Case ID: va_30/html/0741-01.html
Source: Caselaw Access Project
Author: {"author": "CARR, J. CABFBIi, J. TUCKER, P.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Mooreand Another v. Holcombe and Others.
    March, 1832.
    [24 Am. Dec. 683.]
    (Absent Brooke, J.)
    Bonds — Assignment—Effect of Equities of Third Persons as to Bona Fide Assignee.
      
       — Though the as-signee of a bond takes it subj ect to any equity of the obligor, that attached to it in the hands of the obligee, he does not take it sub: ect to any equity of a third person not party to the bond, of which he has no notice.
    Same — Same—Same -Case at Bar. — Therefore, where H. sold land to M. and took no security for the purchase money; and M. then sold the same land to J'1., took his bonds lor the purchase money, and assigned those bonds for valuable consideration, the assigneeshaving no notice ot II.’s claim to a lien on the land for the purchase money due him by M. — though II. might have been entitled to payment of the purchase money due him from M. out of the purchase money due from If. to M. if F.’s bonds for the same had remained in M.’s hands, yet H. cannot assert any such equity as against the bona iide assignees of the bonds.
    Predham Moore sold a parcel of land in ■Campbell to John Lee, for 8000 dollars, and executed a conveyance of thé same to him, but the conveyance was never recorded. Lee, before he had paid any part of the purchase money to Moore, sold the land to Hancock, or rather he exchanged it with Hancock for real property in Lynchburg ; but Lee neither conveyed the land to Hancock, nor put him in possession of it. Hancock, a fterwards, sold the land to Moore, the original owner, for 12,000 dollars worth of timber to be delivered at Lynchburg. Lee being thus indebted to Moore in the sum of 8000 dollars, and Moore indebted to Hancock in the sum of 12 000 dollars, the parties met, and made an arrangement, whereby Hancock agreed to pay Moore the sum of 8000 dollars which Lee owed him, by setting off and discounting that sum from the sum of 12,000 dollars, which Moore owed Hancock, on account of his purchase of the land from him ; and Lee was to give his bond to Moore for 500 dollars, for the rents and profits of the land daring the time he held it. All this was accordingly done : and Moore executed a covenant to Hancock to deliver him 4000 dollars worth of timber, being the residue of the consideration he had contracted to pay Hancock for *the land. As the conveyance from Moore to Lee had never been recorded, and as Lee had not made any conveyance to Hancock, and as Hancock’s sale to Moore had again vested the right to the land in him, the parties thought nothing more necessary to re-vest in him the legal title also, but to surrender to Moore the deed he had executed to Lee, to be cancelled: the deed was, therefore, surrendered to Moore. Moore delivered only a part of the timber he had covenanted to deliver to Hancock; and Hancock brought an action against him upon the covenant, for the residue, and recovered judgment for 1511 dollars damages, and costs of suit. By this time, it appeared, Moore was insolvent. Hancock assigned this judgment against Moore (inter alia) to Holcombe and others, trustees, to secure a debt due to Martin Hancock. But before Hancock had recovered the judgment against Moore, Moore sold the land in question to Lewis Franklin, for 6500 dollars, payable in instalments of 1000 dollars, each, in June 1827-’28~’29-’30-’31-’32, and 500 dollars in June 1833 ; and Moore conveyed the land to Franklin, and Franklin gave him his bonds for the several instalments. At the time of Franklin’s purchase, he had no notice of the debt due by Moore to Hancock, or indeed of Moore’s having ever purchased the land from Hancock. Moore assigned Franklin’s bonds for the purchase money, to Murrell & Meem, for a valuable consideration ; and they gave Franklin immediate notice of the assignment.
    After the sale by Moore to Franklin, and the assignment of Franklin’s bonds to Mur-rell & Meem, but before Franklin had discharged any of the bonds, Holcombe and others, the trustees to whom Hancock’s judgment against Moore was assigned, Martin Hancock, the cestui que trust, and John Hancock, exhibited a bill in the supe-riour court of chancery of Lynchburg, against Moore and Franklin, in which they insisted that the 4000 dollars worth of timber which Moore had covenanted to deliver to John Hancock, for the balance of the purchase money he had contracted to pay Hancock *for the land, having been no otherwise secured than by Moore’s personal covenant, Hancock had a lien, in equity, upon the land itself, for so much of the consideration as remained unpaid; namely, for the amount of Hancock’s judgment against Moore for 1511 dollars, and interest thereon ; and that this lien bound the land while it was in Moore’s hands ; and as Franklin had not yet paid any part of the purchase money, it bound the land in his hands also. And they prayed the court to declare and enforce the lien, and meantime to injoin Franklin from paying Moore the purchase money he had contracted to pay him.
    The answers of Moore and Franklin shewed the fact, that Franklin’s bonds for the purchase money he owed Moore, had been assigned by Moore, for valuable consideration, to Murrell & Meem, and that they had given notice of the assignment to Franklin ; and that Franklin had no notice of the equity asserted by the bill, until after he had received the notice of the assignment of his bpnds to Murrell & Meem. Moore insisted, that the plaintiffs had no such equitable lien as they claimed : Franklin said, that if they had, he ought to be relieved from the payment of the purchase money he owed, pro tanto ; and submitted to the court, whether Murrell & Meem the assignees of his bonds, or the plaintiffs, had the preferable right.
    Murrell & Meem moved the court for a rule upon the plaintiffs, to make them parties defendants in the cause ; which motion was overruled.
    There was proof, that Moore had assigned Franklin’s bonds to Murrell & Meem for valuable consideration, and that they had given immediate notice of the assignment to Franklin; proof also, of the transactions between Moore and Lee, Lee and Hancock. Hancock and Moore, and then of the arrangement between Lee, Hancock and Moore, and the several contracts for the sale and purchase of the land, as above stated ; but no proof, that Franklin had the least notice of the equity asserted in the bill, or of the facts on which the plaintiffs’ claim to the equitable lien was founded, *until some time after his purchase from Moore, and after he had received notice of the assignment of his bonds by Moore to Murrell & Meem; or that Murrell & Meem ever had notice of the plaintiffs’ equity, until some time after Franklin’s bonds had been assigned to them, and they had paid the consideration for the assignment, and given notice thereof to Franklin.
    The chancellor declared, that the plaintiffs were entitled to the equitable lien asserted in their bill, upon the land in Franklin’s hands, and made an interlocutory decree for the plaintiffs accordingly : from which decree the defendants appealed to this court.
    Johnson for the appellants.
    Leigh for the appellees.
    
