it the result of our investigation. In the original certificate there was no reference to any other. The certificate which I gave Love and Com — 199 — pany contained no reference to the snit. I do not know why that was.’ <£ (Cross-Examination.) ‘The date of the old certificate was November, 1905. “ ‘The date of the deed from Dixon to Vernenil was November 9. The reversal of the Court of Appeals in the case of Sanders'v. Dixon was November 1. “ ‘I think that the reason why we gave a clear certificate on January 27, 1906, and gave a certificate showing the pendency of the suit on November 4,1905-, was because the time for rehearing had not yet expired on November 4.’ ” Lambert testified that he saw paragraphs in the paper about the Clemens Place litigation, but did not know what property was involved in that litigation. He also testified that the title company was his agent for investigating the title. On January 23, 1906, Verneuil made Tate another safety deed for the property which was not recorded until March 14, 1907. On January 22, 1906, the deed of trust was executed by Verneuil to Edward K. Love to secure the note for $12,500 .to Gr. H. Dudley who was a straw man and who indorsed the note to Deacon & Lambert and the loan was closed January 30, 1906, the deed of trust having been recorded January 27, 1906. The money furnished on this loan was used in paying deeds of trust and taxes with a small balance paid to Tate as follows: Jan. 30, 1906. On this' date the $12,500 Love — Dudley deed of trust was “unloaded” on Deacon and Lambert, their agent, John H. Drabelle, paying therefor as follows: To Nicholls — Ritter, in payment of the $10,000 deed - of trust of January,, 1901 ....................$10,133.33 ’ 382 For the $1000 Haydel-Killoren deed of trust of November 10, 1905 ............................ 1,008.40 383 General and sprinkling taxes of 1905 ............ 225.24 383 Special tax bill for street improvement .......... 227.98 383 Special tax bill for sewers ...................... 41.20 383 Special tax bill for sewers ....................... 125.52 383 Total $11,761.67 383 Balance ($738.33)) was paid to Tate, — 200 — On June 1, 1906, ITynson made a statement showing the aggregate of receipts and payments on the property and showing a sale of the property to Tate. There was a conflict of testimony as to whether Mrs. Manning ever saw that statement. On June 6, 1906, final judgment was rendered in the case of Sanders et al. v. Dixon et al., and judgment was rendered separately in favor of the several plaintiffs therein for the amounts of damages suffered by each of them, amounting in all to $10,500', all of which by assignment of the other plaintiffs about June 14,' 1906, became the sole property of Sanders. On June 16, 1906, Sanders filed suit in the St. Louis Circuit Court'against Verneuil, Love, Dudley, Haydel, Killoren, Dixon, Hynson, Nicholls, Ritter, Nicholls-Ritter Realty & Financial Co., and Charles H. Tate. Love was the trustee in the $12,500 deed of trust, and Haydel in the $1000 deed of trust. That suit set out the facts of the litigation in Sanders et al. v. Dixon et al., and alleged that the deed from Dixon to Verneuil, and the deed of trust from Verneuil for $1000 and for $12,500 respectively were made in fraud of Sanders’s rights, and prayed that they might be set aside, and that the defendants Nicholls, Ritter, Nicholls-Ritter Realty & Financial Co., and Tate might be adjudged parties to said fraud, and that any secret title which they might have might be adjudged void. In June, 1906, counsel. for Sanders took Tate’s deposition in which Tate stated that Verneuil held the property for him (Tate), but denied that witness had a deed for it. In July following, Sanders’s counsel learned from another deposition of Tate that he» (Tate) did have an unrecorded deed from Verneuil. On November 14, 1906» Tate had filed a demurrer in Sanders v. Verneuil et al., and because of the fact that Tate had no title of record, counsel for Sanders thought they could get a speedier judgment by dis — 201 — missing as to Tate, and they did dismiss as to T'ate and all the other defendants except those who had title-of record. On December 20, 1906, Sander's entered into a contract with Mrs. Manning, by which she agreed to deliver to him the deeds executed by Dixon to her and which had not been recorded, and also to make a warranty deed from herself and husband to Sanders, and Sanders was to hold the land as trustee of an express trust for Mrs. Manning, subject to the lien of his judgments, and Sanders agreed to carry on the litigation and if unsuccessful to pay the costs thereof and to account for all realized by him over and above his judgments and costs to Manning. On December 22, 1906, Deacon & Lambert by consent were made parties in the case of Sanders v. Verneuil et al., and on January 19, 1907, the deeds from Dixon to Manning and from Manning to Sanders were put on record. On February 20, 1907, this suit was filed by Tate against Sanders, Mrs. Manning and husband, Hynson, Dixon, Verneuil, Love, Dudley, Deacon, Lambert, Haydel, Killoren and Mrs. Dixon. On October 14, 1907, the cross-bill of Sanders was filed in this case, and on October 17, 1908, execution was issued in the case of Sanders et al. v. Dixon et al. and levied on the property in suit, and on November 11, 1908, the property was sold under