Case ID: ohio-st_57/html/0148-01.html
Source: Caselaw Access Project
Author: {"author": "Williams, J. Minshall and Spear, JJ.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Sternberger and Willard v. Ragland.
    
      Record of mortgage— When not constructive notice of unrecorded deed — Effect of such deed as against subsequent purchaser— Section 4134, Revised Statutes — Purchaser at judicial sale— When within protection of statute — Rule where judgment creditor is purchaser.
    
    1. A purchaser of real property from one who appears of record to have the title is not required to examine for 'mortgages made to the latter after he became the owner; nor, is the record of such a mortgage constructive notice to the purchaser, of a prior unrecorded deed made by his grantor to the mortgagor.
    2. Under the provisions of section 4134, of the Revised Statutes, until a deed is filed for record it is ineffectual to convey the property as against a subsequent bona fide purchaser who, at the time of his purchase, had no knowledge of the existence of such deed.
    3. Where a judgment debtor appears of record to be the owner of real property, it is subject to the liens of judgments recovered against him and to judicial sale thereunder; and a bona fide xDurchaser at such sale, without notice of an unrecorded deed made by the judgment debtor before the rendition of the judgment, is within the protection of the statute, and acquires the title as against the grantee in the deed; and in this respect the rights of the judgment creditor, when he becomes the purchaser, are not different from those of other purchasers at judicial sales.
    (Decided November 23, 1897.)
    Error to the Circuit Court of Jackson county.
    On the 22d day of January, 1889, the defendant in error, William Ragland, purchased a town lot in Jackson, from the Woocl-Coffman Manufacturing Company, then the owner thereof, and obtained a deed for the same in fee simple. He paid a part of the purchase price, at the time of the conveyance to him, and gave a mortgage on the lot to secure the payment of the balance. This mortgage, which contains a recital that it was given to secure the unpaid purchasemoney, was recorded in April, 1889. The deed was never filed for record. After the conveyance was made and the mortgage recorded, judgments were recovered in the court of common pleas of Jackson county, against Ragland’s grantor, which were purchased in good faith by the defendant in error, Morris L. Sternberger, who paid full value therefor; and executions issued thereon were levied on the lot in question, which then appeared of record to belong to the judgment debtor, and it was thereafter sold under the writs to satisfy the judgments. Sternberger became the purchaser at the sale, which was confirmed by the court, and the sheriff in pursuance of the order of the court executed a deed to Sternberger for the lot, in due form of law, which he caused to be placed upon record. The proceeds of the sale, after payment of the costs and. taxes, were applied under the order of the court toward the satisfaction of the judgments. Sternberger then sold, and conveyed by quitclaim deed, the undivided one-half of the lot to his co-plaintiff in error, Henry S. Willard, who paid full value therefor, and promptlv placed his deed on record. Thereafter, Ragland brought suit to quiet his title to the lot against Sternberger and Willard, who set up their respective claims to its ownership. The case went on appeal to tíre circuit court where a finding was made of the facts, which, in addition to those already stated, are as follows: “The lot described in the petition was not improved, or fenced, and not occupied except occasionally for the storage of small quantities of lumber by the plaintiff, and some fence posts have remained and still remain on said lot; otherwise, said lot was vacant, and, at the time of the purchase by said Sternberger, at sheriff’s sale, the character and nature of the plaintiff’s possession was not of such nature as to place said Sternberger upon inquiry or notice, nor was it of such a character as to place said Willard upon inquiry or notice when he purchased. The Wood-Coffman Manufacturing Company was, upon the deed records of said county, the apparent owner when the sheriff’s sale was made. The defendant, Morris L. Sternberger, when he purchased said lot at sheriff’s sale, paid value therefor in the purchase of said judgments, and he had no notice, actual or constructive, of plaintiff’s claim thereto, unless the mortgage of plaintiff to said company was constructive notice, which we hold not to be constructive notice to him; and the defendant, W illard, when he purchased from said Sternberger, paid value therefor, and he had no notice, actual or constructive, of plaintiff’s claim, unless such mortgage was constructive notice, which we hold was not constructive notice to him; and neither of the defendants had notice of plaintiff’s deed to said lot or claim thereto.”
    Upon this state of facts the court held, as its conclusions of law, as appears from the record that: “The Wood-Coffman Manufacturing Company having conveyed said lot by deed to plaintiff, although said plaintiff .never had said deed recorded, had no; further interest in said lot which could be sold at judicial sale, although it was the apparent owner of said lot upon the records, and the defendant, Sternberger, though purchasing said lot for value and without notice, could not obtain title thereto bjr purchasing at said judicial sale.”
    Thereupon judgment was rendered against Sternberger and Willard, which they seek to have reversed here.
    
