V.
lIOUCK.'
403
The plea appears to be sufficiel1t as to these administrators. The which belonged to the two jointly, at the death of one, however, survived to the other, and remains in him to be prosecuted. Their right is recognized and provirled for· by the statutes. Rev. St. U. S. § 956. Plea allowed as to executors in Missouri, without prejudice to administration in Vermont, and overruled as to the survivor and others.
FRAKER tl. HOUCK
et al.
(Circuit Court, D. Kansas. October 16,1888.) MOB'1'IJAGES-DEEDS OF TRUST-Bn,J,s TO REDEEM-LACHES.
While complainant was confined in the penitentiary. for violation of the na· tional bank act. the trustee, under a deed of trnst to secure complairiant's in· debtedness to the bank. of whicb he had been president, &old the property to purc.hasers. who in good faith paid full value, the proceeds being applied to the debt, of which th,'y paid only a sOlall part. Complainant was pardoned within a few months after these sales. and, although he kuew of them. and that the purchusers, supposing they had good title, were making improve· ments oIi the premises, he did not until more than seven years afterwards give any notice that he had any claim to them; paying no taxes, nor offering to pay any; nor taking other step to assert his rights. Complainant contends that. because of 'his imprisonment at the time ot the conveyances, they were, under statutI'S, absolutely void, and that, as the trust deed gave nopower.6f sale without a clecree establishing the debt. he is in the position of a mortgagor out of possession, and entitled to redeem. lleld, that the claim must be adjudged stl\le. .
In Equity.
Bill to redeem realty from a deed oftrust. On demurrer. L. H. Waters, Goo. H. English, and Goo. W.McOrary, for complainant. W. W. Scott, SlU88 & Stanley, and A. L. Redden, for defendants.
JhEWER, J. This is a bill brought by complainant to redeem certain real estate 'from, a deed of trust executed on the 18th of September, 1876. The circumstances under which this deed of trust was given are these: The Firl:!t Natiolllll Bank of Wichita had suspended. It was expected that a receiver would soon be appointed by the United States comptroller. indebted Complainant had been president of the bank, and was to it at the time of its suspension. James H. Mead was named as trnstee, amI, in adtlition to the ordinary language of a trust deed, makirig the conveyance as security for the payment uf his indebtedness to the bank, the instrument contained the following provision: , "Provided, fnrthEw, that the said James R. Mead, party of the second part, shall at once take possession of the ptelllise<i hereby convp)"ed, anll proceed to receive ami collect the rents, isslles, and profits of thp. same. Pro\'ided, Cut"ther, that. if defall! t' be maue ill the pa.\'Iuen t of any of thl:l illdebt dness or I iabilities herein secured,when the san,e becomes determIned. and dlle and payitems of indehteuuess or Iiahillty, able by the temis or natnre of such the said 'lmrty of the spcond part, 01' hissllceessors, shall, as soon a,s practicable, lifter 11e shidlbe directeu so flo dO: uy the cowptruller ot the United
W4
REPORTER.
