text:
    Charles B. Phillips v. The South Park Commissioners et al.

      Filed at Ottawa January 25, 1887.

      1. Allegations and pboops—-as to contract of sale of land. An averment in a bill, in the nature of a bill of interpleader, showing a contract for the purchase of a tract of land at a stated price per acre, the title to be made good by freeing it of all clouds, will be supported by the production of such a contract, and proof of another agreement, made on the same date, by the vendor with his attorneys, for their professional services in aiding in perfecting the title and defending against adverse claims, by which such attorneys are to receive a certain share of the purchase money when collected, will not establish a contract of sale at variance from that alleged in the bill, and such agreement with the attorneys having so remote a bearing on the merits, might well be admitted in evidence though not stated in the bill.
    2. • CHAMPEETE—whether a contract is champertous. A contract between a claimant of land in the adverse possession of another, and attorneys at law, for their services in litigating such adverse claim, by which the attorneys are obligated to carry on such litigation and required to render their professional services therein, and are to receive one-fourth of what may be realized by their services, is not champertous, it lacking the essential element that the attorneys shall prosecute the litigation at their own cost and expense.
    3. In such case, the fact that a purchaser of the party prosecuting the .litigation may have furnished him money in advance on his contract, which was used by him in prosecuting his suits to recover the property, will have no bearing on the question of champerty.
    4. Chancery—as to the character and purpose of a bill—whether for specific performance. Certain park commissioners filed their bill against various parties showing a purchase by the complainants of certain land from B, for a public park, he to make the title perfect, and a deed from him, and the existence of a dispute as to B’s title, his wife claiming to be the equitable owner thereof and claiming compensation therefor, and praying that B and his wife be required to interplead and adjust their respective claims to the purchase money and for the confirmation of the title in the complainants, and offering to pay the price to the party entitled thereto: Held, that such bill could not be regarded as a bill for the specific performance of the original contract of purchase.
    5. Settlement by husband upon wife—whether established by the proofs. For the purpose of showing a voluntary settlement of land, by a husband, on his wife, by a supposed deed of trust to her father in 1852, the wife produced an indorsement, in the handwriting of her husband, on a will made by him in 1851, that he had made a deed of trust to the father, and also a letter written by her husband in 1852, which stated, “I have concluded to give Lizzie (the wife) a deed of my farm; * * * I shall give her a deed this day,” and also other letters, in which he referred to the farm as belonging to her. She also testified to having resided on the farm and cultivating it for some twelve years, until the house was destroyed by fire, but no deed of trust was produced, and no witness was found who had ever seen it: Held, that the proof was not sufficient to establish the alleged settlement, especially where the letters and acts of the wife were inconsistent with the existence of such claim.
    6. Recording law—priority of recorded deed over one unrecorded. A party taking and recording a deed to him for land, without notice of a prior unrecorded one from the same grantor, will be protected against such unrecorded deed, and the deed first recorded will take priority.
    7. Rescission oe contract—placing party in statu quo. A party re-receiving money by virtue of a contract made by him, if he has any right to declare a forfeiture, will, in equity, not be allowed to exercise it and rescind the contract, unless he restores the other parties to their original position. He must first return the money so received by him.
    8. Purchaser with notice—and what will constitute notice. The rights of a wife in land derived through a deed from her husband will not be affected by a contract for its sale made by her husband, and his subsequent conveyance, when the purchaser, at the time of his purchase, had notice that she claimed such land. Notice of her claim is held sufficient to put such purchaser upon inquiry as to her title.
    9. Eminent domain —payment of compensation, as a condition precedent to right of possession. Our Eminent Domain act requires the payment of the compensation for land taken for public use, or a tender, or a deposit of the same with the county treasurer, before possession shall be taken. This is a condition precedent to the taking of possession.
    10. Same—interest upon compensation awarded. Where possession has been acquired of land for a public park, or other public use, and payment of the compensation awarded is withheld, it is proper to require the payment of interest thereon from the time possession is taken.
    11. Trusts—Statute of Frauds—establishing a trust by parol—what is a sufficient writing. Under the Statute of Frauds, a conveyance, absolute on its face, can not be shown to have been made in trust for another, by parol evidence. That can only be proved by some writing signed by a person authorized to declare the trust. The trust may be manifested by a writing separate from the deed, showing an intention that the conveyance shall fee in . trust.
    12. - If the grantee of a husband, while holding the title to the land conveyed, makes a declaration that he holds it in trust for the grantor’s wife,' by letter, affidavit, answer to a bill in chancery, or even by deposition, it may be binding on him, and be sufficient to show, in writing, a trust in her favor.
    13. Same—evidence to establish a tmst—declarations of grantor after conveyance. After the holder of the legal title to land has divested himself of all interest and title in the same by an absolute deed, any subsequent declarations by him, whether in deposition, or writing, or otherwise, can not affect the title, and charge the premises with a trust.
    14. Same—purchaser from trustee, with notice. Where land is conveyed to one to secure the repayment oí advances of money, after the payment of the debt secured the grantee will hold the title as a mere trustee, for the benefit of the grantor; and a voluntary conveyance by such trustee, in violation of his "trust, to his son, and a conveyance-by the latter to the original grantor’s wife, having notice of the facts, will pass no title which she may assert in a court of equity.
    Appeal from the Circuit Court of Cook county; the Hon. M. F. Tuley, Judge, presiding.
    Mr. E. H. Sellers, for the appellant Charles B. Phillips:
    The contract proved is ckampertous and void, as against public policy. 4 Blackstone’s Com. 134; 2 Chitty on Contracts, 996, 997; Story’s Eq. Jur. sec. 1048. See, also, Thurston v. Percival, 1 Pick. 415; Lathrop v. Amherst Bank, 9 Metc. 489; Redman v. Sanders, 2 Dana, 70; Allen v. Hawks, 13 Pick. 79; Rust v. Larue, 4 Litt. 417; Caldwell v. Shep

      hard, 6 Mon. 392; Smith v. Thompson, 7 B. Mon. 305; Stanley v. Jones, 7 Bing. 369; Norton v. Little, 60 Ill. 130; Gilbert v. Holmes, 64 id. 548; Thompson v. Reynolds, 73 id. 11; Coleman v. Billings, 89 id. 183.
    Sweeney, after parting with all title that ever was in him, could not declare a trust in favor of any one. Tierney v. Wood, 19 Beav. 330.
    Mr. M. W. Fuller, for the South Park Commissioners:
    At common law, interest was not allowed in any ease, and States, counties, cities and towns not being mentioned in the statute regulating interest, are not within its provisions, so as to be required to pay interest,—and the park commissioners fall within the same category. Park Commissioners v. Dunlevy, 91 Ill. 54; Pekin v. Reynolds, 31 id. 530; People v. Tazewell County, 22 id. 147; Beveridge v. Commissioners, 100 id. 81.
    To make champerty, it must be shown that the costs and expenses of the suit are to be paid by the champertee. Park Commissioners v. Coleman, 108 Ill. 601; Torrence v. Shedd, 112 id. 466.
    It is not the inclination of the courts to carry the doctrine of champerty any farther than it has gone. Webb v. Thompson, 23 Md. 428; Patterson v. Nickerson, 79 Ind. 250; Stolsenburgh v. Marks, 79 111. 196.
    Mr. Robert Rae, and Mr. Jomsr S. Miller, for the appellee Mrs. Phillips:
    The tendency in the United States is to sustain and carry into effect a trust in favor of a wife or child. Perry on Trusts, sec. 109; Otis v. Beckwith, 49 Ill. 121; Bryan v. Wash, 2 Gilm. 557; Cline v. Jones, 110 Ill. 563; Smith v. Yocum, id. 142.
    The deposition of Sweeney was competent to prove the trust on which the property was conveyed to him. This trust was created and took effect in January, 1859, and has existed ever since. It may be manifested and proved at any time when the occasion to prove it arises, and when proved it relates back to the time of its creation. Hill on Trustees, *56; Spence’s Eq. Jur. *21; Browne on Statute of Frauds, 95, sec. 97; Perry on Trusts, sec. 82; Lewin on Trusts, 49 ; 2 Washburn on Real Prop. 503; Pinney v. Fellows, 15 Vt. 525; Reid v. Reid, 12 Rich. Eq. 213; Smith v. Howell, 3 Stockt. 349; Davis v. Otley, 33 Beav. 540.
    The statute has merely changed the rule of evidence by requiring the proof to be in writing, which, but for the statute, might be by parol. 2 Washburn on Real Prop. 503 ; Hall v. Livingston, 3 Del. Ch. 348; Murphy v. Hubert, 7 Pa. St. 420; Bank of United States v. Carrington, 7 Leigh, 576; Fleming v. Donahue, 5 Ohio, 255; Foy v. Foy, 5 Hayw. 296.
    No form of words is necessary. (2 Washburn on Beal Prop. 507; Browne on Statute of Frauds, sec. 99.) It is not necessary that the declaration of trust be made to the cestui que trust. (2 Washburn on Beal Prop. 502; Browne on Statute of Frauds, sec. 99.) It may be by letter to a third party. (Kingsbury v. Burnside, 58 Ill. 310; Moore v. Pickett, 62 id. 158 ; Forster v. Hale, 3 Ves. Jr. 696 ; 5 id. 308.) Or by a memorandum. (Raybold v. Raybold, 20 Pa. St. 328.) Or by a written promise to declare a trust. (Bellamy v. Burrows, Talb. 98.) Or by an answer in chancery. (Hampton v. Spencer, 2 Vern. 288; Macubbin v. Cromwell, 7 Gill & J. 157; McLaurie v. Partlow, 53 Ill. 240.) Or by a printed pamphlet. (Barrell v. Joy, 16 Mass. 221.) Or by an affidavit. Barkworth v. Young, 4 Drew, 1.
    Or it may be by a deposition of the trustee, taken and read in the very cause in which the trust is sought to be proved and established, as in the case at bar. Pinney v. Fellows, 15 Vt. 525 ; Reid v. Reid, 12 Rich. Eq. (40 S. C. L. and Eq.) 213; Olcott v. Bynum, 17 Wall. 44.

