Where the holder of a preemption right to lots in the Town of
Dubuque sold them to another person, the facts that the vendor had
received certificates of his right, although the land officers were
not satisfied with their sufficiency, and that the vendor acted as
the undisputed owner, were sufficient to negative the charge of
fraud in his representing his title to be good.
The relinquishment by the vendor of his title to the United
States with a view to a public sale and completion of his title was
not fraudulent towards the vendee if it was the purpose of the
vendor to enable himself to convey a perfect title to his
vendee.
If, at the public sale, the vendee himself became the purchaser,
he became a trustee for his original vendor, and if, at the public
sale, the original vendor became the purchaser, the title inured to
the benefit of his vendee.
Page 47 U. S. 285
The following statement of the case was the brief of Mr. Howard
who argued it.
"This was an appeal from the Supreme Court of Iowa Territory,
sitting as a court of equity, under the following
circumstances."
"On 2 July, 1836, Congress passed an Act, chap. 262, 5 Stat. 70,
for laying off the Town of Dubuque, amongst other towns, under the
direction of the Surveyor General. The 1st section directed lots to
be laid out in a certain manner, and a plat returned to the
Secretary of the Treasury, and within six months thereafter the
lots should be sold to the highest bidder. The 2d section directed
the lots to be classed according to their value into three classes,
viz. at $40, $20, and $10 per acre, respectively, and gave
a right of preemption to those persons who had obtained a permit to
settle or who had actually occupied and improved the lots, paying
for the lot according to its class."
"On 3 March, 1837, Congress passed another Act, chap. 36, 5
Stat. 178, amendatory of the former, substituting a board of
commissioners for the surveyor. They were empowered to 'hear
evidence, and determine all claims to lots'; to reduce the evidence
to writing, which they were directed to file with the register and
receiver, together with a certificate in favor of each person
having the right of preemption. Upon payment for the lot being made
to the receiver, the receiver was directed to give a receipt for
the same, and the register to issue a certificate of purchase, to
be transmitted to the commissioner of the General Land Office, as
in other cases of the sale of public lands."
"The 3d section directed the register and receiver to expose the
residue of the lots to public sale, after advertising, &c."
"On 8 February, 1839, Marshall and Whitesides sold to Bush a
preemption right to two lots in the Town of Dubuque,
viz.,
No. 7 and No. 194. The deed is not upon the record, but the
consideration is stated in the bill, and admitted in the answer
(Rec. 3, 6) to have been three thousand dollars, one-half of which,
viz., $1,500, was paid in cash by Bush. To secure the
payment of the other half, Bush executed a mortgage to Whitesides
and also gave his promissory note to Marshall for $1,790, payable
on or before 1 October, 1839. Of this $1,790, $1,500 was for the
purchase of the lots and the remaining $290 was for rent in arrear,
which was transferred to Bush."
"It appears from the evidence of B. R. Petrikin, the register in
the land office in the Town of Dubuque, that"
"Bush came frequently to the land office to enter the lots No. 7
and No.
Page 47 U. S. 286
194 under the preemption law, but was not allowed to do so by
the land officers because the proof filed by William B. Whitesides
with the commissioners, under the law laying off the Town of
Dubuque, did not satisfy the land officers as being sufficient to
maintain a right under the law in favor of Whitesides'
preemption."
"It appears also from the same evidence that the land
officers"
"had received instructions from the General Land Office to
expose all lots to public sale where the claimants should
relinquish their right to preemption (under the law laying off the
town) to the United States."
"In September, 1840, the lots in the Town of Dubuque were
offered at public sale. Bush went to the land office and protested
against the lots No. 7 and No. 194 being offered at public
sale."
"Previous to the sale, however, it appears from the testimony of
Dougherty that a 'committee of arrangements had been appointed for
the purchase of lots in the Town of Dubuque'; that there was a
'public bidder,' who was a person selected by the claimants to lots
in the Town of Dubuque, to purchase the lots they claimed, as they
were offered at the public sale."
"It appears from the evidence of Dougherty that the committee of
arrangements called on Bush and informed him that the committee
desired him to make his relinquishment to lot No. 7, which he
positively refused to do. The committee then erased the name of
Bush and inserted the name of Whitesides, and informed Whitesides
immediately of the same, when he, the said Whitesides, came before
the committee and made his relinquishment to said lot."