proceed to sell the lands and tenements hereinbefore described, or so much thereof as may be necessary, at public or private sale, as he shall 1:>1' directed by the comptroller of t.he currency or other competent authority, and convert the same iD'to money, and execute to the purchaser or purchasers thereof a deed or deeds for the conveyance of the same. And the said party of the secondpart, or his successors, shall, immediately upon the receipt thereof;. pay and apply the moneys arising from the sale of said lands and tenements, .and the rents and incomes that he may receive upon the same. as follows: First. Pay the reasonable and necessary costs and expenses of executing this trust. Second. That all the rest and residue of the moneys arising from the sale of said lands and tenements, and the rents and incomes thereof, he shall pay to the said the First National Bank of Wbhita, Kansas, its successors or assigns, or to its duly appointed and qualified receiver, as aforesaid, in payment, as far as it will go, of the indebtedness and liability of the said J. C. Fraker to the said the First National Bank of Wichita, J{ansas. of every form, as hereinbefore described. But in the event that the said 'liirtds and tenements C. Fraker's indebtedshould sell for more than enough to Payall the said National Bank of ness and liability, as aforesaid,to the said the Ita, Kansas. after the application of the rents and of the same,; and the payment of the reasonable costs and e1Cpenses of e1Cecuting thil:l trust, the surplus. uany, shall be returned to the said parties of the .firstpart. ,Provided, further. that, for the purpose of securing a more speedy execution of the trusts hereinbefore set out and described, and in the fu'rthel' consideration ,of one dollar in: hand paid, the receipt whereof js herebY'acknQwlp!iged,; we, the said parties of the first part, do hereby make, constitute, and the said James R. Mead, and his SUCcel:lSor, hereinafter to oedel:lignltted, oUr :true and lawful attoruey, irrevocable, with full power.to sell and conveY.anj'i and all of the real estate hereinbefore mentioned and described, in performance of said trust,andto execute and deliver a deed or deeds to thepllJ'chaseror'purchasers of the same for the conveyance of tIle said several tracts ofrelli hereby ratifying and confirming whatever the said JamesR.Mead,ot his successor to. this trust, may lawfully do in the premif\es, the saIl).e as if, we were personally present, and did the same. The said parties of the first part do hereby nominate and appoint as succesSOr of the said James R. Mead in .the execution of this trust the person who shall be appointed receiver oUljel!aid the First National Bank of Wichita, Kansas, by the comptroller of the cur.fenoyof the United States. under the prOVisions of an ,act of congress, known 'as the' National Bank Act;' that, as soon as such receivar is appointed and qualified, the said James R. Mead is hereLy directed to convey to such receiver, as his successor, all and singular the property hereby conveyed to the said party of the second part that may remain then unsold. or any moneythat may be in his hands arising from the sale of any of said propprty,or the,rentf3 and incomes thl'reof. And the said receiver shall receive said lands and tenerments and all moneys and other property convej'ed to him or transferred to him .by the said party of the second part, and shall proceed under thtnJirec.tions of the comptroller of the currency of the Uhited States,' or· petentauthority, to fully perform and execute said· trust as hereinbeforedil. rected. And the said party of the second part doth hereby accept the. :trust <;:reated and in him reposed by these presents', an.d doth, for himself, his heirs, executors, and administrators, hereby covenant and agree to and with the said parties of the first part, their executors. administrators, and assigns; that . he, the said party of the seconri pal't, will honestly, faithfully, and W;ithout unnecessary delay, execute the said trust to his skill. kn6wledger. I1nd ability, and subject to the ad vice .and of the ,of the currency of the United States; and that, as soon as the (Jomptrpller of the rency olthe United States shall appoint a receiver.ofthe said the First
FRAKER V. HOUCK.
105
tional Bank of Wichita, Kansas, and saiJ receiver becomes qualified, he will convev and transfer to the said receiver all the lands and tenements and other or effects that may have come into his hands by virtne of this conveyance as hereinbefore directed. In witness whereof the parties to these presents have hereunto Bet their hands and seals the day and year first above . J.e. FRAKER. mentioned. "ELIZABETH M. FRAKER. "J AMES R. MEAD."