      
      Bonds — Assignment—Equity of Third Party. — while it is well settled that the assignee of a chose in action takes subject to all the equities of the debtor against the assignor, existing at the time of the assignment, yet, if he purchases in good faith he does not take subject to the equities of third persons, who are not parties to the transaction and of whose equity he has no notice. 5 Va. Law Reg. 114, citing Hunter v. Lawrence, 11 Gratt. 111; Broadus v. Rosson, 3 Leigh 12; Moore v. Holcombe, 3 Leigh 597; Mott v. Clark, 9 Pa. St. 299 (49 Am. Dec. 566, and note). To the same elfect, the principal case is cited in Gordon v. Rixey, 76 Va. 704; National Valley Bank of Staunton v. Harman, 75 Va. 610; Stoner v. Harris, 81 Va. 455, 456, 457, 459, 465.
      See monographic note on “Bonds" appended to Ward v. Churn, 18 Gratt. 801; monographic note on “Assignments" appended to Ragsdale v. Hagy, 9 Gratt. 409.
      Vendor and Vendee — Equitable Lien. — The implied eq uitable lien of the vendor of an equitable estate, where the contract of a sale is not recorded, will be enforced by a court of equity against the vendee, his heirs, purchasers with notice, and unsecured general creditors, but not against purchasers for value without notice, nor against mortgage or trust creditors with or without notice. Poe v. Paxton, 26 W. Va. 614, citing the principal case.
      Tn Brawley v. Catron, 8 Leigh 527, the principal case is cited to the point that the equitable lien of the vendor ought not to be extended beyond its present limits as it is violative of the policy of our law which seeks as far as possible to discourage secret liens. To the same effect, the principal case is cited in McCandlish v. Keen, 13 Gratt. 622; Poe v. Paxton, 26 W. Va. 612; foot-note to Kyles v. Tait, 6 Gratt. 44.
      Equal Equity — Priority.—In Cox v. Romine, 9 Gratt. 29, it is said, it may be laid down as a general rule, that between mere equities, equal in all other respects, the elder shall prevail. If, however, the junior claimant shall have an advantage of law. or superior equity, such party shall prevail, citing the principal case.
    
   CARR, J.

