Duncan v. Dazey

Mr. Justice Eldredge

delivered the opinion of the court.

The proofs in this case are very voluminous and no attempt will be made to enter into a lengthy discussion of the same. The master made no findings of law or fact upon the defenses of laches, the statute of limitations or the statute of frauds. Appellee filed no objections to the master’s report, and these questions are not preserved for our consideration. Shaffner v. Healy, 57 Ill. App. 90; Snell v. Deland, 138 Ill. 55; Cook v. Meyers, 54 Ill. App. 590. The evidence shows beyond all reasonable doubt that the acts of appellant in the transactions involved were for the purpose of concealing his property so that it would not be subjected to the payment of the Graybill claim, and that appellee knew and understood that the conveyance of the lands and property by appellant to him was for this purpose. A voluntary conveyance of land in fraud of creditors, while void as to creditors, is binding upon the parties so far as it is executed, and neither law nor equity will lend its aid to complete any part of the transaction. Beebe v. Saulter, 87 Ill. 518; McElroy v. Hiner, 133 Ill. 156; Brady v. Huber, 197 Ill. 291; Rosenbaum v. Huebner, 277 Ill. 360.

If the proofs show that appellant and appellee were in pari delicto in an attempt to defeat the creditors of the former, then a court of equity will not lend its aid to preserve or carry out the trust. But it does not necessarily follow that when two parties commit an illegal act, that they are in pari delicto. The rule adopted in this State is as stated in -1 Story’s Eq. Jur. sec. 300: “In cases where both parties are in delicto concerning an illegal act, it does not always follow that they stand in pari delicto, for there may be, and often are, different degrees in their guilt. One party may act under circumstances of oppression, impression, hardship, undue influence, or great inequality of condition or age, so that his guilt may be far less in degree than that of his associate in the offense.”

In the case of Baehr v. Wolf, 59 Ill. 470, the court said:

“One party may not make use of his peculiar power over another-to procure a contract which, in itself, is illegal, and contrary to public policy, and then invoke the aid of the law to enable him to retain that which he has obtained through fraudulent practices and artifices. It would contravene the settled law that the courts will protect the citizen against all such acts of oppression and deceit.”

The controlling question in this case is, were appellant and appellee in pari delictof The proofs show that appellant, a number of years prior to Septembci 22,1903, was divorced by his first wife in a suit brou^I.t by her and, in the settlement of their property rights, appellant deeded to her what was known as the Shanholtzer farm. This farm, at that time, was incumbered by a mortgage given to secure the payment of promissory notes previously executed by appellant and his then wife, amounting in the aggregate to the sum of $3,000. The mortgage indebtedness his wife agreed to assume. It is stated by counsel for both appellant and appellee that the mortgage on this farm was subsequently foreclosed and a deficiency decree rendered for the sum of $1,000, though no such decree appears to have been introduced in evidence. The record does show, however, that a suit in assumpsit was instituted on August 18, 1903, in the Circuit Court of Shelby county by one Laura E. Graybill against appellant and his former wife to recover on a promissory note dated March 9, 1895, for the principal sum of $1,000, executed by appellant and his then wife, payable to the order of Amos Shanholtzer and assigned by the latter to Laura E. Graybill. In 1903, when this assumpsit suit was brought, appellant, who had married again, was a farmer about 57 years of age, and owned two farms in Shelby county. One farm consisted of 180 acres and was known as the Okaw farm. The other farm, known as the Flat Branch farm, was occupied by M. A. Duncan, a son by his first wife, and consisted of 140 acres. There was a mortgage indebtedness of about $4,000 on the Okaw farm. The market value of these farms at that time was between $90 and $125 per acre. It does not appear that appellant in September, 1903, had any other debts of any consequence except the mortgage indebtedness on the Okaw farm of $4,000, and the Graybill note of $1,000. At this time, the crops were maturing on these farms and appellant had cut between 140 and 150 tons of hay, and also owned considerable personal property, consisting of horses, cattle, hogs, farm implements, etc. The value of the personal property, we have not been able to search out of the very-voluminous record and have not been aided by connsel'in regard thereto. The record does, however, show conclusively, and it is in no way disputed, that appellant in September, 1903, was perfectly solvent.

