WESTERN MORTG. & INV. CO. V. GANZER.
647
First. That it is a doctrine in Missouri that a deed should receive such construction as to give effect to the obvious intentions of the parties thereto. Technical rules of· construction will be ignored, especially in deeds designed as family settlements, when they,do violence to the evident intent of the grantor. Bean v. Kenmuir, 86 Mo. 666, 671; Oook v. Couch, 100 Mo. 29-34, 13 S. W. 80; Lewis v. Pitman, 101 :1\'10. 281-292, 14 S. W. 52; Long v. Timms, 107 Mo. 512, 519, 17 S. ·W. 898. There can be no doubt, in view of the proviso contained in the habendum clause of the deed from. Michael Kelly to John E. Yore, trustee of Mrs. Barbara Ann Yore, ' of date January 12, 1857, that the grantor intended that the title to the lot therein described should vest in Patrick Yore in fee simple in the event that his wife, Barbara Ann, died without having disposed of the property either by deed or wiII. The deed must be construed as having vested in Barbara Ann a life estate, with power of disposal either by deed or will. Hence the plaintiffs cannot recover as to any of the property included in the Kelly deed. Second. The court holds that the action is barred by the statute of limitations, as to the property included in the deed from O'Flaherty to Meegan, trustee of Ann Yore, of date April 26,1852. Judgment for defendant on these grounds. .
WESTERN MORTG. & INV. CO., Limited, v. GANZER et aL (Circuit Court of Appeals, Fifth Circuit. June 12, 1894.) No. 231. 1. HO}IESTEAD-ATTE}IPT TO INCU}fBER-SnWJ.ATED SALE TO RAISE VENDOR'S LJEN-NoTICE-l'RINCIPAJ. AND AGENT.
Knowledge by the agent of a loan company that an ostensible sale and conveyance of a homestead is merely colorable, and for the purpose of enabling the owners to raise money thereon by discounting the notes for the deferred payments with the loan company on the faith and securit;}· of the resulting vendor's lien, is not imputable to the company itself when the whole transaction is arranged by collusion between the agent and the owners for the purpose of perpetrating a fraud upon the company; and in such case the company is entitled to rely upon the vendor's lien. McCormick, Circuit JUdge, dissenting, on the ground that in the particula.r case there was no fraudulent intent, at least upon the part of the Wife; that it was doubtful on the evidence whether the supposed agent was not acting for himself alone, as principal; and that, under such circumstances, it was opposed to the historical and constitutional policy of the state of 'l'exas (in which the homestead was situated) to deprive the debtors of their homestead, even if they had intended to incumber it. 2. SAME-VENDOR'S LJEN-SUBlWGATION.
It is the settled rule in Texas that, where one advances money to pay off a vendor's lien upon a homestead, and the money is so applied. the creditor becomes subrogated to the vendor's lien. Hicks v. Morris, 57 Tex. 658, and Pridgen v. Warn, 15 S. W. 559,79 Tex. 588, followed.
Appeal from the Oircuit C<lurt of the United States for the Northern District of Texas.
648
J'EDERAL 'REllORTER,
vol. G3.
Instituted this below, praying for, judgment against the appellee Ferdi· na.nd Ganzer on the latter's notes, tor $4,200. interest thereon. attorney's tees, and costs. 'and for' foreclosure of deed of trust lien on certain lots in the citrof Dallas, Tex., alleging that; on tbe written application of Ferdinand Ganzer,complainan,t had loaned him $,4,200 on April 17, 1889, payable April 17, 1892':'fhich loan was secured PY a trllst deed executed and delivered by to J. B. Simpson, 9.$ trustee. at the time of the execution of the note. Complainant specially alleged and relied upon a SUbrogation claUSEr in said tr11st deed, which recited the by complainant, at the expressinstanc, and request of graJltors. of two vendor's lien notes on said lots, OM for $1.2OQ. and one for $'lM9. not yet matuJ,"e. The complainant ml!.de the other defendants parties to the suit as claimants under Ganzer. The appellees Ganzer and wife filed separate answers. substantially to the same elfect,....tbat they had no ,know:ledge of the chara.cter of the application ml!.d,e ,(l),rthe loan of $4,200; that prepared by compiainant'lil !!.gent, ,and that it was signed by' relying implicity upon SimpSQn's representations;, that the lots inquellt!on were, at the time of the making of tlie'deed'of trust and said loan, apart or: the homestead of defendants, and weretlOocCupied tOr several yeats prior 'thereto, as was well known to com· plainant; consequently no lien attl!.cbed. They plead,ed,inavoidance of the subrogaj:.ion clause, subrogating to complainant the vendor's lien securing the '$1;200 and $1,000 notes, that theY"'1lere induced by the said Simpson, as the agent of complainant, to sen and execute their warranty deed to the premises in Question. and deliver ,same to one Jolln H.Eberhart. which falsely recited a consideration ,of $3,000 cash paid, and two vendor's lien notelil of $1,200 and $1,000, which said vendor's' lien notes were delivered by J. H. Eberhart to J. B. Simpson, who advanced to them (Ganzer and wife) only about $1.900 therefor; that, as between Simpson. Eberhart. and the Gan· zers, the whole transaction was simulated to enable the Ganzers to borrow money on their homestead, and to enable the said Simpson and his son-inlaw to realize handsome commissions thereby. Ferdinand Ganzer admitted his personal liability on the note, but on pleas of the fraud perpetrated by himself, his wife,. and Simpson in the execution of a warranty deed. and execution and delivery of the notes reCited, suggested that no lien exIsted !!.gainst the lots in question, which were at the time and intended to remain a part of the Ganzer homestead. To the pleas of defendants, complainant answered with'a, replication, denying the allegations of defendants, The court below rendered a decree allOWing complainant a personal judgment against Ferdinand Ganzer for $5,873.58, amount sued for, but denied the lien asserted by complaJ,nant, either as to the $4,200 note, or as to the $1,200 and $1,00(} vendor's lien notes. Complainant excepted to the findings and conclllsions of the court, and urged its motion for rehearing, which was overruled; and the appellant then appealed to this court.
'rba We$tem Mortgage &
W. M. Alexander, W. H. Clark, and W. L. Hall, for appellant. Thomas & Turney and J. L. Harris, for Before PARDEE and McCORMICK, Circuit Judges, and LOCKE, District Judge.. PARDEE, Oircuit Judge (after stating the facts as above). The assigmnents of error relied upon by the appellant present in different forms practically the same question; i. e. whether the court below erred in not allowing the plaintiff in elTor (appellant here) a lien on the lands in controversy for the amount of $2,200; represented by the vendor's lien notes, with interest thereon from April 17, 1891, for the reason that the complainant, at the express instance and request of the defendant Ganzer, and while innocent of any fraudu. lent taint affecting the notes, advanced the value thereof to pay the same before maturity, and became by contract expressly sub-
WESTERN MORTG. & INV. CO. 'V. GANZER.
649
rogated to the lien securing the same. It is conceded that, notwithstanding the representations and declarations of the defendant Ganzer and his wife made in the application for a loan and in the recorded declaration of a homestead, the lots in controversy formed no part of Ganzer's homestead; yet the fact being established that said lots, at the time and up to the institution of this suit, were actually used as a homestead, renders the mortgage sought to be foreclosed in this case, so far as it grants a mortgage lien on the lots in controversy, not enforceable. The evidence establishes that on the 16th day of November, 1888, the defendant Ferdinand Ganzer, having applied to J. B. Simpson, who was agent for the Scottish-American Mortgage Company, for a loan of money, offered as security the lots irlvolved in this suit, which were then, and continued to be, a part of the homestead of said Ganzer and his wife, until the loan on which this suit was brought was made. Said Simpson suggested that, as the security formed part of the homestead of the Ganzel's, the form of the security offered should be changed; that the Ganzers could convey the property to some trusted friend, who would give vendor's lien notes, and, after the loan was made, the property could be conveyed back. He further suggested that a plat of the homestead as an addition to the city of Dallas be made, evidently that a proper showing would appear of record. Ganzer and his wife, being fully informed of the purposes thereof, executed a conveyance of said lands to one John H. Eberhart, reciting a consideration of $5,200,-$3,000 cash, and two notes for deferred payments, one for $1,200, due at three years, and the other for $1,000, due at five years, with interest at 10 per cent. per annum, with vendor's lien retained. Said Eberhart made said notes, and at the same time made a trust deed to Simpson to secure the payment of the same. Simpson recorded both of said instruments, and, taking Ganzer's indorsement upon the alleged notes, discounted them for the Scottish-American Mortgage Company, and said company advanced the money therefor. Ganzer and his wife and Eberhart all knew, as well as Simpson, that the colorable sale to Eberhart was for the purpose of perpetrating a fraud upon the company discounting the notes, as well as upon the homestead law of the state of Texas; and in making said conveyance, and executing the deed of trust and the vendor's lien notes and the plat of Ganzer's addition to the city of Dallas, the said Ganzer and wife knowingly colluded with the agent of the Scottish-American Mortgage Company for the fraudulent purposes aforesaid. In the case of Heidenheimer v. Stewart, 65 Tex. 323, it is said: "The equities between the original parties to a mortgage cannot avail the mortgagor in a suit on the secured negotiable note to foreclose the mortgage (Jones Mortg. § 834; Hil. Mortg. 572), even if it results in the incumbrance of the homestead, if those entitled to the exemption have caused the result tiy their own deliberate fraud (Hurt v. Cooper, 63 Tex. 362). If the owners of the homestead simulate a transaction in which a negotiable note would be secured by a valid and meritorious lien on the exempt estate, and their artifice succeeds in imposing upon an innocent party, they are stopped from denying the truth of their solemn statements, and cannot be permitted
650 W,
FEDERAL REPORTEJt,
vol. 63.
Jo: be ,valid is void beca,U,sa, their acts " prohibit!! <1il;!ns on the homestead, except for hnpl"ovemeuts. The, llen asserted by appellant was for purchase money, lftb:e transaction was'geuuine, and appellees are estopped, as against appellant, from proving that it was otherwise."
