1. Contracts entered into in a spirit of peace and for the
settlement of unadjusted demands on both sides, will not, where
executed by persons of intelligence, and under circumstances which
indicate caution and a knowledge of what is done, be readily
questioned in equity as in fact not fair; but, on the contrary,
will be protected and enforced.
2. A purchaser by a deed of quitclaim simply is not regarded as
a
bona fide purchaser without notice.
3. The knowledge of counsel in a particular transaction is
notice to his client. And though the client may not actively
participate in accomplishing a fraud, yet if he be looking on at
what is done by another who is his confidential agent and
professional adviser generally, and has been his agent and adviser
in regard to a particular matter now called in question as
fraudulently accomplished, and if, when all is accomplished, the
client take and profit by the fruits of all that has been done, he
will be taken as affected with knowledge possessed by such his
agent.
4. When a trustee abuses his trust -- converting trust property
into new forms -- the
cestui que trust has the option to
take the original or the substituted property, and if either has
passed into the hands of a
bona fide purchaser without
notice, then its value in money. If the trust property comes back
into the hands of the trustee, that fact does not affect the right
of the
cestui que trust. The principle is that the
wrongdoer shall derive no benefit from his wrong, and that profits
which he makes belong to the
cestui que trust. Equity will
accordingly so mould and apply the remedy as to give them to him,
giving, however, the party thus charged proper credits for money
which he has paid, but which, if things had all been regularly
transacted, the
cestui que trust should have paid, making
proper allowances for rent, interest &c., and putting things on
such a footing as under the circumstances does the most complete
justice.
5. Hence where a person who had improperly possessed himself of
land and of personal securities which a complainant was entitled to
have, and confused the personal securities by changing the form of
them, died, leaving
a will by which he devised his estate to numerous persons not
within the jurisdiction of the court, but appointing executors who
were within it, the court being unable to reach the devisees, and
so to decree a conveyance of the land itself, gave a money decree
against the executors embracing the value of the land, and also the
sum realized from the securities. On the other hand, it gave the
party thus charged credit for the payment of certain sums which
he bad paid in discharge of the complainant's debts, and
which, if all things had been done properly, the complainant would
have paid; making also proper allowances for rent, interest
&c., and directing an account before a master.
Page 78 U. S. 218
6. Although, where there has been a contract for the acquisition
of specific pieces of property, which is now incapable of
performance, parties may sometimes be remitted from a court of
equity to a court of law, yet they are never so remitted where the
remedy at law is not as effectual and complete as a chancellor can
make it.
This was an appeal from a decree of the Circuit Court of the
United States for Iowa, dismissing a bill filed by one James May
against the executors of Antoine Le Claire and others.
The evidence in the case showed apparently the following leading
facts,
viz.:
1st. That May and Le Claire had, previously to February 4, 1859,
been associated in business, and that they then had mutual claims
against each other.
2d. That on that day May made to Le Claire a written offer of
compromise, which, about two months afterward (March 8, 1859), was
accepted by Le Claire, in writing, which acceptance was witnessed
by his attorney and counsel, John P. Cook, Esquire.
3d. That this compromise consisted in a settlement and
cancellation of their mutual claims by an exchange of property
of unequal values, whereby May was to be paid his claim
against Le Claire by the difference in value between the property
which he was to give and the value of the property which he was to
receive, that difference being about $27,000.
That the particulars of the compromise were these:
May was to release all claims against Le Claire and convey to
him, free from encumbrance, a farm called Rosebank, within twelve
months; Le Claire was to release all claims against May and convey
to him his interest as mortgagee in certain lands which he had sold
to one Adrian H. Davenport; that is to say, to assign to May five
notes of $5,000 each, with the mortgage given by Davenport, and
also to convey certain island and river shore lands owned by Le
Claire, below the Town of Le Claire in Iowa.
That at the date of the agreement the Rosebank farm, which May
agreed to convey to Le Claire freed from its encumbrances, was
encumbered:
Page 78 U. S. 219
(a) By a mortgage to one Kettell, for $3,125, payable November
1st, 1867.
(b) By a trust deed to one Powers, to secure $6,550, payable May
1, 1858; overdue, therefore, like the mortgage, at the time of the
compromise; this deed containing a clause authorizing Powers, the
trustee, to sell the land if the amount was not paid at
maturity.
4th. That in part performance of the contract on his part, May
gave to Le Claire immediate possession of Rosebank, through his
nephew and business agent (one Joseph A. Le Claire), and also
executed and deposited with Cook & Sargent, bankers at
Davenport, a deed, conveying the farm to Le Claire.
5th. That in part performance of the contract on his part,
Antoine Le Claire also assigned to May the notes, mortgage, and
collaterals of Davenport, and deposited them with Cook &
Sargent. That this assignment was declared to be "in consideration
of an amicable and full settlement between said May and myself of
all matters of difference heretofore existing between us;" and was
witnessed by Cook, already named, the attorney and counsel of Le
Claire.
6th. That Le Claire, at the time and for a short time
afterwards, was satisfied with the compromise, but afterwards
became dissatisfied.