From the time that appellant was divorced from his first wife in 1895 until September, 1903, he had no knowledge that his former wife had failed to pay the notes secured by the mortgage on the Shanholtzer farm or that said mortgage had been foreclosed, and from the proofs it is evident that he labored under the belief that, since the decree for divorce was rendered, owing to the fact that he had deeded the Shanholtzer farm to his former wife and she had assumed the payment of the mortgage indebtedness thereon, he was discharged from any further liability for the payment of the same. In fact, his testimony tends to show that he is still convinced that some fraud has been practiced upon him in compelling him to pay the Graybill judgment. Appellant was a very ignorant man so far as education was concerned, as the following letter, one of several which were introduced in evidence, will show:

“McCoy’s European Hotel and Cafe,

Corner Clark & VanBuren Streets Chicago 190

“Mr. J. E. Dazey, Esq.

Sir—I had a talk with E. S. McDonal when I got too Dicatur & he said He worked on Books untill About 6PM his Idea was two take Proceedings two Stay the Jugment & He Said thought the facks Could Be Shone that the Note they was Souing on was Same as the One judgment was taken on.

So we could Nock them Out Law is fur Justic & it Looks as though Pedrow Ought two Feil Papers two get a hereing on case their Is Plain Evidence of Fraud In thiss Case T I feel If Mr Pedrow takes the Proper steps He could Feile papers two Sustain A case.

I now I had a Judment in Christiar county on Plane Note of hand & Old Man Tailor twock Some King of proseedings two hav a New hering & the jugment was very Old. It is turning cool & from Indicasive their will Be Some Cheap Cattle.

In yards thiss weak I could hav Bought Some yesterdy 700 weight for 2% they had horns on the Dehorned Cattle Sell 35 sence per hund Higher.

Looks as though Some of these 2y2 two I kuce Sheap. could Be Sold at a profit & some of theas fleshy hefers at 2 75 can Buy jansis Sanhill hefer In jansis Sity for 2% good Beef weghing fron 7 two 8 Hundred.”

In September, 1903, appellee was, and had been for a number of years, principal owner and cashier of the First National Bank at Findlay, Hlinois; he is also a licensed attorney at law; he also dealt in stock and grain, more or less, and had joined with appellant in several transactions involving the buying and selling of live stock. While he testified that his relations with appellant were no different than with any other customer of his bank, the evidence conclusively shows that they were of a most intimate nature. In addition to the stock deals participated in by appellee and appellant, the proofs, including the correspondence between the parties, show that, their relations had been of a most confidential character long before the transactions involved in this case occurred. There can be no question but that appellant trusted appellee implicitly in business matters and in his personal affairs, even to such an extent that he permitted appellee to draw checks on appellant’s account at the bank and to sign appellant’s name thereto. There can also be no question that, for nearly 12 years following September, 1903, appellant’s actions were practically absolutely controlled by appellee’s directions and advice. With the relations thus existing between the parties as indicated, according to appellant’s testimony, appellee called appellant into the, bank between September 18th and September 22nd, and told him that Mrs. G-raybill had brought a suit against him to recover $3,300 on account of the Shanholtzer notes; that it would be a long and expensive litigation and would ruin him and that, if appellant would deed the farm to him, he would get the claim settled and deed the farm back again to him; that appellee told him he should deed the Flat Branch farm to his son Aubrey; that when appellant protested that he did not want to sell his farm, appellee said that he would give him a bond to deed it back to him. Appellant went home and the next day procured a lawyer from Decatur by the name of McDonald, who came to Findlay to consult with him. McDonald and appellant and appellee had some conversations over the matter and appellant requested appellee and McDonald to go to Shelbyville and look over the papers and records and advise him as to his liability, that appellee drove with McDonald to Shelbyville in the former’s buggy, and that when they got to Shelbyville he paid McDonald his fee and discharged him; that when appellee returned that afternoon from Shelbyville he told appellant, “I just let McDonald go home, we can fix it up”; that appellee also said that McDonald had found the Shanholtzer notes just as appellee had represented; that the sheriff had a subpoena against him and was liable to serve it on him at any time; that he should come and fix the papers as soon as possible or they would ruin him. That that evening appellant and his wife and Aubrey, his son, went to the bank; that when they arrived at the bank, they found there appellee, Glande Laughlin (an employee of the bank) and E. M. Peadro, a lawyer living at Sullivan. A deed was prepared conveying the Okaw farm to-appellee and the Flat Branch farm to Aubrey Duncan. These deeds were executed, by appellant and his wife. Appellee also, at this time, executed a bond for a deed whereby he obligated himself to convey to appellant the Okaw farm upon the payment of $14,000 to be paid all cash on or before “April 1, 1904—1905—1906.” Appellee also induced appellant to execute an affidavit stating that on September 21, 1903, he had sold to appellee this farm and received all the money due him on the same. This affidavit was not only sworn to before Laughlin, as a notary public, but also has attached to it a certificate of acknowledgment such as would be required to a deed. There is no pretext but what this affidavit was a fraud, or that any consideration whatever passed for the conveyance.