      Such deposition answers the statute, and is competent evidence, not only against Sweeney, but his grantees; and the lands in the hands of any such grantees who are not bona ficle purchasers for value, without notice, will be charged with the trust. Reid v. Reid, 12 Rich. Eq. (40 S. C. L. and Eq.) 213; Pinney v. Fellows, 15 Vt. 525; Olcott v. Bynum, 17 Wall. 44; Rutledge v. Smith, 1 McCord’s Ch. 119; White v. Fitzgerald, 19 Wis. 489; Price v. Brown, 4 S. C. 144; Sime v. Howard, 4 Nev. 473; Sieman v. Austen, 33 Barb. 9; Ambrose v. Ambrose, 1 P. Wms. 321; Gardner v. Rowe, 2 Sim. & Stu. 346; 5 Russ. Ch. 258; Hill on Trustees, *57.
    The grantee of a trustee, either with notice or without, having paid value, will take the premises charged with the trust. Hill on Trustees, *144, 164, 172; Perry on Trusts, secs. 217, 828.
   Mr. Justice Craig

delivered the opinion of the Court:

This was a bill in equity, in the nature of a bill of inter-pleader, brought by the South Park Commissioners, against Charles B. Phillips, Elizabeth "Ann Phillips, and others. The bill set up that the South Park Commissioners had acquired title to the east half of the south-west quarter of section 13, township 38 north, range 14 east, in Cook county; that under a contract with Charles B. Phillips, dated December 10,1869, the corporation had agreed to pay Phillips, for the land, $800 per acre, when a good title should be made for each acre; that about February, 1859, the said premises were conveyed by said Charles B. Phillips, and Elizabeth Ann Phillips, his wife, to Daniel S. Sweeney, and by Daniel S. Sweeney to Thomas Wright, and in June, 1863, by Thomas Wright to David U. Martin; that on or about the 30th day of March, A. D. 1870, one David U. Martin, then" residing in the city and State of New York, and then and there holding the title to said premises, did, by his certain deed of that date, make conveyance to complainant, for valuable consideration to him by complainant then and there paid, of the south fractional half of section 13, in. township 38 north, range 14 east, which deed was duly recorded in Cook county April 5,1870; that on the 1st day of July, 1870,.one John Phillips, then and there claiming to have.some interest in said premises, conveyed the same to complainant, by deed duly recorded July 28, 1870; that.on the 20th day of July, 1870, Charles B-. Phillips, by deed conveyed the same premises to complainant, which deed was,.on the 28th day of July, 1870, duly recorded; that the conveyance aforesaid, to complainant, conveyed, all and singular, the beneficial rights and interests of the said Phillips, and of his family j of, in and to said premises, and for the consideration aforesaid, to-wit, $800 an acre, but such consideration was only to be paid for a good and indefeasible title to said premises, free and clear of incumbrances; that at the time of said conveyances, there were divers clouds thereon, which had.been thereon placed by one William P'. Kerr, and which were shown of record in the county of Cook aforesaid, and that it was essential' that said premises should be freed from said clouds before said sum of $800 an acre should be paid; that two certain bills of complaint were filed, involving the title to said south fractional half of said section 13, township 38, etc., by said William P. Kerr, in the United States Circuit Court within and for the Northern District of Illinois,—one against Wilson and others, November 27,1869, and one against Phillips and others, October 3,1870,—to the first named of which, complainant was made a party defendant, September 26, 1870; that these two. bills, were finally consolidated, and complainant answered the said bill, and' such proceedings were tliereafterwards taken in- such suit as resulted, upon the 8th day of October, 1878, in a decree dismissing said bill as to the east half of the south-west quarter of said section 13, and thereby all right, title and interest of said William P. Kerr, or his assigns, in said 80 acres last mentioned, were determined adversely to him and them, but as to the remainder of said premises the said decree was adverse to complainant’s title derived as aforesaid, as will appear by reference to said decree; that from said decree of said 8th day of October, 1878, an appeal was prayed by complainant to the United States Supreme Court, and duly prosecuted therein, which resulted in the affirmance of said decree by said Supreme Court; that the litigation as to the said 80 acres having been determined as aforesaid, complainant is now ready and willing to settle and pay therefor, at the said rate of $800 per acre, as it has always been ready to do, upon title being perfected in the same or any acre thereof; but complainant says, that by reason of the action of said Charles B. Phillips in making conveyances of said 80 acres, and of a controversy which has broken out between said Phillips, and Elizabeth Ann Phillips, his wife, complainant has found it impossible to pay over the purchase price of said land with safety. The bill prays that defendants may set forth their claims, and may interplead and settle and adjust their demands between themselves, and that complainant may be at liberty to bring and pay the said purchase price into court for the benefit of such of the defendants as shall appear entitled thereto, and that complainant’s title to the SO acres may be confirmed and established in complainant, and that complainant may have general relief.

The defendant Charles B. Phillips denied the contract set up in the bill, and filed a cross-bill, claiming the value of the entire 80 acres. Elizabeth A. Phillips put in an answer, and also filed a cross-bill. She denied that she was bound by the contract set up in the bill) and claimed, first, the entire 80 acre tract, under a trust created in her favor by Phillips, in 1852; and second, in the event of a failure to establish title to the entire tract, she claimed that part. of the 80 acres which lies south of the north 103 acres of fractional half of section 13, originally owned by Phillips, under an alleged family settlement, made through one Atkins, in August, 1868.

The decree of the circuit court found that Mrs. Phillips was the owner, in equity, of the south 34^^ acres of the premises, and was entitled to be paid by the South Park Commissioners the value thereof, upon the 27th day of August, 1870, when the park commissioners took possession thereof, with interest thereon from that time, and that Phillips was entitled to be paid for the balance,—45t303q acres,—the sum of $800 per acre,—the amount fixed by a contract between Phillips- and the park commissioners, under which the park commissioners claim,—with interest thereon from the 27th day of August, 1870; and the decree also established the rights of the assignees of Phillips, Eawson, McConnell, Ingersoll, Seeley and Gates, in the portion of the fund decreed to Phillips. From the decree so rendered, Phillips has appealed, and assigned errors which question the finding in favor of Mrs. Phillips, and of the South Park Commissioners, and of the intervening claimants, etc. Mrs. Phillips assigned cross-errors in not being decreed the value of the whole eighty, in the awards to claimants under Phillips, etc. The South Park Commissioners assigned cross-errors to the awarding of the 34T1077 acres to Mrs. Phillips, the allowing of interest from August 27, 1870, etc.

The first question relied upon to reverse the decree, is a variance between the contract set out in the bill and the contract put in evidence. The complainants produced, on the trial, a contract executed December 10, 1869, by the South Park Commissioners and Phillips, which, in substance, provided, that Phillips would perfect in the commissioners a good title to the south fractional half of section 13, township 38 north, range 14, east of the third principal meridian, free and clear of all liens, for which they agree to pay $800 per acre. It turned out, however, on the trial, that on the same date another agreement was executed by Phillips, of the one part, and Beckwith, Ayer & Kales, attorneys at law, of the other part, which refers to the other agreement, and provides that Beckwith, Ayer & Kales shall use their best endeavors and skill, by process of law, and otherwise, to perfect the title to the land sold, in the South Park Commissioners, according to the meaning of the contract, and to render their services to defend against all adverse claims, and Phillips agrees to pay for such services one-quarter of what he may be entitled to receive from the South Park Commissioners, which said quarter is assigned and transferred by Phillips to the attorneys. Conceding that the two agreements are to be treated as one transaction, as contended by counsel for appellant, there was no such variance between the proof and allegation of the bill as would lead to a reversal of the decree. The object of the averments in complainants’ bill was to show that they had acquired the Phillips title for a stipulated price, under a contract in writing, executed by them and the said Phillips, and it is not perceived in what way the contract executed by and between Phillips and Beckwith, Ayer & Kales had any bearing on this question. This latter contract was a mere agreement for professional services, in which the service to be performed was stated and the price to'be paid determined by the parties, and if it is to be regarded as a jiart of the contract set up in the bill, it had such a remote bearing on the real point involved between Phillips and the South Park Commissioners, that we think it might be put in evidence, although the bill contained no allegation in reference to it. We fully recognize the rule that the allegations and proofs must agree, but there was, here, no such variance as to be regarded a violation of the rule.

