35 F. 445 | U.S. Circuit Court for the District of Western Pennsylvania | 1888
This bill is in aid of an action of ejectment pending in this court, brought by the plaintiff, John Satterfield, against H. P. Malone, and Emma E. Malone, his wife, two of the defendants herein, for the recovery of certain oil-producing lands situate in McKean county, Pa. The real parties to the controversy are the plaintiff and Mrs. Emma E. Malone, each of whom claims title to the lands under George A. Baker, who owned' them in fee. By his two deeds, purporting to convey an indefeasible title in foe-simple, dated and acknowledged November 20, 1880, and duly recorded in McKean county on February 12, 1881, George A. Baker, for the expressed aggregate consideration of $150,000, conveyed said lands to Dr. Azariah Everett, who, by his deeds dated December 17, 1883, conveyed the same to Lewis E. Mallory, who a few days thereafter conveyed the same to Mrs. Emma E. Malone, for the expressed consideration of $20,000. On May 19, 1881, Hilton & Waugh began suit by writ of foreign attachment in the court of common pleas of McKean county against George A. Baker, and on the next day
The hill charges that the deeds from Baker to Everett, although absolute
In her answer to the bill, M rs. Malone denies the allegation made therein that the deeds from Baker to Everett were mortgages; she explicitly denies that she had any notice or knowledge that they were otherwise than as they appear on their face, or that it was claimed that they were intended to he mortgages; she denies that she had any notice or knowledge of the foreign attachment at the suit of Hilton & Waugh; she denies every charge of fraud contained in the bill, and avers that she is a bona fide purchaser of said lands for value, without notice or knowledge, either of the claim that the deeds from Baker to Everett were mortgages, or of the pendency of the foreign attachment; she denies that her husband, H. P. Malone, acted for her in the transaction, or induced Everett to convey said lands; she admits that Lewis E. Mallory acted for her in the purchase of said property, and avers that he paid Everett for the property the sum of $20,000 in cash, which money was her own, and that Mallory himself was a bmiafi.de purchaser, without any notice or knowledge that the deeds from Baker to Everett were intended to he mortgages, or of the pendency of the attachment suit of Hilton & Waugh'. The plaintiff not having waived an answer under oath, Mrs. Malone’s answer, which is under oath, and responsive to the hill, is evidence for her, and must prevail, unless it is overcome by the testimony of two witnesses, or one witness and corroborating circumstances which are equivalent in weight to the testimony of another witness. Vigel v. Hopp, 104 U. S. 441; Morrison v. Durr, 122 U. S. 518, 7 Sup. Ct. Rep. 1215.
In the treatment of this case I will first address myself to the inquiry whether, under the proofs, any actual bad faith is imputable to Mrs. Malone in this transaction. The main facts bearing upon this question, as established by the evidence, are these: Mrs. Malone was the adopted child of William Hart, of Cleveland, Ohio. In 1865, shortly
In 1878 Mr. Malone went into the oil-producing business in McKean county, Pa., with George A. Baker; Malone superintending the putting down of wells and disposing of the product. The lands they operated upon (which included those in dispute) were purchased by Baker, and the title was in him; but by an unrecorded contract it was agreed that after Baker was reimbursed his purchase money, etc., he should convey an undivided share of the property to Malone. But it seems that Baker never was reimbursed, and he continued to hold the entire title. Baker, individually, and Baker & Malone, became largely indebted to Everett, Weddell & Co., bankers, of Cleveland, Ohio, of which firm Dr. Everett was a member. In 1880 that indebtedness in the whole much exceeded $300,000. On or about February 11, 1881, Baker and Dr. Everett sent Virgil P. Kline and W. L. Lord, from Cleveland to McKean county, with the two deeds dated November 20,1880, air ead3r mentioned, from Baker to Everett, with instructions'to put them on record, and take possession of the property for Dr. Everett; and this they did. Those gentlemen exhibited to Malone the deeds, and informed him that Baker had sold the property to Dr. Everett to liquidate the debt Baker & Malone owed Everett, Weddell & Co. Mr. Lord, who was then Baker’s book-keeper, and who testified in this case for the plaintiff, speaking of what occurred at that interview, says:
“Mr. Malone made objection to it. He expressed great surprise at the ‘ summary proceeding,’ as he called it, in closing up the firm. And he said he had no knowledge at all; supposed Mr. Baker was a very wealthy man, and was very much surprised at our coming down there, and taking possession of the property as we did; and Mr. Kline and I both labored with him a long while; and at last, by Mr. Kline, as the authorized agent of Dr. Everett, giving him a paper to the effect that he would be held harmless in the future, he consented to the transfer. ”
