Gordon v. Johnson

57 N.E. 790, 186 Ill. 18

• Court: Illinois Supreme Court
• Decided: June 21, 1900
• Status: Published

Opinion

Mr. Justice Magruder

delivered the opinion of the court:

The bill in this case, as originally framed and as finally amended, is filed by the defendant in error, Johnson, against the plaintiff in error, John Gordon, to enforce a vendor’s lien upon 94 acres of land, reserved in a deed of said 94 acres executed by Johnson to Gordon on August 23, 1890. The deed recites upon its face, that a vendor’s lien is expressly reserved upon the lands therein described to be enforced in any court having jurisdiction in such a case. Upon the execution of the deed, John Gordon paid $2815.50 and gave his six notes for the balance of the purchase money. The first of these notes for $962.50, due March 1, 1892, was paid. Gordon refused to pay any of the other notes for the reasons set forth in the statement preceding this opinion. It is provided in each of the notes that, if any part of the sum shall remain unpaid for ninety days after it is due, then all of the notes not then paid shall immediately become due and collectible.

The 94 acres, which Johnson deeded to John Gordon on August 23,1890, had, on March 10,1886, been conveyed to Johnson in the settlement of the indebtedness due from Gordon to the Jacksonville National Bank. The evidence is quite clear, that Johnson himself had no real interest in the land, but held the title for the bank, of which he was a director. The real party in interest is the bank, and not Johnson, although the bill is filed in the name of Johnson. The notes, given for the purchase money, were payable to the order of Johnson, but, as matter of fact, the bank is the real owner of the notes, and of the lien which this bill is filed to enforce. Johnson says in his testimony: “The 94-acre tract, conveyed to me, was valued at $90.00 per acre, and the amount was paid on the bank debt in-the attachment suit; these conveyances were made to me for the use of the bank, and in settlement of the bank’s claim against Gordon, and the same were applied as a credit on Gordon’s debt; * ■* * I do not consider I have any interest in this 94 acres of land, only as I am interested in the bank; I have an interest in the bank, but no personal interest in this land; whatever money is derived from the sale of this land will go to the bank, and not to me.”

Inasmuch as the Jacksonville National Bank was the real owner of the land deeded to John Gordon, and upon which a vendor’s lien was reserved, and inasmuch as the bank is the equitable owner of the notes, given for the purchase money, which are sought to be enforced by these proceedings, the bank was a necessary party. The bill should have been filed in the name of the Jacksonville National Bank, either alone or in connection with H. R. Johnson.

Where there is a stipulation in a conveyance of land, reserving to the grantor a lien on the land conveyed as security for the unpaid purchase money, the vendor’s lien exists by express reservation. Such a lien is different from the implied lien, which equity raises in favor of a vendor, who has parted with the legal title without payment. The lien for the unpaid purchase price, being expressly reserved, is conferred by the contract between the parties. It arises out of the express agreement of the parties. (28 Am. & Eng. Ency. of Law, pp. 184, 185). When the lien is thus expressly reserved, it is in the nature of a mortgage, and in equity is treated as a mortgage. (Robinson v. Appleton, 124 Ill. 276).

The ordinary vendor’s lien, as that term is used in the books, is the equitable right, which the vendor impliedly retains of subjecting the land sold to the payment of the purchase money. It arises from an implied agreement, existing between the vendor and vendee, that the former shall have a lien on the lands sold for the payment of the purchase money. It grows out of the implication of law, that the seller does not intend to release his claim on the land for the purchase money. The vendor’s lien, thus arising by implication of law, is personal and can not be assigned. (Keith v. Horner, 32 Ill. 524; Dayhuff v. Dayhuff, 81 id. 499; Small v. Stagg, 95 id. 39; Bonnell v. Holt, 89 id. 71). But where the lien is expressly reserved in the deed and, so, arises out of the express contract of the parties, it is transferable, and the assignee may enforce it in a court of equity. (28 Am. & Eng. Ency. of Law, p. 190; Carpenter v. Mitchell, 54 Ill. 126; Markoe v. Andras, 67 id. 34; Wright v. Troutman, 81 id. 374; Blaisdell v. Smith, 3 Ill. App. 150). Such an express reservation of the lien in a deed amounts to more than an ordinary lien of the vendor. “It is a written contract that the land shall be burthened with the lien until the notes are paid. If not a mortgage, it approximates one more nearly than an .ordinary vendor’s lien. It declares the land to be in pledge for the payment of the purchase money. It has the same effect as if a written agreement had been entered into and signed by the parties, that there should be a lien on the land to secure the payment of the notes, and that the assignee of the notes should have the right to enforce it.” (Carpenter v. Mitchell, 54 Ill. 126).