It is next urged that the contract is champertous and void, as against public policy. It is true that the land in question was in the possession of Kerr at the time the contract involved was entered into, and the contract provided that the litigation should be carried on, and Beckwith, Ayer & Kales were to render the professional services, and were to receive one-fourth of what should be realized, for such services. If an agreement of this character, entered into between attorney and client, is champertous, then the point is well taken; but as we understand the law, the contract lacked one essential element to render it champertous, and that is, that the attorneys should prosecute the litigation at their own costs and expense. Had the contract provided that the attorneys should carry on the litigation for a share of what they might recover, at their own cost and expense, .then the contract might have been eham.peptous and void. (Thompson v. Reynolds, 73 Ill. 11; Park Commissioners v. Coleman, 108 id. 601.) Such, however, is not the case. The written contract, which alone fixes and determines the rights and .duties' of the parties, contains no provision whatever requiring the attorneys or the park commissioners to pay the costs or expenses of. the litigation. The fact that the park commissioners may have advanced Phillips money which was used in the prosecution of the litigation, has no bearing on the question.

It is next claimed that this is a bill to' enforce the specific performance of a contract, and the circumstances connected with its execution are such that a court of equity will not lend its aid to enforce the agreement. As wre understand the record, the bill is not brought to enforce the specific performance of a contract. The park commissioners do not ask, in their bill, that Phillips, or. any of. the defendants, be required to convey the premises. On the other hand, they allege that they have acquired the title, and are ready to.pay, but desire-a judicial determination in regard to the person or persons ■who may be entitled to receive the money. This is the scope and object of the bill, and it is apparent that it can not be regarded as a bill for the specific performance of a contract. But if it was, we see- nothing in the evidence to impeach or invalidate the contract, unless all the evidence in the record should be disregarded except the testimony of Phillips, and the case should be decided solely on his testimony. During the summer and fall of 1869, Phillips made a number of propositions to sell the property to the South Park Commissioners, which culminated in the written contract of December 10,1869, under which he was to receive $800 per acre. The original contract was not produced on the trial, as it had been destroyed in the great fire, but a photographic copy of Phillips’ duplicate of the contract was produced, and it was backed in the handwriting of Phillips, as follows: “State of Illinois, Cook county.—South Park Commissioners’ bond to Charles B. Phillips, for 196 acres of land, more or less, at $800.” Here is a solemn declaration in writing, made by Phillips, in confirmation of the contract he had executed, which does not indicate that he was to be paid for the land what it might be worth, as he now contends. But this is not all. After the execution of the contract, Phillips wrote the commissioners letters, in which the contract is recognized. Indeed, after a careful consideration of the evidence, we are of opinion that there is no room for saying that the contract was not fairly entered into, or that the consideration was inadequate, and we see no reason why it should not be enforced, so far as Phillips is concerned.

Much has been said, in the argument, in reference to the action of Beckwith, Ayer & Kales in the matter; but we see nothing wrong in what they did or omitted to do. They were attorneys for the South Park Commissioners, but as there was no conflict between Phillips and the commissioners, so far as the title of Phillips was concerned, both being interested in sustaining his title and defeating all adverse claims, there was no impropriety in Beckwith, Ayer & Kales acting for both Phillips and the commissioners, in defence of the Kerr case, or any other litigation involving the validity of the Phillips title to the premises in dispute.

But it is said that Phillips contracted for the services of the three members of the firm, and that Beckwith and Ayer did nothing in the case. It does not appear, however, that Phillips was in any manner injured from this cause, or that liis suit was not properly attended to. Mr. Kales had the management of the case, and, so far as appears, did all that was necessary to be done, or all that could have been done had the other members of the firm given the matter their personal attention, and we perceive no good ground of complaint on this score.

We now come to the claim of Elizabeth A. Phillips to the property. In her cross-bill, she asserts title to the entire 80-acre tract, and, in the argument, it is claimed that if the evidence is insufficient to sustain this claim, then she is entitled to hold the south 34-^^ acres awarded her by the decree of the circuit court, under an agreement that was made' in August, 1868. For the purpose of establishing the claim first made to the property, reliance is placed upon a supposed deed of trust from Charles B. Phillips to Dr. Thomas Wright, in 1852, and, as evidence of such a deed, an indorsement in the handwriting of Phillips, on a certain will which he executed in 1851, is produced, to the effect that he had made a deed of trust to Wright, for the benefit of his wife. Also, a letter written in 1852, by Phillips, in which he says : “I have concluded to give Lizzie a deed of my farm,—200 acres on the lake shore. * * * I shall give her a deed this day, ” etc. Other letters of Phillips were read in evidence, in which he refers to the farm as belonging to his wife. In connection with this, Mrs. Phillips testifies to residing on the farm, cultivating and improving it for some ten or twelve years, until the house was destroyed by fire. We do not regard the evidence sufficient to establish a settlement of the property on Mrs. Phillips. No deed of trust was produced, nor was it shown that such an instrument was ever seen, by any witness, and the acts and declarations of Mrs. Phillips are totally inconsistent with the theory, now set up,—that the property was settled on her. Her possession of the property with her family was such as a man’s wife would ordinarily be, of the husband’s estate. In a letter to Mr. Kerr, in 1867, she speaks of the property as her husband’s, and says: “I have, on several Occasions, tried to persuade Mr. Phillips to allow you a sufficient portion of this place, at the market price, to satisfy your claim, and he has often refused.” In 1863, in a letter to her husband, among other things she says: “I received a letter from George Wait, informing me that everything was being stolen off your farm near Chicago.” -In-the same letter she alludes to the fact that the property had been held by her father, Dr. Wright, as security for money advanced, but deeded back as soon as the advances were paid. The witness Cornell testifies, that in 1868, when he was trying to aid Mrs. Phillips to secure her rights, the only claim made was that of dower and homestead. Dr. Wright testified that he held the property to secure money advanced to Phillips, and when they settled, in June, 1863, he conveyed to Martin, at Phillips’ request. Martin testified that he received the title in trust for Phillips, and conveyed to the park commissioners, at Phillips’ request. Indeed, it was never understood by any one who had any dealing with Phillips and his wife in regard to the property, that she was owner. On the other hand, the property was always treated as belonging to Phillips, by the wife and all who had any connection with it. It may be that Phillips expected, at some time, to convey the property to his wife, and his loose declarations may be regarded as evidence of such an intention; but the evidence is not sufficient to show that the intention was carried out.

/ On the 4th day of January, 1859, Phillips conveyed the-property in question to one Sweeney. Mrs. Phillips joined in the execution of the deed. On the same day, Sweeney conveyed to Wright. Both deeds were executed at the same time, and as soon as the title passed into Sweeney by one deed, it passed out by the other. It is claimed that the conveyance to Sweeney was in trust for Mrs. Phillips. Neither of the deeds contained evidence of the trust, nor was any writing produced to establish such fact, as required by the Statute of Frauds.

The 9th section of the Statute of Francis, (Eev. Stat. chap. 59, p. 574,) provides: “All declarations or creations of trusts or confidences of any lands, tenements or hereditaments shall be manifested and proved by some writing, signed by the party who is, by law, enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of no effect: Provided, that resulting.trust or trusts created by construction, implication, or operation of law, need not be in writing, and. the same may be proved by parol.” This is not claimed to be a resulting trust, or one created by construction, implication, or operation of law. It would, therefore, seem to fall within the terms of the statute, and can only be proved by some writing. It was not essential that the trust should be declared in the deed. It might be manifested by any writing showing a manifest intention that the property was conveyed in trust. If Sweeney, while holding the title to the land, had made a declaration that he held in trust, by letter, affidavit, answer in chancery, or even by deposition, such declaration might have been binding upon him, and a sufficient manifestation in writing to establish the trust; but no such evidence appears.

It is contended that a deposition of Sweeney, taken eighteen years after he had conveyed the property by an absolute deed to Wright,_ may be regarded as proof in writing to establish the trust. After Sweeney had divested himself of all interest in the property, by the execution of an absolute deed, any subsequent declaration that he might make could not affect the title. (Browne on Frauds, see. 106; Hill on Trustees, "61, 62; Turney v. Wood, 19 Beav. 830; Perry on Trusts, sec. 77.) If, while Sweeney held the title to the property in his own name, and the question was, whether he was absolute owner or held in trust, then his subsequent acknowledgment, by letter, by answer in chancery, or by his deposition, might be regarded as sufficient to establish the -trust. (Perry on Trusts, sec. 82, and notes.) But such is not the case. Eelianco is, however, placed upon a deposition of Sweeney, taken eighteen years after he had conveyed, to the effect that the property was conveyed to him in trust for Mrs. Phillips, and that he' supposed, at the time, that the deed be executed conveyed the property to her. If, however, it should be admitted that this evidence was competent to establish a trust, which we do not, the force and effect of the evidence is overcome by the fact that Sweeney actually conveyed to Wright, and it is clear, from the evidence of Phillips, of- Wright, and of Mrs. Phillips, that the property was conveyed to Wright, not in trust for her, but for the purpose of securing him for money which he had advanced to Phillips. The evidence in the record clearly preponderates in favor of this view of the conveyance, and entirely overcomes the proof relied upon to establish a trust.

