255 F. 442 | 1st Cir. | 1918
This is an appeal from a decree in the United States District Court for Porto Rico in an equity suit brought by El Banco Popular against Elias B. Wilcox, June 9, 1914, to foreclose certain mortgages. In the bill, after setting out the citizenship and residence of the respective parties, it is alleged:
(2) That on December 3, 1912, said Landron and wife executed another mortgage before Damian Monserrat, Sr. (Jr.), as notary public, to secure the sum of $1,700, and interest at 1 per cent, per month for the term of one year; that the interest was to be paid in advance every four months, and in case of failure so to do the mortgage was to become due; that the mortgagor was to keep the property insured for the amount of the mortgage debt, which he failed to do, and that the bank had been obliged to pay for insurance premiums the sum of $108.68; that an additional sum of $200 was provided for to pay costs and attorney’s fees in case of foreclosure; that said mortgage had not been paid, and that interest was due thereon from August 3, 1913, to March 3, 1914, in the sum of $119.
(3) That both mortgages were upon the same property, consisting of a house and lot situated in the district of Santurce, San Juan.
(4) That on January 14, 1913, Landron and wife conveyed said house and lot by deed executed before Damian Monserrat, Sr., as notary public, to the defendant Wilcox, who therein assumed and agreed to pay the mortgages above stated.
(5) .That there is now due and owing from the defendant to the bank, on said mortgages, the sum of $7,549.68; that no part of said sum or the interest thereon since March 3, 1914, had been paid, though the same was overdue and payment thereof had been demanded of the defendant.
It prayed that Wilcox be required to answer—
“the several matters and things hereinbefore stated, as fully and particularly as if they were herein again, repeated, and he was thereunto especially interrogated, and that the premises aforesaid may be sold for payment of your orator’s claim, with interest as aforesaid, and that your orator may have such further or other relief as his ease may require.”
July 20, 1914, the defendant filed an answer and a cross-bill. August 3, 1914, the plaintiff filed motions to strike the answer and the cross-bill. July 29, 1915, these motions were denied. October 26, 1915, 'no demurrer, plea, or answer to said cross-bill having been filed, although it should have been before the rule day of the preceding month, the defendant filed a motion for a decree pro confesso upon the cross-bill. November 15, 1915, plaintiff filed motions to dismiss the answer and to dismiss the cross-bill. January 27, 1916, the court rendered an'
, In the opinion the court disposed of the motion to take the cross-bill pro confesso by saying that it was not pressed or insisted upon, and he regarded-it as waived; and, having pointed out that a motion to strike related to formal matters, while a motion to dismiss took the place of the old demurrer and related to “questions of law and of equity,” he proceeded to consider whether the answer and the cross-bill stated an equitable defense or ground for relief, and held that, inasmuch as it was not alleged in either of them that the stipulation in the deed of January 14, 1913, whereby Wilcox assumed and agreed to pay the two mortgages, was inserted in the deed through fraud and without his knowledge or consent, but only alleged that the stipulation was not the contract entered into between him and the Randrons, the allegation did not state an equitable defense, as the conversations leading up to the execution of the deed were merged in it, and that neither the answer nor the cross-bill asked for reformation of the deed, but sought to avoid it “on the ground of parol conversations beforehand.”
As to the allegations in the cross-bill — that the deed of January 14, 1913, was null and void because the notary before whom it was executed was, at the time, a stockholder in and president of the bank, and that the witnesses to the deed were then in the employ of the notary, either of which facts would render the deed null and void under section 20 of the law concerning notaries (section 1998 of the Revised Statutes and Codes of Porto Rico) — the court did not undertake to determine whether they set forth a valid defense, saying that he did not consider the question as at present before the court; that “if it be a valid defense, it arises out of the transaction sued on by the plaintiff, and is therefore within the scope of equity rule 30 (201 Fed. v, 118 C. C. A. v) as to set-off and counterclaim,” and, such being the case, it “can be set mp in an answer, and does not need a cross-bill.”
July 5, 1916, the defendant filed an amended answer, wherein, among other things, he alleged that prior to the date of the execution of the deed of January 14, 1913, he was the owner of a second mortgage upon the property in question, which he had proceeded to foreclose, so far as to obtain a decree of foreclosure, and was about to sell the same to satisfy his judgment, when, at the instance of Damian Monserrat, Sr., he was induced to forego the selling of the property and to enter into an agreement to assume payment of the mortgage for $4,600 and cancel his judgment against the Randrons, upon Randron and wife agreeing to deed the property to him; that said Monserrat,-being aware of the terms of the agreement, was to prepare the deed for execution; that the terms of the agreement between him and Randron were reduced to writing; that thereafter said deed of January 14, 1913, was prepared by Monserrat; that it was written in the Spanish language and was of great length; that, on being assured by Monserrat that it faithfully stated the agreement between him and the Randrons, he was "induced to accept and sign the deed; that he never promised to
A trial having been had, on August 25, 1916, a decree of foreclosure was entered, in which it was adjudged that the defendant, by virtue of the deed of January 14, 1913, purchased the property in question and assumed and became liable to pay the two mortgages held by the bank, and that there was then due and owing it on said mortgages the sum of $9,631.92. It was further ordered and decreed that the defendant pay the complainant said sum, with interest, within 90 days, and, in default thereof, that the mortgaged property be sold and all rights of the respondent forever barred and foreclosed.
