Simon v. Napieralski ( 1902 )

Mr. Justice Shepard

delivered the opinion of the court.

At the time the extension of. the original loan matured, in 1891, or in September preceding the maturity, it was plainly stated by Schintz to ISTapieralski that the $2,800 needed by ISTapieralski to pay the balance due on the original mortgage, held by Simon, would have to be obtained from other parties; “ one fellow has got $2,500 and another fellow has $300 and you can get them;” to which Napieralski replied, “All right, Mr. Schintz.” Napieralski thereupon, or within two days thereafter, executed and delivered to Schintz the new trust deeds, one to secure $2,500 and the other to secure $300, together with notes to correspond. And Napieralski paid Schintz a commission of two and one-half per cent for getting the money. This appears from the testimony of Napieralski himself.

The papers, when executed, were left by Napieralski with Schintz for the purpose of paying off the old mortgage, and obtaining the new loan. For the performance of these acts, we have no doubt from the evidence that Schintz was constituted the agent of Napieralski. Schintz culpably neglected his duty as such agent, and instead of paying off Simon’s original mortgage with the proceeds of the new loans, appropriated the money to his own use, and fraudulently executed a release of the original trust deed held by Simon.

This state of facts gives rise to the familiar principle of equity, that where one of two innocent persons must suffer a loss by the fraud of a third person, the loss must fall upon him who, by his conduct, has put it in the power of such third person to cause the loss. Yeck v. Crum, 122 Ill. 267; Morris v. Preston, 93 Ill. 215.

We do not see how Simon’s connection with the original loan can be said to render him in any wise liable for Schintz’ misconduct. He bought the original papers long before their maturity, no defense then existing to them, or equity being claimed against them, and held them ever thereafter, taking them all and putting them in his private box in a safety deposit vault. He never afterward intrusted Schintz with their possession. True, as the interest matured he took the interest coupons to Schintz’ office, where they were by their terms payable, and received pay therefor through Schintz, but that was not enough to bind him with Schintz’ fraudulent release. Stiger v. Bent, 111 Ill. 328.

As to the controversy between Simon and Auten and Diedesch, concerning their respective priorities, the public records of the Cook county recorder’s office must control.

The fraudulent release by Schintz of the Simon trust deed was filed for record October 24, 1896. The Auten $2,500 papers were purchased by Auten on October 12,1896, and the Diedesch $300 papers were purchased by Diedesch on or prior to October 22, 1896. The trust deeds given to secure the same were recorded, respectively, on September 12, 1896, and September 17, 1896. So that, at the times when the purchases were made and the trust deeds were recorded, Simon’s trust deed remained unreleased of record and constituted a first and unimpaired lien on the premises.The fraudulent release executed and put on record by Schintz, in no way impaired that lien, and nothing that is shown to have been done by Simon can be held to have had the effect to subordinate his first lien to that of Auten and Diedesch.

The decree of the Circuit Court will therefore be reversed and the cause remanded, with directions to that court to enter a decree in accordance with the master’s report. Reversed and remanded, with directions.