'V. MALONE.
445
3. The .embraced only the property of the Wabash pany, and thecoui't took posllession of the property of the Toledo, Peoria & Western, Qat for the benefit of that company and its creditors, but for the benefit of the Wabash Company and its creditors and stockholders. No part of' the expenses of the receivership can therefore be properly chargeable against the Toledo, Peoria & Western property. 4. The Toledo, Peoria & Western property was operated by the refrom May 28, 1884, to June 10, 1885, and. the rent which accrued during that period, applicable to the payment of interest on the first-mortgage bonds, amounted to $321,080047, which amount is due from 'the receivers to thetrtistees in the first Toledo, Peoria & Western mortgage, less $99,571.17, already paid by the receivers on that account,. , 5., Therigbt of this court to decree upon the claim of the trustees in the first mortgage of the Toledo, Peoria & Western for rent for the use of the, leased property during the time it was in the possession of Humphreys and Tutt as receivers, is provided for, and recognized in the orders " and decrees of the court in the Wabash suit at St. Louis. Adecree will therefore be entered against the receivers for the rent which accrued during their possession of the leased property, less $99,1571.,17, the amount already paid as stated, which amount so decreed to be due shall be made a charge upon the property of the receivership, as part of the receivership expenses.
SATTERFIELD 'V. MALoNEet
al.
OQurt,
w: n. Pennsylvania.
June 22,1888.) ,
, ,
To convert a deed absolute on its face into a mortgage, by parol testimony, such testimony must be clear and specific; of a character such as willieavirin ,the mind of the chancellor no hesitation ,or doubt.! The )mow)ed&,e of a husband of facts affecting thetitleto real estate pur· chased by his Wife, is not imputable to her, where the purchase is not effected through ,his agency, and he takes no part in the Itegotlations. AND WIFE;.
ABSOLUTE ON FACE-EVIDENCE.
"
8.
'Thee.stablished doctrine in Pennsylvania is that the principal is not af· fectedbyhis agent's knowledge, unless it is shown that such knowledgevvRs acqui'red by the agent in the'ClJllrse of the business in which he was employed ' , for his principa1. 2 ITo coD:verta'deedabsolute on its faCe into a mortgage, the evidence should be clear and convincing.' Cochrane v. Price, (Md.) 8 Atl. Rep. 001, and cases cited in note.. Knapp v. Bailey, (Me.) 9 Atl. Rep. 122, and note; Pancake v. Cauffman, (Pa.) 7 Atl. ReP, 67,and.note,LMcConnick y. Herndon, (Wis.) 81 N.W. Rep. 808; Canal Co. v. Crawford, (Or.) l'aG. Rep. ;U8.Fprfacts held sufficient, soo..Id.; McMillan v. BisBe1.4 (}lie,h'),29 N,. W. Rep. 787, and n"ote;, HUBcheon v. Huscheon, (Cal.) 12 Pac. Rep. 410'; v. 88(i; Stephens v. Allen, (Or.) 8 Pac.. Rep. 168; Miller v.Ausenig, :,' ,aSh',T.) ita. 111.;, Cosb,Y"V. ;J;!uchanan,,(Ala.) 1 South. Rep-, 898, ;,yearson v, Sha,rp," , Plio.) 9 Atl, 88. ,See, aJ.so, Rogers.y. Beach. (Ind.) 17 N. E. .ttep. 609; Knaus v. , reher, '4 South.Rep. 287. ' . ' " , ,sAs !;q tlle kJ:l,9'Yle<,lge of, an agel1t is n9tiCl3.;to the principal, see Huff v,FQ well, (Iowa,) 2li N. W. Rep. 252, and note. ,C:
SAME-PnINCIPAL AND AGENT.
446 ' 4, .
FEDERAL REPORTER·.
!"!lIe as declared supreme .court ()f States IS,that . tbeptlDclpalls affected by hIS agent's knowledge, no matter when acquIred, it is SUbject to the important qualification that the principal is not bound by his prior knowledge, unless it be present to the agent's mind at the time of acting for his principal, ()f which there should be clear and satisfactory . proof. ' SAME-RUMOR. .
