McLoskey v. Gordon

Mr. Chief-Justice Smith delivered the opinion of the court. This was a bill filed in the vice-chancery court for the northern district, by Patrick McLoskey, to procure a conveyance of two sections of land, the legal title to which was alleged to be held by the respondent Robert Gordon. By an interlocutory decree the legal title to the lands in controversy was determined to be in Gordon, and that he held the same in trust for the complainant; and further, that the former should have a lien upon the lands for certain moneys expended by him in procuring a conveyance of the same from the original vendors. It was also further ordered, that an account should be taken and stated between the parties. An account was accordingly taken and stated, to which exceptions were filed by both the complainant and respondent. The report being amended agreeably to the directions of the chancellor, it was confirmed, and a final decree was rendered, by which Gordon was required to convey the lands to McLoskey, upon the payment by the lat-ter to the former, of the sum of $2,292.64; to this decree both parties sued out writs of error to this court, and both causes have been argued and submitted together. The first question arises upon the interlocutory decree. It is insisted, that under the pleading and proofs it was error to order an account to be taken in the case. Assuming that the answer was so framed, that an allowance could have been legitimately made for the expenses averred to have been incurred by respondent, in procuring the conveyance from the heirs of Colbert, let us inquire whether a foundation was laid for an interlocutory decree to account, for if that was not done, the decree was erroneous. The rule on the subject is, that the facts in relation to the account should not only be [271] put in issue, but there must also be evidence which shows them to be probable, and the equity proper. It appears that respondent, with George and John Wight-man, formed a copartnership in 1836 or 1837, for the purpose of purchasing and dealing in lands reserved to the Indians, unde? the treaty of the 24th of May and 31st of July, 1834, made with the Chickasaws. By the terms of the partnership, the respondent was to furnish $20,000, and the Wightmans jointly the like sum. But respondent furnished in fact $25,000, whilst the Wightmans furnished less than $20,000. John Wightman, in pursuance of the partnership agreement, purchased from the heirs of Levi Colbert four sections of land, embracing the two sections in controversy, for which he paid the sum of $12,000. A conveyance for these lands was made to him by a part of the vendors; and the deed, which was after-wards lost, was not approved by the agent, because all of the heirs of Colbert had not joined in its execution. These lands were divided in 1838, and the two sections in controversy fell to the share of the Wightmans. There is a conflict in the testimony in regard to the fact, whether the whole of the purchase-money had been paid by Wightman; but if the whole of the purchase-money was not paid, the respondent was cognizant of that fact at the time of the divisions. Prior to the transactions with the complainant, the Wightmans were indebted to the respondent seven or eight thousand dollars. By a deed of trust, dated the 8th of May, 1838, Wightman conveyed one of the sections of land in controversy, to wit, section 20, of township 12, range east 6, with other lands, to J. G. English, in trust, to secure certain debts which he owed to J. D. and B. M. Bradford. This deed of trust was not filed for record until the 7th of August following. On the 17th of May in the same year, Wightman sold and conveyed by deed in fee-simple, the said section with the other land in dispute, to Philip McLoskey, who was a bond fide purchaser for a valuable consideration, without notice of the deed of trust previously executed to English. McLoskey filed this deed for record on the day it was executed; and on the 27th of February, 1840, sold and conveyed in fee these lands to complainant. [272] The respondent knew that the original deed from the heirs of Colbert to John Wightman had been lost; and he had actual, as well as constructive, notice of the sale and conveyance by said Wightman to Philip McLoskey. In the fall of 1841, respondent, in possession of full knowledge of these facts, went west of the Mississippi River, whither the Chickasaws had removed. Whilst there, he induced the heirs of Colbert and Myuta-ho-yah, his widow, to join in a deed conveying the lands in controversy to himself. He told them that their deed to Wightman was lost. He persuaded them that it was right and proper for them to execute a new deed, because the original had been lost; and assured them that such was the custom among the whites. He paid nothing to the heirs as purchase-money, to induce them to comply with his request. It was alone by these representations and by means of the original sale to Wightman, that he was enabled to succeed in procuring a conveyance to himself. There were two other sections, to wit, sections 28 and 33, lying in the same township and range, which were purchased from the Colbert’s by Wightman, and embraced in the lost deed, which, upon the partition between him and respondent in 1838, fell to the share of the latter. The titles to these sections were consequently in the same