, 'Fue, ,
R, t,ll, e,,ir,', a,cta de"
In the case of Cunningham v,, Holcomb (Tex. Civ. App.) 21 S. W. 125, the court, of civil appeals of Texas said: . to be held that Where a third' person conspires with an agent to perpetrate a fraud upon the principal, and the rights of innocent third parties have not intervened, the principal is, entitled to have a rescission of the between his agent and Ii,lu:ch third party; or, if he elects not to haVe it rescinded, tQ' have such other adequate relief as a court of equity may deem proper under the circumstances,"-citing Mecham, Ag. § 797.
Int)le case of Hurt v. Cooper, 63 Tex, 362, referred to in Heidensupra,whichW;a.s a case where it was claimed that the ,sale and conveyance of .a homestead was not real, but to as an, expedient to raise money by the notes f91' the deferred payment, it was held that if the of the velldor's notes had notice that the conveyance to the vendee by the owners of the homestead, 'not on'al'eal but waa accepted by him for their aca. means Qfenabling the.owners ,to procure .lll.()P.e*;,tn¢u the deeQ, to ,the apparent purchaser vested. as to him no hOJHestead rights of,. the otigillal' owners; but, if the purchaser' hlld, no notice, he ,cpu}d rely upon the deed from those claiming as havJp.g·peen sufficient to divest them of all inthe terest, the property; ,and this, even though the had reo maiMc'l in possession of the property after executing the deed. l!'rofn, these authorities,. it is clear that the validity of the notes pur:{>ort1ng to be for the purchase money in the sale from Ganzer to Eberhart; in the hands of the Scottish-American' Mortgage Company, who dlscountedtl:J.em for Ganzer, depends upon whether such com-pally had, notice of the colorable character of the transaction. 'I'he agep.t Simpson had, full· notice, in fact seems to have concocted thearran.gement, and probably for the reason assigIled' by Ganzer, to wit, ','on account of the large cOIDJUissions allowed him by the and other considerations of value to bim;" but there is no pretense or suggestion ,that the Scottish-American Mortgage Company had actual notice. In this matter of notice the appellant contends, and the circuit so held, that the general rule that a princfpat is bound by the knowledge of his agent is applicable to and contrpls this case; The supreme court of the United States says: "The rule that a is bound by the knowledge of his ll;gent is based upon the principle of law that It is the agent's duty to commUlllcate to his principal the knowledge which he hils respecting. the subject-matter of negotiat1on,and the presumption that he will perform that duty. When it Is not the agent's duty to communicate such knowledge, when it would be unlawful for him to do sO,as, for example, when it has been acquired conattorney ,for another client in a prior transaction, the reason of the rule ceases; and in such a case an agent would not be, expected to do that which ,would involve the betrayal of professional confidence, and his prinCipal ought not·tp be bound by his agent's secret and confidential intormation.".DistilledSpirits Case, 11 Wall. 367.
WESTERN MOR'fa. & INV. CO. fl. GANZER.
651
In 1 Am. & Eng. Ene. Law, p. 4.23, we find: latter will not be responsible for knowledge of the agent in relation to such fraud. While the knowledge of an agent is ordinarily to be imputed to the principal, it would appear now to be well established that there is an exception to the construction or imputation of notice from the agent to the principal in case of such conduct by the agent as raises a clear presumption that he would not communicate the fact in controversy, as where the communication of such a fact would necessarily prevent the consummation or a fraudulent scheme which the agent was engaged in perpetrating." "If an agent should collude with a third party to defraud theprincipaJ, the
From some of the cases cited in the Encyclopedia, supra, we quote as follows: "The doctrine of constructive notice depends upon two considerations: First, that certain things existing in the relation or the conduct of parties, or in the case between them, beget a presumption so strong of actual knowledge that the law holds the knowledge to exist, because it is highly improbable it should not. * .... Bostock was acting as Mr. Kirby's solicitor in the transaction; and ,altlwugh,. generally speaking, the knowledge ob, tained by a man's attorney or, agent fixes himself, if obtained while so employed, and on the same business,-for 1 do not at all differ from Mountford v. Scott (a), Hiern v. :Mill (b), 'and theother cases,-yet it cannot here be said that Mr. Kirby is fixed with all which Bostock knew; for the fraud practiced by upon Mr. Kirby himself was, of course, concealed from him: and so we may say would certainly be that other fraud which he had practiced on Mrs. Kennedy. Indeed, that was only another part of the same fraud,-another act of the same plot; and therefore 1 think we cannot, on this account alone, fix his client, Mr. Kirby, any more than his employer, Mrs. Kennedy, with the knowledge of his criminal proceedings. We must lay out of our view allthe knowledge, the actual and full knowledge, he had of his own fraud, and are not to hold Mr. Kirby as cognizant (I mean, of course, cognizant in law and constructively) of that, merely because his solicitor himself-the contriver, the actor, and the gainer of the transaction-knew it all well." Kennedyv. Green, 10 Eng. Ch. 697, 718-724. "A., to whom B. was indebted. advised C. to lend money to R, on the security of a mortg'age of personal property, and acted as C.'s agent in completing the transaction. "Vith the money thus obtained, B. paid A. the debt which he owed him. Both A. and B. acted in fraud of Gen. St. c. 118, §§ 89, 91; but C. had no knowledge of the fraUd. Held, that the knowledge of A. was not in law imputable to C." Dillaway v. Butler, 135 Mass. 479. "Where the same person is an officer of two corporations, and he transfers securities issued by one to the other, with knowledge that the securities are subject to an infirmity which renders them invalid in any hands. ,but those of a bona fide holder for value, his knowledge is not the knowledge of the transferee." De Kay v. <Water Co., 38 N. J. Eq. loS. (u) 11 Madd, 34.
(b) 13 Yes. 114.
In the light of these authorities, and considering the fact, well established by the evidence, that Simpson and Ganzer and wife and Eberhart colluded in the execution of the alleged vendor's lien notes, we are constrained to hold that the knowledge of the agent Simpson as to the colorable character of the transaction cannot be imputed to the principal, the Scottish-American Mortgage Company, and the case is thus brought directly within the rule declared in Heidenheimer v.Stewart, supra, and Hurt v. Cooper, supra; and that the vendol"s lien notes in the hands of the Scottish-American Mortgage Company should be treated as against Ganzer and wife as representing a valid, subsisting vendor's lien upon the property in controversy. This being the state of the case, the right of the complainant, the Western Mortgage & Investment Company, which
652
I'EDEBALREPORTER,
advanced the m<!ney to Payoff and extinguish such vendor's lien under .express subrogation. thereto, must be recognized. If it be conceded that notice would affect the Western Mortgage & InvestmentOompany, which is d()Ubtful if the Scottish-American MortgageQ'ompany was a holder the vendor's lien notes without notice of thelJ.' taint, then it is to be said that there is no more reason for charging. the Western Mortgage & Investment Compauy with knowledge of the. sixnulatedsale by Ganzer to Eberhart, by reason of the knowledge of agent Simpson, than there is to charge the Scottish·American Mortgage Company. We understand it is settled in Texas that, generally, where one advances money to payoff and discharge a vendor's lien upon a home$tead, and the money is so applied, the creditor becomes subl'Qgated to. the .vendor's lien, so paid off and discharged. Hicks v. Morris, 57 Tex-608; Pridgen v. Warn, 79 Tex. 588, 15 S. W. 559. In this> case there, was express subrogation, by deed. For these reasons, we are ,compelled to disagree with the cOIlclusions of the circuit court, and hold that it erred in refusing to recognize the cpmplainant's lien fo.r the amount of the alleged vendor's lien notes executed by Eberhart, acquired by the Scottish-American Mortgage Company, and paid off with the moneys obtained from the complainant. Thedecr,ee appealed from is reversed, and the cause is remanded, with instructions to enter a decree in favor of the Western Mortgage & Investment Company, Limited, for the amount of the vendor's lien notes, principal and interest, executed by J. H. Eberhart, and the same as a vendor's lien upon the property described in the complainant's bill, directing the foreclosure of such lie.n, and the sale of the property to pay the same. . (October 2, 1894.) McCORMICK, Circuit Judge (dissenting). At the last term of this court, I had to dissent from the judgment and opinion of the court in a homestead case coming before us from Texas. I have now to dissent from. the judgment and opinion in this case, which is a homestead case coming to us from the same state. I dissent from the views expressed and implied in the statement of the case made by the court in the opening of the opinion, and emphasized as premises for the reasoning of the opinion. As I said in Ivory v. Kennedy, 6 C. C.. A. 371, 57 Fed. 340, in this case there is no questionof high equities before us, but a very plain matter of intensely Texas law. Fl'()m the nature of the case, aU hOmestead questions are local, and domestic to the state where the suit originates. In this case, as in every such case arising in Texas, the issues present mixed questions oHaw and fact. In considering these, perspective is of vital essence. Our view of the force and right application of the written law,of the credibility of the witnesses, and of the weight of the evidence will take its hue from the medium through wbich;we look. The general principles of the of evidence, of natural equity, of approvedprocedure,and the' settled canons of conitmcti()n are to be obser'ved;but it is the Texas law, and not
WESTERN MORTG. & INV. CO. 'II. GANZER.