      T. A. Jones, for plaintiffs in error.
    Our registry statutes protect purchasers at judicial sales as well as those at private sales. Ragland’s deed, never having been recorded, is fraudulent as against Sternberger and his grantee, both of whom purchased for value and without notice.
    The conclusion of law of the circuit court is in direct and positive conflict with our statute law and the decisions of our Supreme Court. Revised Statutes, section 4134 ; Morris v. Daniels, 35 Ohio St., 406; Scribner’s Lessee v. Lockwood, 9 Ohio, 184.
    The principal contention of defendant in error’s attorney was that Sternberger was not entitled to be protected as a bona ficle purchaser, because he was an assignee of a judgment creditor, and therefore not a purchaser for value.
    The circuit court, however, refused to entertain that view, but on the contrary found that Sternberger paid full value.
    In Ohio, in the following cases, the -judgment creditor purchasing, were protected: Lessee of Paine v. Mooreland, 15 Ohio, p. 435; Fosdick v. Barr, 3 Ohio St., 471; Butterfield v. Walsh, 21 Iowa, 99; Evans v. McGlasson, 18 Iowa, 150; Foorman v. Wallace, 75 Cal., 552; Rorer on Judicial Sales, section 708; Barto v. Bank, 15 Hun., 11.
    
      But Sternberger occupies a more favorable position than an ordinary execution creditor. 1. He was the assignee of the creditor, Dungan, and paid full value; he was a lienee owning’ other judgments. 2. He paid out over $500.00 in cash. There was an essential change in his condition.
    The court properly found that he paid value.
    Ragland’s deed, for want of record, is condemned as fraudulent, and Sternberger was entitled to the protection given bona fide purchasers, otherwise he would lose what has been paid by the fault of Ragland. McBride & Murphy v. Longworth, 14 Ohio St., 349.
    However Sternberger may be considered, his grantee, Willard, also being a purchaser for value without notice, under his deed, is also entitled to the protection of the statute. Brown v. Banner Coal Co., 97 Ill., 214; Martindale’s Law of Conveyancing, section 59; Fox v. Hall, 74 Mo., 315; Cutler v. James, 64 Wis., 173; 1 Devlin on Deeds, section 673.
    
      S. F. White and John Harper, for defendant in error.
    Plaintiffs in error seek to maintain this suit on the ground that they are purchasers in good faith, without notice, and for full value of the lot in question, and entitled to protection under section 4134, Revised Statutes of Ohio.
    Such a claim has no support in the record of-this cause.
    I. The claim of a bona fide purchaser is of no avail to any one except- the holder of the legal title. Woods et al. v. Dill et al., 11 Ohio, 455; Larrowe v. Beam, 10 Ohio, 498; Anketel v. Converse, 17 Ohio St., 11; Elstner v. Fife, 32 Ohio St., 358.
    