At or about the time this decree was entered an opinion was filed in which it appears that the court viewed the question presented by the evidence to be whether the defendant was informed of the existence of the $1,700 mortgage of December 3, 1912, which was not recorded until January 28, 1913, at the time he accepted the deed of January 14, 1913, without regard to whether he then in fact knew of the stipulation inserted in the deed of January 14 with reference to the mortgage for $1,700, and held that, regarding, as he did, the deed of January 14 as the primary source of evidence in the transaction, he felt controlled by the stipulation therein contained as to the $1,700 mortgage, for he could not regard the evidence of fraud of such persuasive character as to convince him that the deed did not state the real transaction. lie did not consider the defense set up as to the invalidity of the deed by reason of the notary, Monserrat, being the president and a large stockholder in the bank, and the witnesses to the deed being the employés of the notary.
But, inasmuch as the defendant was allowed to file an amended answer, which he did, and in which he set up, among other, defenses, the defense of nullity of the deed because of the interest of the notary and 'the witnesses being his employés, we think that the defendant was. in no way injured by the granting of the motion to dismiss the cross-bill without the merits of the defense having then been determined.
It is in substance conceded and there can be no doubt, if the stipulation with reference to the assumption by the defendant of the $1,700 mortgage was inserted in the deed through the fraud of the notary, that it is a valid ground of defense as to that mortgage, for the defendant could not be charged with its payment, as was sought to be done in the bill and as was in fact done in the decree. The object of setting out in the bill of complaint the stipulation wherein it is alleged that the defendant assumed and agreed to pay the two mortgages for $4,600 and $1,700 was (1) to make the $1,700 mortgage, which in the absence of the agreement in the deed would be a third mortgage, a second mortgage and enlarge the amount which the defendant would be required to pay in order to redeem; and (2) to conclude him as to the balance due on the judgment after applying the sum realized from the sale of the mortgaged property when he is sued for that balance. Although the decree rendered in the foreclosure suit does not expressly provide for a deficiency judgment, the defendant would nevertheless be concluded by that decree as to his obligation to pay the balance due, which could be recovered against him in a subsequent suit. Coney v. Winchell, 116 U. S. 227, 230, 6 Sup. Ct. 366, 29 L. Ed. 610.
If, however,, the stipulation as to the $1,700 mortgage was inserted through fraud, this alone would not militate against a judgment of foreclosure being entered against the defendant as to the mortgage for $4,600 and charging him with the payment of the debt secured therein. But if the stipulation in the deed as to the payment of the $4,600 mort
As to the question of fraud the defendant’s evidence showed that, having procured a judgment of foreclosure in the sum of $1,465.35 on a mortgage which he held on the property, which mortgage was a second mortgage to that of the bank for $4,600, and being about to sell the property at public sale to satisfy the judgment, Damian Monserrat, Sr., came to him to see if there might not be a way of settling the matter without subjecting Landron, the mortgagor and a fellow lawyer, 1o the humiliation of advertising his property at public sale, and requested the defendant to go to the office of Landron to discuss the matter; that shortly thereafter he met Monserrat, Sr., at Landron’s office, and that a Mr. Timpson accompanied him there; and after discussing the matter it was finally agreed between Landron and the defendant that the latter would take a transfer of the property in satisfaction of his judgment and would become responsible for the mortgage indebtedness recorded on the books of the registry of property of a date prior to the defendant’s mortgage; that nothing was said about a mortgage of $1,700, or any other mortgage indebtedness, except that which the bank held for $4,600; that, after the terms had been agreed upon, Monserrat, who was to draw the deed, left the office; that shortly thereafter the agreement entered into between the defendant and Landron was, on January 13, 1913, reduced to writing and signed by the parties, one copy of which was given to Landron and the other retained by the defendant, and that Timpson signed the agreement as a witness to Landon’s signature; that by the terms of this agreement Landron, representing himself and as attorney in fact for his wife, contracted to sell the house and lot in question to the defendant; that the consideration therefor should be the amount of the judgment stated in the decree in the defendant’s foreclosure proceeding; that the defendant would assume the duly registered incumbrances on the property appearing of a date prior to the defendant’s mortgage; that if within 30 days from the date of the agreement Landron desired he might repurchase the property for the judgment plus the sum of $500 and all expenses necessary in connection with the resale of the property; that in case he did not conclude to repurchase the same within 30 days he should vacate the property promptly and pay as rental for the time he remained therein a sum “equal in amount to the interest for that time, payable to the Bank of Porto Rico upon the mortgage held by said bank against said property”; that on the following day, to wit, January 14, 1913, the parties met at the office of Monserrat, Sr., the notary, and executed the deed that contained the provision stating that the defendant assumed the mortgage of $1,700 held by the bank, as well as that he assumed the mortgage for $4,600; that the defendant did not read the deed, which was written in longhand in the Spanish language and covered several pages, as he was in a hurry, and that it