"It appears also from the testimony of Petrikin, the register,
that Whitesides came to the land office and produced the deeds in
relation to the property before the officers of the land office,
and the said officers considered that the said Whitesides had a
right to relinquish his preemption right, and thereupon the said
Whitesides did relinquish, in consequence of which the lots No. 7
and No. 194 were put up at public sale."
"The following statement of facts was agreed upon in the court
below."
" It is agreed the following statement of facts may be used, in
the same manner as if the same were proved by witnesses on the
hearing of the above causes:"
" 1st. That the lots mentioned in the foregoing pleadings were
sold at a public sale of lots in the Town of Dubuque, by the Unites
states, in last, at which sale John D. Bush above named, became the
purchaser of lot No. 7, and the above-named William B. Whitesides
of lot No. 194. "
Page 47 U. S. 287
" 2d. That said lots would not have been put up and sold at said
sale, unless the said William B. Whitesides had relinquished all
claim to the same to the United States previous to said sale, and
that said Whitesides did thus relinquish, previous to the same's
being put up to sale, and for the express purpose of having them
sold at said sale."
" 3d. That said Bush objected and protested to said Whitesides
against the said Whitesides thus relinquishing."
" 4th. That previous to said sale and at the time of said
relinquishment and subsequent thereto (but previous to the sale),
said Bush was informed by E. C. Dougherty and Whitesides and by
said Whitesides' agent that his object in having the said lots put
up to sale was expressly with a view that the title to them might
be perfected in said Whitesides so that he could make a good title
to said Bush upon said Bush paying the purchase money for said
lots. And also that said Whitesides, by himself or agent duly
authorized for said purpose, did propose and offer to said Bush
that if said Bush would bid for said lots and agree that his
purchase should be under the contract for them set out in the
pleading in the above causes, said Whitesides would make no
opposition to his so doing, but was perfectly willing said Bush
should become the purchaser with this understanding, but that said
Bush utterly refused so to do, when said Bush was informed by said
Whitesides or by his agent that said Whitesides would bid for said
lots at said sale in order to enable him to comply with his
contract with said Bush. That said Whitesides and Bush were the
only bidders for said lots at said sale and that Philip S. Dade was
the bidder for said Whitesides, of which the said Bush, previous to
and at the time of said sale, was advised and informed. That the
memorandum at the foot of the deed or mortgage that said Bush was
to furnish the money to pay for said lots was there inserted by the
express agreement and understanding of said Bush at the time of
executing said deed and mortgage."
" The public sale took place in September, 1840, after Bush had
refused to purchase under his contract. At the sale, the public
bidder and Bush were the only bidders for the two lots No. 7 and
No. 194, the public bidder bidding for Whitesides, of which Bush
was informed previous to and at the time of said sale. The lot No.
7 was bid off to Bush and No. 194 to Whitesides."
" In April, 1841, Whitesides and Marshall filed a bill in the
District Court of Dubuque County praying a foreclosure of the
mortgage and sale of both lots. After an answer and a general
replication, the court decreed for the complainants and ordered
both lots to be sold. An appeal was taken to the Supreme
Page 47 U. S. 288
court of Iowa, where the decree of the court below was affirmed,
and the cause was brought by appeal to this Court."
MR. JUSTICE GRIER delivered the opinion of the Court.
This suit originated in the District Court for Dubuque county,
in the Territory of Iowa. It was a bill in chancery to foreclose a
mortgage given by the appellant, Bush, to Whitesides. The property
mortgaged consisted of two lots (numbered 7 and 194) in the Town of
Dubuque which Whitesides had sold and conveyed on the same day to
the mortgagor for the sum of $3,000, and the mortgage (dated 8
February, 1839) was given to secure the sum of $1,500, the balance
of the purchase money.
At the time of this transaction, the United States had not yet
offered the lands on which the Town of Dubuque was situated for
sale. But notwithstanding the occupants of lots were mere tenants
at sufferance only, they proceeded to make valuable improvements
under the expectation of the grant of a right of preemption from
the government or at least that they could complete their title by
purchase from it when the lots should be offered for sale.
