The opinion of the court was delivered by: Gray, J.
W. A. Maury, P. Phillips, and W. H. Phillips, for Williams.
Jas. S. Edwards and Job Barnard, for Jackson and others.
John F. Hanna and Jas. M. Johnston, for Stickney, adm'x.
This is a bill in equity, filed by Benjamin L. Jackson and others, partners under the name of Jackson, Brother & Co., and heard on the pleadings and proofs, by which the material facts appear to be as follows:
On the first of January, 1875, Edwin J. Sweet and his wife purchased and took a deed from Augustus Davis of a house and land in Washington, and executed and acknowledged a trust deed thereof, in which they recited that they were indebted to Augustus Davis in the sum of $8,000 for deferred payments of the purchase money, for which they had given him their four promissory notes of the same date and payable to his order,–three for the sum of $1,833.33 each, and payable in one, two, and three years respectively, and one for the sum of $2,500, payable in three years, and all bearing interest at 8 per cent.,–and by which deed, in order to secure the payment of those notes as they matured, they conveyed the land to Charles T. Davis and William Stickney, and the survivor of them, their and his heirs and assigns, in trust to permit the grantors to occupy the premises until default in payment of principal or interest of the notes; and upon the full payment of all the notes and interest, and all proper costs, charges, and commissions, to release and convey the premises to Mrs. Sweet, her heirs and assigns, with a power of sale upon default of payment, and a provision that the purchaser at the sale should not be bound to see to the application of the purchase money. That deed of trust was recorded on the fourteenth of January, 1875. The notes secured by that deed were indorsed by Augustus Davis and Charles T. Davis, had on the margin the printed words, 'Secured by deed of trust,' and were, soon after their date, transferred by the indorsers for full value and before maturity to the plaintiffs, and have since been held by them, except the one due at the end of the first year, which was paid by the indorsers. Charles T. Davis was a son and a partner of Augustus Davis, and was a broker and real estate agent.
On the fifteenth of September, 1876, before any of the other notes fell due, and without the plaintiffs' knowledge, the trustees, Davis and Stickney, executed a deed of release of the land to Mrs. Sweet, reciting that the debt secured by the trust deed had been fully paid and discharged, as appeared by the signature of Augustus Davis, who joined in the execution of the release.
At or before the same time, Sweet and wife employed Charles T. Davis to make some arrangement by which they could take up those notes and give others running for a longer time. He went to Samuel T. Williams, and offered him the land unincumbered, as security for a loan of $5,000, payable in four years, and bearing 9 per cent. interest; and Williams agreed to make the loan if satisfied by a conveyancer's abstract of title that the land was free of all incumbrance, but not otherwise.
On the twenty-seventh of September, 1876, a deed of trust, containing provisions like those in the first deed of trust, was executed by Sweet and wife to Robert K. Elliott and Charles T. Davis, to secure the payment of a note for $5,000 in four years to Williams, with interest at the rate of 9 per cent. On the twenty-eighth of September, the deed of release and the second deed of trust were recorded. Charles T. Davis furnished Williams with certificates of a conveyancer that he had examined the title on the fourteenth of September and found it good, subject to the first trust deed, and again on the 28th, when the only changes were the release and the second deed of trust; and Williams thereupon gave to Davis his check, payable to Davis' order, for $5,000, (which Davis applied to his own use,) and received from him the note of Sweet and wife for the same amount, and the trust deed to secure its payment. Neither Williams nor Sweet and wife then knew that, at the time of the execution of the release, Augustus Davis was not the holder of the notes secured by the first trust deed. On the twenty-ninth of September, Sweet and wife executed another trust deed to Charles T. Davis to secure the payment of six promissory notes to Augustus Davis for $530.26 each, payable at intervals of six months from their date.
On the twenty-seventh of July, 1877, the interest due on
the note to Williams not having been paid, the trustees, Elliot and Davis, sold the land by auction for the sum of $6,325 to Eli S. Blackwood, who paid them $1,325 in cash, (which was applied to the payment of the interest and of other charges,) and gave them his note for $5,000, secured by a trust deed of the land.
The bill, which was against Williams, Sweet and wife, Augustus Davis, and Blackwood in their own right, against Charles T. Davis and Stickney in their own right and as trustees, and against Elliott as trustee only, prayed that the release by Stickney and Charles T. Davis, as well as all the subsequent conveyances, might be declared void as against the first trust deed, and the trust created by that deed be declared to have priority over all subsequent incumbrances; that Charles T. Davis be removed from his trust and a new trustee be appointed in his stead; that the land be sold and the proceeds applied, under order of the court, to the payment of the notes held by the plaintiffs and of any other lawful claims; and for an injunction, a discovery, an account, and further relief.
The judge before whom the case was first heard made a decree declining to set aside the release or to declare that the first deed of trust had priority over the second; adjudging that the first deed of trust was fraudulently and negligently released by Augustus Davis and Charles T. Davis, and wrongfully and negligently released by Stickney, and therefore ordering that the plaintiffs recover against Augustus Davis, Charles T. Davis, Stickney, and Sweet and wife, the amount due on the notes held by them, with interest; declaring that the note for $5,000, held by Williams, was the first charge on the land; and ordering the land to be sold, and the proceeds to be distributed in paying off the incumbrances in the order thus established.
The court at general term reversed those parts of the decree which declined to set aside the release, and which declared that Williams was entitled to priority; and also that part which adjudged that the plaintiffs recover against Stickney the amount of their debt; affirmed it in other respects; and ordered the proceeds to be first applied to the payment of the plaintiffs' debt. Williams appealed from so much of this decree as gave priority to the plaintiffs' claim; and the plaintiffs appealed from so much as reversed the decree against Stickney.
By the statutes regulating the conveyance of real estate in the District of Columbia, all deeds of trust and mortgages, duly acknowledged, take effect and are valid, as to all subsequent purchasers for valuable consideration without notice, and as to all creditors, from the time of their delivery to the recorder for record; whereas other deeds, covenants, and agreements take effect and are valid, as to all persons, from the time of their acknowledgment, if delivered for record within six months after their execution. Any title-bond or other written contract in relation to land may be acknowledged and recorded in the same manner as deeds of conveyance; and the acknowledgment duly certified, and ...