Case ID: dc_9/html/0333-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Humphreys Cartter, Ch. J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN A. J. CRESWELL, ROBERT PURVIS, AND ROBERT H. T. LIEPOLD, COMMISSIONERS OF THE FREEDMAN’S SAVINGS AND TRUST COMPANY vs. THE NATIONAL SAVINGS-BANK OF THE DISTRICT OF COLUMBIA AND ALEXANDER SHARP.
    In Equity. —
    No. 3889.
    I. Where a judgment-creditor has a lien upon two funds, and a mortgage-creditor has a lien upon one of them, the rule is, that the former must first exhaust that fund upon which the latter has no lien. The power-of the court to compel the judgment-creditor in such case to exhaust one fund, when he has a lien upon two, before going upon that one which alone constitutes the security of another creditor, is too well established to be called in question.
    II. Where a judgment-debtor afterward executes two deeds of trust to secure distinct creditor!} upon different 'parcels of land, all bound by the judgment, the record of the deed first executed is uotice to all the world, and the party beneficially interested therein can have the property sold to satisfy the judgment in the inverse order of its alienation.
    The case is stated in the opinion of the court.
    
      Enoch Totten for complainant:
    The question arising in the case is, whether or not this judgment, now owned and held by the National Savings-Bank, can be collected out of the property conveyed to the Freedman’s Savings and Trust Company, until all the other property bound by the judgment and owned by Brown, at the date of the sale to the Trust Company, shall have been first sold, and the proceeds applied to the payment of the judgment.
    The lots bound by this judgment, and subsequently mortgaged, or sold by Brown at different times to different persons, are chargeable with the burden of thejudgment in the inverse order of their alienation — that is to say, the parcels last sold are to be charged to their full value, and then go backward until the judgment is fully paid. This is the doctrine now fully established in this country. It was firmly settled in New York in the case of Clowes vs. Dickinson, 5 Johns. Ch., 235; S. C., (on appeal,) 9 Cowen, 403. See also Gill vs. Lyon, 1 Johns. Ch., 447; Sturtevant vs. Hall, 2 Barb. Ch., 151. The doctrine established in Clowes vs. Dickinson has been followed in every State in the Union, where the question has come up, except in the single State of Kentucky. Shannon vs. Massilis, Sax., N. J., 413; Shepherd vs. Adams, 32 Me., 63; Holden vs. Pike, 24 Me., 427; Cushing vs. Ayre, 25 Me., 383; Com. Bank vs. Western Reserve Bank, 11 Ohio, 444; Cummings vs; Cummings, 3 Kelly, Ga., 460; Pallen vs. Agricultural Bank, 1 Freeman, Miss., 419; S. C.; (affirmed on appeal,) 8 S. & M., 357; Gist vs. Pressley, 2 Hill Ch., South Carolina, 318; Stoney vs. Shultz, 1 Hill Ch., 500; Bank vs. Howard, 1 Strobhart’s Eq., 173; Wright vs. Atkinson, 3 Sneed, Tenn., 585; Conrad vs. Harrison, 3 Leigh, 532; Lyman vs. Lyman, 32 Vt., 79. See also 2 Leading Cases in Eq., (Am. notes,) 237. Mr. Justice Story, in his learned work on Equity Jurisprudence, inclines to doubt the justice of the doctrine as established in America, and seems to prefer the doctrine which charges the original incumbrance ratably upon'the land of subsequent purchasers. He says the doctrine has been so “ asserted in the ancient as well as the modern English cases on the subject.” 2 Story’s Eq., Sec. 1233. He cites the cases of Averall vs. Wade, 1 Lloyd & Gould, 252,11 Eng. Ch., as one of the authorities sustaining this view. Upon an examination of the case, it will be found that it sanctions the American rule as above laid down. The case of Hamilton vs. Royse, 2 Sch. & Lef., 315, is to the same effect.
    It is well settled, as a rule of equity, that, when an individual, owning two or more pieces of land bound by a personal judgment against him, sells a part of them, the land retained by him shall be primarily chargeable with the debt. 2 Story’s Eq., 1233. This rule is clearly right and just. On his alienation of a part, the remainder becomes immediately burdened with the entire debt. The vendor cannot escape from the rule, and enforce contribution against his vendee in order to pay the judgment; this is conceded in all the cases. How, then, can he sell to a third person, a privilege or right which he himself does not possess ? The second purchaser “ sits in the seat of his vendor,” and has precisely the same rights. Clowes vs. Dickinson, 5 Johns. Ch., 235. The record of the judgment was notice to the world, and every purchaser or mortgagee was bound to ascertain what lands the judgment-debtor had alienated subsequently to the rendition of the judgment. Every conveyance of land, bound by this judgment-lien, made by Brown, directly and materially affected the title to the lots remaining in his possession, by releasing the parcels so conveyed from the lien of the judgment, and transferring a corresponding additional burden to such remaining parcels. The conveyance operated upon the remaining lots precisely as if the judgment-debtor had placed a mortgage or other additional incumbrance upon them. This was the legal effect of such conveyances, and every subsequent purchaser was therefore chargeable with notice by the record of such conveyance. Lyman vs. Lyman, 32 Vt., 81.
    