Mr. Lord further testified that both Kline and himself represented to Malone that the sale by Baker to Everett was absolute, and called “his attention to the fact that it would not begin to pay the indebtedness of
It appears that before Mrs. Malone came to Pennsylvania she had bought and sold several pieces of real estate. She moved to McKean comity in the spring of 1880. Shortly afterwards she bought an oil property. This purchase she made through one Townsend, an oil operator She put down wells on that property, and then sold it at a profit of §7,000. It is shown that she had often spoken to Lewis. E. Mallory about buying an oil property for her. He was a near neighbor, engaged in the oil-producing business, and in buying and selling oil lands. In 1883, and prior thereto, Mr. Malone was speculating largely in oil, and was much on the floor of the Oil Exchange at Bradford. Mrs. Malone testifies that several times she had requested her husband to buy an oil property for her, and that he replied “that whenever I found a property that suited me, he was ready to pay me.” She states that she considered the speculative business in which her husband was engaged as hazardous, and was afraid he might lose her money, and she adds: “1 wanted it so that if anything happened to my husband I could take care of my parents and children.”
In December, 1883, Dr, Everett employed G. D. Angelí, a real-estate broker at Bradford, Pa., to sell the lands in controversy. Angelí informed Mr. Malone that they were for sale, and could bo bought lor §20,000. No communication whatever had taken place on the subject between Dr. Everett and Malone, and the latter was surprised to learn from Angelí that the property was for sale. Mrs. Malone was then in the city of New York, where she had been for several months. Mr. Malone wrote to her that the property was for sale at the price named, aud that it would be a good purchase, and he inclosed her a check payable to her order for $20,000. Mrs. Malone wrote to Mr. Mallory to make the purchase for her, and sent him the check, indorsed payable to his order. Mallory saw Angelí, and, without disclosing his principal, concluded the purchase in his own name. Dr. Everett’s deed to Mallory, dated December 17, 1883, was brought to Bradford by John H. Webster, Dr. Everett’s lawyer, and by 1dm was delivered-to Mallory upon his payment of the purchase money, §20,000. This money was the proceeds of the Malone check. A few days afterwards Mallory conveyed the property to Mrs. Malone. In this purchase Malone did not act as his wife’s agent, or represent her at all. He did not participate in the negotiations. He took no part in the transaction whatever, except to inform his wife that the property was for sale, and would be a good purchase, and to send her a check for $20,000 to buy if she thought proper. That money honestly belonged to Mrs. Malone, and beyond any manner of doubt it was paid by her, through Mallory, to Dr. Everett for the property. The sale by Dr. Everett was not solicited or suggested by Mr. or Airs. Malone. It ivas Everett’s own volun
What foundation, then, is there for the charge that Mrs. Malone’s title is “fictitious” or “fraudulent?” I have searched through the proofs in vain to discover any evidence to sustain such charge. Circumstances calculated to excite suspicion are not enough to establish fraud. Morrison v. Durr, supra. But even suspicious circumstances are wanting here. Mrs. Malone’s employment of Mallory in this business she satisfactorily explains, if any explanation were needed. The property was offered for sale, and Mrs. Malone had a perfect right to buy, and to employ whom she pleased to act for her. That Malone himself kept aloof is a circumstance which is not prejudicial to his wife. In the course of his cross-examination, Malone having stated that he did “not want to be a purchaser of the property,” and being asked why not? answered: “ Because I was annoyed at the way they had undertaken to sell the property, and thought if I came in as a purchaser they would probably raise the price, thinking I knew more about it than any one else; and as they had not consulted me with reference to selling the property, I didn’t want to have anything'to do with it.” In this, surely, there is nothing of which the plaintiff has any right to complain. Dr. Everett is not complaining, but is content with the sale. I may here add that I am quite unable to see, that by reason of any relation which had existed between Malone and Baker, the former was precluded on any legal or moral ground from promoting the purchase of the property7 by his wife, or, indeed, from buying it himself. Upon this branch of the case my conclusion is that Mrs. Malone’s title is free from any taint of actual fraud, and if it can be overthrown by the plaintiff it must be for some other reason.