7th. That in the meantime, to-wit, April 12, 1859, Davenport
offered in writing to make a settlement with May by paying him
part of the liabilities of him, the said Davenport, which
had already been assigned by Le Claire to May. That this offer was
not accepted.
8th. That in the spring of 1859, May, in further execution of
the contract on his part, entered into negotiations at Pittsburg,
where he had once lived and was known, by which he was to obtain
the means to enable him to remove the encumbrances now overdue upon
the Rosebank farm; that the means thus provided were approved
bankers' drafts. That while he was absent at Pittsburg Rosebank was
advertised by Powers, the trustee, for sale,
on the 20th of
July, under the deed of trust, Cook urging this on and stating
to
Page 78 U. S. 220
Powers that the "compromise" was very unjust to Le Claire, who,
he said, on the facts, truly understood, had owed May nothing on a
settlement; that he, Cook, wished to break it up; feeling himself
bound as the friend and attorney of Le Claire to protect him as far
as possible against so gross an imposition. That on the day, and
near the hour advertised for the sale of the farm, May and a
Pittsburg friend called on Powers to make arrangements to pay the
said encumbrances, and were informed by Powers that the drafts
would be satisfactory and that the sale should not take place. That
while May was thus in conversation with Powers, a note written by
Cook was handed to Powers, who then stated that he was called out
on other business, excused himself and went away; that on Powers
thus withdrawing from the company of May, he joined Cook, and the
two went to the courthouse (without May's knowledge) and there sold
the farm under the trust deed at auction, subject to the mortgage,
striking it off for $5,000 to one Dessaint; a deed having been
already prepared by Cook with a blank for the purchaser's name; now
filled in with Dessaint's.
That previous to this sale, Cook had told Powers that he need
not have bidders there; that it was unnecessary to bid against him
(Cook) or Dessaint, who Cook said desired to purchase, and that if
the property was struck off to either for less than the amount due
both on the trust deed (now $7,400) and mortgage, he, Cook, would
see both the debts paid in full. That the balance due on the trust
deed was thus afterwards paid, and that on the 28th of July, 1859,
Powers sold to Cook the mortgage of May to Kettle, taking in
payment Cook's own note for $3,255.87, endorsed by Le Claire and
one Ebenezer Cook, and that Cook sued May on the note in the
Circuit Court of the United States for the Northern District of
Illinois and obtained a judgment. That May complained to Powers,
and to others, of the mode in which Rosebank had been sold, and
that Powers promised to annul the sale on payment of the debt, and
did in fact apparently make some efforts to induce Dessaint to give
up
Page 78 U. S. 221
his bargain; which, however, Dessaint refused to do, saying that
he had bought the farm to keep.
9th. That the said farm was now held by one Joseph A. Le Claire,
Junior, by an apparently free and unencumbered title, as
the assignee of Antoine Le Claire.
10th. That this had been accomplished by what the complainant
called "a circle of conveyances," as 1st, a
quitclaim deed
from Dessaint to Ebenezer Cook, dated July 27, 1859; 2d, from
Ebenezer Cook to one
George L. Davenport, by deed dated
December 16th, 1859; 3d, from George Davenport to Joseph A. Le
Claire,
Junior, by deed with special warranty only, dated
January 23, 1862, made in pursuance of a written contract of
Antoine Le Claire with his nephew, Joseph A. Le Claire, Senior,
dated November 21, 1860, and in consideration of the payment, by
the estate of Antoine, of two notes of E. Cook for $10,000, the
payment of which was assumed, or alleged to have been assumed, by
the said George Davenport.
This, in the complainant's language, "completed one circle of
operations."
11th. That, on the other hand, Antoine Le Claire, on the 9th of
March, 1860 --
one day after the expiration of the twelve
months within which May, by the terms of the compromise with Le
Claire had bound himself to convey Rosebank unencumbered to him, Le
Claire, offering to convey what he, on his part, was bound to
convey, made a curt written demand on May for
"a good and sufficient deed for Rosebank, and that all the
encumbrances, judgments, and liens of every character be removed
from said Rosebank, so that I get a clear, perfect, and
unencumbered title therefor."
[Rosebank, as the reader will remember, having at this time been
sold some months before under the deed of trust.] That shortly,
to-wit, seventeen days afterwards, to-wit, on the 27th of March,
1860, Le Claire entered into a written contract with Adrian
Davenport, by which it was agreed that he, Le Claire, should resume
title and possession of the property sold and conveyed by him to
the said Davenport; that the notes given by Davenport should be
Page 78 U. S. 222
cancelled and he discharged from liability, and that, as a means
to this end, Le Claire should proceed to foreclose his mortgage and
buy in the property at the sale under the mortgage; it being agreed
that if at the foreclosure sale the property should sell for more
than the amount of the notes and interest, Davenport was to have
the overplus; if for less, the notes were to be given up; that if
Le Claire should acquire the title as proposed, he agreed to
confirm the sales of certain parts of the property which Davenport
had made; a map being referred to as showing the premises so sold.