653
another, that we are called to construe in this case, and from the standpoint and through the medium of that law we should look into the issues joined by these parties appellant and appellees. Whatever may be our individual views as to the concrete wisdom, justice, and force of hoary maxims, we may not struggle to render remedial organic laws nugatory, because such laws may appear to us to be in conflict with the principles embalmed in these time· honored maxims. Judge Bynum said in Duyall v. Rollins, 71 N. C. 221: "Our laws have long been so framed as to make fraudulent conveyances void as to creditors, and our habits of thinking run in the same direction; 80 that it Is difficult to rE'aUze that another and a new right has been Interposed between the creditor and debtor which secures certain of his property, even from his own frauds, upon creditors. It is confirmed by the constitution, and Is Inviolable." ,
Mr. Thompson, in his work on Homestead and Exemption Laws, says these laws "have never been supposed to be founded in principles of equity and justice, but are supported by reasons of humanity, expediency, and sound policy, and these reasons have secured for them on the part of courts a liberal interpretation." Section 339. They are not against equity and justice, but above these, as the substance of saving faith is not against reason, but above it The genesis of these laws, the every-day life and thought of the people who live under them, the expression of the popular construction of them in the successive and progressive steps in organic and statutory legislation which mark the trend of the public policy of the state, the whole line of adjudged cases, the general voice of the legal profession in the state, the very air of the inns of court, and the utterances from the trial bench, furnish efficient helps to a sound construction and right, practical applica' tion of the provisions of the written constitution on this subject. In construing a statute of Massachusetts on the subject of homestead exemption, Mr. Justice Gray, then chief justice of the supreme court of that state, declined to consider the cases in some of the western states cited by the learned counsel in the case of Searle v. Chafman further than to note that they were supported by no reasons, and did not how far they may ha,e been influenced by local statutes. 121 Mass. 19. In construing her statutes, the courts of Massachusetts did not need to look to some of the western states, or any of the new states, but naturally and wisely looked to the common law, and to the principles and practice of the settled jurisprudence in their own state. In the sense in which those terms are used by Judge Gray, Texas is not a "western state," nor is she, as to her history and jurisprudence, a "new state." San Antonio is as old as Philadelphia; and considered, in relation to homestead exemption laws, Texas is the senior state,-the pioneer. In this light, Virginia and Massachusetts are the new states. When the Anglo-American colonists were admitted into Texas, they found in foree there a system of laws as ancient as the English common law, as rich in immemorial tradition, in ethical philosophy, and in fitDeSS for the practical administration of substantial justice as the
;of, qy. iv-rlsdicti,o? p:actice i? eq:tllty. ,,·,tJ"Jia9, not Qrretllined that rennewent lD· techmcal ,p.leaQiftg ery,ditfQP,.holds a dense the sUlto.l'lln,d :tR.e shrine; . it deuounce mystic. penalty) or InSQ!vency. It the credItQr and and abQve all, hiS inferior if he were ,such, and the citizen, whether or nQt he was husband or father. If he was a debtor, it exempted hJBpersQufrClm on that account, at the creditor's suit; and! Inaia, of this. exemption and the discharge of his higher duties, if from s'uciJ;l.. the implements and bealSts Qf i hUi!bandry, the brea<Lofbakers, tools, Qf artificers, bQQks of'advoeates,amd students, beds,weaIing apparel, and other things daily use. ' CobbV:: Ooleman, 14 Tex. 598. When these colonists had, by successful revolution, crowned themselves :th.esQil of Texas, they :blended this system into which they hadJlIeenadmitted,andioiwhich they had become attached, of England into with ,that ay$tem, ofthecoIDmon law and which 'most,ofthem had been born and become more or less instrocted, that union'Qf,principles and procedure which the first 3u.<lgeIJ10f; the;Texas, state: supreme court were wont torePecuUa....!8ystem." Sovereign, independent Te:msput:in her -first shall be imprisoned fQ1' in '¢onBequence .of' inability to pay.'" Constitution adopted Marcl1 17, ,'J.S86. On the 26th January, ,1839, she' prOVided by statute: , i ' >e1lllzen or head of rilibHy in this re,t!;leloower of a writ of fierl.flicias or other jurisdiction Whatever, fifty acres town tot,'i!1<;1u4JIlg)Hs or her and improvements, notext!ee<1hig five hundl'e'd"doillirsin value, all househOld ami kitchen furnitul'e(tprovddQd it does not excelid ill value two hundred dollars), all ,of: !:l.\lsbandry (prlwlded tlleyshall not exceed ,fifty dollars in value), .all tQols",al1paratus and :!?opl}sbelonging to thetrad,eor profession of any citizen, five milch cows, one yoke 'of work oxen or one horse, twenty hogs and Geri.' Tex. p. 118. . . 'eTijtY
"There 'shall 'be Jreserved to pubJie" free
a
'B.Y., .
.t.,e oftook., . 1843,.. it was provided that,qn a citizen,suclJ. of hiS property as had been exempted, set aside by tb.e ordinary for the sole benefit of t4e' ",idQwand children of the deceased. 7 Gen. p. 12. , , .·" , The first' <iQD,stitution of tlle, of Texas provided:
,shall have .PQwerto protect by law frQill forced sale, a certainpoI1lon,Qf,the propert;r, of ¥lhel:l-ds of families. The, ,homestead of a. family not'm two hUl1dreliacres of land (not included in a town or cIty) oran3" -town or city lot'or riots iil' 'Value not to exceed two thousand dollars iil:lQ.i,11 not be subject to ,forced sale, for any debts hereafter contracted; 1101,'. i{ama,rriedl:Uan,ribeat liberty to the same, of, in. sj],ch manner astpe legislature may hereafterpOint;out" CQustl845, art:. 7,§ 22. .., .·... '
'.I,'he be,
9£, May If'
of ,for
that aJl and 1:>enetit
in
adminisproperty ,,,,i,dqw and,
WESTERN MORTG. & INV. CO. 11. GANZER.
655
children; and, in case there were not among the effects of the estate all or any of the specific articles which by the constitution and laws would have been exempt, they should be procured by a sale of other effects. 10 Gen. Laws, p. 308. . By the act of March 20, 1848, it was provided that the ordinary should make an allowance in money adequate for the support of the widow and children for one year, and that all exempt property, except a year's provision, should be set aside for their sole use and benefit; and, in case there were not all or any of such: property belonging to the estate, an allowance in money in lieu thereof should be made; both of these allowances to be a charge on the assets of the estate superior to judgment or mortgage creditors. Hartley, Dig. arts. 1153,1154; 11 Gen. Laws, p. 235. The act of February, 1860, provided: "The homestead in a town or city exempt from forced sale Is hereby declared to be the lot or lots occupied or destined as a family residence, not to exceed in value two thousand dollars at the time of their destination as a homestead; nor shall the subsequent increase in the value of the homestead by reason of improvements or otherwise, subject the homestead to forced sale." Pasch. Dig. art. 3928; 17 Gen. Laws, pt. 1, p. 34.
The act of November 10, 1866, provided: "There shall be reserved to every citizen, head of a family or householder being a citizen in this state, free and independent of the power of a writ of fieri facias, or other execution; issued from any court of competent jurisdiction Whatever, two hundred acres of land, inclUding his or her homestead (not included in a town or city), or any town or city lot or lots in value not to exceed two thousand dollars at the time of their designation as a homestead; nor shall the subsequent increase in the value of the homestead, by reason of improvements or otherwise, subject the same to forced sale; household and kitchen furniture not to exceed five hundred dollars in value; all implements of husbandry; all tools, apparatus and books belonging to any trade or profession; five milch cows; two yoke of work oxen and two horses; one wagon; twenty hogs; twenty head of sheep and one year's provision; all saddles, bridles and harness necessary for the use of the family. Thel'b shall in like manner be reserved to every citizen not a head of a family * * * one horse, bridle and saddle; all wearing apparel; all tools, bookr and apparatus belonging to his trade or profession." 20 Gen. Laws, p. 160.
The constitution of 1869 provided: "The legislature shall have power and it shall be their duty to protect by law from forced sale, a certain portion of the property of all heads of families. The homestead of a family not to exceed two hundred acres of land (not Included In a city, town or village) or any city, town or village lot or lots not to exceed five thousand dollars. In value at the time of their destination as a homestead and without reference to the value of any improvements thereon shall not be subject to forced sale for debts, except they be for the purchase money thereof. for the taxes assessed thereon, or for labor and material expended thereon; nor shall the owner, if a married man, be at liberty to alienate the same, unless by the consent of the wife, and in such manner as may be prescribed by law." Const. 1869, art. 12, § 15.
The constitution now in force provides: "Sec. 49. The legislature shall have power, and it shall be its duty to protect by law from forced sale, a certain portion of the personal property of all heads of families, and also of ullmarried adults male and female. "Sec. 50. The homestead of a family shall be, and is hereby protected from forced sale for the payment of all debts, except for the pUl'chase money thereof, or a part of such purchase money, the taxes due thereon, or for
F.EDERAL REPORTER,·
vpl·. 63.
laiJtcase only when the'.work.and mll.terial are contracted for in writing,
material used .in
fmprotements thereoI\, and in this
W1th the consent of the 'wife given in the Sll.IDe manner ll.S is required in malting a sale and conveYance of the homestead; nor shall the owner, if a married man, sell the homestead without the consent of the wife given in m,anner ll.S may be prescribed by law. No mortgage, trust deed or oth"r Hen on the shall eYer be valid, except for the purchase money· thereof or improvements thereon, as hereinbefore provided, whether SUch. mortgage, or trust deed,. or other lien shall have been created by the husband alone or together with his .wife; and all pretended sales of the homes4!l\d involving any condition of defeasance shall be void. "se<::151. The homestead, not in a town or Nty, shall consist of not more than two hundred acres of IlIJId, which may be in one or more parcels, with the improvements thereon; the homestead in a town, city or village shall consist of lot or lots not to exceed in value five thousand dollars at the time of their designation as the homestead, without reference to the value of any improvements thereon; provided that the same shall be used for the purposes of a home, or as a place to exercise the calling or business of the head of It family; provided also, that any temporary renting of the homestead shall not change thecbaracter of the same, when no other homestead hll.S been acqUired. "sec. 52. On the death of the husband or wife, or both, .the homestead lilhall and vest in like manner as other real property of the deceased and shall be governed by the same laws of descent and distribution, but it shall not be partitioned among the heirs of the deceased during the life time of the surviving husband or wife, or so long as the survivor may elect to use or the same as .'1\ homestead, or so long ll.S the guardian of· the minor chlldrenQf the deceased may be permitted, under the order of the proper court. having the jurisdiCtion, to use and occupy the same." Const. 1876, art. 16, §§ 49-52.
period' from 1866 to 1876, the supreme court of the state of Texas has been composed of a chief justice and two associate justices. The first chief justice, Judge John Hemphill, had been reared and received a university training, including his preparationfQr the bar, in a common-law state. He had acquired an ample knowledge of the Spanish language and of the laws of "Spain·and Mexico. He was four years chief justice in the republic of Texas. He was a member of the convention that framed the constitution of .1845. He remained chief justice 13 years, at the expiration of which time he resigned,. to accept the position of United States senator. Judge Abner S. Lipscomb, one of the first had adorned the supreme bench of Alabama before .he became a citizen of Texas. He, too, was a member of the 'cOnvention tbatframed the constitution of 1845. He was a man of force illaH the elementsof manhood. He was a bold and sound thinker, wh6segift and .h{lbit it was. "to detect and watch that gleam of light which flashed across his'mind from within, more than the luster of the firmament of sages." Be continued on the bench till his death,which occurred in December, 1856. The other one of the firstassoeiate justices, Judge Royall T. Wheeler, was bred to the law in a common-law state.· He.wasa man of profound learning. and wisdom., . He had a genius· for judici{ll work. He was clchly endowed with the virtues and .graces which support and give a charm to high rank in. public and in private life. Rebecame chief justice on the retirement of Judge' Hemphill.. He continued death, in 1863. To the vacancy occasioned on the bench till
WFSTERN MORTG. & INV. CO. V. GANZER.
