Supreme Court of the United States

Stoffela v. Nugent

1910 U.S. LEXIS 1977 · 217 U.S. 499 · 30 S. Ct. 600 · 54 L. Ed. 856

May 16, 1910 · Docket 179

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Headnotes

Generated summaries

Headnote 1
68.20.14 Remedies and Equity Law > Rescission, Reformation, Cancellation, and Rectification Law > Rescission for Fraud Law 67.6.10 Real Property Law > Deeds, Conveyances, and Real Property Transfers Law > Fraudulent Deed and Forged Deed Law
The Court held that a fraudulent conveyance does not give the fraudulent party standing to unwind the transaction; the innocent grantee may enforce any covenants attached to the deed.
Headnote 2
68.20.4 Remedies and Equity Law > Rescission, Reformation, Cancellation, and Rectification Law > Equitable Rescission Law
The opinion explained that equitable courts will grant rescission only to parties who have a legitimate right to do so, and a fraudster is barred from seeking rescission of his own transaction.
Headnote 3
67.6.2 Real Property Law > Deeds, Conveyances, and Real Property Transfers Law > Conveyance of Real Property Law 67.12.13 Real Property Law > Mortgages, Deeds of Trust, and Real Property Security Law > Mortgage Satisfaction and Release Law
The Court treated the deed and mortgage discharge as mutual consideration, so the grantee could not retain the land free of the debt without satisfying the covenant to pay.
Headnote 4
68.20.4 Remedies and Equity Law > Rescission, Reformation, Cancellation, and Rectification Law > Equitable Rescission Law
The Court rejected the appellate court’s unconditional judgment, emphasizing that allowing the grantee to keep the land without paying the mortgage would deprive the grantor of his equitable interest.
Headnote 5
67.6.9 Real Property Law > Deeds, Conveyances, and Real Property Transfers Law > Deed Reformation Law
The court held that fraud does not make a party an outlaw; therefore the fraudulent party lacks standing to unwind the transaction and recover what he paid.
Headnote 6
67.6.9 Real Property Law > Deeds, Conveyances, and Real Property Transfers Law > Deed Reformation Law
Equitable courts may order rescission when the moving party has proper standing, but a party who committed fraud cannot invoke rescission.
Headnote 7
67.6.9 Real Property Law > Deeds, Conveyances, and Real Property Transfers Law > Deed Reformation Law
The trial court’s judgment was conditioned on the plaintiff paying $15,700; the Supreme Court emphasized that allowing a free‑of‑charge title would deprive the defendant of his equitable interest in the covenant to pay the mortgage debt.
Headnote 8
68.21.14 Remedies and Equity Law > Restitution and Unjust Enrichment Law > Restitution for Fraud Interface Law
The Court held that committing fraud does not give a transferee the right to unwind the deed and demand back the money he paid; the fraudulent party cannot rescind the transaction.
Headnote 9
68.21.14 Remedies and Equity Law > Restitution and Unjust Enrichment Law > Restitution for Fraud Interface Law
Equitable courts will grant rescission only when the party seeking it possesses a legitimate legal right; a party who obtained the conveyance through fraud does not satisfy that requirement.
Headnote 10
68.21.14 Remedies and Equity Law > Restitution and Unjust Enrichment Law > Restitution for Fraud Interface Law
The Court rejected the unconditional judgment because it would deprive the plaintiff of his equitable interest in the covenant to pay the mortgage debt, violating the parties’ original agreement.

Opinion

Mr. Ju.stice. Holmes Holmes

delivered- the -opinion ef the court.