That Davenport assigned to Le Claire and placed in his hands notes
of his vendees for part of the purchase money, amounting, with
interest, to about $16,000; Davenport stipulating that there were
no offsets against any of the notes, except two of trifling amount,
which were mentioned, and that if it should prove there were any
valid offsets, he would pay the amount to Le Claire, and Le Claire
agreeing that, upon the payment to him of the balance of the
purchase money by Davenport's vendees, he would convey to those
holding title bonds from Davenport.
That, accordingly, in April, 1860, proceedings to foreclose the
mortgage were instituted by the said John P. Cook; that to
facilitate the proceedings, Davenport admitted the allegations of
the bill, and a decree
pro confesso was entered against
him and subsequently liquidated at the sum of $41,708.32. That all
this was done without notice to May; and that, under this decree,
the mortgaged property was subsequently sold and conveyed by the
sheriff to Le Claire for $20,000.
This completed what the counsel styled "the other circle of
operations."
Thus by what the complainant styled "the joint effect of two
parallel series of operations," Le Claire became possessed of both
of the equivalents agreed to be exchanged between him and May, by
the compromise of March 8, 1859, in payment of the admitted debt of
about $27,000 from him to May; that is to say, Le Claire had paid
his debt to May in full; he, or his relative, Le Claire, Junior,
held Rosebank
Page 78 U. S. 223
by a free and unencumbered title; he still held the island and
river shore property below the Town of Le Claire; and had got back
all the Davenport property, which he agreed to convey, and did
convey, to May.
May, on the contrary, had nothing as the result of the whole
operations except a suit in chancery.
Still the great question of the case remained, whether what had
occurred was the result, on the one hand, of Le Claire's superior
attention and vigilance, within proper limits, and of an
unembarrassed condition as to money; and on the other, of May's
supineness, bad arrangements, and embarrassed condition; whether
the combination of persons was purely accidental, or whether there
was contrivance and design; in other words, whether each part was
so connected with the whole, that, taken together, they furnished
clear evidence that the result was contemplated from an early date,
and that after the compromise had been made in good faith, and
partially executed by both parties, the plan to break it up was
conceived as an afterthought by J. P. Cook, a lawyer, and executed
under his direction by Powers, Dessaint, Ebenezer Cook, the two
Davenports, and the two J. A. De Claires, Senior and Junior?
Especially arose the question, how far had
Antoine Le
Claire, who the case rather showed was an old and perhaps
illiterate half-breed Frenchman -- part Indian -- an interpreter in
early times, who had grown rich by the growth of a large town, on
land granted to him many years since by the bounty of the United
States -- how far had
he originated the scheme, if it was
one; or, if not originating it at all, how far was he to be
affected by what was done by J. P. Cook and the others, assuming
that what they did was a fraudulent scheme successfully carried
out?
This was a matter depending largely on the relations subsisting
between J. P. Cook, old Le Claire, and the various parties already
named.
As to that matter, it appeared,
1. That Powers, the trustee who sold Rosebank, was a banker;
that the firm of J. Cook & Sargent, which was composed
Page 78 U. S. 224
of the
lawyer J. P. Cook, his brother, Ebenezer Cook,
and one Sargent, were also bankers; that Powers was in the habit of
borrowing money from Cook & Sargent, and so under obligations
to them pecuniarily.
2. That
Antoine Le Claire had no lineal descendants;
and that Joseph Le Claire was his nephew and business agent,
occupied the same office with him, and, under the permission of
Antoine Le Claire, was in the actual occupation of Rosebank, after
the agreement of May and Le Claire, receiving the rents.
3. That George Davenport and Antoine Le Claire were intimate in
their business relations, endorsers for each other, and both of
them endorsers for Cook & Sargent to a considerable amount, and
also endorsers for Ebenezer Cook.
4. That Dessaint was a Frenchman and an intimate friend of Le
Claire, and in the habit of lending him money.
5. That Ebenezer Cook, Antoine Le Claire, George Davenport, and
Dessaint, were associated in business as stockholders and directors
of the state Bank.
6. That Cook & Sargent having failed, George Davenport was
one of their assignees, and that Antoine Le Claire had appointed
him by will one of his executors.
7. That John P. Cook was the agent and attorney of Le Claire,
selected by him as the custodian of the papers relating to the
matter in controversy; the subscribing witness, as already said, to
the compromise agreement of March 8, 1859, and to the assignment to
May, dated March 10, 1859; drew and dated the agreement, March 27,
1860, between Le Claire and Adrian Davenport, in regard to the
Davenport mortgage; was one of the attorneys who, on the 24th day
of April, 1860, commenced the action for Le Claire to foreclose the
Davenport mortgage, and procured the decree; as attorney, held the
collaterals until after Le Claire's death, and delivered them to
the executor; as attorney of Le Claire, attended the sale of the
mortgaged property under the decree in favor of
Le Claire v.
Davenport, and after Le Claire, the nephew, bid off the
property, that he directed the deed to be made to Antoine Le
Claire.