This brings us to the question whether the deeds from Baker to Everett were absolute conveyances, as they purport to be, or mortgage securities, as the plaintiff asserts. The bill, upon information and belief, alleges that the agreement for reconveyance or defeasance was not reduced to writing, but was by parol, or, if in writing, was not recorded. It is certain that no such writing was ever recorded, nor has it or a copy7 been produced. In respect to its provisions, no witness undertakes to do more than give its bare substance as recollected. Baker testifies that in June, 1884, at the time of a settlement between him and Everett, Weddell & Co-, he delivered the written defeasance to J. H. Webster. But, according to w'hat I think is the weight of the evidence, that settlement was confined to so much of the indebtedness as was secured'by mortgages on real estate in Ohio, and did not concern the Pennsylvania property at all. Mr. Webster, after diligent search, has not been able to find
Now, under the pleadings, the burden of proof here is upon the plaintiff. In Lance’s Appecd, 112 Pa. St. 456, 4 Atl. Rep. 375, the court said:
“ To convert a deed absolute on its iaee into a mortgage, by parol testimony, such testimony must be clear and specific, of a character such as will leave in*452 the mind of a chancellor ho hesitation or doubt, and failing this, the effort to impeach the legal character of the deed must be regarded as abortive.”
This rule, it seéms to me, is applicable in its full force, here; and I 'think a chancellor, looking at the whole case, might well hesitate to declare the deeds from Baker to Everett to be mortgages.
But were it conceded that the evidence warrants such a decree, it.would still remain for the plaintiff to show that Mrs. Malone, when she purchased, had knowledge or notice, express or constructive, that the deeds were mortgages, or of the pendency of the foreign attachment at the suit of Hilton & Waugh. Mrs. Malone not only swears in. her answer that she had no such notice or knowledge, but she has so testified. That she had any actual notice or knowledge of the foreign attachment there is no evidence whatever. Nor is there sufficient evidence of her knowledge, or of any actual notice to her, that the deeds from Baker to Everett were mortgages, to overcome her answer. The evidence against her in this particular is weak and inconclusive; and, upon the whole, I am satisfied that she purchased in ignorance that said deeds were ever intended to be mortgages, or that it was so claimed. Mr. Malone has testified that he had no knowledge of the existence of the deeds until they were exhibited to him by Messrs. Kline and Lord, and no information as to their character, or as to the nature of the transaction between Baker and Everett, other than what he learned from the deeds themselves and the representations of Kline and Lord. The testimony of those gentlemen tends to corroborate Malone in this regard. Besides, is it likely that he would have sanctioned the investment of $20,000 in this property, had he known that the Baker deeds were simply mortgages? True, Mr. Baker testifies that he had so informed Mr. Malone. But, having regard to the entire proofs, I am not prepared to accept Mr. Baker’s testimony as correct. I think the weight of the evidence is towards "the conclusion that Mr. Malone had no knowledge or reason to believe that the deeds were otherwise than as they appear on their face. But after all, in this transaction Malone did not act as agent for his wife, and therefore his knowledge, if any he had, would not be imputable to her. And this remark is applicable to the matter of the foreign attachment.