,Mere rumors of a defect of title are not notice to a purchaser of real estate, nor do they impose upon him the duty of inquiry. To affect him the information should come from some Cine interested in the estate, or from some authoritative source. ' 6. SAME-REOORD AS N OTIOE. A purchaser is not affected with cO,nstructive notice of anything which does not lie in the line of the title;l .
5.
'7.
SAME.
A purchaser on record a deed conveying an absolute title to land, and referring to nothmg beyond, was not bound to prosecute a later search; and therefore is not chargeable with constructive notice of a, foreign attachment again'st the land in a suit commenced after the date of the record of the deed. 1 FRAUD-EVIDENOE.,
8. 9.
Uircu:t:Dstanc,es calculated to excite suspicion are not enough to establish fraud. 2 The evidence .examined. and conclusion reached that the charge of actual fraud madein, the bill is not snstained. 1
'
In Equity. Roger Sherman, for complainant. D. T. W-atson and J. W. Lu, for respondents. ACHESON, J. This bill is.in aid of an action of ejectment pending in this court, brought by the plaintiff, John Satterfield; against H. P. Malone, and Emma E. Malone, his wife, two of the defendants herein, for the recovery of certain oil-producing lands situate in McKean county, Pa. The real parties to the controversy are the plaintiffand Mrs. Emma. E. Malone,. each of whom Claims title to the lands under George A. Baker, who owned them in fee. By his two deeds, purporting to conveyan indefeasible title in fee-simple, uated and acknowledged November 20, 1880, and duly recorded in McKean county on February 12, 1881, George A. Baker, tor the expressed aggregate consideration of$150,000, conveyed said lands to Dr. Azariah Everett, who, by his deeds dated December 17. 1883, conveyed the same to Lewis E. Mallory, who a few days. thereafter conveyed· the same to Mrs. Emma E. Malone, for the expressed consideration of $20,000. On May 19, 1881, Hilton & Waugh began suit by writ of foreign attachment in the court of common pleas of McKean county against George A. Baker, and on the next day lAs to when and how far recitals in deeds are constructive 'notice to a purchaser,suf1icient to put him on inqUiry, see Roll v. Rea, (N. J.) 12 Atl. Rep. 905, and cases cited in note. tAs to what is evidence of fraud and how fraud is proven,see Mooring v. Little, (N. C.) 48. E. Rell' 485,LRobinson v. Woodmanseet (Ga.) Id. 497, and cases cited in note; RIley v. MelqUIst, (!'Ieb.) 36 N. W. Rep. 657, ana note; Cox v. Cox, (Kan.) 17 Pac. Rep. 847. On the general subject of fraud, see the exhaustive note to Knight (Me.) 1 At!. Rep.l42j Marmon v.Harwood, (Ill.) 16 N. E. Rep. 286, and cases Cited in note.
SATTERFIELD fl. MALONE.
447
the sheriff, by virtue of said writ, attached Baker's right, title, and interest in said lands. The action proceeded to judgment by confession against Baker for the sum of $38,401.04, elitered December 12, 1884. Upon execution issued thereon, the sheriff, on January 10, 1885, sold said hinds to John Satterfield, the plaintiff, for the sum of $6,430, and by his deed, acknowledged 26, 1885, conveyed the same to Satterfield. The bill charges that the deeds from Baker to Everett, although absolute in terms, were intended to be, and really were, mere mortgages to secure an indebtedness from Baker to Everett, or to a firm of which he was a member; that H. P Malone procured Everett to convey said lands to Emma E. Malone, through Mallory, who was a mere conduit of the title, with full knowledge on the part as well of H. P. and Emma E. Malone as. of Everett himself that the conveyances by Baker to Everett were not ab&olute, but mere mortgages, and that the lands had been attached as the property of Baker, by Hilton & Waugh; that no considera.tion was paid for the lands by Emma E. Malone to Everett or Mallory, and that the latter paid no money and received none; and, finally, that the title cl.aimed by Emma E. Malone under said conveyances is "wholly 'fictitious, fraudulent, and void in law." In her anSWer to the bill, Mrs. Malone denies the allegation made therein the deeds from Baker to Everett were mortgages; she explicitly denies that she had any nQtice or knowledge that they were otherwise than as they appear on their face, or that it was claimed that they were intended to be denies that she had any notice or knowledge of the foreign attachment .at the suit of Hilton. & Waugh; she denies every charge of fraud contained in the bill, and avers that she is a bona fide purchaser of said lands for value, without notice or knowledge, either of the claim that .the