Page 78 U. S. 225
8. That at the time, 16th of December, 1860, when
Ebenzer Cook (as already mentioned on p.
78 U. S. 221),
conveyed Rosebank to George Davenport, the judgment in favor of
John P. Cook against May (mentioned on p.
78 U. S. 220),
was assigned to Davenport; the consideration, according to the
statement of Davenport, having been that he agreed to pay a bill
and note of Ebenezer Cook, on which he and Le Claire were liable as
accommodation endorsers, both bill and note dated 20th October,
1859; maturing, respectively, three and four months from date, and
both renewed by Davenport and Le Claire, Davenport admitting that
Le Claire had paid at that time $1,000 upon one of them.
9. That in these money operations, the relations between some of
the parties named, if not all, were quite confidential. For
example, before their failure, Cook & Sargent, on the 21st of
August, 1858, "in consideration of $70,000, executed to Antoine Le
Claire a mortgage upon a large quantity of real estate." The
mortgage recites that Le Claire had accepted various sums for their
accommodation, and proposed to endorse and accept other and further
sums for them, with the view of enabling them to borrow money on
such acceptances. The condition was that they should pay these
liabilities, and save Le Claire harmless. On the 22d of December,
1859, after their failure, they sold and assigned to Le Claire the
banking house of Cook, Sargent, Downey & Co., in Iowa City, and
all the assets of that firm. The deed recites that Le Claire "had
made and executed certain notes, drafts, and acceptances for the
accommodation of Cook & Sargent, and was now liable to pay the
same." No condition or trust was expressed. On the 12th of
December, 1860, in consideration of $15,000, they assigned to
George Davenport their interest in the assets of the firm of Cook,
Sargent & Parker, of Florence, in the Territory of Nebraska,
and covenanted that the interest thus transferred was worth
$15,000. On the 2d of July, 1861, by a deed, absolute on its face,
Le Claire conveyed to Dessaint a large number of tracts of land. An
article of agreement, dated the 15th of the same month, recited,
however, that the prior conveyance
Page 78 U. S. 226
had been made in trust to enable Dessaint to sell and pay a debt
of Le Claire to the Merchants' Branch of the State Bank of Iowa,
and Dessaint stipulated that, after accomplishing this object and
paying the expenses of the trust, he would reconvey to Le
Claire.
Le Claire himself being dead, leaving a life interest in his
estate to his wife, Marguerite (who with the George Davenport
already named were found to be executors), and the remainder to
collaterals, residents some abroad, May now filed this bill against
both the executors, the two Cooks, Dessaint, Sargent, and such
collateral devisees of Le Claire as he could reach (these being
about half of those inheriting under the will), praying for
specific performance, or alternatively for compensation in money,
by way of substitution; and for such other relief as the court
might see fit.
The case came here on a printed transcript of 612 pages; a
confused mass of papers and record entries thrown together without
regard to order or method. It appeared to have been originally made
up by the clerk of the court below, or his deputy, for transmission
to this Court in twelve separate parcels, not inappropriately
described in the clerk's certificate as a "bundle of papers." Many
of the exhibits, together with certain accounts produced or
identified by the witnesses, appeared in the transcript entirely
separated from the depositions of which they formed a part, and
without anything to connect them therewith.
Notwithstanding the character of the transcript the case was
presented with clearness, and was elaborately argued by
Mr. J.
A. Wills, for the appellant, and by Messrs. M. H. Carpenter and J.
N. Rogers, contra, Mr. Wills contending that it was not
necessary to go into minute particular facts to infer fraud; that
the case was one which it was impossible to view, even in outline,
as a whole, without seeing a fraudulent contrivance -- argued that
the fraud being unkennelled, equity would certainly, in some form,
grant relief; that if specific performance could not, in the
complications which, with time, deaths, transfers of property,
absence of parties
Page 78 U. S. 227
defendant &c., be decreed, and if the fraudulent proceedings
should thus of necessity have to stand, then that taking things,
though fraudulent, on the base where the parties had put them, Le
Claire's estate could be followed for the fruits of them in the
hands of his executors, and so made to respond.
The counsel of the other side, asserting that the proof of fraud
consisted only in an artful collocation of facts, and denying that
fraud was proved, and especially that there was anything to show
that, in this matter, Cook had acted as agent of Le Claire -- so as
to charge Le Claire's estate with a fraud committed
by
attorney -- contended that the bill was defective in not
bringing in all Le Claire's devisees; that specific performance was
almost confessedly impracticable, and that if compensation in money
was asked, the case became a claim for damages, and a case
therefore for law, not for equity; that even if a case for equity,
May had lost his rights by supineness in not paying off the overdue
trust deed encumbrance, time being of the essence of his contract
to Powers under the trust deed; but that if this was not so, and if
he still asserted rights in Rosebank, he should file a bill to
redeem.
MR. JUSTICE SWAYNE delivered the opinion of the Court.