Appellee’s version of the transaction is that ap< pellant insisted on selling him the land • in order to avoid the payment of the G-raybill claim; that he did not take McDonald to Shelbyville and did not hire Peadro; that he met Duncan and his wife in the bank that evening and that Laughlin and Peadro were there. He states in his testimony, “There was not much said about the land at that time. The deed was prepared and signed, and that was about all there was to it. They were not there very long, 10, 15 or 20 minutes.” He further testified: “In the talks Duncan asked more than $90.00 for the land and I finally offered $90.00, and he accepted it. His proposition was that he would take $90.00 and I was to pay him when I sold it. He was to have the crops off of it and he was to pay interest on the money I advanced to him. This was said before the deed was made.” In explanation of the execution of the bond for the reconveyance of the land, he stated that he executed the bond for the purpose of inducing appellant’s wife to sign the deed. At this time, appellant had cut between 135 and 140 tons of clover and timothy hay, which was still on the farm, and there were 23 acres planted in corn and a few acres in oats. There was some old corn on the place, fifteen or eighteen head of cattle, five or six brood sows and several shoats, four horses and fourteen sheep. Appellant further testified that appellee told him he should immediately leave the State so that he could not be served with process. This is denied by appellee. Appellant further testified that he agreed with appellee that his wife should remain on the farm and run it with hired help until the G-raybill claim was defeated and he could return. Appellant did not go home with his wife that night but went to the home of his son, Aubrey, and the next day started on a wandering journey which finally terminated at Tulsa, Oklahoma. He left Tulsa the following May and went to St. Louis, Missouri, where he remained until shortly before this suit was started.

The most favorable construction that can be placed upon the testimony of appellee is that he, a supposedly educated, intelligent business man, controlling the only bank in a small town, and thereby holding himself out to the community at large as one entirely worthy of confidence and trust, aided, assisted and encouraged an ignorant and illiterate man to convey to him 180 acres of land, worth at least $13,000 above the mortgage indebtedness thereon, to abandon his home and family and to become an exile from his State in order to defeat a claim of a little over $1,000. He even admits that he willingly aided in the commission of a fraud upon appellant’s wife by executing a bond for a reconveyance, thereby inducing her to execute a deed nuder the false belief that he would hold the title of the land but temporarily, when, in fact, he at the time intended to claim the deed as an actual conveyance of the title to him. It seems incredible that, even a man of appellant’s limited intelligence, would, of his own volition, sacrifice so much to gain so little. If it be conceded that appellant’s act in conveying the premises to appellee for the purpose of defeating the Gray-bill claim was unlawful, there is an extenuating circumstance in the fact that he believed, at the time, that the Graybill claim was one which he did not morally or lawfully owe and that its attempted collection was a scheme to deprive him of his property. In other words, he was not intending to defraud a legitimate creditor but to protect his property from what he considered to be a fraudulent claim. The evidence shows that he many times importuned appellee to get an attorney and to take other steps to fight the claim and that appellee led him to believé, during the whole period of the 12 years that he remained out of the State, that appellee was looking after his interests and would eventually defeat the Graybill suit. Letters written by appellee to appellant during this period show conclusively that appellee operated continually upon the fears of appellant and continually advised him to remain out of the State. He even implanted the fear of arrest on some mythical criminal charge if appellant should return to Illinois. On September 26, 1903, appellee wrote to appellant stating that he was down to the farm that morning, everything was O. K. and would keep him posted. On February 19, 1904, he wrote to appellant stating that he would look after things, that everything was all right, that he would go out to see him the next month, and closed, “Chafee (Mrs. Graybill’s attorney) is yet mad, but I don’t know just what he can do.” On March 1, 1904, he wrote to appellant while the latter was at St. Louis, among other things, as follows: “I am real anxious to see you, and, as soon as you get to St. Louis, send me a letter or message and I will go down at once. If you send a message sign it John Jones, just say ‘am here at Bement Hotel.’ ” On March 9, 1904, appellee addressed a letter to appellant under the name of John Smith in which, among other things, he says: “I would sooner meet you in Decatur than in Sullivan, for you will see too many that know you there and it might cause some trouble.” On October 26, 1904, in another letter he says: “You need not worry about that matter, I feel absolutely safe on it now. You need not be afraid of Mr. Peadro. Do not send any one to see the other fellows yet, leave that until later. I see no immediate cause for uneasiness and if there was any, I think I would know it. ’ ’ On April 29,1905, he writes,.“ Chafee has an execution out and sent it to Moweaqua.” This statement was untrue. In a letter dated July 1, 1905, appellee writes to appellant, among other things, “I do not know what they have for you, but as soon as I get home I will look into this matter. It would be best to keep away from them. If you get arrested, fight the requisition papers and, if I am at home, I will come down. I will any way as soon as I get time.' * * * Do your best to keep out of their way. It is easier to keep out than to get out after you get in.” On July 25, 1905, he writes, “I have been trying to find out what they have for you, but so far have been unable to do so. But I have a ‘man now that I think can find out from the sheriff.” On June 3, 1906, in a letter to appellant, he uses this language, “When you write me use plain envelope, if you can. Chafee is storming around all the time. ’ ’ Although appellee was served with subpoena duces tecum and also with notice for the purpose of procuring the letters written by appellant to appellee, he, through his counsel, refused to produce any except three, one of which we have quoted in the former part of this opinion.