This is a bill in equity to subject land to sale, under the lien for the purchase money. As the effort seems, of late, to have been to push this doctrine of equitable lien, beyond what seems to me its legitimate extent, I have thought it might not be amiss to look a little into it. It is a doctrine of comparatively modern date, and seems to have arisen from a supposed understanding between the parties. In Gilman v. Brown, 1 Mason, 212; 4 Wheat. 292, in notis, judge Story discusses the subject with much learning. He says, “ The rule is manifestly founded, on a supposed conformity with the intention of the parties, upon which the law raises an implied contract; and therefore it is not inflexible, but ceases to act, where the circumstances of the case do not justify such a conclusion.” In that case, there was-certainly no express waiver of the equitable lien : it was brought ' by an appeal to the supreme court of the U States, 4 Wheat. 255, and the supreme court was clearly of opinion, that, from the circumstances, the parties contemplated no such lien, and therefore decided, without difficulty, against its existence. In Bailey v. Greenleaf, 7 *Wheat. 46, it was decided, that this lien could not be asserted against creditors holding under a bona fide conveyance from the vendee ; and this, after a most able examination of the authorities by the chief justice. Some of his remarks are exceedingly strong to shew the mischief which would flow from extending this equity beyond its just bounds. He says, this lien “ is a secret invisible trust, known only to the vendor and vendee, and those to whom it may be communicated in fact. To the world, the vendee appears to hold the estate divested of any trust whatever ; and credit is given to him, in the confidence that the property is his own, in equity as well as at law. A vendor relying upon his lien, ought to reduce it to a mortgage, so as to give notice of it to the world. If he does not, he is, in some degree, accessary to the fraud committed on the public, by an act which exhibits the vendee as the complete owner of an estate, on which he claims a secret lien.” Id. 51, again, he says, “ The lien of the vendor, if in the nature of a trust, is a secret trust, and although to be preferred to any other subsequent equal equity, unconnected with a legal advantage, or equitable advantage which gives a superiour claim to the legal estate, will be postponed to a subsequent equal equity connected- with such advantage.” Id. 57. And for this he cites Buller’s note, Harg. Co. Litt. 290, b, note 1, § 13, and Stanhope v. Earl Verney. there stated. These remarks seem to me very sound; and beyond the limits here established, I am unwilling to extend the equitable lien.

In the case before us, looking at the facts of the transactions between Moore and Lee, Lee and Hancock, Hancock and Moore, and then between the three parties, the case does not appear to me, so much like a regular sale and transfer of land, as a cancelling, by the parties all round, of their contracts,— Moore paying Hancock 4000 dollars in timber for his speculation, and taking back his land: more especially, as, instead of regular conveyances, they agreed that the deed made to Lee should be destroyed, and that Lee should give Moore his bond for 500 dollars for the rents *andprofits of the land while he held it. These facts furnish strong evidence to my mind, that the parties never expected or intended to apply the equitable lien to this transaction. But I shall not discuss this point further ; for it is clear to me, that if, as between Hancock and Moore, this lien ever existed, it has been lost, by the subsequent transactions. Moore soon after he got back the land, sold and conveyed it to Franklin, who executed to him his bonds for the purchase money ; and these bonds were assigned to Murrell & Meem, for valuable consideration, and Franklin had notice of these assignments before he had notice of Hancock’s claim to this secret trust, this lien for purchase money. The assignees ought to have been made parties ; for, as nobody can suppose Franklin will be left exposed to pay both claims, the question is, which has the preference? But though not parties, the claim of the assignees, is perhaps sufficiently before the court, to enable us to make this comparison. We have seen from the case of Bailey v. Greenleaf, that this equitable lien will be “postponed to a subsequent equal equity, if connected with a legal advantage.” The assignees here, have that very legal advantage. They can sue at law on the bonds, and this lien will furnish no defence in that forum. Therefore they have nothing to ask of equity, but hands off — let us alone. But independent of this legal advantage, their claim is, I think, decidedly the best. It was said in the argument, that these assignees took the bonds subject to all the equity of the ob igor. True, to all the equity of the obligor: but it is equally true, that they do not take them subject to the latent equity of a third person. Murray v. Lylburn, 1 Johns. C. R. 443; Livingston v. Dean, Id. 479. And that is the case here. Franklin has no equity against these bonds, unless he be liable to this equitable lien : he cannot be liable to both : and I think it clear, that he is liable to the bonds.

I have discussed these questions, since what has been said may tend to put an end to the controversy ; but they are not properly presented by the record ; since Murrell & *Meem, though parties interested in them, have not been made parties in the cause. They ought, undoubtedly, to be made parties, that they may have an opportunity to assert their rights.

CABFBIi, J.