In the case at bar, Johnson held the legal title to the land and was the payee in the notes, but the bank was the equitable owner both of the land and of the notes, and hence could become the owner of the vendor’s lien, reserved in the deed, by assignment of the notes, or conveyance of the land to it by Johnson. It was not necessary to use the name of Johnson alone to enforce the vendor’s lien, because, being expressly reserved in the deed, the lien could be assigned to the bank.

It is well settled that, in equity, those, having a beneficial interest in the subject matter and relief sought, are the proper parties to sue, although they may not have the legal title or interest therein. (Moore v. School Trustees, 19 Ill. 83; Frye v. Bank, 5 Gilm. 332; Winkelman v. Kiser, 27 Ill. 21). The general rule is that, in suits respecting the trust property brought either by or against the trustees, the trustee is a necessary party because he holds the legal interest. The beneficiary is a necessary party, because he- has the equitable and ultimate interest to be affected by the decree. (Dubs v. Egli, 167 Ill. 514, and cases cited). A bill in chancery to enforce a vendor’s lien for the unpaid purchase money should not be filed in the name of one party for the use of another, but the suit should be brought in the name of the beneficial party, or of the real party in interest. (Elder v. Jones, 85 Ill. 384; Smith v. Brittenham, 109 id. 540). In every suit in equity, all persons having equitable rights in the subject of dispute, as well as persons having legal rights therein, should be made parties. (Gerard v. Bates, 124 Ill. 150; Moore v. Munn, 69 id. 591; Story’s Eq. Pl. sec. 207). The rule, as applicable to foreclosures, has been thus stated: “All persons who have the legal interest in the mortgage, as well as those who have the equitable interest therein, are necessary parties to a bill to foreclose.” (Story’s Eq. Pl. sec. 201).

Inasmuch as an express lien to secure the notes given for the purchase money was reserved in the deed executed by Johnson to Gordon, and inasmuch as the enforcement of such a lien is treated in equity as the foreclosure of a mortgage, and inasmuch as, under the authorities cited, the equitable and legal owners of a mortgage are both necessary parties to a bill to foreclose, it necessarily follows that the Jacksonville National Bank was a necessary party to this suit. The bank, however, was not made a party thereto in the¡ original or amended bill filed by Johnson, or in the cross-bill filed by Elizabeth Stryker, although attention was called to the beneficiary interest of the bank in the answers filed by the plaintiffs in error. The plaintiff in error, John Gordon, made the bank a party defendant to his cross-bill, but that bill, being demurred to, was dismissed, and thereafter the suit proceeded without the presence of the bank in court.

Where the-rights of parties not before the court are intimately connected with the matter in dispute, so that a final decree cannot be made without materially affecting their interests, as in this case, the objection may be taken at the hearing, or on appeal, or on error. (Prentice v. Kimball, 19 Ill. 320; Knopf v. Chicago Real Estate Board, 173 id. 196).

In the case at bar, the rights of the Jacksonville National Bank were so involved as to make it a necessary party, and, as it is a necessary party, advantage may be taken of its absence from the suit at any time during the pendency thereof, either on appeal or error.

That the bank was a necessary party is evident from an examination of the cross-bill filed by the plaintiff in error, John Gordon, against the Jacksonville National Bank and the defendant in error, H. R. Johnson. We think that the court below erred in sustaining the demurrer to that bill. The bill shows that the plaintiff in error, John Gordon, and the two firms, in each of which he was a partner, had extended business transactions for many years with the Jacksonville National Bank. A set-' tlement was had between Gordon and the bank of his indebtedness and of the indebtedness of the firms, of which he was a member, to the bank. But a mistake was made, according -to the allegations of the cross-bill, which, by demurrer, were admitted to be true, in the amount of the indebtedness due by Gordon and the firms in question to the bank. The details of the settlement in question, and the grounds, upon which it was arrived at, are set forth in the statement which precedes this opinion, and need not, therefore, be here repeated. The bill alleges that the mistake was not discovered until November 21,1892. The original bill in this case for the enforcement of the vendor’s lien was filed on March 19, 1894, and the cross-bill of Gordon against the bank and Johnson was filed on July 15, 1895. As we understand the argument of counsel, the main ground, upon which the demurrer to the cross-bill was sustained, was, that Gordon was guilty of laches in filing his cross-bill, inasmuch as it was not filed until nearly three years after his discovery of the mistake.