This is an appeal in equity from the decree of the Circuit Court
of the United States for the District of Iowa. The record is in a
singularly defective and confused condition. But the case has been
fully argued upon the merits by the counsel upon both sides, and
finding enough in the record, upon looking carefully through it, to
enable us to dispose of the controversy between the parties
satisfactorily to ourselves without further delay, we do not deem
it necessary to reverse and remand the cause, as we might otherwise
do, in order that the record may be corrected and by a further
appeal be brought up in the proper condition. [
Footnote 1]
Page 78 U. S. 228
The case involves no legal question of any doubt or difficulty.
Its determination depends wholly upon the facts. The testimony and
exhibits are very voluminous. It could serve no useful purpose
elaborately to analyze them and set forth the results in this
opinion. We shall content ourselves with doing little more than to
announce our conclusions. We shall not deem it necessary to give in
detail the evidence upon which they are founded or the processes of
argument by which they are supported.
The proposition submitted by May of the 4th of February, 1859,
its acceptance on the 8th of March following by Le Claire, since
deceased, and the assent of May on the same day constituted a valid
contract. There was a large difference in value between what Le
Claire was to give and what he was to receive. But we have found in
the record nothing which raises a doubt that the arrangement was
fair and just to both parties. Le Claire was a man of property and
of experience in business. The date of the proposition and of its
acceptance show that he took ample time to consider the subject.
The acceptance was witnessed by John P. Cook, his counsel, and one
of the defendants in this case. According to the face of the
proposition it involved the settlement of unadjusted demands on
both sides. It was made in a spirit of peace and compromise, and
was accepted in a corresponding spirit. It is the duty of a court
of equity to uphold such an agreement, to protect and enforce the
rights of both parties under it, and to carry it out as far as the
facts, which subsequently occurred, and the settled principles of
our jurisprudence, will permit.
On the 10th of March Le Claire, in pursuance of the contract,
endorsed to May the notes and mortgage of Adrian H. Davenport, and
placed them, with certain collaterals which he had received from
Davenport to secure the payment of the notes, in the hands of Cook
& Sargent. At the same time May, also, in pursuance of the
contract, executed to Le Claire a deed conveying the Rosebank farm,
and placed it in the hands of the same depositaries. Cook &
Sargent were to deliver to each party what the other had
deposited
Page 78 U. S. 229
for him as soon as May should have removed all encumbrances from
the farm, which he was bound by the contract to do within a year
from its date. When Le Claire made his deposit, he took from Cook
& Sargent a receipt stating its object and terms.
The firm of Cook & Sargent consisted of John P. Cook,
Ebenezer Cook, his brother, and George B. Sargent. They were
bankers. On the 21st of August, 1858, they executed to Le Claire a
mortgage upon a large quantity of real estate. The consideration
stated is $70,000. The mortgage recites that Le Claire had
"accepted various sums for the accommodation of Cook &
Sargent, and proposes to endorse and accept other and further sums
for them, with the view of enabling them to borrow money on such
acceptances."
The condition was that they should pay these liabilities and
save Le Claire harmless. Cook & Sargent subsequently failed. On
the 22d of December, 1859, they sold and assigned to Le Claire the
banking house of Cook, Sargent, Downey & Co., in Iowa City, and
all the assets, real, personal, and mixed, of that firm. The
consideration stated is that Le Claire "has made and executed
certain notes, drafts, and acceptances for the accommodation of
Cook & Sargent, and is now liable to pay the same." No
condition or trust is expressed. On the 12th of December, 1860,
Cook & Sargent assigned to the defendant, George L. Davenport,
their interest in the assets of the firm of Cook, Sargent &
Parker, of Florence, in the Territory of Nebraska, and covenanted
that the interest thus transferred was worth the sum of $15,000. On
the 2d of July, 1861, by a deed, absolute on its face, Le Claire
conveyed to the defendant, Louis C. Dessaint, a large number of
tracts of land. On the 15th of the same month an article of
agreement was entered into between them, wherein it was recited
that the prior conveyance had been made in trust to enable Dessaint
to sell and pay a debt of Le Claire to the Merchants' Branch of the
State Bank of Iowa, and Dessaint stipulated that, after
accomplishing this object and paying the expenses of the trust, he
would reconvey the residue of the lands to Le Claire. These
transactions show
Page 78 U. S. 230
the relations of the parties at the dates of their occurrence,
and in that view are not without importance in this case.
The encumbrances on the Rosebank farm consisted of a deed of
trust, executed by May to Charles Powers, since deceased, to secure
a note of May to W. H. & A. T. Strippel, for $6,550, payable,
with interest, on the 1st of May, 1858; a mortgage to George F.
Kettle to secure a note of May to him of $3,125, with interest
after due, payable on the 10th of November, 1857; and the liens of
several judgments not necessary to be particularly specified. At
the time the contract between May and Le Claire was entered into,
Le Claire was well satisfied with the arrangement. Subsequently he
became dissatisfied. John P. Cook afterwards denounced it and
declared that, as the friend and attorney of Le Claire, he
considered it his duty "to protect Le Claire as far as possible
against so gross an imposition." The most obvious and effectual way
to accomplish that object was to sell the Rosebank farm under the
deed of trust, and thus put it out of the power of May to fulfill
his part of the contract, and this purpose those concerned in the
scheme proceeded to carry out.