But it is claimed that the testimony of Lewis E. Mallory, who was a witness for the defense, shows that he had knowledge that the Baker deeds were mortgages, and that his knowledge affects Mrs. Malone. The portion of Mallory’s testimony, which, it is supposed, sustains this position, is as follows, the answers being made in response to questions in chief:
Question. “State whether or not, at the time you made this purchase of the property in controversy, you had any knowledge whatever that there was any claim against it, or any dispute as to the title? Answer. I hadn’t the least knowledge in the world; not the least. Q. Hid you know, or had you ever heard, that it was alleged that the deeds from George A. Baker to Everett were mortgages? A. I never heard anything of the kind. It was turned to Everett as security for money, as I understood it, and that by getting it from Everett we had it straight, without any incumbrance whatever. Q. Your information was, then, that it had b’een given to him for debts? A. Yes, sir;*453 as we frequently do here; that the banks will take a mortgage on the property, and hold it iorthe money; and X supposed this property had been put up with Everett for money, and got so far in that it couldn’t be closed out; and I hadn’t any idea that anything else could be against it. * * * Q. Did you ever know or lioar, prior to the beginning of this suit, or since this suit was begun, that the deeds made from Baker to Everett were given for anything but money paid direct for them? A. So, sir; I never did. Q. Did .you ever hear, prior to the commencement of this action, that anybody claimed that they had first been given as a pledge for money? A, I never did.”
After Mallory’s examination was closed, on a subsequent day, bo was recalled by the defense before the examiner, and, his attention being directed to his second and third above-quoted answers, he testified that any information he had on that subject was acquired long after his purchase, and that at that time he had no knowledge nor any idea that the Baker deeds were mortgages, or anything of that nature. This re-examination of the witness took placo without leave of court, and was objected to as not permissible under the equity practice. Without deciding whether or not this later testimony should be admitted, 1 will dispose of this part of the case without taking it into consideration.
Undoubtedly a principal may lie charged with constructive notice by reason of Ms agent’s knowledge. But the established doctrine in Pennsylvania is that, in order to so affect the principal it must be affirmatively shown that such knowledge was acquired by the agent in the course of the business in which he was employed for his principal. Houseman v. Association, 81 Pa. St. 256, 262; Barbour v. Wichle, 116 Pa. St. 308, 9 Atl. Rep. 520. The supreme court of the United States, indeed, in the ease of Distilled Spirits, 11 Wall. 356, 366, stated the rule more broadly, bolding the principal to be bound by his agent’s knowledge, no matter when acquired; but with this important qualification: that the principal “is not bound by knowledge communicated to the agent, unless it bo present to the agent’s mind at the time of effecting the purchase;” and of this there should bo “clear and satisfactory proof.” id.
As to what is sufficient notice to a purchaser of real estate of an unrecorded title, or adverse claim, the settled rule is that the information must come to Mm from some one who is interested in the estate, or from some authoritative source. Mere rumors are not notice, nor do they impose upon a purchaser the duty of inquiry. Kerns v. Swope, 2 Watts, 75; Churcher v. Guernsey, 39 Pa. St. 86; Hottenstein v. Lerch, 104 Pa. St. 460.
Bearing these legal principles in mind, let us now turn to the evidence relating to this matter. The plaintiff himself made no attempt to show that Mallory had any knowledge of the alleged defeasible character of the deeds from Baker to Everett. Nor was Mallory cross-examined at all upon this subject. So that- the above answers contain the entire evidence tending to bring home to Mallory such knowledge, and thus to fasten constructive notice on Mrs. Malone. Now, there arc no circumstances in the case indicative that Mallory possessed any information touching the dealings between Baker and Dr. Everett, or that he had any means of such information. They resided at Cleveland; he at Bradford. So far as appears, Baker and Everett were strangers to him. He had
Waiving the question whether notice at .the time of the purchase of the pendency of the foreign attachment at the suit of Hilton & Waugh would have affected unfavorably Mrs. Malone’s title, even upon the theory that said deeds were mortgages, let us now briefly inquire whether she is chargeable with constructive notice of the same. We have already seen that she had no actual notice of the attachment.' Neither had
And now it only remains for me to declare as the judgment of the court, based upon a most careful consideration of the proofs, that in no view of the ease permissible under the evidence is the plaintiff entitled to any relief.
Let a decree be drawn dismissing the bill, with costs.