      The deed of the sheriff is essential to invest the purchaser with the legal title. Without confirmation the sheriff has no authority to execute a deed, and any attempt to do so is wholly invalid. Curtis v. Norton, 1 Ohio, 278; Bassett et al. v. Daniels et al., 10 Ohio St., 620.
    The sheriff’s deed was executed to Sternberger on July 3, 1891, while the sale was confirmed on July 8, 1891.
    The record therefore shows conclusively that the deed of the sheriff, upon which plaintiffs in error base their claim of title, was executed five days before the sale was confirmed.
    For that reason the plaintiffs in error are precluded from claiming the protection of the statute.
    II. To constitute one a bona fide buyer within the meaning of the statute above referred to he must pay full value at the time of his purchase. He must either pay money or its equivalent. 2d Warvelle on Vendor, 610.
    An execution creditor, purchasing at his own sale, pay's no value at the time of his purchase. He parts with his money or its equivalent, at the time the debt or obligation upon which the judgment rests was incurred. Freeman on Execution, vol. 2, section 344. Lewis v. Anderson, 20 Ohio St., 281; Eaton et al. v. Davidson et al., 46 Ohio St., 355.
    When Sternberger purchased the judgment on which this sale was made, he stepped into the judgment creditor’s shoes, and it was then that he parted with his money.
    In the sale of property he was in fact the execution creditor, and in the - purchase of the lots he parted with nothing that would constitute him. a purchaser for value in the sense contemplated by the statute.
    These judgments were in no sense liens on the lot in question for the legal title thereto was in Ragland, a stranger to said judgments. Neither did the levy create a lien thereon, because the lot was not in fact subject to such seizure.
    Ragland could have intervened by motion or injunction and successfully resisted the confirmation after all costs had accrued on the execution sale. In such case neither Ragland nor his lot would have been liable for the cost of the sale or the judgments upon which it was made, but the costs would attach to the property actually belonging to the judgment debtor.
    A large number of lots actually owned by the judgment debtor were sold. It was on these that the costs were incurred. So far as the record discloses, it was upon these that the large amount of taxes paid, were due, and so far as anything appears by the record, Sternberger bid and paid no more than he would, had this lot not been included in the levy.
    III. The first conclusion of law seems to be supported by some courts of the other states, but there appears to be no decision of the precise question by the Supreme Court in this state.
    Section 1153, Revised Statutes, requires alphabetical indexes to be kept by the county recorder, showing- the grantor and grantee to each conveyance.
    We think the conclusion of the reporter in the head lines of Leiby v. Wolf et al., 10 Ohio, 83, are correctly drawn from opinion of the court .and set forth the true rule, viz.: “The registry of a deed, the grantor and grantee in which are both out of the chain of title as recorded, is no notice to a subsequent purchaser. ” In our view of the above case there is no distinction between a deed and a mortgage.
    By its acceptance and record of the mortgage from Ragland, The Wood-Coffman Manufacturing Company was estopped from denying title in him, independently of its deed to him, or the record thereof, had it been recorded. Kelley et al. v. Stanberry et al., 13 Ohio, 408.
    The estoppel adhered to the lot itself. It runs with the land into whose hands it may come. Douglas v. Scott, 5 Ohio, 195.
    The plaintiff in error, Willard, obtained by his deed from Sternberger only such title as Sternberger had.
    A purchaser under a quitclaim deed may be protected, yet the character of the deed is a notification to him to search for himself.
    Willard was bound to search the record and take notice of Sternberger’s title. 2d Warvelle on Vendors, 615; 5 O. C. C., 385.
   Williams, J.

The question in the case . is whether Sternberger, under the judicial sale, became a bona fide purchaser within the rule which protects such purchasers against unrecorded conveyances. It must be reg-arded as established by the facts found in the court below, that there was not such possession of the lot by Rag-land as put Sternberger. upon inquiry, or charged him with notice of any claim or equity of the former, either, when the judgments were recovered, or the executions levied, or when the sale was made and confirmed, or the. deed from the sheriff was received by Sternberger; and also, that Sternberger was without any actual knowledge of Ragland’s unrecorded deed, or of any claim by him to any interest in the lot.

The record of the mortgage executed by Ragland for the unpaid purchase money for the lot, was not constructive notice of his unregistered deed, to a subsequent purchaser from his grantor.

When a prospective purchaser finds a complete record title in the proposed seller, he is not bound to examine for mortgages made to the latter after he became the owner; such a mortgage is not in the chain of his title, and is not, therefore, constructive notice to a subsequent purchaser, of a prior unrecorded deed made by him to the mortgagor. The circuit court so held. But, notwithstanding its finding that Sternberger was a purchaser at the judicial sale for value and without notice, actual or constructive, of any adverse claim of Ragland to the premises he so bought, the judgment of the court was adverse to him. The judgment appears to rest upon the ground that the deed to Ragland, though unrecorded, divested his grantor of all interest in the lot, and thereafter nothing remained in the judgment debtor, although appearing’ of record to be the owner of the lot, upon which the judgments became liens, or that could be sold at judicial sale thereunder.