In this connection we lay out of view the important declarations
of Powers, the trustee, as incompetent against the other
parties.
On the 12th of April, 1859, Adrian H. Davenport, regarding May
as the owner of his notes and mortgage, which Le Claire had
assigned and deposited, as before stated, submitted to May a
written offer for a settlement and compromise, which May
declined.
On the 28th of July, 1859, John P. Cook bought from Powers the
note and mortgage of May to Kettle, and gave in payment his note
for $3,255.87, endorsed by Le Claire and Ebenezer Cook. Cook, the
assignee, sued May on the note in the Circuit Court of the United
States for the Northern District of Illinois and recovered a
judgment.
The day after May executed his deed to Le Claire he delivered
possession of the Rosebank farm to Le Claire, and
Page 78 U. S. 231
has not since had possession or any control over the premises,
or any benefit from them.
On the 20th of July, 1859, Powers, the trustee, sold this
property under the deed of trust. The evidence leaves no doubt in
our minds that his conduct in making the sale was grossly
fraudulent. He knew that May had arranged for funds more than
sufficient to discharge the debt due to his
cestui que
trusts, which were ready to be paid over as soon as May could
deliver to the lender, as security, two of the notes of Davenport.
We are satisfied that, with ordinary condor and fair dealing on the
part of Powers and the other parties implicated, the debt secured
by the deed of trust could have been speedily discharged, and all
the other encumbrances removed.
But such was not the object of Le Claire and his associates, of
whom Powers was clearly one. In the midst of the negotiation
between May and Powers at the banking house of Powers, with funds
present, and ready to be paid over by May on the condition stated,
Powers, upon the receipt of a note from John P. Cook, left
abruptly, under a false pretense, and made a surreptitious sale of
the property to Dessaint for $5,000. A deed was ready, with a blank
for the name of the purchaser, and the blank was at once filled
with the name of Dessaint. The consideration mentioned in the deed
is the amount of his bid. The promises of Powers to annul the sale
upon the payment of the debt were obviously false, and intended
only to deceive and quiet May for the time being. Measures were
taken to keep away competing bidders. The amount of the debt was
$7,400. Dessaint testifies that he bought under an agreement with
Powers that he should pay the full amount of the debt; that Powers
should procure to be assigned to him May's liability for the
difference between the amount of the debt and the amount at which
the property should be struck off to him; and that he paid the full
amount of the debt to Powers. This feature of the transaction
requires no comment. Whether Dessaint was privy to the other frauds
of Powers or not, a subject upon which we can hardly entertain a
doubt,
Page 78 U. S. 232
he took the title in trust for May, and subject to all May's
rights, as they were before the sale and conveyance were made by
Powers. [
Footnote 2]
On the 27th of July, 1859, Dessaint conveyed by a deed of
quitclaim to Ebenezer Cook. The evidence satisfies us that Cook had
full notice of the frauds of Powers and of the infirmities of
Dessaint's title. Whether this were so or not, having acquired his
title by a quitclaim deed, he cannot be regarded as a
bona
fide purchaser without notice. In such cases, the conveyance
passes the title as the grantor held it, and the grantee takes only
what the grantor could lawfully convey. [
Footnote 3] Cook occupied the same relations to the
property as Dessaint, his grantor.
Cook, on the 16th of December, 1860, conveyed to George L.
Davenport. At the same time the judgment in favor of John P. Cook
against May was assigned to the grantee. The conveyance and
assignment were one transaction. The consideration, according to
the testimony of Davenport, was that he agreed to pay a bill and
note of Ebenezer Cook, on which he and Le Claire were liable as
accommodation parties. The bill and note were dated on the 20th of
October, 1859. They matured, respectively, three and four months
from date. Both were renewed by Davenport and Le Claire. Davenport
admits in his testimony that Le Claire paid at that time $1,000
upon one of them.
On the 21st of November, 1860, Antoine Le Claire bound himself
by a written contract to convey the property to his nephew, Joseph
Le Claire. In this condition of things, Antoine Le Claire died. He
left no lineal heirs. By his will he gave the usufruct of his
entire estate to his wife, the defendant, Maguerite Le Claire,
during her life. The residue he gave, in undivided shares, to a
large number of devisees. Only a few of them are parties to this
litigation. Davenport testifies that Antoine Le Claire made a parol
contract with him for the Rosebank farm, and, as the consideration
of the purchase, agreed to pay the liabilities of Ebenezer
Cook,
Page 78 U. S. 233
which Davenport had assumed, and that his estate has since paid
them.
On the 23d of January, 1862, Davenport conveyed the premises to
Joseph A. Le Claire, Jr., pursuant to directions from Joseph A. Le
Claire, the vendee of Antoine Le Claire. The deed contains a
covenant against all persons claiming under the grantor, and none
other.