deeds from. Baker to Everett were mortgages, or of the pendency of the foreign attachment; sha denies ·that her husband, H. P. Malone, acted for her in the transaction, or induced Everett to convey said lands; she admits that Lewis E. Mallory acted for her in the purchase of said property, and avers that he paid Everett for the property the sum of $20,000 in cash, which money was her own, and that Mallory himself , was a bonafide purchaser, without any notice or knowledge that the deeds from Baker to Everett were iutended to be mortgages, or of the pendency of the attachment suit of Hilton & Waugh. The plaintiff not having waived an answer under oath, Mrs. Malone's answer, which is under "oath, and responsive to the bill, is evidence for her, and must prevail, unless it is oVE.'rcome by the testimony of two witnesses, or one witness and corroborating circumstances which are equivalent in weight to the testimony. of another witness. Vigel v. Hopp, 104 U. S. 441; MO'I'7"i8cm. v. Durr, 122 U. S. 518, 7 Sup. Ct. Rep. 1215. In the treatment of this case I will first address myself to the inquiry whether, under the proofs, any actual bad faith is imputable to Mrs. Malone in this. transaction. The main facts bearing upon this questIon, as established by the evidence, are these: Mrs. Malone was the adopted 'of William Hart, of Cleveland, Ohio. In 1865, shortly
448
FEDElt.A.L ltEPORTER. '
after her marriage, Mr. Hart gave, and conveyed to bera lot in the city of Cleveland, of the value of $20,000, which she sold a few years afterwards for $26,000 8hethen purchased anditIlprOved another property at a cost of $22,000, which she sold in November, 1873, for $43,000. At that time, undoubtedly, she had an estate in her own right of at least the amount last-named. Mr. Hart and Mr. Malone wcre then ngaged in business as partners. Mrs. Malone loaned. them money. They failed, and went into brankruptcy in 1875. They then owed. about $28,000, which she proved in bankruptcy, receiving a dividend of 25 per centum only. There is satisfactory proof that after Malone's dis.charge in brankruptcy he distinctly recognized his liability to his wife for the old indebtedness, and repeatedly promised herthat he would pay it. She sUb&equentlymade him additional loans of considerable sums. 'out going into further details, I content myself with saying that the proofs dearlysatisfy me that in December, 1883, Mr. Malone justly oWed his wife far more than $20,000. In 1878 Mr. Malone went into the oil-producing business in McKean .county, Pa., with George A. Baker; Malone superintending the putting down of wells and disposing of the product. The lands they operated upon (which included those in dispute) were purchased by Baker, and the title was in him; but by an unrecorded contract it was agreed that after Baker was reimbursed his purchase money, etc., he should convey an undivided share of the property to Malone. But it seems that Baker never wasreitnbursed. and he continued to hold the entire title. Baker, individually', and Baker & Malone, became largely indebted to Everett, Weddell &Co., bankers, of Cleveland', Ohio, of which firm Dr. Everett was a member. In 1880 that indebtedness in the whole muchexceed'ed $300,000'. On or abont February 11, 1881, Baker and Dr. Everett sent Virgil P.Klineand W. L. Lord, from Cleveland to McKean county, with thetwodeeds"dated November 20, 1880, already mentioned, from Baker to Everett, with instructions to put them on record, and take possession of the property for Dr. Everett; and this they did. 'Those gentlemen exhibited to Malone the deeds, and informed him that Baker had sold the property to Dr. Everett to liquidate the debt Baker & Malone owed E\"erett, Weddell & Co. Mr. Lord, who was then Baker's book-keeper, and who testified' in this cnse for the plaintiff, speaking of what occurred at that . , "Mr. Malone made to it. He expressed great surprise a.t the · summary proceeding,' as he called it, .in closing up the firm. And he sa.id he had no knowledge at all; supposed Mr. Baker was a very wealthy and was very mucbsurprised at our coming down there, and taking possession of the property as ,we did; and Mr. Kline and I both labored with' him a long while; and at last, by Mr. Kline, as the authorized agent of Dr. Everett, giVing him a paper .to the effect that he would be held harmless in the future, he consented to the transfer." Mr. Lord further testified that both Kline and himself represented to Malone that the sale by Baker to Everett was absolute, and called "his attention to the fact that it would not begin to pay the iridebte'Uliessof
SATTERFIELD
v.