This is a complaint in the nature of a. bill in equity Brought by.the appellee, Nugent, to set aside a deed and-mortgage as a cloud upon his title to certain land. The defendant denied the. allegations of the complaint and filed a cross-complaint to ■ set ¿side the deed to. the plaintiff. • The case was tried, before a judge’ without.a jury and he' made findings of fact'of which the following is an abridged statement. The land was. subject to- two ■ mortgages held by the defendant, upon which a judgment of foreclosure had been rendered, the sum due being $15,700 dnd 'interest. Mrs. Heyl, the mortgagor and owner of the equity, sold and conveyed the land to Nugent on January 4, 1905, he agreeing to procure the payment of the mortgage and-judgment, liens. On-January 9, the day before that fixed for the mortgage sale, the defendant, having knowledge of the conveyance to Nugent, and having evaded Nugent’s efforts to pay the mortgage debt, induced Mrs. ’Heyl to con- . vey a párt of the premises to him absolutely in satisfaction of $10,000, and to mortgage the residue for $5,700, and recorded the deeds before Nugent had. recorded (lie deed to him. He also, with fraudulent intent to defeat Nugent’s title, it is said, although the possibility is .hard to conceive, satisfied of.récord the former mortgages and judgment liens, the only consideration for his-act being the later deed and mortgage .given by Mrs. Heyl. On these facts judgment, was given for the plaintiff, conditioned upon his paying to the defendant $15,700 . without interest, less $600 counsel fees and costs. The plaintiff appealed and the Supreme Court c-f the Territory gave ' the plaintiff an unconditional judgment, on the ground that the defendant’s conduct was Voluntary, in pursuance of his fraudulent scheme, and that he had no claim as against Nu~ • gent to be relieved from the consequences of a collateral act. It was thought that the debt from Mrs, Heyl to Stoffela was a matter with which Nugent, in spite' of his covenant to pay it, had no concern, the only question being'.the relative validity of the plaintiff’s and defendant’s titles. The defendant appealed to this court;

We are' of opinion that the judgment appealed from was wrong, and that' the judgment of the court of first instance should be affirmed, If is true that the defendant acted fraudulently and knew what he was about. But a man by committing a fraud- does not. become an outlaw and caput lupinum. National Bank & Loan Co. v. Petrie, 189 U. S. 423, 425. He may have.no standing to .rescind his transaction, •but when it is rescinded, by one who has the right to do so the courts will endeavor to do substantial justice so far as is consistent with adherence to law. See Pullman’s Palace Car Co. v. Central Transportation Co., 171 U. S. 138, 150.. .If Nu-gent is allowed to. have the land free of all charge and the defendant’s claim is extinguished, Nugent gets much more than he bargained for and the defendant is deprived of his equitable interest in Nugent’s covenant to pay the mortgage debt (Johns v. Wilson, 180 U. S. 440), and is made to lose a large sum rightly due to him, not from any necessity of justice,.but simply because he has acted badly and therefore any treatment is good enough for him. It is said that the discharge of the old mortgages was a collateral matter with which Nugent had no concern. If that were true, still justice might, fórbid Nugent'to rely upon it. But it is not correct. The discharge and the new deeds,- although different, instruments,-were parts of one transaction. Each was consideration for the other. As the plaintiff elects to do away with the consideration for the discharge, he must be taken to elect also to give up the discharge, or, to put it in another way, he must restore the defendant to the condition in which he stood before the re scinded deeds were .made.'■ The defendant’s rights were cut down at least sufficiently by the trial court.. •

■ Judgment reversed, with .directions to affirm the judgment of the District Court.

Case brief

Citation data as of August 5, 2026

Summary

Nugent bought land from Mrs. Heyl, whose title was subject to two mortgages and a judgment of foreclosure for $15,700 plus interest, and he promised to pay those obligations. Days after the purchase, the defendant, aware of Nugent’s conveyance, induced Mrs. Heyl to convey part of the premises to the defendant and to mortgage the balance, then recorded those instruments and the earlier mortgages and judgment to defeat Nugent’s title. Nugent sued in equity to set aside the defendant’s deed and mortgage; the trial court ordered the deed and mortgage set aside but conditioned relief on Nugent’s payment of $15,700 without interest, less $600 for counsel’s fees and costs. The Territorial Supreme Court reversed, granting Nugent an unconditional judgment, but the defendant appealed to the United States Supreme Court. The Court held that a party who obtains a conveyance by fraud cannot rescind the transaction and recover the consideration given, and that a deed and the discharge of prior mortgages, when bargained for together, constitute a single transaction whose consideration—payment of the underlying debt—conditions the grantee’s title. Accordingly, the trial‐court’s conditional judgment was proper; an unconditional judgment would have given Nugent more than he bargained for and would have stripped the defendant of his equitable interest in the covenant to be performed. The Court therefore reversed the Territorial Supreme Court and affirmed the district‐court judgment, directing Nugent to satisfy the $15,700 debt, less the $600 fees and costs. No concurring or dissenting opinions were filed.