These possessions and improvements were treated as valid and
subsisting titles by the settlers, and were the subjects of
contract and sale by conveyances in the forms usual for passing a
title in fee. On one of the lots which was the subject of the
mortgage in question a tavern house and other improvements were
erected for which the tenant paid a rent of seventy dollars per
month at the time of this purchase. The deed from Whitesides to
Bush was not put in evidence, but, from the recitals of the
mortgage and admissions of the answer, it appears to have been a
deed in fee simple, with a covenant of general warranty. The
mortgagor is estopped by his deed from denying seizin, and cannot
make out a sufficient defense unless by proving payment of the
money, want of consideration, or fraud which will avoid the
contract.
Accordingly, the appellant, in his answer, has set up two
grounds of defense by way of avoidance of his deed. First,
fraudulent misrepresentation by the vendor to induce him to make
the purchase, and secondly, want of consideration from failure of
title.
1st. The fraudulent misrepresentation charged consists of three
particulars. First, that the vendor represented, "that he
Page 47 U. S. 289
held a valid preemption right to the lots, by virtue of the laws
of the United States in relation to town lots in the Town of
Dubuque;" secondly, that he represented that the fixtures in the
tavern, to-wit, the bar shelves and counter, formed a part of the
property sold, whereas they were claimed and taken away by Hale,
the tenant, and the house much injured by the moving and tearing
away of said fixtures; and thirdly, that by falsely representing
Hale, the tenant, to be punctual in his payments, Bush was
prevailed on to give his note to the complainants for the sum of
$290 for the rent of the unexpired term, whereas Hale was not
punctual, and defendant was unable to collect the rent from
him.
The latter two of these charges may be summarily disposed of by
the remark that there is no evidence in the case of any
representations by the complainants on the subject, and as the
matter alleged in the answer is not responsive to the bill, but set
up by way of avoidance, the defendant was bound to prove it.
But the first is the one chiefly relied on in the argument, and
deserves more particular notice.
It is proved by Davis, the scrivener who drew the deed and
mortgage, that Whitesides told Bush "that he, Whitesides, had a
preemption to the property." Was this representation false? The
only evidence on the subject is in the testimony of Petrikin, the
register of the land office, who swears
"that the commissioners, appointed under the act of Congress
laying off the Towns of Dubuque &c., filed in the land office
certificates in favor of Whitesides' preemption to these lots, No.
7 and No. 194."
He states also
"that the land officers had instructions from the General Land
Office to expose all lots to public sale, where the claimants
should relinquish their right of preemption to the United
States."
He states, moreover, "that the land officers were not satisfied
with the regularity or sufficiency of Whitesides' certificate," but
whether these doubts or opinions were well founded or not does not
appear from any testimony in the case. The facts also that
Whitesides was permitted to relinquish the preemption right to the
United States and that no other person laid any claim to the
possession and preemption of these lots except Whitesides, and Bush
claiming under him, are conclusive when taken in connection with
evidence of a certificate in his favor by the commissioners to show
that the representation of Whitesides was not false or fraudulent
and that defendant has wholly failed to support this allegation as
set forth in his answer.
But it has been contended that this relinquishment, made by
Whitesides to the United States against the consent of Bush
Page 47 U. S. 290
was fraudulent and injurious to the interests of Bush. To this
argument two answers may be given, either of which is conclusive.
First, that there is no allegation in the pleadings on the subject,
and secondly, the evidence clearly shows that although Whitesides
did relinquish his preemption to the United States, and that too
without the consent of Bush, yet the act was not fraudulent, as it
was not intended and did not tend to do any injury to Bush.
Whitesides, by his warranty, was bound, under penalty of $3,000, to
obtain a good title for Bush, cost what it may, while Bush was
bound to pay only the minimum or preemption price. The
relinquishment of his preemption right by Whitesides was not
intended as an abandonment of his claim, but was a plan adopted by
himself, in common with the other claimants of lots in Dubuque, as
the most convenient method of obtaining a title. By thus suffering
them to be exposed to auction, they ran the risk of being compelled
to pay more than the minimum or preemption price for a title, but
could not get it for less. The record admits that Bush knew
"that Whitesides' object in having the lots put up to sale was
expressly with a view that the title to them might be perfected in
said Whitesides, in order that he could make a good title to
Bush."