657
by the death of Judge Lipscomb, Judge Oran M. Roberts was elected. He had received a university training and had served in the legislature of a common-law state before becoming a citizen of Texas, after which he grew and ripened through a full general practice at the bar and service as attorney for the state and as nisi prius judge before his elevation to the supreme bench. For more than 40 years he has done service to the state in places of the highest trust and honor, to the equal credit of the state and himself, and now, venerable and venerated, is enjoying in a green old age the respect and affectionate esteem of all worthy men who know him. To fill the vacancy occasioned by the retirement of Judge Hemphill and the promotion of Judge Wheeler, a native Texan, Judge James H. Bell, was elected, of whom, as he was a near kinsman of mine, I may not further speak. In 1861, Judge Roberts withdrew from the bench to take military service in the war then flagrant, and remained oft' till after the death of Chief Justice Wheeler. To fill the vacancy thus caused, Judge George F. Moore was elected. During his long service on that bench, he so impressed himself on and endeared. himself to the legal profession and the people of Texas that when his sight had so far failed as to impede his wonted dispatch of work, and he expressed a wish, on that account, to retire, with one consent he was pressed to remain as long as his general health could support the labor of sitting in consultation with his brethren. Not to make further specific mention, it is safe and meet to say that, excluding the period of reconstruction when conditions were abnormal, the constituents of the supreme court of Texas have ever been men and lawyers of the first rank, worthy and fit to sit in any court, and faithful to their trust. Running through 40 years, and through 80 volumes of its official reports, that court }las published written opinions in 385 distinctly homestead cases. Beginning with the earliest case, it profoundly considered, and has often, and sometimes warmly, stated the object and purpose of, the homestead exemption; so much so that 10 years ago the court, speaking through the late chief justice (over whose death the state now mourns), then associate justice, said: "The objeet and purpose of the homestead exemption has been so often stated that there is no need to repeat now."
And later, through the present chief justice, then associate justice, the court said: "The beneficent provisions of our homestead laws have been the occasion of much enthusiastic comment and of not a few rhetorical fiourishes in the opinio.ns of this court"
In one of the later, if not the last, of the opinions delivered by Chief Justice Moore in a homestead case, this language occurs: "Whether. the policy of our legislation regarding the homestead exemption has been wise or unwise is not for us to say. It is, however, unquestionable that from its first introduction there has been a uniform and steady tendency in the popular mind in favor of its liberalization and enlargement; and, it the courts have not at all times responded to the popular sentiment upon the subject, they have been constrained to give way to it by more explicit legis-
v.63F.no.5-42
i
latiotl .or ; it mani'feft) the inclined . . the exemption in the constitutl,qIl of. 1845 to the lot and. its. improvements. than it was the improvements should not be COJ:!.Sidered in estimating. the value (Jf the exemptetHots; as we think,wheJi it became apparent that this Mmft.dld not regard the place of busineSS of the head of the family, if endifltiuct aJd separll-te from within the' exemption, by reason· pt' its use, there .was an. of the homestead exemption, as wefii;ld it in the 'present constitution." Miller v. Menke, 56 Tex. 550. !'. ",', , i if',;
From a careful consideration of the whole line of Texas decisions .on thiS subject, it appears obvious to Die that the provisions of the constitution now' in force in not, in SUbstance, an enlargement of the homestead exemption, but only a more explicit -expression of that exemption,-a conclusive organic COD'struCtion by the people. of Texas· of th\'! exemption as fixed in the ,first constitution of the state government.. An exhaustive analysis ofthe respectiveconstitutionalprovisionsandre'\tiew of the numerous decisions would.lead too;far,but a few suggeStions may be;indulged, and wHlsutice. The first sentence of section 22, art: 7"in the constituti6n.of',1845, las a mere grant of power, was unnecessary. The legisll'UJure !hadexercised tliat power, inHhe absence OfSllCh a grant, by the' act of .1839\ the vaJ:iaity of which 'has never been' questioned. Subjedtto be withdrawn or modified by the constitution, it was inherent in ·the i.The intent'of this .sentence, therefore, must.'have been to charge the legislature with a duty.: ' Thespecific and eaustiveprovision $nthe next sentence leftpersonal property Qnly'On w hicb' the legislative power could act. Botti of these necessany implications are now in section 49,' art. 16; The selfacting, exclusive character of the homestead provision in the second section 22, so clearly implied:therein,and authoritatively announced by the' supreme court in Darst v. Walker, 31 Tex. 681, isliterall(Y expressed in the words "and is hereby," in section 50. TheeXeeptions embraced'in this section are clearly constructions of the existing exemption, for the law had and has ever been in Texas that, to the extent of the unpaid purchase money, the vendor of land retains the superior title. The homestead exemption can only attach or rest on what the claimant owns, be it fee simple, equity Qf rei:leru.ption,as:tenant in common, leasehold, or other right. The homestead, therefore, had never been protected from forced sale for payment of the purchase money thereof. Where the vendor's lien covered more than the exempt homestead, it had, in case of sale, toseek satisfaction timt out of the excess. It was never supposed or held th.at the homestead wal!l not liable for the taxes assessed thereon. The supreme court accept the last sentence. of section 50 ,"as a legislative of. the general policy of our -state.ih this regard." .' .Black v. Rockmore, 50' Tex. 96. It must have been in Judge Moore's mind, when he wrote the laQguageabove Miller v. Menke, that section 51 was, as'touching tb,e parii¢ulars he 'Was COn1Jig.e'ring, rather a Williams v. ;JeJ),ldns, 25 Tex. 279, and of !ken v. Olenick, 42 Tex. 195, than an extension of the exemption. Even the change in the numerical figures used to express the limit of value put iOIl' tile urban home-
WESTERN
&
659
stead is not, in fact, all of that exemption asftxed in the constitution It is only a restoration of it. In 1845 the purchasing power of the precious metals had not been lowered by the output of the mines in Australia and in our Pacific states. The value of the bare land of the average rural homestead did not exceed, probably rarely equaled, $2,000. It is evident that the intention was, as it certainly should have been, to make equal provision, as nearly as could be, for each of the two classes of inhabitants into which all civilized people are divided,-the rural and the urban. In 1869 and in 1876 the conditions of the currency and of the country were so changed that, in order to preserve the spirit of the provision, it was necessary to change the letter. The spirit giveth life; the letter killeth. He that sticks in the letter stops in the bark, and fails to reach or know the rich sap and stout heart of this tree of life, of Texas origin, which for 50 years has cast forth its good seed into the fields of other states, where some have fallen by the wayside, and some on stony places, and some among thorns, but much othel,' has been received into good ground, and brought forth fruit in due season and measure, while in its native iiioil the parent tree maintains perennial life and growth, majestic in its strength, a joy forever in its beauty. Its roots take deep hold on and fill all the land. Its trunk and limbs and leaves and bloom and fruit shelter, heal, delight, and nourish the families that uphold the pillars of the state. And whosoever will, let him come. This policy of homestead exemption is not a pro,""ision by the public for the poor. It has no element of pauperism in it; neither has it any element of bounty in it. It does not collect from the proviuent and affiuent, and bestow its exactions to foster fraud or sloth. It bestows on all alike. It takes from all alike. It takes from all heads of families the right to make so much of their land as they use as a home the basis of credit, and from the married man who owns a homestead the right to sell it, except with the consent of his wife, and in the prescribed by law. It is not the debtor who is protected from his creditor; it is the homestead of the family that is protected against both. As to the homestead, the owner is not and cannot become a debtor. The land is bound for the charges fixed on it before the homestead designation. 'l'hese charges may be enforced. They are the debts of the homestead. They underlie its right, and are not ousted or rendered dormant by the homestead use. But no act of the owners or of others can put a charge over the homestead use not within the named exceptions. Homestead in Texas is not an estate that can be sold and conveyed, or a right that can be waived by deed, or estoppel arising out. of recitations in a deed. Where, in fact, the property is actually in use for homestead purposes, neither the declarations of the husband or of the wife, nor of both, can change its character. Jacobs v. Hawkins, 63 Tex.!. The husband and wife cannot by any char.acter of solemn writing, executed and acknowledged; or even sworn to before a public officer, authorized to take acknowledgments of married. women and or' other parties,. and to administer oaths generally, and placing that paper in the
660>
FEVEUAL· REPORTER,
vol. 63..