MALONE.
449
Mr. Baker to Everett & Weddell."' The paper which Kline gave Malone was a release of his liability to Everett, Weddell & Co. for the indebtedness of Baker & Malone. Kline's testimony corroborates Lord's. ' After they had thus taken possession of the property, they employed Malone to superintend it for Dr. Everett, at a salary, and he continued so to act until the subsequent sale. It that before Mrs. Malone came to Pennsylvania she had bought and sold several pieces of real estate. She moved to McKean county in the spring of 1880. Shortly afterwards she bought an oil property. 'l'his purchase she made through one Townsend, an oil operator She put down wells on that property, and then sold it at a profit of $7.000. It is shown that she had often spoken to LewisE. Mallory about buying an oil property for her. He was a near neighbor, engaged in the oil-producing business, and in buying and seJling oil lands. In 1883, and prior thereto, Mr. Malone was speculating largely in oil, and was much on the floor of the Oil Exchange at Mrs. Malone testifies that several times she had requested her husband to buy an oil property for her, and that he replied "that whenever I found Ii property that suited me, he was ready to pay me." She states that she considered the. speculative business in which her husband was engaged as hazardous, and was afraid he might lose her money, and she adds: "I wanted it so that if anything happened to my husband I could take care of my parents and children." , In December, 1883, Dr. Everett employed C. D. Angell, a real:estate broker at Pa., to sell the lands in controversy. Angell informed Mr. Malone that they were for sale, and could be bought for $20,000. No communication whateverhad taken place on the subject between Dr. and the latter was surprised to learn from Angell tliat Everett and the property was for sale. Mrs. Malone was then in the' city of New York, where she had been for several months. Mr. Malone wrote to her that ,the property Was for sale at the price named, .and that it would be a good purchase, and he inclosed her a check payable to her order for $20,000. Mrs. Malone wrote to Mr. Mallory to make the purchase for her, and sent him the check, indorsed payable to his order. Mallory' saw Angell, and,w'ithout disClosing bis principal, concluded the purchase in his own name. Dr. Everett's deed to Mallory, dated December 17, 1883, was brought to Bradford by John H. Webster, Dr. Everett's lawyer, and by bim was delivered to Mallory upon his payment ofthe chase money, $20,000. This money was the proceeds of the Malone check. A few days afterwards Mallory conveyed the property to Mrs. Malone. In this purchase Malone did not act as his wife's agent, or represent her at all, He did not participate in the negotiations. He iookno part in' the transaction whatever, except to inform his wife that the property was for sale, and would be a good purchase, and to send her a check for $20,000 to buy ifshe thought proper. That money honestly belonged to Mrs. and beyond any manner of doubt it was paid by her; through Ml111ory, to Dr. Everett for the property. The sale by Dr. Everett was not &olicited or suggested by Mr. or Mrs. Malone. It was Everett's own voltinv.35F.no.7-29
450
.... ,.
'.J.