On behalf of the plaintiff, Monserrat, Sr., testified that he did not recall being present at Landron’s office at the time ¡the agreement was made; that the only knowledge he had of the agreement between Landron and the defendant was obtained from the defendant himself, who called to see him at a time prior to the parties appearing at his office to execute the deed; that the defendant then told him the terms of the agreement, of which he made a memorandum, from which he after-wards drew the deed, and that the deed was made in accordance with the instructions thus received; that at the time the parties met to sign the deed the defendant read the deed himself, and that he, the notary, also read the deed to the defendant and the witnesses to the deed. The plaintiff did not call the witnesses to the deed to testify, but did call Landron, who testified that, while he remembered that Wilcox came to his office to talk about the settlement, he did not remember that Monserrat, Sr., was there with him at that time; that he signed the document that had been agreed upon, drawn up, as he supposed, by Wilcox, and brought to him by an American whose name he did not know, but who used to attend to some business for Wilcox. His testimony was inaccurate and confused as to the details of the different transactions, and he gave no testimony as to whether at the time the deed was signed it was read over by Wilcox or by Monserrat, Sr., the notary, in the presence of Wilcox.
It was agreed that Monserrat, Sr., at the time the deed was executed, was the president of the bank and a stockholder therein, and the allegation in the sworn answer of the defendant that Monserrat was largely, if not wholly, responsible for the loans from the bank to Landron was nowhere denied in the testimony.
The written memorandum of January 13, 1913, was offered in evidence by the defendant, and was excluded subject to exception, but was permitted to be read. Why this document was excluded, and why
But the interest of Monserrat, Sr., in the transaction was quite different. He was the president of the bank that held the $1,700 mortgage, he had been largely instrumental in making the loan from the bank to Landron, and he was individually interested in the welfare of the bank, being a stockholder in it; and it seems to us that the evidence, when taken as a whole, demonstrates that he purposely concealed from Wilcox the fact that the deed obligated him to pay the $1,700 mortgage, and that the court below erred in finding that Wilcox was responsible for and bound to pay the sum called for by that mortgage.
Section 20 of the Notarial Law of Porto Rico of March S, 1906 (section 1998 of the Compilation of 1911), reads as follows:
“The following public instruments shall be null and void.:
“First Those in which (he notary authorizing same has intervened as a party thereto, or which contain any provision in his favor.
“Second. Where the relatives of the parties concerned therein, or the relatives, clerks or servants of the notary authorizing the instrument, are witnesses thereto.”
As above pointed out, if Monserrat, the notary before whom the deed was constituted, intervened as a party to the deed, or it contained
While the provisions of this law are old, being taken from the Spanish notarial law, no decisions of the Spanish courts construing them, have been called to our attention, and it is asserted by counsel that none are to be found, for the reason'that under the notarial law of Spain a notary could not take part in his notarial district in the administration of a bank of discount, or a brokerage establishment or any commercial or industrial company, and that a notary, not being permitted to be an executive of a bank, no occasion for a construction of the law has arisen.
The provision of law prohibiting a notary from taking part in the administration of a bank in his notarial district is not now in force in Porto Rico, but inasmuch as it was embodied in the old notarial law of the island, of which section 20 was a part, it would seem that it might be availed of in ascertaining the meaning of the section. But, however this may be, we think that section 20 is capable of but one of two constructions; that either it means that a deed should be void if the notary before whom it was acknowledged had any interest in the transaction, however slight, or that it should be void only in case it was made to appear as a fact that his interest was sufficiently large to cause him to be biased. Opinion of the Justices, 75 N. H. 613, 72 Atl.
The bill should have been dismissed; it having been brought against Wilcox as the owner of the equity, when in fact he was not the owner, the deed to him being a nullity, and Eandron not having been made a party. Terrell v. Allison, 88 U. S. (21 Wall.) 289, 22 L. Ed. 634; Whitehouse, Equity Practice, § 68.
The decree of the District Court of Porto Rico is reversed, 'and the case is remanded to that court, with directions to enter a decree dismissing the bill, and the appellant recovers his costs.