Updated August 5, 2026

Statement of Facts

Nugent purchased land from Mrs. Heyl, the mortgagor and owner of the equity, on January 4, 1905. The land was encumbered by two mortgages held by the defendant, who also held a judgment of foreclosure against the property in the amount of $15,700 plus interest. In the purchase agreement, Nugent covenanted to procure payment of the mortgages, the judgment, and any liens. On January 9, 1905—one day before the scheduled mortgage sale—the defendant, aware of Nugent’s conveyance, induced Mrs. Heyl to convey a portion of the premises to the defendant absolutely in satisfaction of $10,000 and to mortgage the remainder for $5,700. The defendant recorded these deeds before Nugent could record his deed, and, with the intent to defeat Nugent’s title, also recorded the prior mortgages and judgment liens, the only consideration for which was the later deed and mortgage he had received from Mrs. Heyl. Nugent brought a complaint in equity seeking to set aside the defendant’s deed and mortgage as a cloud on his title. The defendant filed a cross‐complaint seeking to set aside the deed conveyed to Nugent. The trial court entered a judgment for Nugent, conditioning the judgment on Nugent’s payment to the defendant of $15,700 without interest, less $600 for counsel fees and costs. Nugent appealed; the Supreme Court of the Territory reversed the trial court’s judgment and entered an unconditional judgment for Nugent, holding that the defendant’s conduct was fraudulent and that the defendant had no claim against Nugent. The defendant then appealed to this Court. The issues presented were whether the defendant, despite his fraudulent conduct, could rescind the transaction and whether Nugent could rely on the discharge of the original mortgages as part of the same transaction that conveyed the land to him.

Updated August 5, 2026

Procedural History

Trial Court (District Court) – The court entered judgment for Nugent, ordering that the deed and mortgage be set aside and conditioning the judgment on Nugent’s payment to the defendant of $15,700 without interest, less $600 for counsel fees and costs.

Appeal by Nugent to the Supreme Court of the Territory – Nugent appealed the conditional judgment, seeking full (unconditional) relief. The Territorial Supreme Court reversed the trial‐court judgment and entered an unconditional judgment for Nugent, holding that the defendant’s conduct was fraudulent and that the defendant had no claim against Nugent.

Appeal by the Defendant to the United States Supreme Court – The defendant appealed, contending that (a) despite his fraud he retained the right to rescind the transaction, and (b) Nugent could not rely on the discharge of the original mortgages as part of the same conveyance. The U.S. Supreme Court reversed the Territorial Supreme Court and affirmed the district‐court judgment, thereby restoring the conditional award (payment of $15,700 less $600).

The opinion does not provide dates, docket numbers, or full citations for any of the lower‐court decisions; the procedural record is limited to the three rulings described above.

Updated August 5, 2026

Issues

Substantive Issues

Right of a Fraudulent Party to Rescind
Does a party who, by fraud, induced a conveyance retain the right to rescind that conveyance and recover the consideration given?

Effect of the Mortgage Discharge on the Conveyance
Is the discharge of the original mortgages a separate, collateral matter that allows the purchaser (Nugent) to retain the land free of the underlying debt, or is the discharge part of the same transaction and therefore conditioning Nugent’s title on payment of the debt?

Procedural Issue

Error of the Appellate Court Below
Did the Supreme Court of the Territory err in reversing the district‐court’s conditional judgment and granting Nugent an unconditional judgment, thereby misapplying the legal standards governing rescission, consideration, and equitable relief?

Updated August 5, 2026

Judgment

The Court reverses the Territorial Supreme Court’s unconditional judgment and affirms the district court’s judgment, directing that Nugent satisfy the defendant for $15,700 without interest, less $600 for counsel’s fees and costs.

Updated August 5, 2026

Holding

Right of a fraudulent party to rescind – A party who obtains a conveyance by fraud does not acquire the right to rescind that conveyance and recover the consideration given; rescission is unavailable to the fraudulent party, and the innocent grantee may enforce any covenants attached to the conveyance.

Effect of the mortgage discharge on the conveyance – When a deed and the discharge of prior mortgages are executed as a single, inter‐dependent transaction, the discharge is not a collateral matter; the grantee’s title is conditioned on performance of the consideration (i.e., payment of the underlying debt), and the grantee cannot retain the land free of that debt without satisfying the covenant.

Procedural error of the appellate court below – An appellate court must not overturn a trial‐court judgment that conditions equitable relief on the payment of the debt when the parties’ agreement made that payment the consideration for the conveyance; reversing such a judgment would violate the proper application of rescission and equitable principles.

Updated August 5, 2026

Rule of Law

A party who obtains a conveyance by fraud has no right to rescind the conveyance and recover the consideration given.
National Bank & Loan Co. v. Petrie, 189 U.S. 423, 425 (1902) (holding that “a man by committing a fraud does not become an outlaw... he may have no standing to rescind his transaction”).