custody of the· register of land for the county, and having it inscribed in the order of its date on the boak for the record of deeds,and accurately inde::red, restrict the limits of their homestead defin.ed by actual use. There is no law authorizing such a restriction, nor can the legislature of Texas so provide. Radford v. Lyon;61:i'Tex. 471. The convention that framed the constitution now.in. (force did, with great deliberation, after full and earnest debate,' 1n()st wisely refuse to require or authorize the designation of the to be made on the record. The act for subjecting the excess in a rural homestead to execution has no application to this case, even if all of its provisions are valid, which as yet has not .b'een tested. The constitutional method of designation is tithat the same shall be used for the purposes of a home or as a place to exercise the calling or .business of the. head of a family." The right of trial by jury remains inviolate. There are now in Texas, approximately, 2,500,000 peoplE', which will give, allowing five persons to a family, 500,000 families. If one-half of these live in a city, town, or village, and own homesteads to th·e limit in value of exemption, these will embrace improved real. estate the bare ground of which was at the time of designation of the value of $1,250,000,000. It the other half of these families own homesteads not in a town or city, to the limit in area of the exemption, they will aggregafe78,125 square miles of improved countr:y lands. It is sadly true that many families do not own their homes.· Many others are not able to own to the extent of the exemption. It is happily true that very many who own homesteads have no desire to borrowmbney on them, and could not be The strictly legal possibilities only are given in the above figures, and, though far beyond the moral and practical possi. bilities, show the gravity of the subject; and the number and characteroficurrent suits, as shown by official records and reports, show the'interest, tb.e zeal, the cunning, and the skill which mortgage companies and other money lenders have, and have often successfully to evade this exemption, and reach with their investnienfsthe homes which it is the policy of the state to protect from their benevolence. As already stated, the homestead in Texas has always been held to be subject to forced sale for the payment of the purchase money thereof, 'hutnot for the payment of the purchase money of five times as much more, or of any more, of a tract of which it formed a part in the purchase. In Harrison v. Oberthier, 40 Tex. 385, it appears that John Harrison had bought 307 acres of land from T.J. Walling. John Harrison died:· His widow resided on the land. On the application9f the administrator, 200 acres of the tract were set apart for There still remained due to Walling of the unpaid purchase 307 acreS about $600. He asked for: and'ol1tainedan order of the county court for a s?-le of all the land .to satisfy his unpaid purchase'money. . Oberthier was in possessl'Ou of the land, as the tenant of the·plaintiff (the widow), atthethrie the sale theorder of the probate' made. bou.ghtat the sale. It was confirmed. The' adininistrator con· .
WESTERN MORTG. & INV. CO. tI. GANZER.
561
veyed the land to the purchaser on his payment of the purchase money, with which Walling's claim was paid. The widow brought trespass for the whole tract. The trial court gave judgment against her, and she appealed. In the supreme court the case was reversed, on a question of procedure. The purchaser at the probate sale was held to have acquired no title to the land by his purchase, but to have become subrogated to the right of Walling, by the payment to him of tl;1e purchase money. The court pointed out the correct procedure to have his rights enforced, and said: "It this course should be taken, and it should be found necessary to seIl the land to pay the balance of the purchase money, the surplus of one hundred and seven acres in excess of the homestead should be sold first, and the deficit, if any, should be made up by a sale of a sufficient quantity, or tb.e whole, if necessary, of the two hundred acres, If it is not otherwise paid."
The case of Pridgen v. Warn, 79 Tex:. 588, 15 S. W. 559, I have studied with care. 'fo give an adequate analysis of it would involve irksome detail. I insist that it is not authority for the decision of the court in Ivory v. Kennedy. "All pretended sales of the homestead involving any condition of defeasance shall be void," and "no mortgage, trust deed, or other lien on the homestead shall ever be valid, * * * whether such mortgage or trust deed or other lien shall have been created by the husband alone or together with his wife,"-is the mandate of the constitution. Real sales of the homestead, made in the manner prescribed by law, will, like mortgages on the separate property of the wife to secure the debts of the husband, be closely scrutinized; and they must be free from symptoms of fraud, coercion, o.r undue influence, but within the conditions of good faith they are not discouraged. Where a fraud is practiced on the wife by others whom she trusted, and the purchaser is willfully blind, in order that he may profit by it, he is ,as guilty as those who perpetrated the fraud. . If, before signing and acknowledging the deed, she was made to believe that these acts were a mere matter of form, and not binding on her or on her home, of which the creditor had knowledge or should have taken notice, the wife will not be bound. Shelby v. Burtis, 18 Tex. 645; Pierce v. Fort, 60 Tex:. 464. In the case of Hurt v. Cooper, 63 Tex:. 362, it was claimed in the answers that the lots on which the trust deed was given by Cooper were conveyed by Catherine and Thomas D. Gilbert and his wife to Cooper for the sole purpose of procuring a note in the form of a purchase-money note, on which appellant was willing to lend money, and that in fact Cooper made the note and accepted the deed solely for the accommodation of the Gilberts, who, as between themselves and Cooper, were the real debtors and also the owners of the lots, which, in accordance with the original understanding between them, he soon afterwards reconveyed. The evidence showed that, as between the Gilberts and Cooper, such was the real nature of the transaction. The answer further alleged that Hurt had timely notice: The court says: "If he bad such notice, tben he could not rely upon· the deed from the Gilberts to Cooper for the divestiture of such homestead rights as the former bad in lot 11. block 143, for he would stand charged with notice that Cooper
662(;
ri '
for the G\lberts; ,!liD4 th¢ trust deed lfllpat:ently the purcl:jase· tQl;. lot, could nb't:!titt..,l#aJiy furthe'l' 'effect towards. the divestiture of the. hOmestead right, a dood,badlt bOO11'ElXecuted by the Gilberts 'directly. If, [Hurt had no· noth;e ott tll.e nature or purpose Of the conveyance e . G lberts to. 00.oper, . . .i ..l1.J.}.e m.ight. relY. up.on., th,Rt deed .for the dt'VElB r of. the, title to the 10 . and the conse<}uent divestiture .of any hom' Itight the Gilberts mayitave hM therein, and it would be subject tosale:t6t Slltisfyhis debt contracted 'in good faith on' what appeared to be, tM: of Oooper, which would Pll£,& through a sale made under the ' ; i " ,
bf;2illIi..
In itbe,:easeof MortgageiOoi:'vJNorton, 71 Tex:. 683,10 So W. 301, inwhicbthewife had.sigfied the"ajlplication for the loan, a written mortgages or deeds of trust, and thelIl: ijefore ,the proper officer, the supreme court, after recitlllg the "It is the Ifl,'aUdulent' to her passive submission to the '\jf. acts dictated andr.eqUlrM to perfect the loan for the husband by the';g,gen'J;' b:l! the company." l' ,
And,
tie court says:
'
"As the 'C911stitutl.on .lnvalid all liens upon the homestead save money' or for made thereon, whether created by for the husblUll1 alone or'together with his wife (article 16, § 50), the cannot,.J;1elrupon such mortgage or trust deed attempting to give a lien. of the 'W),fe does not cure the invalidity of a ,for ,. a \lPon tlie. ,J;LQIIlestE*i.d. Tbe estoppel, therefore, must be' made' proof of facts the instrument itself. It cannot directl3"'oJ."' br'its recita'18 bind the h6i:h'este.ad."
65 Tex. 321, is this: The inqof!'leeS' of, Alexander, brought suit against amolfnt due.on a negotiable promissory note executedlJt to foreclo8El a lien on a certain tract of land retiri;ned deed from Alexander to the.llttvl." oland for sometime before the the ,laild,in question was the homestead of was . :man. He was indebt.ed to Alexander on open a<\.count. To ,seciIre,this debt,. Stewart and wife conveyed the land 'by proper deed, with full warranty, to Alexander, who, on oocouveyed the laJ,ldto Stewart, taking sued. on, and retJtining vendor's lien to secure the note. A,ll this .done in pursuance a distinct understanding ,aqd in to conceal the true character of the tranliJaction was i Iilecurethe pre-existing debt. The eoul't " ',': . ' "If 'the 9,wIlers bomestel),d a transaction In which a negotiltble note 1:!e !ie.cured by ,a v.alid and pleritorious liep. on the exempt estate, and their a:rti1\ce llucceedS in 'imposing upon an innocent party, they areestopPMl'from denying the truth of their sOlemn statements, and cannot be. permi$ll'l & lien. thedr acts declared to be valid is void be.acts .. "ase ..·. T. co.n,stltuti.o,n,.pr.Ohibi.ts ... 8. o.n the home-. fal,se. ..aasertedby stead mQueY',ll.nd. improvements. . . appellant was' for 'urchase money, if the. traIisaction was genUine, and appellees are estopped as against appellant froin proving tliil.tit was othernotice of the fact that the deeds were intenqed to, la,W. tor; if' thetransactlons had been as recited, the note would havf,l by's. v.alid llen., '"That therewaano actual no-
of.
663
tiee, which might have arisen from the date of the deeds, the consideration, and registration (Gaston v. Dashleld, 55 Tex. 508), was stipulated between the parties In. the court below."
In this connection it may be noticed that in Texas the husband not only has control and exclusive power of disposition of his separate estate, but, pending the marriage, has like control and power of disposition of the community property and exclus,ive management of the wife's separate estate, and, with exceptions not neces· sary to notice, is a necessary party to all litigation for or against her, which, as a rule, is prosecuted or defended on her behalf under his direction; hence, doubtless, the stipulation as to notice which con· trolled this Heidenheimer Case. What is the case before us? On February 24, 1893, the appellant exhibited its bill in the circuit court of the United States against Ferdinand Ganzer, his wife, Helene Ganzer, and others, not now material to mention. The bill showed that appellant is a corporation organized under the laws of England, and that the de· fendants just named are husband and wife, citizens of Texas, and inhabitants of the district where the suit was brought. It charges that Ferdinand Ganzer had on the 9th day of April, 1889, prepared his written application, addressed to the complainant, in which he solicited a loan of $4,200 for the term of three years, proffering as security lots 1, 2, 3, 4, 5, 6, and 7, in block 847 of Ganzer's addition to the city of Dallas, which he represented to be free from incumbrance, except $2,200, which was. to be paid out of this loan. That he occupied no part of the same as his homestead, but occupied lot 8 in said block as his homestead, which lot 8, with its improvements, was worth $8,000. That on 17th of April, 1889, Ganzer and wife executed and filed for record their designation of their homestead, designating the lot number 8, which was then and there actually occupied by them as their homestead. That on the faith of the recitals in the application, and on the faith of this designation of homestead and of their actual occupancy, and of the recitals in a deed of trust that day given by defendants, complainant made the loan asked, taking the deed of trust and a note foI' $4,200, at thI'ee years, with six interest coupons to covel' semiannual inteI'est. That the principal note and the three last maturing of the inteI'est coupons are oYeI'due and unpaid. It then declared on this provision in the deed of trust: "That the herein-described property Is not our homestead. That the principal note secured by this deed .of trust Is given partly for and in lieu of two certain notes executed by J. H. Eberhart to F. Ganzer, both dated the 16th day of November, 1888, one for the sum of $1,200, due 3 years after date, and the other for the sum of $1,000, due 5 years after date, both notes bearing Interest at the rate of ten per centum per annum. Said notes were gIvev for part of the purchase price of the lands herein conveyed, to selJure which notes the vendor's lien was specially retained. The note secured by this deed of trust Is intended In part as an extension of said vendor's lien notes, which, with Interest accrued thereon, have been paid off for me, the said Ferdinand Ganzer. and at my special Instance and request, by the Western Mortgage and Investment Company, Limited, with the express understanding and' agreement that said Co. Is thereby subrogated to all the rights of the said Ferdinand Ganzer under said vendo'r's lien to the extent of the eum so paid by the said Co. for principal and Interest of said vendor's'llen
664 ,notes. Tha.t:wEI wtllpay the ",fd notes and Interest thereon as the same ,and plJ,yable. 'Vbllt we have a good and perfect title In fee simple to the said lands, and have the right to convey the same to the said James B. Simpson,trJ,lstee."