On the trial, Mrs. Phillips put in evidence a deed of the premises from Thomas Wright, to his son, John E. Wright, dated October 9, 1861, and a deed from John E. to herself, dated October 3,1878, (both recorded October 3,1878,) and, in the argument, reliance is placed on these conveyances. Thomas Wright, as appears from his own evidence, held the title as security for money which he had advanced to Phillips. On the 2d day of June, 1863, a settlement was made between Phillips and Wright, when the latter was paid in full, and on' that date he conveyed the premises to Martin, who recorded his deed June 5, 1863. This deed having been taken and recorded without notice of the prior conveyance made by Wright to his son, will take priority. But aside from this, Mrs. Phillips knew, as shown by her letters and her deposition, that Thomas Wright held the title as security for money due from her husband. She could not, in a court of equity, profit by a conveyance from her father. After the debt had been paid and discharged, Wright held as a mere trustee, and was bound to convey to Phillips, or to such person as he might direct. A conveyance by Wright to his son, without consideration, in violation of his obligation, conferred no superior equities on Mrs. Phillips.

We now come to that part of the decree in which the title to the 34tYo' acres of the 80-acre tract is confirmed in Mrs. Phillips. This part of the decree is challenged by both Phillips and the South Park Commissioners. It appears from the record, that Kerr, on the 3d day of September, 1866, had obtained a judgment in an action of ejectment, against Charles P. Burton and one Blackwell, under which he had obtained possession of the entire Phillips tract of land, consisting of 194 acres. This judgment was obtained by default, and, under the statute then in force, would become absolute upon the expiration of two years,—September 3,1868. In August, 1868, Mrs. Phillips saw. the situation of affairs, and undertook the recovery of the premises. She.engaged Atkins, Cornell, and Learning & Thompson, to assist her. Phillips, who was then in New York, ivas induced to come to Chicago, and after some negotiation, an arrangement ay as consummated, and an agreement in Avriting executed, bearing date August 21,1868. This contract Avas made betAveen Charles P. Burton, (by Charles B. Phillips, his attorney in fact,) and Charles B. Phillips, parties of the first part, and Charles H. Atkins and Learning & Thompson, parties of the second part,.under Avhich the land Avas to be divided by an east and west line, so as to cut off 103 acres north of the line, and the parties of the second part agreed to use their best endeavors and skill to free the title of said premises, and pay the parties of the first part $1500, and the party of the first part agreed to convey to the second party all the land except the 103 acres, the deed to be held by Atkins, to be deliA^ered to the party of the second part upon completion of their undertaking. For some reason this agreement Avas not strictly adhered to, but a deed was executed by Phillips and his wife, dated August 19, 1868, to Atkins, for the whole tract, and on August 21, 1868, by Charles P. Burton, (by Phillips, his attorney,) to Charles H, Atkins. On the same date, Atkins conveyed, by deed, to Phillips, in trust for Burton, the north 103 acres. The deed to Atkins was recorded September 5, 1868. The $1500 paid Phillips came from Mrs. Phillips, the larger portion of which came from certain notes she held on Boyington. The balance she raised from other sources. The Boyington notes were executed originally to Phillips, for certain lots he had sold, but in 1863 he gave the notes to his wife. After the execution of this agreement, Atkins and Learning & Thompson commenced proceedings against the Kerr title. They entered a motion in court to vacate the judgment, supported by affidavits of Phillips, Atkins, Mrs. Phillips, and others. Phillips filed an affidavit, in which he set up that he was the sole agent of Burton, who resided in California; that neither Burton nor himself had any knowledge of the action of ejectment; that, he was the sole agent of Burton, who had a full defence to the action. Efforts were made by the attorneys of Kerr to find Burton, but no such man could be found. The court thereupon gave Phillips six months to produce Burton, and upon the expiration of six months, Phillips having failed to produce his man, the court overruled the motion. At this stage of the proceeding Phillips became dissatisfied with Learning & Thompson, and they, no doubt on account of his inability to produce Burton, became dissatisfied with him. They withdrew from the case. Subsequently, Atkins and Mrs. Phillips employed Sansom, and, afterwards, Barker and Mr. Bay. The evidence was procured, and a trial had in the Circuit Court of the United States for the Northern District of Illinois, in the case of Kerr v. South Park Commissioners et al., and 80 acres of the land recovered.

It is clear, from the evidence, that the recovery of this land was due to the efforts of Mrs. Phillips, and Atkins, who acted for her, and her attorneys, in connection with the services rendered by the attorney of the South Park Commissioners. It is true that Learning & Thompson withdrew from the case, but at the instance of Mrs. Phillips others took their place, and all has been done that was agreed to be done to free the land from the Kerr title. Under such circumstances, is Mrs. Phillips entitled to protection in a court of equity, or shall the land recovered from Kerr all go to Phillips ? That the contract which was entered into with Phillips was made for the benefit of Mrs. Phillips, is beyond question. Learning & Thompson claim nothing under it. Atkins interposes no claim, but admitted of record, under oath, that he held under the deed from Phillips, in trust for Mrs. Phillips. She, and she alone, it is clear, from the evidence, is entitled to the benefits of the contract of August 21, 1868, and the deeds executed in pursuance of that contract.

It is urged that when Learning & Thompson withdrew from the case, Phillips forfeited the contract: But this he had no right to do. In no event could he retain the $1500 .which -he had received under the contract, and at the same time declare a forfeiture. If he had any right of forfeiture whatever, which it is not necessary here to determine, he could only exercise such right by restoring the parties to the position they occupied when the contract was made. It is apparent, too, that Phillips knew that the contract was made for the benefit of Mrs. Phillips. The evidence is ample on this point. It is shown by the evidence of Atkins and Cornell, as well as the letters of Phillips himself. The contract of August, 1888, and the deeds executed in pursuance of that contract, under which Mrs. Phillips derived title, were executed prior to the contract which Phillips made’ with the South Park Commissioners, under which they claim title, and it was proven by the evidence that the commissioners had actual notice that Mrs. Phillips claimed the land when they entered into contract with Phillips in 1869. As the commissioners therefore had notice of facts sufficient to put them on inquiry at the time they contracted with Phillips, as to Mrs. Phillips’ rights in the property, the lands allotted to her are. not, as was held by the circuit court, affected by the contract made between Phillips and the commissioners.

The court allowed interest on the amount decreed Mrs. Phillips, from the 27th day of August, 1870,—the time when the commissioners took possession of the land,—and this is relied upon as error. Lands can not be taken and appropriated to public use without just compensation is made to the owner; and we think our law of eminent domain requires the payment of the compensation, or a tender, or deposit of the same with the county treasurer, before possession of the land shall be taken. This seems manifest from section 10 of the Eminent Domain act, which, in substance, provides, that when the report of -the jury is brought in, the court or judge shall make such order as to right and justice-shall pertain, ordering that petitioner enter upon such property, and the use of the same, upon payment of full compensation, as ascertained as aforesaid. The payment of the compensation, or the deposit of the same, seems to be a condition precedent to the taking of possession. When, therefore, the possession of the land is taken, the compensation is due; and if due and payable, it, in justice, ought to draw interest from that time. Here, the South Park Commissioners "went into the possession of the land on the 27th day of August, 1870, and they have had the use of the property ever since. They have also had the use of the money which represents the property, although it was due to the owner when they took possession. It is neither equitable nor right that they should have the use of the land and of the money; but as they have had the land, and withheld the payment of money, they should be required to pay interest thereon, as ruled in the circuit court. Seklen v. Jones, 6 Rand. 465; Delaware Railroad Co. v. Bronson, 61 Pa. St. 369; Railroad Co. v. Gesner, 20 Pa. 240.

Counsel for Phillips finds fault with the decree protecting the rights of certain intervening petitioners who claim rights in certain distinct parcels of the premises, through Phillips, for money severally clue them from him. Without entering upon a discussion of this part of the decree, we will merely add that we see no objection to it. Indeed, the whole decree, after a laborious examination of a voluminous record and a lengthy argument, we regard as equitable, and one which settles the rights of the various parties as nearly in accordance with justice and right as could he expected where there are so many conflicting interests and diversity of claims.

The decree of the circuit court will therefore be affirmed.

Decree affirmed.


source: Caselaw Access Project

author: Mr. Justice Shore

license: Public Domain

text:
    The Drovers’ National Bank v. M. J. O’Hare.

      Filed at Ottawa January 25, 1887.