'. REPORTER· '. ,I
tary act. He was anxious. to sell, and was seeking a purchaser. The price was presumably fair, and the highest obtainable. Nothing to the 'Contrary appears. At any rate, th,e sale was satisfactory to Dr. Everett. Of him it is here to be said that, whatever was the nature of his title, he . seems to have entertained no doubt as to his right thus to dispose of the property. In truth, the debt' for which it was taken far exceeded its value.. Furthermore, iftbe property was not taken in absolute payment thereof, then no part of that large indebtedness, or sum of $150,000, has . ever been paid at all. What foundation, then, is, there for the charge that Mrs. Malone's title is "fictitious" or "fraudulent?" I have searched through the proofs in vain to> evidence to sustain such charge. Circumstances enough to establish fraud. Morrisoo calculated to excite suspiCion v. ,Durr, 8Up1:'a· ., But even suspicious circumstances are wanting here. employment of Mallory in this business she satisfactorily Mrs. explains, if any explanation were. needed. The' property was offered for s,iJe, arid Mrs. Malone had a pertect right to buy, and to employ whom spe pleal!ied to' act for her. That Malone himself kept aloof is a circumstancewhi9h is not prejudicial ,to his wife. In the course of his crossexamination, Malone having stated that he did "not want to be a purcpaser of the property," and being asked why not? answered: "Because at the way they undertaken to sell the property, and l,was thought if I came in as a purchaser they would probably raise the price, thinking I knew more about it than anyone else j ,and as they had not consurted me with reference to selling the property, I didn't want to have anything to do with it." In this, surely, there is nothing of which the plaintiff" has apy right to conlplain. Dr., Everett i,s not complaining, but iscoIJ.tent with. the sale. I maybere add that I am quite unable to see that 'of any relation which had existed between Malone and Baker, the. former was precluded Qn any legal .or moral ground from promoting the purchase of the property by his wife, or, indeed, from buying it himself., Upon this branchof the case my conclusion is that Mrs. title is free from any'taint of actual fraud, and if it can be overthrown by the plaintiff it mllst be for some other reason. brings us to the. question whether the deeds from Baker to Ever, ett were a,bsolute conveyances, alii tpey purport to be, or mortgage securithe plainti,ff asserts., Tllebill, upon information and belief, all!lges that thElagreement for reconveyance or defeasance was not reduced to writing, but w.as by parol, or, if in writing, was not recorded. It is recorded, nor has it or a copy been certain that nasuch wrjting no witness undertakes to do more produced. In respect to Baker testifies that in June, than give.its bare substance as 1884, at the thne of a settlement J;>etween him, and Everett, Weddell & Co" he delivereg; the written defeasance to J. H. Webster. But, acc6l,'ding to w,batl think. is tPe. :weight of the evidence, that settlement confined to so much of tpe as was secured by mortgages property QIlfeal estate in Ohio, and, did not concern the search, has not been able to find at, all. Mr. Webster, after
SX1-rtRFIEtD 'Ii.· MALOi'iE.
sUch' paper; a.nd 'he k6owledgeof, and Withotitundertaking to. determine whether the. defeasance agreement was reduced to writing, or rested in parol only, it is enough forme to say that 1 think the evidence does fairly show that originally said deeds were intended to operate as mere securities in the nature of mortgages; But the plaintiff's case has this most remarkable feature: that his own proofs, taken in chief, tend to prove that in February, 1881, Baker and Everett made a new agreement, whereby the conveyances became abso;lute, and that Baker signed a paper so stipUlating. The to show this are Mr. Kline, who was acting in this business as attorney for both Baker and Dr. Everett, and Mr. Lord; who was then in Baker's employ. Mr. Kline testifies that a few days before their visit to McKean county, already referred to, "some papers were executed here in the city of Cleveland, and a settlement had, and basis fixed upon which the papers or the Pennsylvania property became absolute, as 1 recollect it." 'This statement Mr. Kline made when testifying in chief; Upon cross-examination he stated, with more positiveness, perhaps, that Baker signed a paper declaring that the deeds were absolute. He further testified that the deeds were taken down for record as absolute conveyances, and he adds: "I showed Mr. Malone the terms upon which the-propertythere had liquidated their liability." Upon re-examination Mr; Kline adhered to the statement that Baker signed such a paper. On this point Mr. Lord's testimony, though less full than Kline's, borative of Baker's having signed such paper. Mr. Kline states that the paper was delivered to George A. Berry, a lawyer of McKean county. Mr. Berry afterwards became insane. His testimony was never taken. In view of Mr. Kline's professional relations to both the parties, is it likely that he is mistaken? The attt'nding circumstances, viz., the sending of the· deeds to McKean county, the putting them on record, and the change of possession of the property, corroborate what Kline states as to the "settlement had," and the." basis fixed," whereby the" property became absolute." Besides, no-little weight is to be attached to the contemporaneous declarations made by Kline and Lord, the representatives of Baker, to Malone, that Baker had sold the property to Everett in liquidation of the debt owing by Baker and Malone. Nor is the fact of the release to Malone, executed on that footing, without significance. It is true that George A. Baker contradicts very positively the ments of Kline, and testifies that the deeds continued to be what they were originally, mortgage securities; and perhaps there are some circumstances in evidence tending to corroborate him throughout. But it is to be. remembered that the evidence of an agreement and settlement by way of liquidation of the debt, under which the deeds became absolute, an4 the signing by Baker ofa writing so declaring, was introduced into the. case by the plaintiff, and did not come in by way of defense. Now, under the pleadings, the burden of proof here is upon the plaintiff. In Lance's Appeal, 112 Pa. 8t..456, 4 Atl. Rep. 375, the court said: . "To·convert a deed absolute on its face intaa mortgage, by parol Buch-testimony must be clear and specific, of a character such as willieava'in
it.