the execution to Sanders and he received the sheriff’s deed therefor. On April 22, 1907, Tate was brought back as a party defendant in Sanders v. Verneuil et al., for the reason that he had filed of record thé deed from Verneuil to himself. The pleadings, like the facts, are almost infinitely ramified, consisting of petitions, cross-bills and demurrers, to which are added many motions. Let it suffice to say that they are broad enough to support any finding of fact justified by the evidence, except — 202 — that no'amendment was made of any pleading so as to show the purchase by Sanders under execution or the sheriff’s deed to him. The trial court held that the deed of trust for $12,500 was a first lien on the property, and that the judgment for'$10,500 held by Sanders was a second lien thereon. It also held that the deeds from Dixon to Manning and from Manning to Sanders and the sheriff’s deed from Dixon to Sanders were void, and directed that the property be sold by the sheriff subject to the $12,500 deed of trust and that the proceeds, after paying costs and expenses should be used in paying, first, the judgment held by Sanders, and that the balance, if any, should be paid to Tate. I. The respondents, Love, Deacon and Lambert, make the point that there is no appeal and no bill of exceptions in this case. The condition of the record as to those questions is almost as voluminous and involved as are the facts as to the merits, and as we have reached the conclusion that the judment must be affirmed as to those respondents, we will not assume the burden of deciding whether, strictissimo jure, the ap^ peal and the bill of exceptions are properly here. II. The appellant contends that his plea in abatement should have been sustained. He had, on June 16, 1906, filed a suit against Verneuil, Tate et al. to set aside the deed from Dixon to Verneuil, stating that Tate was a party to the fraud, in aid of which that deed was made, and asking that any secret title which Tate might have might be declared invalid. In June and July, after that suit was begun, appellant’s counsel became aware, by reason of a deposition of T'ate, that he (Tate) held an unrecorded deed from Verneuil for the property. — 203 — On November 14, 1906, knowing that Tate held sneh unrecorded deed, and in order not to be delayed in his efforts to get judgment against those who had interests as shown by the record, Sanders dismissed as to Tate, who had interposed a demurrer to the petition. After such dismissal, and while he was not a party to such former suit, and before Deacon and Lambert were made parties thereto, Tate brought the suit now being considered, and Tate was not again made a party to that former suit until April 22, 1907. The action of the trial court in finding against the plea in abatement was proper. Sanders, with full knowledge, dismissed as to Tate, which left Tate free to bring this suit against Sanders. He was not then a party to the case of Sanders v. Verneuil et al., and he was not in any way estopped from asserting his rights by another suit. III. Mrs. Manning intentionally left the record title to the property in Dixon and withheld from record the deed from Dixon to her. Consequently, whoever got Dixon’s title, in ignorance of her rights, was entitled to hold as against her. If the deed of trust held by Deacon & Lambert is good as against Dixon it is good as against her. The trial court found that the deed from Dixon to Verneuil was made by Hynson by using one of the four blank forms of deeds which had been signed by Dixon and wife and left with Hynson, who filled up all the blanks by inserting the date, the names of the parties, the description of the property and all other essentials, and then placed thereon a false certificate of acknowledgment and delivered the same to Tate, the name of the grantee therein being Verneuil, Tate’s straw man. We concur in that conclusion. It is unreasonable to suppose that Hynson, having taken the precaution — 204 — to supply himself with four blanks having the genuine signatures of Dixon and his wife, would discard them and forge Dixon’s signature. The deed from Dixon to Verneuil and some of the blank deeds with the genuine signatures of Dixon and his wife are before us. From a comparison of them and from all the evidence in the case, we have no doubt of the correctness of our conclusion. The appellant contends that an instrument made in that way is void as a deed. Let the point be conceded. Though void as a deed, it is valid as an estoppel. Dixon left that blank instrument with his signature thereto with Hynson deliberately fo.r the purpose of its being used in just that way. We have not overlooked the fact that Dixon testified that he. gave Hynson no authority to use those blanks in conveying any tract for which he had previously made a deed. But we attach no weight to such statement in the light of the overwhelming facts in this case. What Dixon intended should be done was done. That instrument was placed of record just as Dixon contemplated. Deacon and Lambert, or their examiner, saw it, or the abstract of it, and supposed it was a good deed and invested their money on their faith in it. That result was also intended by Dixon. We need not encumber this opinion with authorities that such conduct on the part of Dixon constitutes an estoppel. As against both Dixon and Manning the deed