-;-That the note for $4,200 intended in part as an extension ,. of said vendor's lien notes, which were fully paid off, with the understanding and agreement that complainant was thereb,rsubrogated to all the rights, legal and equitable, of said Ganzer. The. bill prays subpoena to defendants requiring them to answer (without waiving oath to the same), for judg-ment for principal and interest; for foreclosul'e of the lien and decree of sale of the premises described in the deed of trust, to satisfy its debt and costs. The defendant Ferdinand Ganzel' answered that he was indebted on the $4,200 note, principal and interest. That he is, and was at and long before the time of making said note and deed of tl'ust, a married man. 'l'hat,at the time and long before the execution of the same, he and his wife owned, occupied, and used the whole of the premises as their homestead, which the agent of complainant, who negotiated the loan, well knew. That about the 14th of November, 1888, he applied to James B. Simpson for a loan of money; and that Simpson; as agent of complainant, stated that he would make the loan for complainant, but requested respondent to comply with certltin forms in relation to his homestead property, which he distinctly stated could not be held as security for the loan, but that as a form only he wished it. He advised that a plat of respondent's homestead, then actually occupied and used for homestead purposes, be made 'and recorded as an addition to East Dallas. That this was made on the 14th of November, and filed for record on the 15th Novembel', 1888, dividing the homestead into eight lots, numbel'ed from 1 to 8. The lots fl'om 1 to 7 included respondent's stable, cow house, chicken house, laundry, and gard,en, then ande+er since in actual use as the homestead of respondent. That Simpson named this "Ganzer's Addition to the City of East Dallas." That it was not made with a view to a sale of any part of the property, but a part of the tl'ansaction upon which Simpson pl'oposedto proceed as follows: He directed respondent to select some friend to whom a simulated conveyance of lots from 1 to 7 might be made, to be canceled or the lots to be reconveyed to respondent's wife, if desired, as soon as the loan should be obtained. Respondent suggested a laborer boarding with him,' named' J. H. Eberhart, who had no means to purchase the pr(}perty, as; Simpson 'well knew. That Simpson prepared a deed to, Eberhart for lots from 1 to 7, reciting a consideration of $5,200,--$3,000, cash, and the two notes, one fol' $1,200, and one for $1,000,referredto in the bill. That in fact nothing was paid orintendeq;to be paid, and SlPlPson ad,'Vised that nothing need ever be paid on account of these formalities. He was. willing, as the representative of complainant, to loan the money, and did loan it, on the personal I'esponsibility of respondent; but, to preserve riniforri;J.it;y. in his mode of proceeding, desired, as he stated and led respondent to believe, only,the form of a conveyance, which should
WESTERN MORTG. &: INV. CO. '0. GANZER.
665
in no way bind the lots. These papers were executed-the notes by Eberhart and the deed by respondent and wife-on November 16,1888, and were duly recorded. At the same time Simpson took a deed of trust to himself, as trustee, with power of sale from Eberhart on the same lots. ostensibly to secure the payment of the $1,200 and the $1,000 notes. These notes he retained, and, although they were afterwards settled, they have never been delivered to respondent. That on the 17th of April, 1889, Simpson, for complainant, devised a method of payment of the two notes for $1,200 and $1,000, and for that purpose he agreed to make for complainant a further loan to respondent, to secure which he prepared the mortgage and trust deed and note with coupons declared on in this case, all of which were executed,-the notes by respondent, and the deed of trust by him and wife. About this time, Simpson procured respondent and wife to sign a statement that lot 8, on the plat, was their homestead. The respondent Helene Ganzer adopts her husband's answer, and further says that she signed the trust deed upon the express understanding and agreement that it should not affect the title to her homestead, and that complainant, through its agent, had full knowledge of her homestead rights at and before any and all the transactions detailed in the bill and in the answer of Ferdinand Ganzer. The complainant put in evidence the application, in print and in writing, for the $4,200 loan. This application is not signed by the wife, Helene Ganzer. It is not sworn to by Ferdinand Ganzer. It is made on a printed blank form, twin to the latest improved edition of such corporation literature, with which the legal profession and the courts have become may take notice, as matter of common knowlso familiar that edge, of the labyrinthine intricacies of marginal directions, alternative statements, mostly printed in small type, in crowded lines, and the confusion of short and narrow blank spaces, which any one who has had the benefit of actual experience in filling out in his own behalf knows are apt to mislead and deceive even the elect. This one, like the whole brood, has those statements in reference to homestead which provoked the TexaB supreme court to indulge in this sarcasm: . "The wonder is that the b()ITower was not required to make. and did not make, a further statement that no agent or officer of appellant had capacity to know that land owned and occupied by a husband with his wife as their sole place of residence was their homestead." Loan Co. v. Blalock, 76 Tex. 85, 13 S. W. 12.
. Some of its features may help us further on. It values lot No. 8, with its improvements, designated as the homestead, at $8,000. It values lots 1 to 7, proposed for security, with improvements thereon, at $11,000. The appellant's witness Hodge was employed by appellant and paid by appellant to inspect and appraise this proposed security. He did inspect it, for he so testifies, and this application was filled out, he says, "by my partner, Mr. Hoya, under my direction, and Mr. Ganzer. Mr. Ganzer furnished the data for the application, and signed it, and I signed the appraisement attached to the application. This was sent to the complainant at
66'6
I'JWERA,LRE:OO:R'llER,
yolo 63.
loan business,at rthe time he testlftecl,,and was so engaged at the time these transactions W'enehaQl;In his report of appraisement, he values lots l·folf:"with improvenwntB, at $11,000; and says that, in his best judgmen:1i, they would, sell"f<tt forced sale,atthat time, for $8,000 ,cash;th;at he hadacqutred, the following information respecting . the PI'OP0Sed security and borrower: "Borrower IsO. ,K.,' and enjoys A No.1. ,Thestatewents made II;
'l'h;i8' witnesswaa j 6'1 iyear$ ·Q}Qi,,.no the proprietor ,of the' leading hotel iii., the of Dallas, and ,eilgaged also in real estate and
Kansas City, and the applicatio,n,)vas, approved and the'loaD. made."
very good' reputation.. ' 'Oonsider securIty, report ,are made on mY satd, ,Vro-Wrty as an jUdge of rel1-l property 'Values in the city of Dall/Ul. ." , ,.'. ' ,··Dated thIS 12th daY'of April. 1889. "[SIgned] A. Ii. Hodge,' Appraiser."
Botl;lGanzer and wife had ltllQ)VllSiinpsoJifor a number of had bougij.1fa part . otltheir from him'. Ganier had had several .\"jifu, :Siitlpson, and in his, answer ,and testifies 'thatSimpsot;l th9roughly knew the property, its .wife as their homestead, his busmess relatIOns, a..hd:finarrciill condition, and that he had no occa· . sion to. make, arill 'did not ID,ake;any representations or give any data toSimp'soni 01:" to Hodge,wJio. acted in connection with Simpson,' hi the matter of thi§ Appellant also put in evi· dence the recorded'plat of Ganzer's addition to the city 'Of East Dallas, as follows:
tir
-Also the recorded designation by Ganzer and wife of their homestead; the principaJnote, with three interest coupons attached, for the $4,200 loan ; the deed of trust to secure them, the deed
WESTERNM:ORTG. ,&
TNV'. CO.V. GANZER.
667
of, trust ,and note· ail 'date.A:pril 17, '1889; the two .Eber, hart notes, of date November 16, '1888; and the depositions of SiDlpsottand Hodge. The respondents madesllch ample proof in support of their plea that the whole homestead, and was at the time of its designation as such of less value than $5,000, that in this court the appellant' does not claim that the property is bound beyond the amount of tJ1esiIrfulatedpurchase motley notes. ' " There is not a syllable of proof that the wife,Helene Ganzer, did or said anything in connection with this Eberhart transaction further than the signing-and acknowlediing; her execution of the deed to Eberhart This she claims to hitve done under the express understanding that it was not to affect her title to her home, and her cl!lim: in' this respect seems to be conceded, and appears to be abundantly proved. "If the husband or any really tree agent had stated that his signatlire was merely a, matter of foi'In, not intended to be binding, it would have had the effect to give, if possible,! additional force to his acts. His staJteinent would be regarded as a confession of fraudulent design. , Such imputation -cannot,liOwever, be made against :the wife, who is supposed to be not well informed of her rights or the effect of her acts." Shelby v. Burtis, supra. It is clear that she is not pound by the act itself (Simpson knowing all the facts), and cannot' become bound unless she, and not another, her husband, Eberhart or Simpson, or all three, perpetrated a fraud. Where such an issue is to be found by the jury, the charges should limit the inquiry to the acts of the wife (Mortgage 00. v. Norton, supra); and the chancellor, sitting in equity, must observe the rule which as a judge, sitting at law, he would give to the jury. It may be permitted to repeat from the case last cited: "It Is difficult to attach the term 'fraudulent' to her passive submission '[even if it had been] to a series of acts dictated and required to perfect the loan for the husband by the agent of the company."