At law money paid under a mistake of fact may be recovered back. (Wolf v. Beaird, 123 Ill. 585; Kerr on Fraud and Mistake, p. 415). Where money is paid by a man under a mistake as to his right and his duty, which he was under no legal or moral obligation to pay, and where the recipient has no right in good conscience to retain it, it may be recovered back. (Northrop’s Exrs. v. Graves, 19 Conn. 548). In such cases of fraud or mistake, the Statute of Limitations begins to run from the time of the discovery of such fraud or mistake, and not before. (McIntosh v. Saunders, 68 Ill. 128). The rule applies not only to money, but to anything which is received as money. Even land, when received and acknowledged as money, has been held to be sufficient to sustain an account for money had and received. (Baltimore and Susquehanna Railroad Co. v. Faumce, 6 Gill, 68). Here, the money or land, paid by Gordon under mistake towards the settlement of his indebtedness to the bank, could be recovered by him in an action at law at any time within five years from November 21, 1892, when the discovery of the mistake was made. As a general rule, courts of equity follow the law in allowing the defense of the Statute of Limitations. Where-the Statute of Limitations would bar a matter-at law and the matter- is litigated in chancery, the latter tribunal will follow the analogies of the law. (Harris v. Mills, 28 Ill. 44; Castner v. Walrod, 83 id. 171; Cartwright v. McGown, 121 id. 388). The cross-bill here was filed within less than three years after the discovery of the mistake, and, as the Statute of Limitations would not have been a good defense to a recovery at law, it could not bé a good defense in equity. Of course, where it clearly appears that the money was voluntarily paid with full knowledge of the facts, it cannot be recovered back though paid under a mistake. (Bank v. McGilvry, 4 Gray, 518). In the case at bar, however, the land was not conveyed in payment of the debts-due to the bank with full knowledge of all the facts in the case.’ In view of what has been said, it cannot be successfully contended that plaintiff in error, John Gordon, was guilty of laches in filing the cross-bill.

In addition to what has been said, the evidence shows that the plaintiff in error, John Gordon, was in possession of the 94 acres from March 10, 1886, up to the time of filing his cross-bill in July, 1895. The cross-bill prayed that there should be entered upon the records a full release of the vendor’s lien, described in the bill, as being a cloud upon the cross-complainant’s title. A cross-bill for relief may be filed when the original bill is brought for the specific performance of a written contract, which, the defendant at the same time insists, ought to be delivered up or canceled. (Story’s Eq. PI. sec. 391). In the case at bar, the bill is brought for the specific performance of a written contract for the sale of land as embodied in the deed, reserving a vendor’s lien and describing notes for the unpaid purchase money; and the cross-complainant, John Gordon, one of the defendants below, insists that the contract reserving the lien should be canceled. It is well settled that laches cannot be imputed to the complainant in a bill, who is in possession of the property in controversy. The Statute of Limitations, or a rule of limitation in equity, does not run against the party in possession of real estate, but only against him who is out of possession. (Parker v. Shannon, 137 Ill. 376). Here, for the reason that the plaintiff in error, John Gordon, Avas in possession of the property, his cross-bill is not demurrable upon the ground of laches.

The cross-bill should have been retained for the purpose of bringing into court the bank, which was the owner of the subject matter of the litigation, so that the true state of affairs could be ascertained in equity. The defendant in error, Johnson, representing the bank, came into a court of equity to enforce a lien for unpaid purchase money represented by notes given therefor. The cross-bill filed by the defendant, John Gordon, set up equities arising out of the subject matter of the original bill, which entitled him to affirmative relief. He could, therefore, as a matter of right, present such equity by way of cross-bill, and it was error to dismiss his cross-bill. He sought to set up therein a set-off of what the bank owed him on account of his alleged over-payment to the bank against the purchase money sought to be collected. It is true, that a court of equity will not allow such a set-off, unless the party seeking it can show some equitable ground for relief. The mere existence of cross demands is not sufficient, but a set-off is ordinarily allowed in equity, when the party seeking the benefit of it can show some equitable ground for being protected against his adversary’s demand. (Quick v. Lemon, 105 Ill. 578; Houston v. Maddux, 179 id. 377).

For the errors in failing to make the Jacksonville National Bank a party to the proceeding, and in dismissing the cross-bill of the plaintiff in error, Gordon, the judgment of the Appellate Court and the decree of the circuit court are reversed, and the cause is remanded to the latter court for further proceedings in accordance with the views herein expressed.

Reversed and remanded.