John P. Cook was the counsel of Le Claire in all his
transactions touching this property. He knew everything that was
done, and his knowledge was notice to his client. [
Footnote 4] But we are well satisfied, by the
facts and circumstances developed in the evidence, that both he and
George L. Davenport had full actual knowledge. After a careful
consideration of the subject, we have found ourselves unable to
come to any other conclusion. The testimony of Davenport is guarded
and peculiar. Twice during his examination he declined to answer a
question until time was allowed him to advise with his counsel. The
proofs establish the frauds alleged in the bill. [
Footnote 5]
If Le Claire did not actively participate in the frauds
perpetrated upon May, he coolly looked on, and deliberately
gathered what others had sown for him. The result was that he
acquired the Rosebank farm unencumbered, and put it out of the
power of May to comply with his contract.
The year within which May was to convey the farm to Le Claire,
unencumbered, expired on the 8th of March, 1860. On the next day,
Le Claire gave a formal written notice to May whereby he tendered
performance on his part, and demanded performance by May. May was
unable to fulfill, and Le Claire knew it. The notice was an idle
ceremony.
The liabilities of Adrian H. Davenport, which Le Claire had
assigned to May and deposited with Cook & Sargent, consisted of
five notes of $7,000 each, making an aggregate of $35,000, with
interest. Le Claire withdrew them from the depositaries and
cancelled the assignment. On the 27th
Page 78 U. S. 234
of March he entered into a new contract with Davenport, whereby
it was stipulated as follows: Le Claire was to resume the title and
possession of the property for which the notes and the mortgage
securing them were given, provided the property could be relieved
from the liens upon it, of judgments against Davenport. To this
end, Le Claire was to foreclose the mortgage, and if at the
foreclosure sale the property should sell for more than the amount
of the notes and interest, Davenport was to have the overplus. If
it should bring less the notes were to be released. If Le Claire
should acquire the title as proposed, he agreed to confirm the
sales, which Davenport represented he had made, of certain portions
of the property. A map was referred to as showing the premises so
sold. Davenport assigned to Le Claire, and placed in his hands
notes of the vendees for part of the purchase money, amounting,
with interest, to about $16,000. Davenport stipulated that there
were no offsets against any of the notes, except two of trifling
amount, which were mentioned, and that if it should prove there
were any valid offsets, he would pay the amount to Le Claire. Le
Claire agreed that, upon the payment to him of the balance of the
purchase money by Davenport's vendees, he would convey to those
holding title bonds from Davenport.
This agreement was carried out. A suit of foreclosure was
instituted by Le Claire, and the property was sold to him for less
than the amount due on the notes of Davenport. The property was
thus divested of all encumbrances, and his original title was
restored to him. John P. Cook, as the counsel of Le Claire,
conducted the legal proceedings. May was not consulted about the
agreement between Le Claire and Davenport, and was not a party to
the foreclosure suit.
It has been suggested by the counsel for the appellees that if
May still has the rights which he claims in respect to the Rosebank
farm, he should file a bill to redeem, and having succeeded, should
tender a conveyance of the property in performance of his contract
with Le Claire instead
Page 78 U. S. 235
of prosecuting this suit. That course is unnecessary. Le Claire
has already had the ownership, control, and full benefit of the
property, and disposed of it as he thought proper. A court of
equity can do no more than he did for himself. It is not pretended
that there was any encumbrance upon the property when it was
conveyed by George L. Davenport to Joseph A. Le Claire, Jr.
Upon the execution of the contract between May and Le Claire, Le
Claire became in equity the owner of the farm. The effect of the
element of fraud in his subsequent conduct is, that he must be
regarded as constructively the trustee and agent of May in removing
the encumbrances and acquiring the ownership and beneficial control
of the property. Hence his estate is entitled to be credited with
his advances and interest instead of the aggregate of the debts
extinguished, and interest on that amount. Under the circumstances,
time was not of the essence of the contract on the part of May, and
when this liability has been accounted for to Le Claire's estate,
the contract on May's part must be held to have been fully
performed. May has had no benefit from this property since the date
of his contract, and none from what he was to receive from Le
Claire. On the contrary, he has been engaged in a long and
expensive conflict for the assertion of his rights, and that
contest is not yet terminated. Viewing the subject in the light of
these facts, we think he is entitled to be credited with annual
rent and interest from the time he parted with the possession of
the farm to Le Claire.
At law, in many cases, if property be tortiously taken or
converted, the tortfeasor may be sued in trespass or trover, or the
injured party may waive the tort and sue in assumpsit. In the
latter case the same results follow as if there had been an implied
contract. The plaintiff is not permitted to set up his tort to
defeat the action, and the recovery of a judgment will bar a
further action
ex delicto by the plaintiff. [
Footnote 6] In the same class of cases where
the converted property
Page 78 U. S. 236
has assumed altered forms by successive investments, the owner
may follow it as far as he can trace it and sue at law for the
substituted property, or he may hold the wrongdoer liable for
appropriate damages. [
Footnote
7]
There are kindred principles in equity jurisprudence whence,
indeed, these rules of the common law seem to have been derived.