Moreover, in this case it is not the declaration or the wife that she makes the deed as a matter of form, and is not bound by it, nor is it the declaration of the husband, with whom she joins in making the deed, but it is the statement and express agreement of Sirnpson, the man for whom the deed to Eberhart is being executed and delivered, and to whom Eberhart's deed of trust is being delivered, and from whom Ganzer is getting the money. May she not plead and testify to and prove this without being charged with conspirllcy to commit fraud, with the actual perpetration of fraud, and when fully proved, as it is, will she be bound? And the subjectmatter being 'homestead, if she is not bound, will the husband be bound? lnge v. Oain, 65 Tex. 79. There is on the Eberhart notes not even a pencil memorandum to show that these notes were ever' the property of tb:e Scottish-Amer'ican Company. On their face they are payable to the order of Ferdinand Ganzer, at the office of Simpson & Huffman, Dallas, Tex. On the back they are indorsed in blank, "Ferd. Ganr.eri" only this, and nothing more, 'That company is not mentioned in connection with this simulated
668
FEDERALR1ilPOBTER,
unpaid. (lanzer's application to the appellant for the lqau, .TheScottish:A.werican Mortgage Oompany .isnot of tl'1llilt)n connection .with the paying o:tr,qf these El:)erhaJit notes; and.,itis to be remark;«l that Ganzer, W[,givjng a deed his o:wn property, (l()es not covenant off a debt w4ich is held against land. hili! . lan,,-, j li!ubrogated toa11 the rights of the holder of said notes and lien, but the stipulation is that it shall be s,\!bl'()gated. to all rights of the debtor hiJnself,!the said Ferdinand ,. '.' , Tllella,m,e of theScpttish.AJij.erl<lan MortgageOompany is not in any tne pleadings of the conmlainant or of the resPPlldents. IUs not m,entioned in anY of the or cross interrqgatqries:propounded to· the respondents' or in any of all:swers in which were filed in, the court below on 0'ctoqe1'31, 1893. It.is notrp.entionedinauy ofjhe interrogainterrogatories propounded to: the appellant's wit· nesses atter the respon,dents' answel."S and their depositions and the their witD.ef*les were all filed in the court below. It iii! the sun, that up, to this time tile of the Scottish·American Mortgage OOmpany with th,ese Eberhart notE!s was utterly' unknown to the veteran solicitol."S of the appellant. In of JamesB. Simpson, taken 7tb. December, 1893, to one of the interrogatories propqunded by the appellant, appear these words: "I bonght1;hem [the Eperhart for the Scottish· American Mortgage Oompany, Limited, of Edinburgh, Scotland." In all the pleadings and in all the evidence there is no. other men· tion of or reference to that company. There is no other proof that such a copipany exists, or where it has a local habitation, or what relation Simpson then or ever sustained to it, or that it had in Texas. or elsewhere any representative, employe, agent, officer, or constituent other than James B. Simpson. Not only so. It is fully proved that Simpson was connected with the appellant from 1884 till '1891; that the money for the $4,2QO loan made Ganzer was forwarded to Simpson through the bank of Flippen, Adoue, and Lobit; that Simpson let have about $1,800 of that money, and retained the balance, to meet his commissions and charges (fol! the loan was net to the appellant company), and to pay the Eberha,rl;g.otes; but there is no whisper of evidence or testi· mony by Qr from Simpson, or any other source, that any money on this account-the Eberhart ever paid to the ScottishAmerican Mortgage Oompany, or to any except to James B. Simpson, who knew their simulated character. Ganzer's written application for the $4,200 is dated and was made April 9,was approved April 15, and the loan waf! to date from April 17, 1889. The notes and deed of trust given to secure it bear date April 17, 1889. The deed of trust was not acknowledged and delivered till May 6, 1,889. The date of its filing for record does not appear. The deed from Eberhart and wife conveying the premises to Helene Ganzer; though dated' April 28, was not completed by the taking of the wife's acknowledgment till May 7,1889, on which day it was
of
669
filed for record. All of these instruments were doubtless of record before any of the money of this $4,200 loan passed. The instruments ordinarily might be considered contemporaneous, notwithstanding the order of their dates, or of their actual execution and record. But is the order of their dates, actual execution, and record not pregnant with notice to the appellant? Soon after the execution and record of Eberhart's deed, he applied to Simpson for the surrender of the $1,200 and $1,000 notes. Simpson said the notes had not returned from Scotland, which was literally true, for the notes had never gone to Scotland, and hence had not returned. Eberhart demanded a writing showing that the notes had paid, and Simpson gave Eberhart this certificate: "Dallas, Texas, May 13th, 1889. "This is to certify that the two J. H. Eberhart notes-one for $1,000, dated Nov. 16th, 1888, arid due [) years after date, and the other for $1,200, of same date, and due 3 years after date-have been paid off and fully satisfied of this date. These notes are in Europe at present, but, when they are returned, I agree to hl\.Ild them over to Mr. Eberhart. "For James B. Simpson, "Dick IUtchie."
This certificate was made, executed, and delivered to Eberhart, in Simpson's presence, by his direction and dictation. Does it not deserve especial notice that this certificate does not name the Scottish-American Mortgage Company as the holder, to whom payment of these notes had been made, or as the party thereby agreeing and bound to hand them over to Mr. Eberhart? It does not even mention Scotland. It does not purport to be given by Simpson for or on behalf of any other person, natural or incorporated, who had been the innocent holder and owner of these notes. It is given by James B. Simpson, purporting on its face to be only for him and on his own behalf. .The fact that Eberhart was willing to receive it, and did receive it, in this shape, shows convincingly that he had no suspirion, as he had no reason to suspect, that Simpson was acting in this matter for an undisclosed principal. Is the appellant not chargeable with knowledge that the dealing with Eberhart was only a simulated sale? The deed to him stood on the record. His deed of trust to Simpson stood with it. No deed from him to Ganzer, or to Ganzer's wife, or to any other person, appeared there or had been made when Ganzer, in possession of the premises, using all of the same as his homestead, did, in a writing dated and duly signed by him April 9, 1889, with the attached report of A. L. Hodge, dated April 12th, forwarded to Paul Philips, the general manager at Kansas City, by James B. Simpson, and examined and approved by the general manager, April 15,1889, give the express notice in these plainly-printed words: "The title to the above property is vested in fee simple in the undersigned." If this does not charge the appellant with knowledge, it might be very interesting to learn how notice can be got to the mind of Simpson's principal. The appellant nowhere, in its pleadings or in the proof it offers, seeks to charge Simpson with fraud. It is clear that he committed no fraud on the appellant. He fell into an error of law,-an error persisted in by the appellant until the final action
l670
,l1';;FEDERA.'LkEPORTER,
\Qt ", t,
had;
'to Jtlie"t9,!n'ofEaWf fiaUas, and the
·
and' recording '.<>f,'
,de,;s, *p-a"if6,h, r, abatld6nltle,p,'t';:9t::lots lto ,1::as, part of' 'therefQl"ellHd 'thereafter, ,and to,mlp 'fGr the
,<luestIon, but constItuted no part of "sallie;» ' that :bought the notes for the S, ttish,-A,we"',r!"c,a, '¥,o,ct, , i e,' "C, om,',pan,!' and, ',W"'a,,iV,ing,",the I,aato hisre)lttlonto beIng such to charge It WIth that he to perpetrate a :)bis Jfraud onit'jjdl<mnzer was -in good bueinessand .credit; was l as Hodge.. deolaM'a ,on his·honor,0, K. asa bornowel'; and had imof theivaluie:(April 9,1889) 01'$19,000, the part of wMcn $l1 l 000 would have sold at forced sale for cash, of its real value, · s-q,ch then'in Mtivedemand., May not SImpson, man $2,2000nhig personal responsi"tWity,? ',. (for, ,no .proof) Simps@n's,'instruc,.fi(tns promIssory notes not se· cured ,and that, by doing so, he, may have to hIs principal, there is not only no proof that · but a,ll the fair from ·the proof to show that ,was good for that' amount. Before · the first of. semiannual interest had matured on these .notes! h,'alf acre too va.!uable for a tuan in his circumstances it as a induced him to,dQ!,'A'itlJ"the conCUI're.llce of bis wife, what Simpson believed an .abandonttumt as' homestead effected that the premIses, embraced In lots 1 to 7, and to borrow ;,on the ,pa,rt ,on mortgage, to the of less than ',40 per cent. 'otHs value., Simpson still had the E.berhart notes. lIe neVer p,arte,d with them from the day of their execution till aboutthetimeof the institution of this suit, wb'enhe delivered them 'tQthesolicitora, of tb,e' appellant. They were 'to be paid out of tllis new loa4"and this new)Qan .was a valid mortgage, was,not inex'I'or to. these acts' of Ganzer' and wife cQp.clusively an l;l.ba'ndonment of tha:tpart of their home· 'f!tead,' " ,', ,', ' ;.i ,From the pleadings andp:roof in this ease, itls clear that Ferdinand ,pi!'lnot bad not least ground to sus,pectl Wat: was two different mortgage com· ,paniE\s in 9f: the:! two loans. It that Ganzer ,representing. in loaning money In Dallas, and he. ayers and testIfied expressed himself sllch to let Ganzer ha've the first on his person;tl cre\litl and wished the Eberhart papers for the sake of form; but it is manifest that Ganzer considered that
as
,
tbewrltten rba c,onclusive and that, :could bind it by from
III th.elr, Instrument In
adJoln
WESTERN MORTG. 41: INV. CO'. 11.