452
FEDERAL REPORTER.
the mind of a chancellor no hesitation or douht, and failing this, the effort to impeach the legal character of the deed must be regarded as abortive." This rule, itseems to me, is applicable in its fnll force, here; and I think a chanceij.or, looking at the whole case, might well hesitate to declare the deeds from Baker to Everett to be mortgages. But were it conceded that the evidence such a decree, it would still remain for the plaintiff to show that Mrs. Malone, when she purexpress or constructive, that the deeds chased, ha,d knowledge or ,were mortgages, or of the pendency of the foreign attachment at the suit of Hiltoll& Waugh.' Mrs. Malone not only swears in her answer that she had no suc4 'or know but she has so tl:lstified. That sloe had any actual notice or knowledge of the foreign attachment there is no evidence whatever. Noris there sufficient evidence of her knowledge, or of any actual. notice to her, that the deeds from Baker to Everett were mortgages, to overcome her answer. ,The evidence against her in this particular is weak and inconclusive; and, upon the whole, I am satisfied that she purchased in ignorance that said deeds were ever intended to be mortgages, or that it was so claimed. Mr. Malone has testified that he had no knowledge of the existence of the deeds until they were exhibited him by Messrs. ,Kline and Lord, and no information as to their character, or as to the nature of the transaction between Baker and Everett, other than what he learned from the deeds themselves and the representations of and Lord.. The testimony of those gentlemen tends tocorroborate Malone in this regard. Besides, is it likely that he would have sanctioned the investment of $20,000 in this property, had he known that the Baker deeds were simply mortgages? True, Mr. Baker testifies that he had so iuformed Mr. Malone. But, having regard to the entire proofs, I am not prepared to accept Mr. Baker's testimony as correct. I think the weight of the evidence is towards the conclusion that Mr. ledge or ,reason to believe that the deeds were oth. Malon e had. no tJrwise than as they appear on their face. But after all, in this transaction Malone did not act a\> agent for his wife, and therefore his knowledge, if any he had" would not be,imputable to her. And this remark is applicable to the matter of the foreign attachment. But it is claimed that the testimony of Lewis E. Mallory, who was a witness for the defense, shows that he had knowledge that the Baker deeds were mortgages, and that his knowledge ,affects Mrs. Malone. The , portion of testimony, which, it is supposed, sustains this po· sition, is as follows, the answers being made in response to questions in chi,ef: Question,. or not, at the time you made this purchase of the property in controversy, you had. any knowledge whatever that there was any claim against it, or any dispute as to the title? Answer. I hadn't the least knowledge in the world; not the least. Q. Did yOll know, or had you ever IleaI'd, that it was alleged that the deeds from George A. Baker to Everett were 'A. I never heard anything of the kind. It was turned to Everett as secllrity for money. as I understood it, and that by getting it from Everett we had it straight. without any incumbrance whatever. Q. Your in· fOI!llation was, then, tha,t it had been given to him for debts? .4. Yes, sir;
BATTERvmLD 'V. MALONE.
