follows: "I never paid my papa any money for the deed that he showed me. I do not know anything about how much money was mentioned in the deed as being the consideration for it. I never knew anything about that. Nothing of that kind passed between us. No property or money or anything. I did not have any property at that time to give him. If I had any, I didn't know it." So that, even if the ward could have consented to such an appropriation of his funds. without the sanction of the probate court, there was no such consent. Nor was there any sanction of the probate court. It may be that upon a proper settlement of the guardian's accounts a much larger sum will be found to be due from him. He cannot get rid of liability to his ward in that way. In the next place, it is said that L. R. Peek promised his first wife upon her deathbed that the son should have the property. But it is clear that such promise was a mere moral, and not a valuable, consideration. It did not prevent the plaintiff from being a volunteer. See generally, Lloyd v. Fulton, 91 U. S. 484, 485, 23 L. Ed. 363. Finally, it is argued that the first wife furnished half of the money with which the property was purchased, and that a trust resulted to her in consequence. This was the view taken by the trial court. But, conceding that a trust did result, it did not affect the whole property, but at most only a portion corresponding to the proportion of the price which she furnished; and the portion which it did affect was in no sense a consideration for the deed which is involved here. Upon the theory that a trust resulted to the first wife, the plaintiff must claim as her successor in interest. It does not appear that she left a valid will in his favor, and if not he could succeed to a portion only of her interest. Furthermore, it might possibly become a question as to whether the defendant took with notice of the son's equitable interest, and as to how she would be affected thereby. These latter questions have not been argued, and we think they should be left open upon the retrial. It is deserving of serious consideration whether L. R. Peek, who was a party to the contract which the defendant relies upon, should not have been joined as a party to the cross-suit. But the objection as to his nonjoinder as a defendant to the cross-complaint was not taken by demurrer, and is not argued in the respondent's brief, and for these reasons we express no opinion concerning it. We therefore advise that the judgment and order denying a new trial be reversed, and the cause remanded for a new trial. We concur: BELCHER, C. C.; FOOTE, C. PER CURIAM. For the reasons given in the foregoing opinion the judgment and order are reversed, and the cause remanded for a new trial. HEYDER et al. v. EXCELSIOR BUILDING LOAN ASS'N NO. 2 OF CITY OF NEWARK. (Court of Errors and Appeals of New Jersey, 1887. 42 N. J. Eq. 403, 8 Atl. 310, 59 Am. Rep. 49.) KNAPP, J. The learned master who decided this cause reached the conclusion on the evidence that the purchaser of the premises, and not the mortgagee, should bear the loss incident to the fraudulent cancellation of the mortgage made upon the record prior to the purchase, on the faith of which cancellation the buyer parted with the whole purchase money believing the property to be unincumbered. • After a careful review of the case, I am led to an opposite result. I am fully impressed with the importance of securing due protection to the holders of mortgage securities, where, in pursuit of the provisions of the registry laws, the lien has been made apparent on the record. The security afforded by registry should remain undisturbed by a cancellation effected through mistake, accident, or fraud of third persons, even if by such cancellation subsequent mortgagees or purchasers are made to suffer loss. Such after-acquired rights ought not to prevail against the just claims of an innocent non-negligent incumbrancer, because the record has been wrongly effaced. Cancellation of a mortgage on the record is only prima facie evidence of its discharge, and it is left to the owner making the allegation to prove the canceling to have been done by fraud, accident, or mistake. Such proof being made, the mortgage will be established, even against subsequent purchasers or mortgagees without notice. Banking Co. v. Woodruff, 2 N. J. Eq. 117; Harrison v. Railroad Co., 19 N. J. Eq. 488. Between a mortgagee whose mortgage has been discharged of record solely through the unauthorized act of another party, and a purchaser who buys the title in the belief, induced by such cancellation, that the mortgage is satisfied and discharged, the equities are balanced, and the rights in the order of time must prevail. The lien of the mortgage must remain despite the apparent discharge. But this is apart from any default attributable to the holder of the lien. If through his negligence the record is permitted to give notice to the world that his claim is satisfied, he cannot, in the face of his own carelessness, have his mortgage enforced against a bona fide purchaser taking his title on the faith that the registry is discharged. Where one gives to another the power to practice a fraud upon innocent parties, the court will not interfere in his protection at the expense of those who have been deceived and misled by such fraud. What circumstance shall be sufficient to establish negligence, such as shall preclude a mortgagee from a decree establishing his canceled paper, must be determined as a question of fact in each particular case, tested by those rules of conduct which men of common prudence usually observe in the care and management of such securities. That it is negligence in the owner of a mortgage to permit it to be in the custody and control of the mortgagor or owner of the mortgaged premises, in view of the provisions of our statute of registry, will not admit of denial. Such an occurrence is so unusual, so imperils the owner, and therefore so unlikely to happen in business dealings, that it was regarded in Harrison v. Railroad Co. as ground for the gravest suspicion of the truthfulness of a witness who had testified to such custody by the assent of the owner of the security. The minute of discharge of this mortgage made upon the record by the register expressed, in general form, the fact of cancellation. The entry was made upon evidence presented to the register such as the statute has declared to be sufficient authority for so doing. The mortgage was produced by the mortgagor, canceled, and there is no doubt