      Walter S. Cox and Hanna & Johnson for National Savings Bank :
    Where there is a paramount lien upon land which is sub. sequently sold or transferred in different parcels at different times to different persons, as purchasers or incumbrancers, each without notice of the former sales or transfers, the paramount lien is to be borne ratably between said purchasers or incumbrancers, according to the relative values of the several parcels of the land. This doctrine has been asserted in the ancient as well as the modern English cases on the subject. Barnes vs. Rackster, 1 Younge & Collyer, New Rep., 401, in which case it was decided that, “ Where there is a first mortgage on two estates, a second on one of them, and a third on the other, or both, the right of marshaling will not be exercised in favor of the second against the third mortgagee, though with notice of the second incumbrance. In such case the first mortgage will be ratably apportioned between the two estates.” This case is referred to in 1 Hilliard on Mortgages, 310. See Bacon’s Abr., title Execution, B. 4; Carter vs. Bernardiston, 2 Eq. Cases, abr., 224; Sir William Harberts Case, 3 Co., 14; Harris vs. Ingleden, 3 P. Wms. 98 and 99. (Note. — The two last eases specially referred to in opinion of Chancellor Kent.) Stevens vs. Cooper, 1 Johns. Ch., 430; see also Averall vs. Wade, 2 Lloyd & Goold, 252; Aldrich vs. Cooper, 8 Ves., reported in 2 Leading Cases in Eq., 158(b). In our own country the same doctrine has been asserted as follows: 2 Story’s Equity, section 1233; Adams’s Equity, 270. “ Upon this subject the law is perfectly settled. All the alienees of the lands of a debtor bound by a judgment or recognizance, no matter in what order the alienations were made, are bound to bear equally the burden of satisfying the judgment by mutual contributions, pro rata, according to the value of the property held by them; all being considered as in cequale jure, without regard to the priority of their purchases or conveyances. Authorities for this doctrine are referred to in 5 Vin. Abr. Contrib. & Av., 561;’ Beverly vs. Brook, 3 Leigh, 426. “It is a doctrine well established, that where land is charged with a burden, the charge ought to be equal, and one part ought not to bear more than its due proportion; and equity will preserve this equity by compelling the owner of each part to a just contribution. I need not go at large into the doctrine. It is perfectly well understood; and I had occasion recently to examine it in the case of Cheeseborough vs. Millard.” Opinion of Chancellor Kent in Stevens vs. Cooper, 1 Johns. Ch., 430, citing in support of his opinion Sir William Harbert’s Case, 3 Co., 14; Harris vs. Ingleden, 3 P. Wms.,98, 99. Incumbrances which attach to the land in the hands of the vendor must be apportioned equally among all who claim under him by purchase in the ratio of the value of their respective interests at the time of the purchase. T. B. Monroe, 312, quoted in 2 Lead. Cases in Equity, 177; see also 2 Humph., 34; Parhham vs. Welch, 19 Pick., 237, which is to the effect that, prima facie, there should be equality of contribution between successive purchasers.
    If, h o wever, there is a right on the part of the prior purchaser or incumbrancer to throw the burden of the paramount lien on the subsequent purchaser or incumbrancer, such a right is obviously a mere equity, and, like all equities, binding only on purchasers or incumbrancers with notice. In the States where a contrary doctrine has been held, an examination of the cases will show, generally, that notice to the subsequent purchaser or incumbrancer of the circumstances on which the equity claimed by the first purchaser is founded is either not questioned, or shown or admitted to have existed. The circumstances referred to are the conveyance to the first purchaser and the existence of the conveyance. Attention is especially called to the fact, that in the present case the National Savings-Bank is not charged with actual notice of the former ■deed of trust given to secure the Freedman’s Savings and Trust Company, and, inasmuch as the former deed of trust does not embrace any of the property named in the deeds of trust given to secure the National Savings-Bank, the record of said former trust is not constructive notice, because the land records only apply as constructive notice as between successive conveyances of the same land, and have no application where the subject-matter conveyed is different, although the grantor may be the same. Boggs vs. Warner, 6 Watts, 409; Gayon vs. Knabe, 6 Paige’s Ch., 42; Hamilton vs. Royse, 2 Sch. & Lef., 326. See more recent case in Ohio, Green vs. Ramage, 18 Ohio, 429. Also, 2 Leading Cases in Eq., Am. notes to Aldrick vs. Cooper, 176, which says (180) that, “ on the whole, it would seem that this doctrine” (viz, of -charging the paramount lien on the purchasers in the inverse order of alienation to them) “ is too delicate in its nature, and dependent upon too many minute considerations, to be administered with advantage, and that the rule of equal contribution, if less just in theory, is better suited to application in practice.”
   Mr. Justice Humphreys