    1. Banks and banking— deposit of money for transmission to another bank for the use of a third person—of the trust character of the deposit— rights, duties and liabilities in respect thereto. A person holding funds of another, deposited the same in a bank for transmission to another bank, for the use of the principal, the deposit being accompanied by a ticket showing for whose use the deposit was made, and, on accepting the deposit, the bank receiving it gave a certificate that the amount had been carried to the credit of the other bank for the use of the principal. It was held, that these facts charged the bank receiving the deposit, with full notice of the ownership of the money, and of the trust character in which it was to be transmitted.
    2. In such case, the liability assumed by the bank receiving the deposit was to pay to the bank to which the funds were to be transmitted, for the use of the owner, the amount of the deposit, and upon such payment being made, "and acceptance thereof, the liability of the bank making the transfer would cease, and the bank receiving the money' would become liable to the person for whose benefit the deposit was made.
    3. But in such case the bank through which it is sought to make payment to the principal, may decline to receive the money and accept the trust, and should do so, if it has suspended payment before receiving notice of the deposit. It will not,become liable to the cestwi que use except on coming into possession of the funds, or acceptance of the credit.
    4. The bank to the credit of which the deposit was made, being but an intermediary, and being no party to the contract to transmit, and not having accepted the trust before its failure, will not be the proper party to sue for and recover the deposit of the bank receiving it, for a neglect of duty on its part resulting in a loss.
    5. Where a person, by his agent, deposits money with one bank, to be transmitted for his use and benefit to another bank, which refuses or is unable to receive it, and can not be compelled to receive it, the purpose of the deposit failing, the bank so receiving the same will hold it to the use of the depositor, and must account to him for it.
    6. Money so deposited, and expressed in the certificate of deposit to be forwarded in the usual course of business, is not to be regarded as assets of the bank to which it is to be transmitted, and can not be applied by the bank receiving the deposit,'in payment of debts due from the correspondent bank, nor is it subject to garnishment at the suit of creditors of that bank.
    7. Where money is thus deposited in one bank to the credit of another bank for the use of the depositor, the latter bank being a mere medium for the transfer of the funds, and liable to account to the depositor if it should receive the same, it will be the duty of the bank taking the deposit to give notice to any other intermediate bank it may select, of the trust character of the funds, and not permit it to be carried to the general account of the trustee bank to be applied upon its debts, and will be liable to the cestui que trust for a breach of that duty.
    8. Action—money had and received—privity of‘contract. Where a party deposited money in a city bank to the'credit of his country bank, for his use, this course being adopted as a means for the the transmission of the funds to the depositor’s place of business, and the city bank transferred the funds to another city bank, which was the correspondent of the country bank, without any notice that the country bank was a mere trustee for another, and the funds were placed to the credit of the country bank, and on its failure they were applied on its indebtedness to its correspondent bank, it was held, that, there being no privity of contract between the depositor and the second city bank, he could not maintain an action against that bank, but had his action against the bank which originally received the deposit.
    Appeal from the Appellate Court for the First District;— heard in that court on appeal from the- Circuit Court of Cook county; the Hon. John G. Rogers, Judge, presiding.

      This was an action for money had and received, brought by M. J. O’Hare, appellee, against the appellant, in the circuit court of Cook county, where a trial ■ by the court, without .a jury, resulted in a judgment for plaintiff for $1129.50. The defendant appealed to the Appellate Court for the First District, where the judgment of the circuit court was affirmed, and now prosecutes this further appeal from that judgment.
    The plaintiff, living at Mineral Point, Wisconsin, shipped to Chicago a car-load of cattle, consigned to Bensley Bros., commission men, at the Union Stock Yards, with directions to sell, and remit the proceeds to plaintiff, by sending the same to the Henry Bank, at Mineral Point. The commission men received and sold the cattle, April 11, A. D. 1884, the sale amounting, after deducting commissions and expenses, to the sum of $1053.16. Bensley Bros, were customers of the appellant bank, and on said 11th day of April, 1884, made a deposit of the proceeds of said sale in the appellant bank, accompanying the same with a ticket, showing upon its face that such deposit was to the credit of the Henry Bank, for the use of M. J. O’Hare, (plaintiff,) and the appellant bank issued to Bensley Bros, a certificate of deposit to W. T. Henry, acknowledging a deposit to the credit of the Henry Bank, for the use of M. J. O’Hare, of that sum of money. On the 11th day of April, 1884, the Henry Bank failed. The plaintiff first learned of it on the 12th, and supposing the money would be sent by express, endeavored to prevent its falling into the hands of the Henry Bank, but failed to find it, and on the 13th telegraphed the failure to Bensley Bros., and directed them to send the money to him, by express, to Mineral Point. Bensley Bros, applied to the appellant bank on the 14th of April,' but it appears that on April 12, 1884, the appellant, by check, transferred the same sum to the Northwestern National Bank, to the credit of the Henry Bank, but omitted to mention that the funds were for the use of O’Hare, but permitted it to be received by the Northwestern National Bank as funds of the Henry Bank, and it was carried to the account of the Henry Bank, and applied upon indebtedness due from the latter bank to the Northwestern National Bank, and that bank refused to account therefor to appellee. The transfer by appellant was in no way authorized by appellee, but the appellant bank now insists that by such transfer of the funds they are relieved from liability, the transfer having been made in pursuance of instructions of W. T. Henry, of date January 24, 1883, to transfer all deposits made with the appellant bank to the credit of said W. T. Henry, to the Northwestern National Bank. - W. T, Henry died July 2, 1883.
    Messrs. Sleepeb & Whiton, for the appellant; '
    There being no privity of contract between us and O’Hare, he can not maintain an action at law against us, when we, as shown by the evidence, before any notice of his alleged equities, had paid over the fund to the order of the party who was legally entitled to call on us for it. Carpen v. Hall, 27 Ill. 386 ; 29 id. 512; Trumbull v. Campbell, 3 Gilm. 502; Miller v. Whipple, 1 Gray, 321; Reed v. Savings Bank, 127 Mass. 295; Ross v. Milne, 12 Leigh, 204; Savings Bank v. Ward, 100 U. S. 195; Wharton on Contracts, sees. 784-787.
    If other parties have claims upon deposits to the credit of A, individually, or upon trust, they must, before A checks the money out, give the bank definite and authentic notice, or the bank must have notice from the surrounding circumstances, that to honor the depositor’s checks would be abetting a fraud. Fay v. Strawn, 32 Ill. 295; In re Fire Ins. Co. 38 id. 289; Chandler v. Hoyle, 58 id. 46; Otis v. Gross, 96 id. 612; National Bank v. Hyde Park, 101 id. 595; Miller v. Receiver, 1 Paige, 444; Bank v. Mason, 95 Pa. St. 113; Ætna Bank v. National Bank, 46 N. Y. 88; National Bank v. Insurance Co. 14 Otto, 54; Phelan v. Savings Bank, 4 Dill. 88; Laubeck v. Leibert, 87 Pa. St. 55; Morse on Banking, (2d ed.) 37, 293, 300; Ridgely Bank v. Patton, 109 Ill. 479.

      Mr. P. L. O’Meaba, for the appellee:
    If money is to be transmitted to a distant place, a trustee may do so through the medium of a responsible bank. But he must give notice to all persons whom he employs, that he transmits the money as trustee. If he neglects this precaution, he will be responsible for any loss. Wren v. Kerton, 11 Ves. 380; Routh v. Howell, 3 id. 566; Mossey v. Banner, 1 J. & W. 247; Knight v. Plymouth, 1 Dick. 120; 1 Perry on Trusts, 406.
    A trustee may deposit money temporarily in some responsible bank, but he will be liable for the money in case of failure of the bank, or for its depreciation, if he deposits it to his individual credit. Perry on Trusts, (2d ed.) 443; Attorney General v. Randall, 21 Vin. Abr. 554; 29 Beav. 211; Matthews v. Brice, 6 id. 239; Mason v. Whitehouse, 2 Coldw. 242.
    If the cestui qxie trust is unable .to trace the trust money into the hands of other persons, or elects not to do so, he may proceed personally against the trustee. Oliver v. Piatt, 3 How. 333; Flagg v. Mann, 3 Sum. 486 ; Hawkins v. Hawkins, 1 D. R. & S. M. 75; Freeman v. Cook, 6 Ired. 379; Norman v. Cunningham, 5 Gratt. 72; Roberts v. Mansfield, 38 Ga. 452; Tathrop v. Bampton, 31 Cal. 17; Calhoun v. Burnett, 40 Miss. 59; Perry on Trusts, (2d ed.) 839, 843.
    He may proceed against the trustee as against an ordinary debtor. Tathrop v. Bampton, 31 Cal. 17; 1 Perry on Trusts, 444.
    An action at law will lie. Chase v. Roberts, Holt’s N. P. C. 501; Ed. v. Botts, 7 M. & Y. 590; Dias v. Brunels, 24 Wend. 9; McCrea v. Purmont, 1 Story’s Eq. 444; 16 Wend. 460; Insurance Co. v. Router, 24 id. 505; 4 Yerg. 57; Hull v. Harris12 Ired. 29; 2 Perry on Trusts, 843.
    The certificate issped by the Drovers’ Bank, and held by O’Hare, is a written declaration that, defendant received said money as trust money; and O’Hare would be entitled to the money against the assignee or receiver of the Drovers’ National Bank, had the same become bankrupt while the money was under its control. Clark v. Hallan, 19 Beav. 262; Puckett v. Wright, 2 Hare, 120; Hill on Trustees, 65.
    The Drovers’ Bank liax'ing notice of the nature of the deposit, xvas bound to keep it separate, as a trust fund. Morse on Banks, 40; 13 Eng. L. & Eq. 222.
    The law undoubtedly is, that the cestui que trust may, if he choose, folloxv the trust fund as far as he can identify it; and the following authorities go far towards shoxving that this money, deposited April 12, 1884, by the Drovers’ Bank with the Northxvestern Bank, had not, as a matter of law, sufficient ear marks to enable O’Hare to follow it in their hands : 25 Ill. 73; 96 id. 612; 2 Wall. 252; 28 Ill. 463. But the Drovers’ Bank could not cast upon us the additional burden of identifying the trust fund, and so xx-e can, if xve choose, proceed against it personally. 2 Perry on Trusts, (2d ed.) sec. 843; 1 id. 444; Wharton on Negligence, sec. 435; Matthews v. Brice, 6 Beav. 239.
   Mr. Justice Shore

delivered the opinion of the Court:

It is contended that if a right of recovery exists in the plaintiff, the action should haxTe been brought against the Northxvestern National Bank, and not against the appellant. We are of opinion that the suit was properly brought. The Northwestern National Bank had no notice whatever that the check of appellant represented money belonging to appellee, or that appellee was in anywise interested therein. It never consented to become his debtor, or to become the depository of funds for his use, and received the money without notice that it was charged xvith such use. The check purported to transfer to the Northxvestern National Bank, funds of the Henry Bank, going to its general account, and the same xvas so receixred by that bank and carried- to the credit of the Henry Bank by the Northwestern National Bank. There was no privity of contract between the Northwestern National Bank and appellee. The transfer was made to that bank without his authority or consent. Nor did the Northwestern National Bank consent to act as trustee in respect of this money, for its transmission to the Henry Bank, for his use. No action would lie by appellee to recover of the Northwestern National Bank. Carpen v. Hall, 29 Ill. 512; Trumbull v. Campbell, 3 Gilm. 502; Savings Bank v. Waid, 11 U. S. 195; Wharton on Contracts, 784, 787. 1

Bensley Bros, had been directed by appellee to forward the proceeds of the sale of his cattle to the Henry Bank, at Mineral Point, Wisconsin. For this, purpose they were his agents, and whatever they did in pursuance of that direction was the act of appellee. In the course of transmitting appellee’s money, the agents of appellee deposited it in the appellant bank to the credit of the Henry Bank, for the use of O’Hare, appellee. The deposit was accompanied by a ticket or memoranda, distinctly notifying appellant that the deposit was for the use of appellee. Appellant, with such notice, accepted the deposit, and issued and delivered to appellee’s agents a certificate therefor, in which they certify that the amount has been carried to the credit of the Henry Bank, for the use of appellee. Appellant must be held to have received this money with full knowledge that it belonged to appellee, and of the trust character in which it was to be transmitted to the Henry Bank. The liability assumed by the appellant bank was, to pay to the Henry Bank, for the use of appellee, the amount of this deposit .with it, and upon such payment being made, and acceptance thereof by the Henry Bank, the liability of appellant would cease, and the Henry Bank become liable to account to appellee for the same.

It is, however, urged, that as the deposit was to the credit of the Henry Bank, it alone had the right to demand and receive the money, and alone could recover the same. This position is, we think, untenable. The deposit was by appellee, for transmission of his own funds to the credit of his home bank, for his use. ' The Henry Bank was not a party to the deposit, never gave its consent to receive the credit, or accepted the trust created for appellee’s benefit. On the very day the deposit was made, the Henry Bank, without any notice of this deposit to its credit, closed its doors as a bank, and its affairs passed into the hands of an assignee, for the benefit of its creditors. It will not be questioned, that if, before closing its doors, the Henry Bank had had notice of this deposit to its credit, it would have had the right to decline it, and refuse to assume the trust with which it would be charged upon receiving the money. Common honesty would have dictated such a course, in view of its financial condition. The Henry Bank was a mere intermediary, chosen by appellee,, through which the money should pass in reaching appellee, and it would become liable to appellee only in the event of its coming into possession of the funds, or acceptance of the credit.

The fact that the deposit was made to its credit without its knowledge or consent, created no contract relation between the Henry Bank and appellee, unless the Henry Bank can be held in some way to have assented thereto. (Wharton on Contracts, 787, and authorities cited.) The authorities cited seem fully to support the reasoning of the text. That the Henry Bank did no act indicating" its assent to receiving the credit, is apparent. As stated, at no time since the deposit was made has it been in condition to consent or to act as trustee of this fund. Waiving, then, the question whether the transfer to the Northwestern National Bank, by check, of a like amount of money, constitutes a defence, if the Henry Bank refused to accept the credit, or for any reason it became impossible that it could receive the money in trust, for the use of appellee, it became the duty of appellant to hold the money for the use of the depositor. He, by his agent, deposited the money with appellant, to be transmitted, for his use and benefit, to another bank, which refuses or is unable to receive it, and can not be compelled to do so. The purpose for which the deposit was made has failed, and is incapable of execution, and appellant would hold the funds to the use of appellee, and must account to him for the same. City of St. Louis v. Johnson, 5 Dill. 241; Farley v. Turner, 26 L. J. and C. 710; Wharton on Contracts, supra. Nor does it militate against this view, that appellee may have been indebted, in some ampunt, to the Henry Bank. The evidence wholly fails to show that there was any understanding or agreement that the bank was to be paid out of this fund, or had any interest therein.

It is shown, however, that it is the custom of the city banks, when a deposit is made to the credit of a country bank in a .city bank not its correspondent, to transfer the amount, by check, to the city correspondent of the country bank, and it is urged that the transfer to the Northwestern National Bank, by appellant, was in accordance with this custom, and that appellant is protected from liability. While it probably is true that parties dealing with the city banks, with knowledge of the custom mentioned, would be bound thereby, it is not necessary, in this ease, to determine the effect to be given to that general usage among the city banks. As we have seen, when this money was deposited with the appellant bank, it was impressed with the trust in favor of appellee, and while the Henry Bank would be entitled’to draw it from the appellant bank if it accepted the deposit to its credit, for the use designated, yet it was, as already said, a mere intermediary in the transit of the funds from Chicago to appellee, at Mineral Point, and the Henry Bank would be compelled to account to him therefor. Appellant might hold the money subject to the order of the Henry Bank, which, by its letter of advice and certificate of deposit, would be advised of the use for which it was to receive the money, or appellant might transmit it in the regular course of business, being responsible only for such care and diligence as the law charges upon persons similarly situated. But if the Henry Bank must, from the character given the funds in the hands of appellant, account to appellee therefor, it was the duty of appellant to give notice to any intermediary it might select, of the trust character impressed upon the funds, and not permit it to he carried to the general account of the trustee, to be applied upon its debts. (1 Perry on Trusts, 406, 443, 444, and authorities cited.) In the hands of appellant this money was not liable as assets of the Henry Bank, nor could it be applied by appellant in payment of debts due from the Henry Bank, nor would it be -subject to garnishment, in appellant’s hands, at the suit of creditors of that bank. In what is claimed as an attempt to transfer the funds to the Northwestern National Bank, appellant. withheld all indications of the trust character of the funds, or that it was other than money going to the general account of the Henry Bank. To this, appellee in nowise consented, and appellant stands in no better position than if it had retained the money in its custody.

It is, however, contended, that, under the authority of the letter of W! T. Henry, appellant was justified in transferring this fund to the Northwestern National Bank in the manner it did, and therefore the loss must fall upon appellee, if loss occurs. Without pausing to discuss whether the death of W. T. Henry would, under the circumstances here shown, amount to a revocation of that authority, it is apparent that the direction was from W. T. Henry, who, up to his death, July 1,1883, carried on the banking business in his own name, as W. T. Henry. After his death, the business was carried on by another, who adopted the style of “Henry Bank, ” and it was to this latter institution that the credit was given in this instance. But, independently of this, that letter, if otherwise binding, would not authorize the deposit, in the Northwestern National Bank, of appellee’s money, to the credit of. the Henry Bank, as funds of the Henry Bank generally, and destroy all “ear marks” by which the funds could be identified as held for appellee’s use. While appellant held the funds the trust character continued. When the Henry Bank received them, if at all, it was for the benefit of appellee, and it can not be held that any previous direction of the Henry Bank, relating to a disposition of its funds, would authorize the destruction of the evidences of the trust relation created in respect to this fund.

There is no hardship in the rule requiring the bank to preserve the character of the funds received by it, in transmitting the same. All appellant had to do to protect itself, was to preserve the trust character impressed upon the fund in transferring it to the Northwestern National Bank. If that bank had, with notice of the trust, received this money, it would have held it in the same character it was held by appellant, and charged with the same use, and upon failure of the Henry Bank before the transmission of the funds to it, would be bound to account to appellee therefor.

Perceiving, therefore, no error in this record, the judgment of the Appellate Court will be affirmed.