that upon the faith of this cancellation the purchaser took title to the property, and paid the consideration. But it clearly appears that the mortgage was unpaid, and that the act of the mortgagor ir, procuring the entry of the discharge was fraudulent, and without the knowledge or assent of the mortgagee. If this were all of the case, and no default appeared on the part or the mortgagee, notwithstanding the forcible language of the act which declares such minute to be a full and absolute bar to and discharge of the said entry, registry, and mortgage, the right of the respondent to the lien of its security should be maintained; and it is solely upon the ground that the respondent is chargeable with negligence which tended to and actually did produce the injury that I think the decree should be reversed. The mortgage was in the possession and under the control of the mortgagor at the time when it was produced for cancellation on the record. How long he had such custody does not positively appear, but the strong inference from the testimony is that it was during the whole time between the registry of the mortgage and its cancellation. Neither the president of the association, nor its treasurer, who had charge of its securities, were able to say that they ever had the actual custody of this mortgage; and they further declare that the mortgagor, although an officer of the company, had no access whatever to the securities in the possession of the treasurer. It is therefore impossible that he should have obtained its possession by means resembling theft. His possession must, I think, be attributed either to the assent or to the negligence of the officers of the association responsible for its securities. If we regard the theory that the mortgagor, at the conclusion of his transaction of the loan, fraudulently substituted a copy of the mortgage for the original paper, and delivered that to the association, I am still forced to the conclusion that the officers were culpably negligent in permitting themselves to be thus imposed upon. The fact that he was the law officer of this body would not justify so implicit a trust in him in the matter of a loan to himself. We must assume that these officers were men of business capacity and skill. The transaction was in the line of their ordinary duties. Indeed they did not trust to him, but employed other counsel to make searches against his property. In their ordinary transactions their habit was to submit to counsel the securities received for loans for inspection and approval. The slightest examination of the paper received by them would have shown it to be but a copy. They submitted it to no legal adviser; they gave it no examination. If it were not intended to be, as was its purport, a mere copy, leaving the original in other hands, any degree of care, exceeding the blindest confidence, must have revealed the deception. The theory fails to lead us out of the difficulty. I do not think that any circumstance presented in this case made it the appellant's duty, in order to avail himself of the rights of a bona fide purchaser, to institute personal inquiry of the mortgagee. Any rule placing him under this exaction would embrace every case of a purchase of lands that had ever been subject to mortgage which the record showed to be canceled. Such a rule, it is needless to say, would render this provision of the registry act entirely nugatory. A purchaser could then only buy with safety when the registry had been discharged, and an admission of payment obtained from the mortgagee. Doubtless circumstances may, and frequently do, arise to put the purchaser upon inquiry, and charge him with notice, It seems to me that nothing appears in this transaction which should have put this purchaser upon further inquiry. He was permitted to rely upon the record. He did so, purchasing upon the belief that it spoke the fact truly. It was false, but the deception was directly traceable to the culpable negligence of the mortgage owner, and the loss should fall upon the party chargeable with the fault. The decree below should be reversed, and the bill of complainants be dismissed. fee: 2939 MAYOR, ETC., OF CITY OF BALTIMORE et al. v. WHIT- (Court of Appeals of Maryland, 1893. 78 Md. 231, 27 Atl. 984.) Suit by Jacob Craft Whittington against the mayor and city council of Baltimore and Clarence M. Ellinger for injunction. From a decree for complainant, defendants appeal. MCSHERRY, J. By section 47, art. 49, of the Municipal Code of Baltimore City, it is enacted, in substance, that when any lots of ground are chargeable with the payment of taxes, and are subject to ground rents or leases for terms of years, renewable forever, the collector shall, in the sale of such lots for nonpayment of taxes, first sell only the leasehold interest, if it should sell for an amount sufficient to pay the taxes, but, if it should not, then that he shall sell the whole fee-simple estate, provided these provisions "shall not apply to cases where the books of the city do not disclose the fact that the lot or lots are on lease as aforesaid, or unless the collector shall have actual notice of such lease prior to the sale thereof." The city tax collector of Baltimore sold in March, 1891, for the nonpayment of state and city taxes, the fee-simple estate in a lot of ground on Druid Hill avenue, and the mayor and city council became the purchaser. The sale was reported to the circuit court of Baltimore city, and was ratified in May, 1892. In October following, the city, through and by its comptroller, sold the lot to Clarence M. Ellinger, to whom it was thereafter conveyed. When the sale was made by the collector, the lot was subject to a lease for 99 years, renewable forever, which was owned by J. Henry Weber, and the reversion or fee was owned by the appellee, Whittington. The unpaid taxes were due by the owner of the leasehold estate, but the collector sold the whole fee, without having first offered, or having attempted to sell, the leasehold, as required by the section of the City Code to which reference has been made. There was no entry on the books of the collector showing that the lot was subject to a lease, and the single question involved in the case is whether, when the collector made the sale, he had "actual notice" of the existence of the lease. If he had, the sale was irregular. If it was irregular, the decree of the circuit court of Baltimore city, restraining 4 For discussion of principles, see Eaton on Equity (2d Ed.) §§ 44-55. Glied that the лили Geu R 109 |