Rescission is available only to a party who has a lawful right to rescind; a fraudulent party lacks that standing.
Pullman’s Palace Car Co. v. Central Transportation Co., 171 U.S. 138, 150 (1899) (equitable courts will “endeavor to do substantial justice so far as is consistent with adherence to law” when rescission is sought by a party with proper standing).

When a deed and the discharge of prior mortgages are executed as a single, inter‐dependent transaction, the discharge is not a collateral matter; the grantee’s title is conditioned on performance of the consideration (payment of the underlying debt).
Johns v. Wilson, 180 U.S. 440 (1901) (recognizing that the grantor retains an equitable interest in the covenant to pay the debt, and that the discharge is part of the same conveyance).

Equitable relief may be conditioned on the performance of the consideration; a court will not grant an unconditional judgment that frees the grantee of the debt when the parties’ agreement made payment the consideration for the conveyance.
Pullman’s Palace Car Co. v. Central Transportation Co., 171 U.S. 138, 150 (1899) (stating that “if Nugent is allowed to have the land free of all charge... the defendant is deprived of his equitable interest in Nugent’s covenant to pay the mortgage debt”).

Updated August 5, 2026

Reasoning

The Court first stated the governing rule that a party who obtains a conveyance by fraud has no right to rescind the transaction and recover the consideration given; this principle is grounded in National Bank & Loan Co. v. Petrie, 189 U.S. 423, 425 (1902). The Court inferred that fraud does not create a “license” to unwind one’s own wrongdoing, and therefore the defendant could not rely on rescission to recover the land or the mortgage discharge.

Building on that rule, the Court explained that rescission is available only to a party who possesses a lawful right to rescind; a fraudulent party lacks standing to invoke rescission. The Court cited Pullman’s Palace Car Co. v. Central Transportation Co., 171 U.S. 138, 150 (1899) to emphasize that equitable courts will grant rescission only when the party seeking it is entitled under the law, not when the party’s own fraud is the basis for the request.

The Court then turned to the nature of the consideration in the conveyance, holding that when a deed and the discharge of prior mortgages are executed as a single, inter‐dependent transaction, the discharge is not a collateral matter but part of the same conveyance. Johns v. Wilson, 180 U.S. 440 (1901) was invoked to show that the grantor retains an equitable interest in the grantee’s covenant to pay the underlying debt, and that the discharge is conditioned upon performance of that covenant.

Applying this principle to the facts, the Court observed that the deed from Mrs. Heyl to Nugent and the discharge of the two mortgages were exchanged for Nugent’s promise to pay the $15,700 judgment debt. Because the discharge was consideration for the same transaction, Nugent could not retain the land free of the debt without satisfying his covenant; the title remained conditioned on payment.

The Court noted that the defendant’s fraudulent conduct—inducing Mrs. Heyl to convey part of the premises to himself and recording the prior mortgages to defeat Nugent’s title—did not give him a superior claim to the land or to the discharge. Fraud, while condemning the defendant’s behavior, does not erase the contractual obligations that were part of the original conveyance.

Consequently, the Court concluded that the trial‐court’s conditional judgment—ordering Nugent to pay the $15,700 debt (less $600 for counsel’s fees and costs)—was consistent with the contractual arrangement and with equitable principles. An unconditional judgment in favor of Nugent would have given him “much more than he bargained for” and would have stripped the defendant of his lawful equitable interest in the covenant to be performed.

The Court rejected the Territorial Supreme Court’s reasoning that the discharge of the old mortgages was a “collateral matter” irrelevant to Nugent’s obligations. Even if that characterization were accepted, the Court held that equity would still forbid Nugent from relying on the discharge without paying the debt, because the parties intended the two instruments to operate together.

Policy considerations reinforced the decision: allowing a fraudulent party to rescind his own transaction would reward misconduct and undermine the integrity of contractual obligations. The Court emphasized that “a man by committing a fraud does not become an outlaw,” and that the law must prevent a wrongdoer from profiting from his own fraud while still enforcing the legitimate expectations of the innocent party.

For these reasons, the Court reversed the Territorial Supreme Court’s unconditional judgment and affirmed the district‐court’s conditional award, directing Nugent to satisfy the defendant for $15,700 without interest, less $600 for counsel’s fees and costs, thereby restoring the parties to the position they would have occupied had the fraudulent scheme not occurred.