On October 21, 1876, H. B. Cullom was appointed receiver, and thereupon Mr. Mead conveyed the property t() him. On January9, 1877, Cullom, as such receiver, obtained authority, from the United States district court for the district of Kansas, for the sale of this property as well . as other assets ofthe bank. During the year 1878 Cullom and his successor, as receiver, conveyed two of the tracts in controversy ·toparties who were bona fide purchasers, and paid full value, the proceeds being applied to complainant's indebtedness to the bank. Part of the property. conveyed by this trust deed was a one-third interest in a certain mill. After the failure of the bank, the other owners of the mill property commc:mced suit in the state court to wind up their 'partnership affairs; and have the rriill sold to pay the partnership debts. This proceeding re- . suIted in a decree and sale, the conveyance being made on the 17th of June,1878.' . This interest in the mill is the other property which the . complainant seeks to redeem. By the 1st of August, 1878, all the property embraced within this .suit had been sold to parties' who bought in good faith,and paid full value. On the 13th of October, 1877 , complainant· was convicted in the United States district court upon the charge of vio- . lating the national bank act, and sentenced to imprisonment in the penitentiary for five years. He remained in the penitentiary until October, . 1878, when he was pardoned. All the conveyances challenged were made during his confinement in the penitentiary.· . After his pardon complainant returned to Wichita; and engaged in the milling bUSiness, remaining there until February, 1881, when he removed to Arkansas, where he resided until the commencement of this suit, in 1887. The sales ofthe property conveyed by realized only a small portion of his indebteuness to the bank, and· the balance remained a part ·of the assets in the hands of the receiver until 1880, when, pursuant to an order ofthe United States district court, this property,with other as- . .sets, was sold at public auction, bought in by on.e Charles Hatton fOf . .$6.15, and thereupon assigned by him to cOll1plainant for $25. On his return to Wichita, in the fall of 1878, after his pardon, complainant knew of these sales; knew that the purchasers were in possession, supposing they had good title; lived within two blocks of one of them, who .occupiedhis formerhomestead; knew of improvements being made upon. the premises, or a part of them; gave no notice to any of the parties that h,e supposed he had any claim to any part. of the property; left them in perfect ignorance thereof, and in the belief that they had a perfect title, until the year 1885, when he consulted with counsel as to his rigMs; then gave'or caused information to be given to defendants that he <llaimed ihe to redeem. During these years he paid no taxes; madt:>. no of-
406
FEDERAL REPORTER.'
fer to pay any; took no steps to assert his rights, and so acted as to leave the parties in possession, and claiming title infull belief that they had a perfect title. It is true that in the year 1879 he wrote one or two letters to the comptroller and Mr. Cullom, the first receiver, to ascertain the state .of his account. and failed to get much inforruationj but that seems to be about the only notice he took of past transactions. Now he claims that. because he was confined in the penitentiary at the time these conveyances were made, they were, under the statutes of Kansas, absolutely void, and that under that trust deed no power of sale was vested in the trustee or receivtJr without a decree of the court establishing the debt, so that he stands in the position of a mortgagor out of pos· session, with a right to redeem· from those in possession. l1>hllll not stop the consider the question discussed by counsel as to the elfect of the provision quoted from the trust deed. Neither shall 1 stop to consider the sufficiency of the plea of the statute of limitations. Though upon that these cases may well be noticed. Miner v. Beekm(J,n, 50 N. Y. 337; Hubbell v. Sibley, Id. 468; Oro88 v. Knox, 32 Kan. 736, 5 Pac. Rep. 32; King v. Meighen, 20 Minn. 264, (Gil. 237;) Green v. Turner,38 Iowa, 112; Locke v. Caldwell, 91 Ill. 417. However, waiving these questions, it seems to me that complainant's claim must be ad. judged stale. It should be noticed that, during the years of his silence, Wichita grew from a small town to a large city, so that one of these properties, worth at the time of its purchase three or four thousand dollars, is now affirmed to be worth filty thousand. The doctrine of staltJness of claim is one peculiar to a court of eljuity. It does not of'pf'nd for its vitality upon any statute of limitations, but is applied by those courts where, by reason of the lapse of time, the acquiescence or inattention of the claimant, and the changed condition of aflilirs, it would be grossl)' inequitable to permit him to assert a right whh:h, if asserted earlit'r, would have bf'en sustained. 