Without deciding the point, I am willing to consider Hancock as having the same rights that he would have had, if he had conveyed the legal title to Moore, and if the consideration for the purchase had been a pecuniary one. If there were no persons concerned in this case, other than Hancock, Moore and Franklin, it would be perfectly clear, that, as Franklin received notice of Hancock’s lien, before he paid his purchase money, the land would be liable in his hands, for the unpaid purchased money due from Moore to Hancock; and it would be equally clear, that Moore, also, would have a lien on the lands for the purchase money due to him from Franklin ; although that lien would be subordinate to the lien of Hancock. But there are other persons, whose interests are involved in the controversy. Franklin’s bonds to Moore for the purchase money, have been assigned to Murrell & Meem, for valuable consideration, and (it seems) without notice of any equity affecting them. This assignment of the bonds transferred to Murrell & Meem, the lien on the lands which Moore had before the assignment. Is this lien, thus acquired, subordinate in the hands of Murrell & Meem, to that of Hancock ? I think not.

The doctrine of the lien of a vendor of lands, is the creature of a court of equity. It ought not, therefore, to be so applied as to operate injustice. So long as it is confined to the parties and their heirs, and to those claiming under them with notice, it can never be liable to objection. But the lien of the vendor, whether it be regarded asa natural equity, or as a trust, is founded on no matter of record, or even of express contract, but is merely implied from the supposed intentions of the parties. It is, in itself, secret and invisible. The vendor had it in his power to make it otherwise, *by reserving a lien, expressed in his deed to the vendee, or by taking a lien from the vendee, in some other form, so as to be notice to all the world. If he omit to do this ; if he convey the land to the vendee, in such a manner as to make him appear to be the complete owner, with full power to sell or to charge it; justice forbids, that he should use his secret lien to the injury of those who, in ignorance of it (an ignorance produced by his own omissions), have acquired for valuable consideration, either the legal title or an equitable incumbrance. That this is so, as to a purchaser of the legal title, is undeniable. It is certainly true, also, as to a mortgagee, who is not regarded in a court of equity as a purchaser, in the full extent of the term, but as an equitable incumbrancer, having the advantage of a legal title. It is also true as to a mere equitable incumbrancer, who has not the legal title, but who has the preferable right to call for the legal title ; as a creditor whose debt is secured by a deed of trust. I think the principles of equity require us to go one step further, and to protect from this secret lien of the vendor all subsequent equitable incumbrances, however acquired, provided they be acquired for valuable consideration and without notice. What is the principle of justice, that exempts from the lien of the vendor, a subsequent purchaser ? It is, that he has made his contract and paid his money, without notice. His acquisition of the legal title, does not add to the justice of his claim, the weight of a feather. In justice, then, the equitable incumbrancer stands on the same ground with the purchaser of the legal title ; for he also has made his contract, and has paid his money, without notice of the secret lien of the vendor. I do not think it necessary to fortify the equity of a mere in-cumbrancer, by shewing that he has a legal advantage or preferable right to call for the legal title : he has an equitable lien on the land : that is sufficient for his purpose. It is not to be affected by the lien of the vendor ; because, even as to the mere equitable incumbrancer, the vendor has no equity. It is on this ground that *1 think Murrell & Meem must prevail in this controversy. I place no reliance on their having a legal title to the bonds, although I do think they have such title. That is not the sort of legal advantage of which the cases speak: the legal- advantage there spoken of, is, I think, some advantage as to the land : but the only legal advantage, which the assignment of the bonds gave to Murrell & Meem, was a legal title to the bonds, and the right to sue at law, in their own names : as to the land, the assignment gave them no legal advantage whatever; as to the land, their claim was purely equitable. True, they might have sued at law on the bonds, but that did not strengthen their claim to the lands.

The doctrine of lien, if thus understood and enforced, will have a just operation, and be freed from the reproaches so frequently cast-upon it.

Murrell & Meem ought, therefore, to be made parties, they being the parties interested to contest the claim asserted by the appellees ; and, if in the controversy between them and the appellees, their case shall turn, as it now appears, that they acquired these bonds, bona fide, by assignment for valuable consideration, and gave Franklin notice of the assignment, before they had any notice of the equity asserted by the appellees, their claim to the money due on the bonds ought no wise to be affected by that equity.

TUCKER, P.

I shall consider this case, as if there had been an ordinary sale for money by Hancock to Moore, a deed made, and part of the purchase money in arrear ; reserving for some other occasion the inquiry, whether the vendor’s lien extends farther than to secure the payment of purchase money; in other words, whether it can be extended to secure the performance of covenants to do some collateral act as the consideration of the sale.