Judgment\ffirmed.


author: Mr. Justice Magruder

text:
    Henry Smith v. James Dinsmoor.

      Filed at Ottawa January 25, 1887.

    1. Mortgage—revival after merger. By vacating a decree of foreclosure of a mortgage, and dismissing the bill, the mortgage will be revived from its merger in the decree, and stand as though no proceeding to foreclose had been taken.
    2. Purchases from mortgagor—discharge of prior incumbrance— right to subrogation. The owner of a large body of lands gave three mortgages to an insurance company, each on different tracts from the others, after which he gave another mortgage to A, on all the lands embraced in the three prior ones. He then sold to B two hundred and twenty acres of the land in the first mortgage, and also in the mortgage to A, for $7700, shortly after which C recovered a judgment against the mortgagor, who procured a release from the insurance company as to the two hundred and twenty acres, by the purchaser applying $4400 of the purchase money on the debt secured by its first mortgage, and the balance on the other mortgages: Held, that the purchaser was entitled to be subrogated to the lien of the first mortgage, to the extent of $4400, with six per cent interest, as against the mortgage of A and the judgment in favor of C.
    3. Same—purchaser taking indemnity as against another prior lien—■ effect upon his right to subrogation to the lien discharged. Where a purchaser of mortgaged premises procured a release of the first mortgage, by payment of the purchase money to its holder, and took from his vendor a mortgage on other property to indemnify himself against another and intervening mortgage on the land sold him, it was held, that the taking of the mortgage indemnity did not affect his right to be subrogated to the lien of the first mortgage.
    4. Same—when purchaser is regarded as an assignee, in equity—as respects intervening lien holders. Where a second mortgage is given on the same land, the holder thereof acquires but a lien on the equity of redemption, and a subsequent judgment creditor occupies the same position; and a purchaser from the mortgagor, after these several liens have attached, is under no obligation to discharge the prior mortgage for the benefit of the other lien holders, and if he procures a release of the first mortgage as to his land, instead of taking an assignment, equity will treat him as an assignee, and the other incumbrancers will have no ground of complaint. By subrogation the prior incumbrance is transferred from one owner to another, which does not impair the junior security.
    5. Judgment creditor-—to what time his rights relate bach. The rights of a judgment creditor are fixed by the state of facts existing' at the date of his judgment, and not by the date of the levy of his execution; and he will not, in equity, be allowed to take advantage of a release of a prior mortgage after the recovery of the judgment, as against the right of a purchaser from his debtor, who procures such release, to be subrogated to the lien of the mortgage.
    6. Cloud on title—certificate of purchase as against holder of prior equity. The owner of mortgaged premises sold and conveyed the same on March 8, 1883. On March 15, 1883, a judgment was recovered against the mortgagor, upon which execution was issued, and the premises sold on June 13, 1883. The purchaser from the mortgagor, on March 22, 1883, procured a release of the mortgage as to the land bought by him: Held, that such purchaser was entitled, on bill for that purpose, to have the sale on the execution, and the certificate of purchase, set aside as a cloud on his title.
    Appeal from the Circuit Court of Whiteside county; the Hon. John Y. Eustace, Judge, presiding.

      Mr. J. McPhebban, and Messrs. Manahan & Wabd, for the appellant:
    Subrogation obtains when the relation of guarantor, indorser, surety, co-promisor or creditor, under a claim junior to the subsisting lien of another, exists. Where a person, in view of the subsisting record debts on lands, purchases the same while the debts are liens thereon, he is a volunteer, so far as he may discharge any such liens, as to all other creditors of the debtor who had subsisting claims at the time of such purchase.
    It is only in cases where a person advances money to pay the debts of a third party, or stands in the situation of a surety, or is compelled to pay it to protect his own rights, that a court of equity substitutes him in the place of the creditor as a matter of course, without any agreement to that effect. In other cases, the demand of a creditor, which is paid with money of a third party, and without any agreement that the security shall be assigned or kept on foot for the benefit of such third person, is absolutely extinguished. Sanford v. McLane; 3 Paige, 122; Constant v. Matteson, 22 Ill. 547; Bishop v. O’Conner, 69 id. 431; Bassett v. Lockheart, 60 id. 165; Pool v. Marshall, 49 id. 441.
    The lien of a judgment is not affected by the act of the debtor, or the equities of others, of which the judgment creditor has no notice. Massey v. Westcott, 40 Ill. 163; Giteau v. Wisely, 47 id. 436; McFadden v. Worthington, 45 id. 363; Tenney v. Wolston, 41 id. 213; McHany v. Schenck, 88 id. 357; Root v. Curtis, 38 id. 192; Ryhiner v. Frank, 105 id. 326; Schultz v. Houfes, 96 id. 335.
    The money paid by Dinsmoor was Bressler’s money, and the payment was a payment by the latter. Poole v. Marshall, 48 Ill. 441.
    The lien of a judgment attaches to whatever interest in realty, the record, at the time of its rendition, discloses as being in the judgment debtor. Buggy Co. v. Graves, 108 Ill. 459; Warder v. Cornell, 105 id. 170.
    Creditors are within the Registry act, whether by mortgage or judgment. McCormick v. Wheeler, 36 Ill. 117.
    Creditors' and subsequent purchasers are bound only by the record. Warder v. Cornell, 105 Ill. 179; Root v. Curtis, 38 id. 193; Massey v. Westcott, 40 id. 160; Porter v. McNabney, 77 id. 235.
    When Martin purchased under his judgment, the records showed the .¿Etna mortgage released by the mortgagee. Why is he not protected by the Recording act ? Buggy Co. v. Graves, 108 Ill. 462.
    Messrs. J. & J. Dinsmoob, for the appellee:
    The right of subrogation does not grow out of any contract between the parties to that effect, but is an inherent or natural equity. Deering v. Lord Winchelsea, 1 Cox, 318; Conway v. Parkman, 24 Miss. 665; Salmon v. Slaggett, 3 Bland’s Ch. 173.
    That a purchaser of land paying off a prior lien thereon may be subrogated to such lien, even as against an intervening incumbrance, see Towle v. Hoit, 14 N. H. 61; Bell v. Woodward, 34 id. 90; Forbes v. Moffatt, 18 Yes. 384; Vanderkemp v. Shelton, 11 Paige, 28; Young v. Morgan, 89 Ill. 200; Beaver v. Slanker, 94 id. 175; Kinney v. Knoebel, 51 id. 126; Taul v. Epperson, 38 Texas, 492; Barr v. Patrick, 52 Iowa, 704; Rodgers v. McCluer, 4 Gratt. 81; Tyrrell v. Ward, 102 Ill. 29.
   Mr. Justice Magruder

delivered the opinion of the Court:

On March 21,1881, Peter Bressler made three mortgages, which were recorded on May 5, 1881, to the iEtna Life Insurance Company, of Hartford, Connecticut, one to secure a principal note for $8200, one to secure a-principal note for $6000, and one to secure a principal note for $6500. The notes were of even date with the mortgages, were due by their terms July 1,1886, and drew seven per cent interest, payable on July 1 in each year. The coupons for interest from July 1, 1881, were each for $574 on the note for $8200, $420 on the note for $6000, and $455 on the note for $6500, the interest on all the notes after maturity being eight per cent. The mortgage-for $8200 was secured on the south-west .quarter of section 7 (166^^ acres), the north-west quarter of section 18 (leS-]-8^ acres), and part of the south-west quarter of section 18 (76^^ acres), containing in all over 4.10 acres, all in town 21, north range 7, east of the fourth principal meridian, in Whiteside county. The $6000 was secured on part of the south-east quarter of section 7 (145 acres) and a part of the north-east quarter of section 18 (150 acres), in the same township. ' The $6500 mortgage was secured on part of the north-west'quarter of section 17 (lé7^0 acres), the southwest quarter of section 8 {160 acres), and paid of the-southeast quarter of section 8 (5 acres), also in the same township. The insurance company filed a bill to foreclose these mortgages in the United States Circuit Court for the Northern District of Illinois, and a foreclosure decree for the sale of all the foregoing premises was therein entered on January 3,1883; but the land, covered by the $8200 mortgage, was decreed to be sold to pay the amount due thereon, and so, the lands covered by the $6000 and $6500 mortgages, respectively, "were to be sold separately to pay the respective amounts due thereon.

On May 20,1881, Bressler.'made another mortgage to Adam Smith, which was recorded May 21, 1881, covering -all the. lands described in the three mortgages to the insurance company, to secure four "notes, one for $1500, due on or before eighteen months, one for $1500, due on or before two years and six months, one for $927.91 and one for $700, each due on or before four years and six months after date, amounting in all to $4627.91. The two $1500 notes were assigned to-Henry Smith.

On March 15, 1883, John Martin recovered, in the circuit court of Whiteside county, a judgment for $3395 against Bressler, upon which an execution was issued April 3, 1883, and levied, on June 13, 1883, upon the 220 acres, released from the mortgage for $8200, and conveyed to James Dins-■moor, as hereinafter stated, and also upon an undivided one-third of block 43 in Sterling. All the property, so levied on, was sold by the sheriff to Martin on July 14, 1883, for $3535, being the amount of debt, interest and costs, and the execution was returned satisfied and certificates of sale issued to Martin. The Sterling lot was separately sold for $1500, and the 220 acres were sold for $2035, and a separate certificate was issued for the latter.