of trust held by Deacon and- Lambert is valid. IV. Appellant contends that the notice of Us pendens in Sanders v. Dixon et al. had the effect of subordinating the deed of trust held by Deacon & Lambert to the judgment held by Sanders. The opinion of the St. Louis Court of Appeals had the effect of eliminating from that case all its equitable features. — 205 — From that time it was purely an action in personam. The notice of lis pendens became functus officio. In Crocker v. Lewis, 144 N. Y. 140, the facts were that a suit had been brought to restrain the erection of flats contrary to an agreement. Notice of lis pen-dens was filed. Thereafter and before judgment a mortgage was placed on the land. The injunction was made perpetual and the plaintiff recovered costs. It was held in effect that such judgment for costs was subject to the mortgage, being a mere personal judgment which did not relate back so as to supplant the mortgage. It was held that in so far as the suit was a proceeding in rem it bound the subsequent mortgage, but as to the recovery of a judgment for costs which was merely in personam it did not affect the mortgage. Bennett on Lds Pendens, Sec. 131, says: “Where a bill was filed to enforce a lien for purchase money, but was not prosecuted with that view, but, on the contrary, when it came to decree, the decree was so framed as merely to determine the amount of the purchase money, without any provision with respect to the lien, one who had purchased the land pending the bill, although with full knowledge of the equitable lien, was held not bound by lis pendens,” and cites Briscoe v. Bronaugh, 1 Tex. 326. St. Joseph Mfg. Co. v. Daggett, 84 Ill. 556, is to the same effect. The reason for the rule is stated in 13 Am. & Eng. Ency. Law (1 Ed.), 879 as follows: , “Were the rule otherwise, it would be in the power of an unjust claimant to greatly embarrass and finally destroy the business of a defendant. It would tend to a prohibition in dealing with defendants.” The title company doubtless took this view of the law when they omitted to note the Us pendens on the certificate. The fact that the title company knew of the lis pendens, even if it was the agent of Deacon & Lambert, would not alter the case. Knowledge on the part of Deacon & Lambert that there was a suit for — 206 — damages pending against Dixon was no notice to them that the deed to Yernenil was made in fraud of Dixon’s creditors. We, therefore hold that as against all parties to this litigation the deed of trust held by Deacon & Lambert is a first lien on the property involved, the record being devoid of any evidence tending to show that Deacon & Lambert knew of any fraud, on creditors in the conveyance to Yerneuil. Y. The trial court found that the conveyance from Dixon to Yerneuil was a fraud perpetrated by Tate, Dixon and others against the rights of Sanders. We approve that finding. So far as Tate is concerned that deed is void. On November 11, 1908, Sanders purchased at execution sale of the property and received the sheriff’s deed therefor. The proof of Sanders’s title under that deed was in evidence without objection. The trial court held that such deed conveyed no interest whatever. We are of the opinion that it conveyed the title as against Dixon and Tate, and that as against that deed Tate has no title whatever. There was no supplemental pleading filed by Sanders setting up the acquisition of such title. The proof is in without objection. Sanders should be permitted to file a supplemental pleading setting up such facts to the same effect as if made at the trial. YI. As against all other parties to this suit the title from Dixon through Manning to Sanders is void, and Sanders has no right thereunder. YTI. Appellant contends that he is entitled to rents as against Tate. He was not entitled to any rents until he got title under the sheriff’s deed on November ' 11, 1908. The adjustment of the rents should be made on the basis that Tate is entitled to all that accrued prior to' the date of the sheriff’s deed — 207 — to Sanders and that Sanders is entitled to all accruing thereafter. YIII. 20 Cyc. 631 holds that where the fraudulent grantee places incumbrances on the property to a bona-fide mortgagee he is liable to the creditor for the amount of the incumbrance, and Bump on Fraud. Con. (4 Ed.), Sec. 623, and Wait on Fraud. Con. (3 Ed.), Sec. 177, are to the same effect. Of the amount loaned on the $12,500 deed of trust, $1008.40 went to pay the amount of the Killoren deed of trust which was a fraud and was held by Tate. The sum of $738.33, the balance after paying the $10,000 deed of trust and special taxes, was used in partly paying the expenses and commissions on the loan. So that the amount of adiditional encumbrance put on the property was $1746-.73, and for that amount Sanders is entitled to judgment with interest at six per cent per annum from December 26, 1908, the date of the decree herein. The judgment is reversed and remanded with directions to permit defendant Sanders to file a supplemental pleading setting up the acquisition of title by the sheriff’s deed, and to take an account of the rents since the date of said sheriff’s deed and to enter judgment in accordance with this opinion. Blair, G., concurs. PER CURIAM. — The foregoing opinion of Rot, C., is adopted as the opinion of the .court. All the judges concur.