453
as we frequently do here; that the banks will take a mortgage on the property, and hold it forthe money; and I supposed this property had been put up with Everett for money, and got so far in that it couldn't be closed out; and I hadn't any idea that anything else eould be against it. ... ... ... Q. Did you ever know or hear, prior to the beginning of this suit, or since this suit was begun, that the deeds made from Baker to Everett were given for anything but money paid direct for them? A. No, sir; I never did. Q. Did you ever heal', prior to the comqlencement of this action, that anybody claimed that they had first been given as a pledge for money? A. I never did." .
After Mallory's examination was closed, on a subsequent day, he was recalled by the defense before the examiner, and, his attention being directed to his second and third above-quoted answers, he testified that any information he had on that subject was acquired long after his pmchal;le, and that at that time he had no knowledge nor any idea that the Baker deeds were mortgages, or anything of that nature. This re-examination of the witness took place without leave of court, and was objected to as not permissible under the equity practice. Without deciding whether or not this later testimony should be admitted, I will dispose of this part of the case without taking it into consideration. Undoubtedly a principal may be charged with constructive notice by reason of his agent's knowledge. But the established doctrine in Pennsylvania is that, in order to so affect the principal it must be affirmatively shown that such knowledge was acquired by the agent in the course of the business in which he was employed for his principal. Houseman v. Association, 81 Pa. St. 256, 262; Barbour v. Wiehle, 116 Pa. St. 308, 9 Atl. Rep. 520. The supreme court of the United States, indeed, in the case of Distilled Spirits, 11 Wall. 356, 366, stated the rule more broadly, holding the principal to be bound by his agent's knowledge, no matter when acquired; but with this important qualification: that the principal "is not bound by knowledge communicated to the agen.t, unless it be present to the agent's mind at the time of effecting the purChase;" and of this there should be"clear and satisfactory proof." Id. As to what is sufficient notice to a purchaser of real estate of an unrecorded title, or adverse claim, the settled rule is that the information must come to him from some one who is interested in the estate; or from some authoritative source. Mere rumors are not notice, nor do they impose upon a purchaser the duty of inquiry. Kerns v. {3wope, 2 Watts, 75; Churcher v. Guernsey, 39 Pa. St. 86; Hottenstein v. Lerch, 104 Pa. St. 460. Bearing these legal principles in mind, let us now turn to the evidence relating to this matter. .The plaintiff himself made no attempt to show that Mallory had any knowledge of the alleged defeasible character of the deeds from Baker to Everett. Nor was Mallory cross-examined at all upon this subject. So that the above answers contain the entire evidence tending to bring home to Mallory such knowledge, and thus to fasten constructive notice on Mrs. Malone. Now, there are no circumstances in the case indicative that Mallory possessed any information touching the dealings between Baker and Dr. Everett, or that he had any means of such information. They resided at Cleveland; he at Bradford. Baker and Everett were strangers to him. He had So far as
this or with the coli. veyances from BaJrer to Everett. , His negotiations for the purchase were conducted at BraQ.f'o'l'd, occupying .only ,a few .days; and he Wal:! not brollght inlcontaot withany'one who had knowledge that the deeds were mortgages,orwere claimed so to be. As we have already seen, Mr$. Malone had no such information. Neither had C. D. Angell, with whom MaJloryneg9tiated; at least is not the slightest evidence that he had any'. ,Angell states that Mallory inquired of Mr. Webster whether the title was good, anel Webster assured him that it was, tracing the chain of transfers to some extent; and Mallory then decided to take the property. Mr. Webster confirms this; and he testifies that not one word was said about the deeds ever having been pledges or mortgages, and that at that time he himself had no knowledge that they were so, or that it was so alleged. The second and' third above-quoted answers of Mallory, if considered alone, do not, I think, satisfactorily establish that, at the time he was acting for Mrs. Malone' in this business, he had any definite information or clear conception in respect to the transaction between Baker and Everett. These answers are confused, and there seems to be an inconsistency about them. He'starts out with the positive assertion, "1 never heard anything of the kind ;"--i. e., that it was alleged that the deeds from Baker to Everett were mortgages. If he any informationon the subject, the answers do not disclose how he acquired it, or from whom, or the extent of it, or that it was present in his mind when he made the purchase. The latter part of the 8econd of these answers indicates that the witness was really giving utterance to his mere conjectures. "And I supposed this property had been put up," etc., is his language. But these two answers must be read in connection with those which preceded and followed. He previously had said that when he purchased the property he had not "the least knowledge in the world; not the least," that there was any claim against it, or any dispute as to the title. And at the last he most explicitly declares that prior to the bringing of the present suit he did not know and had never heard that the deeds from Baker to Everett were given for anything but "money paid direct for them," or that anyone claimed that they had first been given as a pledge for money. To hold, then, Mrs. Malone chargeable with constructive notice by reason of anything contained in Mallory's above-quoted testimony would be to put an overstrained anel unfair interpretation upon it as a whole. The burden of proof here, as in other particulars, is upon the plaintiff, and the answer must be overthrown. I am of the opinion that the proofs are insufficient to charge Mrs. Malone with either actual or constructive notice that the Baker deeds were mortgages. Waiving the question whether notice at the time of the purchase of the pendency of the foreign attachment at the suit of Hilton & Waugh would have affected untilVorably Mrs. Malone's title, even upon the theory that said deeds were mortgages, let us now briefly inquire whether she is chargeable with constructive notice of the same. We have already seen that she had no actual notice of the attachment. Neither had
PHELPS fl. ELLIOTT.
455
Manory. It will be observed that the deeds from Baker to Everett were recorded in McKean county on February 12, 1881,and the suit of Hilton & Waugh was not commenced until more than three months later. The suit was for the recovery of a money demand against Baker, and was against him alone. The attachment was of Baker's right, title, and interest in the lands. Now, as Mrs. Malone is not claiming under any subsequent alienation or transfer by Baker, and had no dealings at all with him, the doctrine of lis pendens nas no application whatever to the case. DOt'ey'8 Appeal, 97 Pa. St. ·153. To affect with constructive from the denotice even a subsequent purchaser of attached real fendant in a foreign attachment, it is necessary that a timely entry should be made on the judgment docket of the names of tbe parties, etc. 1 Purd. Dig. p. 825, pI. 16; Ridgway's Appeal, 15 Pa. St. 177. Here the proper entry was made (but not until May 22, 1881) in the name of George A.Baker. But this foreign attachment proceeding was not in the channel of Everett's title, nor connected with it; therefore a purchaser froIn Everett had no concern with it. A purchaser is not affected with constructive notice of anything which does not lie ill the lineofthe title. WoodS v. Fa1"me'fe, 7 Watts, 382; Hetherington v. Clark, 30 Pa.St. 393; Maul v. Rider, 59 Pa. 8t.167. In McLanahan v. Reeside, 9 Watts, 510, it was said by the court that a creditor, in the examination of a title, would of course stop at a conveyance absolute on its face, Bnd referring to nothing beyond. "He would have no reason to suspect that further search would lead to a defeasance, of which, not lying ill the channel of the title, he would not, though actually recorded, beboilnd to take notice." ld. So here Mrs. Malone, finding on record absolute deeds from Baker to Everett, was not bound to prosecute a later search. It follows then that constructive notice of the attachment is not to be imputed to her. And now it only remains for me to declare as the judgment oftha court, based upon a most careful consideration of the proofs, that in no view of the. case pennissible under the evidence is the plaintiff entitled to any relief. .. Let a decree be drawn dismissing the bill, with costs·
.. PHELPS fl. ELLIOT'r
et al. July 10, 1888.
(Circuit Oourt, 8. D. N61JJ York.
1,
VENDOR AND VENDEE-PURCHASE PENDING ApPEAL-MERCANTILE TIEs-BoNDS·.
SECURI-
Where bonds held by a receiver. in a suit to adjudicate the ownership of the fund evid/'lnced by them, are, On dismissal of the complaint, turned onr by him, under order of court. to the defendant, who sells the same to a purchaser having knowledge of the fact that. an appeal has been taken, but without a ,uper,edeas, such purchaser takes subject to the determination of the cause on the appeal.thoughthebond& are of the nature of mercantil!J securities. .