It is not easy to apprehend how fraud can be predicated of the
conduct of Whitesides, who, it is admitted, was using every
endeavor to fulfill his contract and obtain a good title for his
vendee. As to the alleged fraud on the government by the conduct of
the people in Dubuque on this occasion, it is sufficient to say
that the question is not raised in the pleadings nor the fact
proved in the evidence.
We are of opinion, therefore, that the appellant has wholly
failed to show any fraud or misrepresentation on the part of his
vendors which would justify a court of chancery in annulling an
executed contract.
Indeed, the facts of the case tend rather to show that the
fraud, if any, in this transaction may be more justly charged to
the party who is so liberal in imputing it to others.
If Bush could have thwarted Whitesides in his endeavors to
procure the legal title for him -- if he could hold the lot on
which the tavern house and improvements were situated (and valued
at $2,200) for his bid of less than twenty dollars and then recover
the $2,200 from Whitesides on his warranty -- he will have effected
what is commonly called a speculation, but one in the perpetration
of which he ought not to expect the aid of a court of equity. The
anxious disavowal of an intention "to defraud or wrong the
complainants," contained in the defendant's answer, was not called
out by any charge
Page 47 U. S. 291
in complainants' bill, but seems rather to have resulted from a
consciousness that his conduct was justly liable to such an
imputation.
II. The other ground of avoidance is failure of
consideration.
The answer alleges that at the public sale by the United States,
lot No. 7 was purchased by defendant himself, and therefore the
vendor is unable to comply with his contract by making him a title,
and moreover that Whitesides has become the purchaser of lot No.
194, and therefore he, Bush, was without title to it.
This defense seems founded on an entire mistake or ignorance of
the law, as the facts alleged lead to a directly contrary
conclusion and show that the defendant has a complete legal title.
If Whitesides sold to him with covenant of warranty and afterwards
purchased the legal title, as the answer asserts, with regard to
lot No. 194, then is the title vested in Bush the vendee by
estoppel, and no further conveyance is necessary.
As to lot No. 7, Bush having obtained possession under
Whitesides, cannot, by the purchase of an outstanding title, defeat
the claim of his vendor. It is a well established rule of
equity
"that if a vendee buys up a better title than that of the
vendor, and the vendor was guilty of no fraud, he can only be
compelled to refund to the vendee the amount of money paid for the
better title. . . . Equity treats the purchaser as a trustee for
his vendor because he holds under him, and acts done to perfect the
title by the former, when in possession of the land, inure to the
benefit of him under whom the possession was obtained and through
whom a knowledge of a defect of title was obtained. The vendor and
vendee stand in the relation of landlord and tenant; the vendee
cannot disavow the vendor's title."
See Galloway v.
Findlay, 12 Pet. 295, and cases there cited.
In the present case, the vendee has bought in for twenty dollars
the legal title to a property worth more than two thousand, the
possession of which he received from his vendor, and not only so,
but, contrary to good faith and fair dealing, he has interfered to
overbid his vendor, who was using every endeavor to purchase the
title for the use of his vendee in fulfillment of his own
covenants. The appellant has paid no more (or, if more, so little
as to be unworthy of notice) than he agreed to pay for the purpose
of getting the legal title. He has got a good title to the
property, and ought in justice and equity to pay for it the full
consideration which he has covenanted to pay.
The decree of the Supreme Court of Iowa must
therefore
Page 47 U. S.
292
be affirmed, with costs, with leave to the appellees to sell
the mortgaged property in the mode prescribed by law unless the
appellant shall pay the amount of said decree, with interest
thereon and the costs, within sixty days from the filing of the
record in this case in the proper court of the State of
Iowa.
Order
This cause came on to be heard on the transcript of the record
from the Supreme Court of the Territory of Iowa and was argued by
counsel. On consideration whereof it is now here ordered, adjudged,
and decreed by this Court that the decree of the said supreme court
in this cause be and the same is hereby affirmed with costs and
damages at the rate of six percentum per annum, with leave to the
appellees to sell the mortgaged property in the mode prescribed by
law unless the appellant shall pay the amount of said decree, with
interest thereon and the costs, within sixty days from the filing
of the mandate in this case in the proper court of the State of
Iowa.