1112 Porn. Eq. Jur. § 965, the author thus states the rule: "Whl'n l\ party, with full knOWledge, or at least with sufficient notice or means of knOWledge. of his rights, ami of aU the ruaterial facts, freely does what llllJounts to It recogllilion of thl' transa,"tion as existing, or acts in a manner inconsistent with its replluiation, or lies by fol' a CtJnsiueral,le time. and knowingly P"I'llIits the other party to dt'al wilh the siluject-Illalter ullder the belief that the trall5ltctiun has ueen l'ecognizeu, or freely ah:;tains, for a con:;ideraule length of time. from impeaching it. so that the other part.r is thereby I"easonably in Itlced to SUPpOSll that it is recognizeu. there is acquiescencp, and the lransaetion. although origi nally illlp'achabJe, bt'comes unim. peachable in equity. Even where there hal:l been no act nor langllage properly amounting to an acquiel:lcf>ncl'. a IDere delay, a mere slltl'el"Jng of tillte to elapse U1Ht'asonahly, lIIay of itself lJe a reasoll why cOllrts of equity refuse to exercise tllt'ir jllrisllidion in cases of active and cor.jtrllcti VI' fraud, as weil as in othel' inl:ltancell. It has always ueen It pl'illciple of e'luity to uiscourage stale demands. Lachell are ofteu a defense whully indevenJent or the statute of limitatiolls. "
So, in the case of Hayward v. Bank, 96 U. S. 611, is the matter discussed as follows:
FRAKER
v.
HOUCK ·
407
.. , Courts of equity often treat a lapse of time, less than that prescribed by the statute of limitations, as a presumptive bar, on the ground of discouraging stale claims, or gross laches, or unexplained acquiescence in the assertion of an adverse right.' 2 Story, Eq. Jur. § 1520. In Smith v. Clay, Amb. 645, Lord CAMDEN said: ·A court of equity, which is never acti ve in relief agai nst eonscience or public convenience, has always refused its aid to stale demands when the party has slept upon his right, and acquiesced for a great length (If time. :Nothing can call forth this conrt into activity but conscience, good faith, and reasonable diligence. When these are wanting, the court is passive, and does nothing. Laches and neglect are always discountenanced.' These doctrines have received the approval of this court in numerous cases. Oil Co. v. Marbu1'lI, 91 U. S. 587; Bad.qer v. Badger, 2 Wall. 87; Marsh v. Whitm01'e, 21 Wall. 178; Harwood v. Railroad Co., 17 Wall. 79. In the last-named case .this court said that, withoilt reference to any statute of limitation. eqnity has adopted the principle that the delay which will defeat a recovery must depend upon the particular circumstances of each case.. The question of acq uiescence or delay may often be controlled by the nature of the property which is the subject of litigation. 'A delay, which might have been of no consequence in ,an ordinary case, may be amply sufficient to bar relief when the.property is of a speculative char;lCter, or is suojPct to contingencies, 01' where the rights and liabilities of others have been, in the mean time, varied. If the property is of a speculative or precarious nature, it is the duty of a man complaining of fraud to put forward his claim at the' earliest possible time. He cannot be allowed to remain passive, prepared to affirm the transaction if the.concern should prosper, or to repudiate it if that should pruve to his advantage.' Kerr, Fraud & M. (Bump's Ed.) 3()2, 306; Oil 00. v. Marbury, sup1·a. If Hayward was defrauded of bis the title did not pass from him or the bank because of the peculiar relations which the purchasers held to him and the propelty; if he had the right originally, upon any ground, to repudiate the sale, and reclaim the stock,-it was incumbent upon him, by every considerati0l1 of fairness, to act with diligence, and before any material cilange in the circumstances and the value of the stock had intt·rvened. No sufficient reaBoil is given for the delay in suing. His poverty or pecuniary embarrassment was not a sufficient excuse for postponing the assertion of his rights. He must be deemed tu have made a final election not to disturb the sale of 1868; and a court of eq uity should not permit him, under the circumstances, to recall that election. Upon the grounds, then, both of acquiescence and lapse of time, he should be held to have forfeited all right to relief in a court of equity." See, also, The Walter M. Fleming, 9 Fed. Rep. 474; Graham v. Railroad Co., 14 Fed. Rep. 753; York v. Mill Co" 30 Fed. Rep. 471, Munn v. Burges, 70 Ill. 604. Applying these considerations to the case at bar, we have a party, for seven years, with a claim upon property,living in its vicinity, conscious of the fact that parties in possession believe that they have a perfect title, sufficiency of their title, pay taxes, leaving them to go in a belief in and ulake improvements, and giving no information as to his claim. Under those circumstances the mere lapse of time makes strongly against the equity of his present assertion. But that is not all. The property which ha$ been sold to the defendants was sold to pay his indebtedness to the bank, and the money paid by the purchasers, which was the fair value of the property, was applied in partial payment of that debt. Yet, notwithstanding these sales, that debt was unsatisfied. The balance of the debt was believed to be absolutely worthless. He says nothing about
408
FEDERAL REPORTER.