671
Simpson ws;s the real party. Ganzer and his wife are plain Germans, born" in the fatherland, taught to read and write in their native language. On reaching adult years, they intermarry, and begin life in Dallas county, Tex., not in the city;, '.I.'hey have no children. The husband has learned to read and write English; the wife learned to read English, but not to write it. By 1883, having lived then in Dallas county 10 years, they were able to buy a part of the half acre that now constitutes, their homestead. It had nO house on it, and they b,ad not then the means to pay for erecting a dwelling house on it; but it was purchased for a home place, and, as soon as practicable, they commenced improving it for that purpose, erecting first stables and cowhouse and an out· house used as a washhouse; and in 1886 they were able to build, and did erect, a house thereon for their dwelling, which they then commenced and still continue to use as their dwelling. 'rhe first part of this half-acre lot was acquired October 2, 1883; the last part, March 8, 1888; and at the cost for the whole of about $1" 200. They had both known James B. Simpson for a number of years. A part of their home lot was purchased from Simpson. He was a practicing attorney, of experience and skill, engaged also and largely in the business of loaning money. To them he was the great lawyer, with untold wealth to lend; and he was held by them in that honor which, in their native land, honest yeomen accord to worthy eminent men. The rest of this picture presented by the record has already been drawn. In this investigation the effort has been to soak the mind with the record, eliminating color. In the opening of this opinion, refer· ence was made to the office and effect of perspective. It may now be permitted to suggest that the view of this case taken by the majority of this court illustrates the power and value of perspective. It is respectfully submitted that the distinction drawn in the opinion of the court by which the corporation claimed to be the principal in the purchase of the Eberhart notes by Simpson is to escape from being charged with his knowledge finds no support in the opinion of the supreme court in the Distilled Spirits Oase, 11 Wall. 367. The citations from the American & English Encyclopedia of Law are not accessible at this writing, but do not seem to require notice. The distinction drawn by the majority of the court in this . case may rest on a refinement in casuistry fit to have exercised the fancy of the schoolmen, but one which the judgment of a superior court, charged to administer the Texas homestead exemption law, should reject. Much of the money-seeking investment on mortgage security in Texas is owned by aliens or by citizens of other states. It is now the vogue there, as elsewhere, to effect such: investments through mortgage companies. Oitizens of that state desiring to invest money there on such security will have easy opportunity, of which they will not be slow to avail themselves, to make their investments through incorporated mortgage companies, created by or under the -laws of SOUle foreign countr-yor of some other state of this Union. If the views in the opinion of the court in tliiscase are to become its settled doctrine, the United
672
I'EDEBA!L BEPORI.rER,
States courts in Texas 'will enjoy a monopoly of' all similar sutts in which the matter invGlVed' is of value sufficient to support their jurisdiction. Cases like Ivory v.' Kennedy, 6 C. C. A. 371, 57 Fed. 340, may not occur so often, but cases like this will abound. The evil intended to be eX(Jluded is the object of the tempter's arts, and subjectslnot proof a:gaihSt'his beguiling wiles will be charmed into The barrierbf,the constitution will be withdrawn, for the doctrine of notice; as' held' and applied in' this case, will prac· tically''exempt incorpomtedmortgage companies ,from the operaation of that organic law. v. DURLACHER. (Circuit Court, 13., D. New York. October:l., 1894.) , , , CLERK, ()lI' CIRCUIT COURT-,·:!lIGHT TO HOLD OFFICE OF COM:lUS8IONER.
Sectioh 2. under subdiyiElion "Judicial," of the appropriation act ot July 'SO, 1894, which proYj.;ies that "no person, who holdi> an office the sallliY or annual compenstition' attached to which 'amounts to the sum ojl $21500. shall be apPOinted to or hold any other office to which com· appliel3 only to offices. to which a fixed an· pensation iEl attached,," of at Is attached, ,l;l.Ud does not prevent a c1el'!l; of the circuit c(>urtfrom holding the office of commissicmerot 'such', court. "
Thili,,}Vasapetition to test 'the questi9n whether under section 2, subOivision "Judicial," appropriation act pf 1894, the clerk of the circuit court for southern district of New York could hold the office of commissioner of the circuit court in such district. Abr;tm J. Rose, for petitioner. Wallace McFarlane, U.:S. Dist. Atty. LACOMBE, Circuit,Judge. The section presented for construction upon this motion is numbered 2, undel' the subdivision "Judiciar' in the appropriation act approved July: 31, 1894. The dausewhose meaning is in dispute is as follows: "No person whQ holds an office the salary or annual compensation attached to which amounts to the sum of two thousand five hundred dollars shall be allPointed to or hold any other office to which compensation is attached unless ElpeciaIly heretofore OJ,' hereafter specially authorized thereto by law."
'I:
J
;:
John A. Shields, before whom this proceeding is pending, has held the office ()f "commissioner of the circuit court" (section 627, Rev. St. U. S.) in this district for many years. He has also, since May 1, 1888, been the clerk of this court. That it is eminently desirable for lawyers, litigants, and all persons interested, including the local representatives of the administrative branches of the government, that the clerk of this circuit court should also be a commissioner thereof, is a self-evident proposition to anyone who is familiar with the character, extent, and conditions of the business tra,nsacted here. That prior to the passage of the act there was no legal objection to the same person holding both offices and receiving .the fees earned by discharging the functions of both is settled by authority, U. S. v. McCandless, 147 U. S. 692, 13 Sup. Ct. 465. To
UNITED STATES 1I.nURLACHEB.
673
neither office is a. salary attached. The compensation received is by a separate fee for each separate official act The only question here presented is, "Has this section of the appropriation act changed the law?" In my opinion, it has not. The phrase, "an office the salary or annual compensation attached to which amounts to the sum of two thousand five hundred dollars," plainly imports a fixed compensation of at least that amount The annual compensation must be determinate, and not merely matter of speculation. It will not do to say that because on one particular day the fees received amounted to $10 over and above all expenses, and b'ecause there are some 300 working days in the year, therefore the annual compensation for the current year is $3,000. Nor does the act contemplate a shifting compensation, which might at one time be $2,490 and at another $2,510, thus making the clerk competent to hold the office of commissioner on Monday, incompetent on Wednesday, and competent again the ensuing week. That there have been years when the compensation of the clerk aggregated more than $2,500, and that there may hereafter be such years, does not establish the fact that the compensation for the current year amounts to that sum. No one can know what is to be the annual compensation of the clerk for any given fiscal year until the year has closed, his accounts have been passed at Washington, and his personal compensation taxed and allowed by the attorney general. Day by day, as his functions· are discharged, he collects the separate fees allowed for them by law. For all of these he renders an account to the government. From the fees thus received he retains the amount of "his necessary office expenses, including necessary clerk hire," transmitting vouchers for the same to be audited by the proper accounting officers of the treasury. Rev. St. U. s. § 839. Out of the surplus, and out of that only, he to receive his personal compensation; and it is manifest that if for any reason the volume of business done decreases, the fees will, in like manner, decrease, and the surplus may be reduced to less than $2,500, or may disappear entirely. Moreover, even if the surplus be over $2,500, the statute does not insure it to him. Its phraseology is, "No clerk .. .. .. of the circuit court shall be allowed by the attorney general * .. .. to retain of the fees and emoluments of his office .. .. .. for his personal compensation .. .. .. a sum exceeding $3,500 a year." Rev. St. U. S. § 839. This limits the power of the attorney general in one direction, but not in the other. He must not allow the clerk more than $3,500 a year; he may allow him less. Apparently it is within the power of that officer to reduce the salaries of all clerks of circuit courts to $2,000 at any time; a reduction which may be made at the beginning of a fiscal year, or during its course, or at its close. The "annual compensation" of a clerk of the circuit court is therefore unknown and unknowable until after the expiration of the year, the auditing of his accounts and allowance of his compensation by the attorney general. When, therefore, the question arises whether the incumbent of such' office shall be appointed to or hold some other office, it is impossible to discover that he is disv.63F.no.5-43
674
63.:
office the salary or annual compensation attacbeq to which. to the sum of two thousand five hundred dQllafs." , :It is further ,contended that ,section of the appropriation act ispr013pective QI\lY, and doe!t ,pot affect persons in office when it was supportin P.eoplev. Green, 58, N. Y. 295; but that point-need not be here discussed. Mr. in t4e case at. bar. Shi,eld$,shoul(}pl'(),(feed as
v. iroircuit Court of .';
ADAMS et aI. October 12, 1894,)
Third Circuit.
;
.
No. 10. bank organlzed 1a trust and deposit COm-
,·'t.
IN80LV,EN.T BANKS-+LuBILITIlt8 ...... ORGANIZATION 011' TRUST AND DEPOSIT COMp,url: ,TO ElfBLIC. .: i ·
of the lat;ter were as belonging to the bank, and were abstracted from time to time to III:eet its nec.essities. Held, that the organiand use IIllide of tlte' trust company 'was a plain fraud on the public, and, on·: the failure of both institutions, the trust company was to be' treated .· as ,it creditor 'of. the bank ,to the amount of the funds so
1laJl.k, owned aU. the trust company's stock, and the deposits and securi-
Pauy to "aid 'the bank in itssttuggle for exililtence." The two institntionshad the same officel'l'l,lmd did business in the same building. The
ofilcersoflin
used.
Appeal from: the OircuitOourt of the United States for the Eastern District of Pennsylvania. Thi'S was an action by Josiah R. Adams, receiver of the Penn Safe Deposit & Trust Oompany,and others, against Benjamin F. Fisher, as receiver of the Spring Garden National Bank, and against the bank itself, to establish a liability on the Jlart of the bank for certain funds of the trust and deposit company, which were used for its benefit The circuit court entered a decree for complainants, and respondents appealed. cloh,n R. W. Pettit, and H. B. Gill, for appellants. M. E;ampton Todd, Samuel B. Huey, and Thomas R. Elcock, for appellees. Before AOHESON, OircuitJudge, and BUTLER and GREEN, Distriet Judges. BUTLER, District Judge. The Spring Garden National Bank and· the Penn: Safe, Deposit. & Trust Oompany were substantially one concern. .The latter was organized as an adjunct to the former. Its stock was oWlledby the'bank, held in the names of the bank's directors, its business was conducted in t;hesame building as the bank"s,and the; officers of each were tbe, same. F. W. Kennedy the president of both, after . describing the manner of organizing' the trust company and the purpose it was intended to serve, says it "Radone purpose, and that was to aid the bank in its struggle for exThere was I mUde use of the trust company as