delivered the opinion of the court:

On the 3d day of March, 1870, one John M. Jolly obtained .a judgment on the law side of this court against Samuel P. Brown and Austin P. Brown, partners under the style of S. P. Brown & Son, for the sum of four thousand six hundred and ninety-four dollars and five cents, ($4,694.05.) This judgment is still unsatisfied.

At the date of this judgment Samuel P. Brown was the owner and in possession of valuable parcels of land in this District, and near the city of Washington, which would have been more than sufficient to pay the judgment. This is adrnitted, and it is also admitted that the judgment is a lien upon the lands in question. On the 20th of June, 1870, the Freedman’s Savings and Trust Company loaned to said firm of S. P. Brown & Son ten thousand dollars, for which the firm executed a promissory note, payable to the order of Samuel P. Brown, at twelve months, with interest. Said Samuel indorsed the note, and to secure its payment, and before the loan, the said Samuel and his wife executed and delivered a deed in trust to David L. Eaton, trustee, for said Trust Company, the complainants. This deed was regularly recorded in the proper registry office for the record of deeds, in the city of Washington, District of Columbia, on the 27th of June, 1870. On the 26th of June, 1871, and at various periods after that date down to April 24, 1872, inclusive, the National Savings-Bank of this District loaned to said firm of' Brown & Son various sums of money, amounting to thirty thousand dollars and more. To secure these several loans the said Samuel P. executed, at the times of the same, deeds in trust, conveying to trustees parcels of his estate, no parcel of which is the same as those conveyed to the benefit and. for the security of the complainants. As far as the case discloses, neither complainants nor defendant knew, actually, of the unsatisfied judgment at the time of the respective loans. The note to the complainants not having been paid at maturity, the trustee, Eaton, on the 12th of October, 1872, sold the lots conveyed to complainants, and the said company, through its agents, purchased the same, and have made sale,, with indemnity to the purchasers of the same. Said sales-were made in 1873, before the execution issued. It comes incidentally through the proceedings in the contest that the case of Jolly against said Brown had'been appealed to the Supreme Oourt of the United States, and the same, being held by supersedeas, was lost sight of. No point is made on this branch of the case, but the judgmentis treated by all the parties as a subsisting lien upon all the lands embraced in the deeds both to comifiainants and defendants. On the 16th of July, 1874, defendant, the National Savings-Bank, purchased the judgment from Jolly, all of which is conceded to be regular, and to invest all right in the judgment in the said bank. The bank, immediately after the sale and assignment by Jolly, had execution issued, and all the parcels of land included in. the conveyance to complainant, except two or three lots,, were levied upon and published for sale by the marshal. The bill was filed in August, 1874, to restrain this sale, and the bill seeks to force the judgment to be satisfied, as far as it can be, from the lands not included in complainant’s deed., and if any balance remains, the offer is made to satisfy it.