his claim until; in a roundabout way, and for a mere song, he acquires and thus extinguishes the claim of the bank against himself, and leaves its creditors largely unpaid. 1ibe had asserted his rights before the bank bad parted with this claim against him,it wOllld have been an easy matter, by judicial proceedings, in respect to which no challenge could have been made, to have subjected the property atits then value to the satisfaction of his just debt to the bank; but he waits until, in this roundabout way, he has extin-guished the claim ofthe bank against him, and then seeks to reqover possession of the very property which has been in good faith appropriated to the partial payment of his debt. And upon what equity does he l;est tbis Claim? Not ,upon the ground that the propertywas sacrificed; that a fair value was not obtained; that a just debt was not partially liquidated; but upon the barren and cold averment that, by the letter of the law, a sale and conveyance made while he was in thepenitentiary, suffering thejust punishment for his crime, was technicnlly void. 'If there is anything which can make less of an a:ppealto the conscience{)f ,a chancellor than that of an ex-conviet, who pleads his own punishment in the penitentiary as a reason why his property which bas been in good · faith long years ago applied to the satisfaction of his just dpbts be restored to him, I have yet to hear it. Not the first imputation of bad faith or misconduct is cast upon the defendants. The complainant rests upon the mete technical protection which the law in its humanity casts about him · who suffers the punishment of crime. This property, at talr value, in the course of supposed due legal proceedings, appropriated years and years ago to the payment of his just debts. Equity forbids that a title apparently conveyed by these proceedings should, after this lapse of time, be disturbed. I think the demurrer of the defendants should be sus· tained, and sustained,if upon no other, then upouthe single groundoi the staleness of the claim; and it is so ordered.' ..
GREGORY
'/1. BOSTON SAFE-DEPOSIT
&
TRUST
eo. et al.
(Oircuit CQurt, D. Massachusetts. October 5, 1888.)
1.
Plaintiff, to raise money for a business enterprise, caused notes of his debtor to be made payable to R" who, with plaintiff's consent. gave them to .J., to . be used to raise money by either B. or J. for that purpose; they both being associates of plaintiff. J. exchanged the notes for others payable to himself, and one of these B. pledged to obtain the necessary funds. There was a conflict of evidence as to whether .plaintIff authorized this pledge. as made, but he apparently acquiesced in it for months after learning of it, and it was when the venture proved unsuccessful that he.expressed dissatisfaction With B.'s action. Held that. as against the pledgee. who was an innocent purchaser for value, plaintiff was estopped from claiming the proceeds of the . note. A submission to arbitration of a pending suit, without the consent of aU the parties thereto whose interests may be affected by the award, is irregular and void. ANII AwARD-SUBMisSION-NoN-JOINDER OF PARTIES.
P,LEDGE-CONVEBSION....,:.EsTOPPEL.