On March 8,1883, James Dinsmoor bought of Bressler for $7700 lot 2 of the south-west quarter of section 7 (S6r^o20 acres), lot 2 of the north-west quarter of section 18 (88 acres) and lot 2 of the south-west quarter of section 18 (45TAL acres), making in all 220 acres, and being a part of the 410 acres, or thereabouts, covered by the mortgage for $8200. Bressler and wife executed their deed of the 220 .acres to appellee on March 8, 1883, and the purchase was .really made on that day, although the deed was not recorded until March 23, 1883, and the money was not actually paid over to the company until March 26, 1883. The proof shows, that, on March 8, 1883, appellee deposited $7700 in certain national banks in Sterling, for which certificates of deposit, that were afterwards delivered to the company’s agents, were issued to him; and, on that day, Adam Smith executed to appellee, for an expressed consideration of $1000, a release of his mortgage upon the 220 acres, which release was on the same day placed in the hands of Reed, cashier of one of the banks, to be delivered to appellee “on his return from Chicago, with a release of mortgage of the ¿Etna Life Insurance Company on” the 220 acres, but which was never delivered by Reed to appellee, and was afterwards surrendered to Adam Smith on June 30, 1884. .The appellee had prepared a release of the mortgage for $8200 to submit to the company for their execution, but they were not satisfied with the description of the property therein, as it did not correspond with the description in their mortgage. A new release had to be obtained, which was executed in Hartford, Connecticut, on' March 22, 18S3, and recorded in Whiteside county on March 27, 1883. The objection of the company to the release, submitted to them, caused a delay, during which the Martin judgment was rendered.

Upon being paid the $7700, the insurance company vacated its decree in the United States Court, and dismissed its proceedings, brought to foreclose its three mortgages. After this vacation and dismissal, the company held the mortgages, revived from their merger in the decree, and the matter stood, as though no proceedings had been begun to foreclose, except that court costs and expenses had accrued. Dinsmoor paid for the 220 acres by assuming and paying the $7700 on the incu.mbrance upon the 220 acres and other lands included in the decree. Of the $7700, the sum of $4400 was credited on the principal note for $8200; two coupons of $574 each, belonging to that note, were taken up, and the'balance was applied upon the two mortgages for $6000 and $6500, and in discharge of costs and expenses, incurred in the foreclosure proceeding. The testimony shows, that the insurance company insisted upon applying the $7700 in this manner, instead of crediting it all upon the mortgage for $8200, and that Dinsmoor was obliged to submit to such application, in order to get a release of his 220 acres.

The original bill in this ease was filed by Henry Smith against Dressier, Adam Smith, Dinsmoor, Martin, and others, to foreclose the mortgage to Adam Smith. Dinsmoor answered, and filed a cross-bill, setting up substantially the facts here recited, and praying that he might be subrogated to-tlie rights of the insurance company, and be declared to have the first lien on the lands bought by him for $7700 and interest, at six per cent, from date of payment, and that the rights of Martin should be decreed to be subject to the prior liens of himself and the Smiths, and that the Martin sale and certificate of purchase should be set aside and cancelled.

The proofs further show that, on March 21,1883, Dressier executed a mortgage, which was recorded March 27, 1883, to Dinsmoor, upon the undivided one-third of said block 43 in Sterling, to secure Dinsmoor against the Smith mortgage, so far as the latter rested upon the 220 acres. The testimony tends to show that the Sterling property was worth about $3000.

The decree of the circuit court of Whiteside county was in accordance with the prayer of the cross-bill. The Appellate Court affirmed the decree of the circuit court, except that Dinsmoor was only allowed to be subrogated to the rights of the ¿Etna Insurance Company, to the extent of that portion of the $7700, which was applied on the mortgage for $8200 and to the extent of such portion of the costs and expenses of the United States foreclosure proceeding, as properly belonged to the mortgage for $8200,

Dinsmoor, the appellee, was entitled to be subrogated to the rights of the ¿Etna Life Insurance Company to the extent hereafter stated. When the Smith mortgage was executed, the mortgage of the company for $8200 wras already a subsisting lien upon the 220 acres. Smith took subject to a prior lien. His security was upon a mere equity of redemption.

When the judgment was rendered in favor of Martin, on March 15, 1883, the mortgage of the company, or the decree in which it had been merged, was still a subsisting lien on the 220 acres. As judgment creditor, Martin occupied the same position, as though he had been a subsequent purchaser. He took subject to two liens, that were prior to his own, the mortgage to the company, and the mortgage to Adam Smith. His security was upon an equity of redemption, already twice incumbered. Appellee was under no obligation to make the securities of Smith and Martin more valuable than they were, when Smith and Martin accepted them. He purchased 220 •acres'of Bressler, and agreed to apply $7700 upon the insurance company’s mortgage, as the consideration for such purchase. He was not bound to pay up a mortgage and have it discharged for the benefit of others. It was not his duty to do so, and it can not be presumed to have been his intention. It could make no difference to Smith and Martin, whether the lien, that was ahead of their liens, was owned by the insurance company, or by Dinsmoor. The doctrine of subrogation, enforced in behalf of Dinsmoor, merely changed the .ownership of the prior incumbrance,—merely transferred that incumbrance from one owner to another. Such change and transfer did not make the securities of Smith and Martin any worse than they were before. The facts here are similar to those in Young v. Morgan, 89 Ill. 199, and the principles, announced there, are applicable to this case.

It is said, that, on June 13, 1883, when Martin’s execution was levied on the' 220 acres, the release had been recorded, and the 220 acres were shown by the records to be free of the lien of the company’s mortgage. If this were material, it might be said in reply, that, on June 13,1883, the deed from Bressler to Dinsmoor was also on record, and had been recorded, before the release was recorded. The deed was filed ■for record on March 23,1883, and the release not until March 27,1853. But the rights of Martin, under his judgment, are fixed by the date of the rendition of the judgment, and not by the date of the levy. If the release of the 220 acres from the company’s-mortgage or decree had been filed for record, before the judgment was rendered, then a different question would be presented.

It can make no difference with appellee’s right to subrogation, that he took a mortgage on block 43 in Sterling, to protect himself against the mortgage of Adam Smith. Although the insurance company executed a release of the mortgage for $8200, so far as it was a lien on the 220 acres, to Bressler, instead of making an assignment to appellee, yet, under the circumstances of this case,, equity will regard appellee as the assignee of that mortgage pro tanto, and the lien of the Smith mortgage was none the less subject to the lien of the company’s mortgage, because the company, or its equitable assignee, happened to hold some additional or collateral-security. But the evidence shows, that the undivided one-third of block 43 wras levied on under 'the Martin judgment and sold to Martin at sheriff’s sale for $1500. This levy and sale made Martin the owner of the property if there .was no redemption. •The mortgage, given by Bressler to Dinsmoor on the one-third of block 43 was not executed'until March 21,1883, and was not recorded until March 27,1883. There is no evidence, that Martin had any actual or constructive notice of it prior to March 15, 1883, when his judgment wras rendered; therefore the judgment would hold Bressler’s interest in the block against appellee’s mortgage thereon.

It was not error for.the circuit court to cancel by its decree the certificate of purchase ‘of the 220 acres issued by the sheriff to Martin. The mortgage on the land, bought by appellee, had no existence in law, after the release by the company, and with that certificate, Martin could obtain a sheriff’s deed, that would be a cloud upon appellee’s title. Such a cloud was removed by the decree in Young v. Morgan.

The appellee, however, is only entitled to charge against the land, purchased by him, such proportion of the $7700, as was applied on the mortgage for $8200. The decree in his favor should not embrace the portion, which was credited on the mortgages for $6000 and $6500 respectively. Where a purchaser or junior incumbrancer is given the right of subrogation, it must be in a case, where the lien discharged rests upon the land purchased or covered by the junior incumbrance, and not upon some other land. Appellee can not, by paying other debts of Bressler, consolidate such payments with the payment made on the land bought by him. The company, having applied $4400 on the note for $8200 there remained $3800 due on that note. This $3800 was secured on the balance of the 410 acres, embraced in the mortgage for $8200 and not sold to appellee. If appellee charges the 220 acres with $7700, this, added to the $3800 for which the company held a mortgage on the 190 acres, would make a total incumbrance of $11,500 on the 410 acres. This would be making a new mortgage for the principal sum of $11,500, whereas Bressler only mortgaged the 410 acres for the principal sum of $8200. Appellee, however, is entitled to interest, at the rate of six per cent per annum from the date of payment, on the principal and interest paid by him on the $8200 mortgage, and on such proportion of the costs and expenses of the foreclosure proceedings, as properly belongs to that mortgage.

The decree of the Appellate Court is reversed, and the cause remanded to the circuit court with directions to enter a decree in conformity with this opinion.

Decree reversed.