On the 4th of May, 1875, the justice sitting in equity ordered and signed a decree enjoining the sale of the lots which had been levied upon, and which are included in the conveyance to complainants, until the real estate belonging to the said Samuel P. Brown, on the 20th day of June, 1870, bound by said judgment, and not involved in said conveyance to complainants, should be sold, and the proceeds of such sale applied to the payment of the judgment.

This cause was well, comprehensively, and fairly argued by the solicitors of the parties, and we have been greatly aided by the openness with which they respectively presented the legal questions. We think the decree in this case impregnable.

The English mode and doctrine of tacking mortgages and liens might exist, and the learning on the doctrine of actual and constructive notice would be applicable, if our registry laws were not in force. The possession of real estate would be very uncertain if we were to depart from the accustomed rule of appealing to the record of deeds, and resort to the uncertain practice of parol testimony of notice. The statutes in this country were designed to give permanency to possessions and facility to sales by establishing a central depository of the evidences of title. Section 447 of the Revised Statutes, act of April 29,1838, fixes, establishes, and prescribes the order and priority of liens, titles, and evidences of titles. Of course, unfairness, imposition, or fraud iu any matter of deeds and conveyances would upset, overturn,, and destroy a pretended transaction. But the record is notice to the world. That record itself may be attacked where a fraudulent use is attempted to be made of it, but when that is done, the matter therein is to be expunged, and not to be taken as a record. The registry is notice, however, and so long as it is unassailed for any of the causes which avoid it, it must staud as of even more force in law than mere parol evidence of notice.

So far as the deeds in this case are involved there can be no difficulty, for the statute ascertains the relation they bear to each other. This is also the case with the judgment in its relation to the deeds. It is prior, and must be satisfied. It was notice to the world, and would operate so long as untainted. It makes no difference that the judgment and the junior deeds are held by the same creditor; they must each be satisfied in the order of priority. The only difficulty may be, whether it is in the power of the court to force the judgment-creditor to resort to and exhaust one fund, where he has a lien upon two and his contestant has a lien on one only, before going upon the fund, which alone is bound to the subsequent creditor. On this point we think the p ower is too well established to doubt it. The power exists to do equity; equity follows the law. The statute ascertains and settles that the judgment binds the property in advance of the deeds to both. The statute ascertains and settles that by the registry; the first deed is to have priority of the second. The judgment was notice to both, and binds all the property equally. It would not be equity to suffer the judgment to be satisfied out of the property to its exhaustion, which really was bound to a debt specifically, and the remaining property could not be reached by the creditor, when it can be reached by the judgment. Here the levy was made, exclusively, upon lots which were subject to a mortgage preceding the mortgages of the judgment-creditor, the mortgage and judgment cred-tor being the same.

By the rule we state, that the record is notice, this creditor took his mortgage with notice of a prior one. Both the judgment and the complainant’s mortgage must be satisfied before the last mortgage can claim participation, and the contest must really be between the judgment and the first mortgage. The judgment-creditor has a lien upon two funds; the mortgage-ereditor has a lien upon one only, and the rule is that he must first exhaust that fund to which he may resort and the other cannot. After section 447, Revised Statutes, the act of 1838 has settled that “all deeds of trust and mortgages shall take effect and be valid, as to all subsequent purchaser's for valuable consideration, without notice, and as to all creditors,” from the time of proof and delivery to the recorder. Section 448 prescribes and directs that, “ if two or more deeds of the same property, after having been provided, be delivered to the recorder on the same day, that which shall have been first sealed and delivered shall have preference in law.” Section 449 makes even a title-bond or other written contract in relation to land, if recorded, “notice to all subsequent purchasers.”

We have concluded, by a majority of the court, that we are called upon, by rules too firmly established to be unsettled, to affirm the order and decree of restraint in this case.

Cartter, Ch. J.,

dissenting, on the ground that therecord of complainant’s deed, as it embraced other lands, was not notice in law to the Savings-Bank. The latter was not bound to search the title of any other lands of Brown than those it was about to take security upon. And as the right of a person having a prior lien upon real estate to have the lands of a subsequent purchaser sold first, to satisfy an incumbrance antecedent to them both, depends upon notice, the principle has no application to the case at bar. The decree therefore ought to be reversed.

Mr. Justice Wylie did not sit in the case, and took no part in the decision.