In the view I take of the case, the material facts are simply these: Moore, after his purchase from Hancock, sold the land to Franklin, executed a deed to him, received his bonds for the purchase money, and assigned them to Murrell *& Meem, all which occurred before Franklin had any intimation of the claim, of Hancock. On hearing of the claim, he determined to retain the purchase money, until it should be decided, whether Hancock, or th,e assignees of the bonds, had the best right to it. He has, therefore, been in no default, nor has he at all committed' himself, for Murrell & Meem did not take the assignments upon any assurance of payment from him. They never applied to him until after the assignment. It is obVious, therefore, that there is no pretense for making him pay it twice : so that the question is really between Hancock and the.assignees, which shall have this portion of the purchase money yet in the hands of Franklin. In other words, whose is it ? Does it belong to Hancock by virtue of his implied lien, or to the assignees who have purchased the bonds without notice of the arrears due to Hancock ? I think the latter have the best right.

Where the vendee of land still retains the estate it is clearly liable for the whole of the unpaid purchase money by virtue of the vendor’s lien. Where he has sold to a sub-vendee, and the title has been made by him, and the money paid before notice of the original vendor’s lien, the sub-vendee holds discharged of that lien. Where, however, a part of the purchase money is unpaid by the sub-vendee, the land in his hands is liable for that unpaid portion, but for no more. The equity is, that he shall pay to the orignal vendor whatever he himself yet owes to his own vendor. If he owes any thing, he, and his land, are discharged, upon his paying up that to the original vendor’s demand; and if he owes nothing, neither himself nor his land is in any wise responsible.

Try this case by these principles. Was any thing due from Franklin to Moore (when he received notice of Hancock’s claim) which equity demanded that he should pay over to Hancock instead of Moore? Nothing was due. His bonds, indeed, had been due to Moore, but Moore had sold them, for value, to persons who knew nothing*of the vendor’s pretensions. From the moment of that sale, Franklin ceased to owe Moore any thing. He became the debtor of the assignees; and as he owed Moore nothing, he could be liable to Hancock for nothing, as has been already shewn.

It is true that assignees take every bond subject to the obligor’s equity against the obligee ; but I have yet to learn, that they take subject to an unknown equity of a stranger against the obligee. The equity set up by an obligor is against the bond : it is to avoid the bond. But the equity of Hancock is not to discharge or vacate, but to enforce, the bond, for his benefit. Can it be possible that the assignees take subject to this equity? They bought, indeed, subject to any equity of Franklin against Moore ; — subject to the equity of Moore’s debtor against the bond, but surely not subject to any supposed equity of his creditor to enforce it, of which equity they had no notice.

That the vendor’s lien is lost as to the land by a sale to a subsequent vendee without notice, is clear. And if he has any lien upon the bonds given by the sub-vendee, why should not that lien also be lost by a sale of the bonds without notice? I can see no reason for the distinction ; for as the assignee has possession of the bonds, and has by law a legal right to sue for them in his own name, and has therefore complete power to enforce payment at law, it is very clear that he has the legal advantage. Shall equity take away this legal advantage from a fair purchaser without notice? I think not. Murray v. Lylburn, 2 Johns. C. R. 441; Eivingston v. Dean, Id. 479.

I am, therefore, of opinion to reverse the decree ; and if the facts distinctly appeared in evidence as to the assignment, I should direct a dismission of the bill. In the present aspect of the case, I think it better to send it back, with directions that Murrell & Meem be made parties, as the real contest is between them and the appellants. If the appellants refuse to make them parties, then their bill should be dismissed for want of proper parties.

*The decree entered by the court declared, that if Murrell & Meem took the assignment of Franklin’s bonds from Moore, and gave notice of the assignment to Franklin, before they received any notice of Hancock’s claim to charge the land with the unpaid balance of the purchase money due to him from Moore ; in such case, if Hancock might otherwise have had a just claim in equity, so to charge the land with the balance of the purchase money due to him from Moore, that right was lost, and the assignees Murrell & Meem, had a preferable right to the amount of Franklin’s bonds assigned to them; that Murrell & Meem, being thus parties in interest, ought to be made parties defendants in the cause ; and that the chancellor erred in decreeing in favor of the appellees, before Murrell & Meem were brought before the court to assert their rights: Therefore, the decree was reversed, with costs, and the cause remanded to be further proceeded in, according to the principles here declared.