situation; and the new deed which respondent obtained, embraced them as well as those which are the subject of this suit. There are no specific statements in the answer, in regard to the amount of the expenses incurred by respondent in procuring the deed; but it was in proof, as a part of his statements which were offered in evidence by the complainant, that respondent had expended for that purpose $1,500. From this recital of the evidence it is to us manifest, that respondent had no equitable claim to remuneration for his trouble or the expenses incurred in procuring the deed. He was fully apprised of the conveyance by Wightman to Philip Mc-Loskey, and had constructive notice of the conveyance by him to complainant. He might have supposed that that had not passed the legal title;, but he knew McLoskey had a valid-equitable title to the lands. He made use of the original sale to Wightman to procure a deed to himself. And although his [273] primary object may have been to secure his demand against the Wightmans, the act was directly prejudicial to the interests of McLoskey, and, as it was performed with a full knowledge of his rights, it must be held fraudulent. And if fraudulent, it constitutes no foundation for the claim to reimbursement on account of the expenses incurred by respondent. The rule on this subject is laid down by this court in the case of Stovall v. The Farmers and Merchants Bank of Memphis, 8 S. & M. 316, in which it was said by the late chief-justice, that “ a fraudulent intent vitiates a purchase made in consummation of the design as against purchasers. We know of no rule which gives a lien under a fraudulent contract. Every one who engages in a fraudulent scheme, forfeits all right to protection at law or in equity. The law does not so far countenance fraudulent contracts as to protect the perpetrator to the extent of his investment. This would be to hold out inducements to engage in schemes of fraud, as nothing could be lost by a failure to effectuate the entire plan.” It may be said in the case at bar, that the complainant was.not ultimately injured by the acts alleged to be fraudulent. If such be the fact, it was. certainly not the intention of the respondent, that they should prove beneficial to him, and cannot exempt the case from the rule, that an act of fraud can never constitute the foundation of relief in a court of equity. Nor do'we think the sale made by English under the trust deed, at which respondent became the purchaser, entitled him to either a lien upon the land, or reimbursement to the amount of his bill. McLoskey had no notice of the trust deed under which the sale was made, had purchased the lands, and took a deed from his vendor, which purported to be a conveyance of the land in fee. It was recorded on the day it was executed, and took effect from that date; whereas the trust deed, although of prior date, did not take effect until it was filed for record, which was not done until more than two months had elapsed after the execution of the deed to McLoskey. But, if it were admitted that the registry act does not apply, and hence, that a bond fide sale under the deed in trust would pass whatever title was vested in the trustee,-the respondent would not occupy a more favored position. [274] The deed of Wightman to McLoskey, upon this supposition, if it did not convey the fee, in consequence of Wightman’s defect of title, or of the prior deed of trust, was certain!y so far operative as to vest in McLoskey the equity of redemption. Hence he had a right to force a legal title, by paying off the incumbrance imposed by the trust deed, at any time before a foreclosure and sale. This right was defeated by the sale, unless void as to McLoskey, in consequence of the alleged fraudulent conduct of the respondent. And if void for that reason, he can claim neither a lien upon the land, nor a repayment of the purchase-money. The proofs in regard to the conduct of the respondent, leave no room to doubt, that the sale was void as to creditors and the person holding the equity of redemption. The land at the trust sale was worth upwards of $3,000. It was sold for $500 to the respondent, who bid that sum. Persons were induced not to bid for the land by the respondent, who proclaimed that he wished to buy in the land for the Wightmans, and exhibited a letter from them, authorizing him to buy it. There was evidence which tended strongly to show that it was not the real intention of the respondent to purchase the land for the benefit of the Wightmans, but to secure it for himself. If so, his acts' were fraudulent in a double sense. And it is in proof, that the land w-as sold greatly below its value in consequence-of those acts. We bold that he was not entitled to a repayment of the sum he bid at the sale. 8 S. & M. 316. Entertaining this view of the transactions connected with the procurement of the deed from the widow and heirs of Colbert, and the sale under the trust deed, we think the vice-chancellor erred in ordering an account to be taken. But, in regard to the main question, we think the decree was right. We think it was properly holden that the legal title to the lands was in the respondent, and that the complainant clearly is entitled to a conveyance of that title. We, therefore, reverse the decree, and order the decree which the court below should have rendered to be entered in this court.