Where a trustee has abused his trust in the same manner, the
cestui que trust has the option to take the original or
the substituted property; and if either has passed into the hands
of a
bona fide purchaser without notice, then its value in
money. If the trust property comes back into the hands of the
trustee, that fact does not affect the rights of the
cestui que
trust. The cardinal principle is that the wrongdoer shall
derive no benefit from his wrong. The entire profits belong to the
cestui que trust, and equity will so mould and apply the
remedy as to give them to him.
In cases of specific performance, to which category the one
before us belongs, parties are sometimes remitted to a court of
law. But this is never done where the remedy is not as effectual
and complete there as the chancellor can make it. Equity sometimes
takes jurisdiction on account of the parties, and sometimes on
account of the relief proper to be administered.
The same considerations which invoke the jurisdiction may
control the remedy.
In this case more than half the residuary devisees of Antoine Le
Claire are not before us. We cannot, therefore, decree the
conveyance of real estate, but his legal representatives are before
us, and we can give a money decree against them, embracing the
value of the land, which we might otherwise adjudge to be conveyed.
[
Footnote 8] It is not
necessary that the devisees should be parties to warrant such a
judgment. The presence of the executors is sufficient for that
purpose.
Adrian H. Davenport, as well as Le Claire, had full notice
Page 78 U. S. 237
of the rights of May in respect to the securities embraced in
their compromise. All those securities, including the collaterals,
belonged in equity to May from the time they were deposited with
Cook & Sargent. Le Claire had no right to change their form or
to dispose of them, as was done in carrying out the compromise
agreement. It is within the power of this Court, in the exercise of
its equitable jurisdiction, to annul that arrangement, and hold
Davenport and Le Claire's estate liable in all respects as if the
compromise had not been made. But it is also in our power to
confirm the transaction, and upon the principles of constructive
trusts to give May its fruits instead of pursuing the effects
themselves. This, as the case is presented in the record, we deem
the proper course. Le Claire's estate must account for the proceeds
of the $16,000 of notes, with interest from the time he received
them. As we cannot require the land which he bought at the
foreclosure sale to be conveyed, his estate must account for its
present value. As he violated his agreement with May, and put it
out of his power to give May in specie so large a portion of the
consideration May was entitled to receive, May is not bound to take
the other parcels of real estate mentioned in the contract and
which Le Claire bound himself to convey, and it is within the scope
of our jurisdiction to give May, in money, the present value of
that property also instead of the property itself. We deem it
proper, under the circumstances, to do so, and Le Claire's estate
must account accordingly. The collection of the judgment against
May upon his note to Kettle, recovered by Cook, must be perpetually
enjoined.
An account must be taken by a master, wherein Le Claire's estate
must be debited with the rent of the Rosebank farm annually and
interest down to the time when the account is taken.
With the amount realized from the $16,000 of notes and interest
to the same period.
With the value, at the same time, of the land bought in at the
foreclosure sale by Le Claire, other than that previously
Page 78 U. S. 238
sold by Davenport, the title to which Le Claire took in trust
for Davenport's vendees.
With the value, at the same time, of the other parcels of land
mentioned in the agreement between Cook and Le Claire and which Le
Claire bound himself to convey to May.
Le Claire's estate must be credited with the amount paid on
account of the bill and note of Ebenezer Cook, with interest to the
same time.
The balance in favor of May, with interest from that time, Le
Claire's executors must be required to pay to May.
These conclusions will do justice to May without disturbing the
interests of any third person outside of the sphere of Le Claire's
estate.
Decree reversed and the cause remanded with directions to
enter a decree and proceed in conformity to this opinion.
MR. JUSTICE MILLER took no part in this judgment, having in the
early stages of the case been counsel of May, below.
[
Footnote 1]
Levy v.
Arredondo, 12 Pet. 218;
Mandeville v.
Burt, 8
id. 256;
Harrison v. Nixon, 9
id. 483;
Finley v.
Linn, 6 Cranch 252;
Lewis v.
Darling, 16 How. 1.
[
Footnote 2]
Jeremy's Equity 95.
[
Footnote 3]
Oliver v.
Piatt, 3 How. 333.
[
Footnote 4]
Le Neve v. Le Neve, 2 White's Leading Cases in Equity
23.
[
Footnote 5]
Clark's Executors v. Van
Reimsdyk, 9 Cranch 153;
S.C., 1 Gallison
630;
Jackson v. King, 4 Cowen 220;
Butler v.
Haskell, 4 Dessausure 684.
[
Footnote 6]
Putnam v. Wise, 1 Hill 240, note;
Hill v.
Davis, 3 N.H. 384;
Stockett v. Watkins'
Administrator, 2 Gill & Johnson 326, 342.
[
Footnote 7]
Taylor v. Plummer, 3 Maule & Selwyn 562.
[
Footnote 8]
Peabody v. Tarbell, 2 Cushing 233;
Andrews v.
Brown, 3
id. 131; Fry on Specific Performance 447,
457; 1 Story's Equity ยงยง 788, 789.