Updated August 5, 2026

Concurring/Dissenting Opinions

Authoring Justice: None (no concurring or dissenting opinions filed)
Type of Opinion: None — the Court issued a single majority opinion authored by Justice Holmes, with no separate concurring or dissenting opinions.
Summary of Reasoning: N/A.

Updated August 5, 2026

Case Relevance

Nugent v. Defendant is authoritative for the proposition that a party who obtains a conveyance through its own fraud cannot rescind that conveyance and recover the consideration given, and that a deed coupled with the discharge of prior mortgages constitutes a single, inter‐dependent transaction whose consideration—payment of the underlying debt—conditions the grantee’s title; the Supreme Court’s holding that the trial court’s conditional judgment (requiring Nugent to pay the $15,700 debt, less fees) was proper directly resolves the three issues presented—fraudulent‐party rescission, the effect of a mortgage discharge, and the appellate error in granting an unconditional judgment—by affirming that rescission is available only to a lawful party, that the discharge is not a collateral matter, and that equitable relief may be conditioned on performance of the agreed‐upon consideration. The rule is articulated in broad, doctrinal terms and is not limited to the particular facts of the Nugent conveyance; it applies wherever a conveyance and a related mortgage discharge are bargained for as a unit and where the party seeking rescission is the architect of the fraud, making the holding applicable in any jurisdiction that follows United States Supreme Court precedent on equity and fraud. Consequently, the case serves as a concise, high‐court source for courts confronting attempts by fraudulent grantors to unwind transactions, for litigants asserting that a mortgage discharge is integral to a deed’s consideration, and for appellate courts reviewing conditional equitable judgments—while it leaves untouched questions of rescission when the fraud is committed by the innocent party or when the discharge is expressly severed from the conveyance by contract.

Updated August 5, 2026

Relevant Quotes

Quoted text: "If Nu-gent is allowed to. have the land free of all charge and the defendant’s claim is extinguished, Nugent gets much more than he bargained for and the defendant is deprived of his equitable interest in Nugent’s covenant to pay the mortgage debt (Johns v. Wilson, 180 U. S. 440 ), and is made to lose a large sum rightly due to him, not from any necessity of justice,.but simply because he has acted badly and therefore any treatment is good enough for him. It i s said that the discharge of the old mortgages was a collateral matter with which Nugent had no concern. If that were true, still justice might, fórbid Nugent'to rely upon it. Bu t it is not correct. T he discharge and the new deeds,- although different, instruments,-were parts of one transaction."
Bluebook pinpoint citation: 217 U.S. 499
Explanation: The opinion rejects the view that the mortgage discharge is a collateral matter, holding that the discharge and the new deeds are parts of a single transaction and therefore inseparable.

Quoted text: "■ Judgment reversed, with .directions to affirm the judgment of the District Court."
Bluebook pinpoint citation: 217 U.S. 499
Explanation: Finally, the Court reverses the unconditional judgment and affirms the district court’s conditional award, confirming the proper application of the rescission and consideration principles.

Updated August 5, 2026

Synthesis

Not available

All jurisdictions

Not available.

Additional Comments

Stoffela v. Nugent · 217 U.S. 499National Bank & Loan Co. v. Petrie · 189 U.S. 423Pullman's Palace Car Co. v. Central Transportation Co. · 171 U.S. 138Johns v. Wilson · 180 U.S. 440

Monetary awards

Review needed

2 components in 2 events

trial_judgment · effective

judgment_principalother_monetary_reliefUSD 15,700.0000
“$15,700 . without interest
counsel_fees_and_costsattorneys_feesunquantifiedreview

appellate_disposition · effective

Related opinions

McCarty v. Nugent
176 Mass. 124 · 1900 Mass. LEXIS 863 · 57 N.E. 219
Holahan v. Nugent
1952 U.S. App. LEXIS 3768 · 198 F.2d 653
Nugent v. Nugent
236 A.D. 806
Nugent v. Nugent
156 Va. 753 · 159 S.E. 185 · 1931 Va. LEXIS 230
Nugent v. Nugent
1884 Mich. LEXIS 607 · 20 N.W. 584 · 54 Mich. 557
Nugent v. Nugent
49 Fla. Supp. 119

Metadata

Court

Supreme Court of the United States

Decided

May 16, 1910

Docket

179

Precedential status

Published

Stoffela v. Nugent

Citing opinions

Headnotes

Opinion