During appellant’s ridiculous expatriation, he from time to time drew sums of money on appellee which were paid by the latter. On March 30, 1905, appellant’s father died and appellee visited appellant at St. Louis with the result that appellant executed a written assignment of his interest in his father’s estate to appellee and, at the same time, appellee procured from appellant a judgment note for $3,015, on which judgment was subsequently confessed. As a result of this conference, appellant also is induced to convey by deed his interest in the real estate owned by his father to one E. M. Herron, an employee in appellee’s bank, with the understanding that Herron was to file a suit for the partition of said premises, which he did, and appellee succeeded in obtaining appellant’s share in said estate amounting to the sum of $284.28 from the personal estate and $1,453.43 from the sale of the real estate in the partition suit. Appellee claims that he paid a note for $3,015 which appellant had given to the bank and that the judgment note for the like amount was executed by appellant to reimburse appellee for paying the note. Appellant denies that he ever gave any such note to the bank. Judgment was thereafter confessed against appellant in favor of appellee on this note.

On Sunday, June 18, 1905, Duncan went to Shelby-ville, Illinois, and was served with summons in the Graybill suit and subsequently judgment was rendered against him in that case. Appellee in November, 1905, in a letter to appellant stated that he had had the service quashed because it had been made on Sunday, which was, in fact, untrue and the service was sustained. In 1914, while appellant was still living in St. Louis, his brother died leaving him more property. The Graybill judgment was made out of this property.

On March 30, 1905, appellee conveyed the Okaw farm to one Fry for $16,020. On December 14, 1907, Fry conveyed the land to one John Boyle for $23,400,

No attempt has been made to mention all the facts appearing in the very large record in this case, but enough has been set out to show the extraordinary influence appellee exercised over appellant. As stated in the outset of this opinion, the controlling' question in the case is whether appellant and appellee were in pari delicto. Our conclusion, from the manifest weight of the testimony in this case, is, that appellee’s contention that, in the fraudulent transactions between himself and appellant for the purpose of defrauding the latter’s creditors, appellant was equally guilty with himself and therefore in pari delicto, cannot be sustained. Appellee had the master mind and exercised an inexplicable influence over that of appellant. He actually succeeded in procuring not only appellant’s- original farm but the property he inherited from his father, and in keeping appellant out of the State for 12 years, through the fear of ruination and arrest. Appellant followed appellee’s advice during all that period of time absolutely and unquestionably, and the relations between these parties could not have been more confidential if they had been between attorney and client. In the case of Herrick v. Lynch, 150 Ill. 283, the court said:

“We do not think, however, that under the circumstances there should be an application of that rule of equity which denies relief to one party against another when both have been engaged in a fraudulent transaction. The parties were not in pari delicto. One was legal adviser, the other client. The advice of the former being adopted, he procured title to the latter’s interest in valuable real estate. Equity will not tolerate the idea that an attorney may make use of his peculiar power over his client to procure a contract which is illegal and contrary to public policy, and to then invoke the aid of the law to enable him to retain that which he has obtained through his fraudulent artifices. 1 ^Story’s Eq. Jur. sec, 300 5 Baehr v. Wolf, 59 Ill. 474.”

If the parties are not in pari delicto, equity will give relief to the one that is comparatively innocent. Woodall v. Peden, 274 Ill. 301; Brady v. Huber, 197 Ill. 291.

The decree is reversed and the cause remanded with directions to enter an order referring this case to the master in chancery, with directions to state an account between the parties.

The original exhibits certified to this court are hereby ordered to be returned to the clerk of the Circuit Court of Shelby county.

Reversed and remanded with directions.