It is undoubtedly the general rule, except in so far as it is modified and controlled by statute, that a judgment creditor obtains a lien only on such interest in lands as his debtor had when the judgment was rendered, and, it is subject to such equities as could then be successfully asserted against the debtor. But our statute (section 4134, Revised Statutes), requires that all deeds and instruments for the conveyance of lands, or interests therein, “shall be recorded in the office of the recorder of the county in which the premises are situated,” and provides that, “until so recorded or filed for record, the same shall be deemed fraudulent, so far as relates to a subsequent bona fide purchaser, having, at the time of purchase,-no knowledge of the existence of such former deed or instrument.” This statute renders any prior unrecorded deed wholly ineffectual to convey the title out of the. grantor, as against a subsequent bona fide purchaser from him., and leaves him with as full and ample power to convey a good title to such subsequent purchaser as if the prior conveyance had not been made. And, it is settled by the adjudications of this court, that purchasers at judicial sales, without notice of a prior unrecorded deed from the judgment debtor, are within the protection of the statute equally with purchasers at private sale. Scribner’s Lessee v. Lockwood, 9 Ohio, 184; Morris v. Daniels, 35 Ohio St., 406.

The title acquired by Sternberger at the judicial sale was, therefore, superior to that" of Ragland, unless the former is to be denied the position of a bona fide purchaser because he was the owner of the judgments under which the sale was made.

It is claimed that as he was the owner of the judgments at the time of his purchase, and their satisfaction pro tanto was the only consideration he paid, he does not come within the rule in favor of banco fide purchasers. This position is sought to be sustained by Lewis v. Anderson, 20 Ohio St., 281. But that case simply holds, that: “Where there is no consideration for a mortgage of real estate other than a pre-existing debt of the mortgagor, and the mortgagee is not induced thereby to change his condition in any manner, he cannot he regarded as a bona fide purchaser for value.”

That decision is placed upon the ground, as stated in the opinion, that, “the rule which favors a bona fide purchaser of land, and that which protects the holder of negotiable paper for value before due from infirmities affecting the instrument before it was transferred, are based substantially on the same equitable grounds, and upon the policy of the law which favors trade and the security of titles, as conducive to the public good.” And in that case, Roxborough v. Messick, 6 Ohio St., 448, is cited, where the rules applicable in determining what considerations are sufficient to protect the holders of commercial paper are fully considered, which, as there laid down, have since been regarded as the settled law on that subject. It is there held, that while a voluntary transfer of a negotiable instrument to secure a pre-existingdebt, where the parties are left in respect to such debt in statu quo, there being- no new consideration, stipulation for delay, or credit given, or right parted with, is not sufficient to protect the holder against equities existing between the prior parties at the time of the transfer, yet, when the note is transferred in payment of the precedent debt, the consideration is sufficient to entitle the holder to such p rotection. ‘ ‘ The weight of authority, ’ ’ says Swan, J., in that case, “ seems to settle the principle, that where a negotiable instrument of a third person is transferred before due, in payment of a pre-existing debt, and is bona fide received by the creditor, without notice, the defenses existing as between the prior parties cannot be set up against such holder.” And that learned judge further says, in that ease, that there is “no substantial difference between the consideration for the transfer of negotiable paper in payment of a precedent debt, or in payment of goods sold at the time of such transfer.” Applying these principles to a purchaser of real property, it was held in Clements v. Doerner, 40 Ohio St., 632, that a purchaser who takes a conveyance of real estate in payment of a pre-existing debt is a bona ficle purchaser for value, and entitled to be protected as against a prior defective mortgage made by his grantor. When the conveyance is received in payment of the debt, there is a change in the situation of the parties; the debt is for the time being, at least, discharged; and, though the creditor may be restored, upon failure of his title to the property, to his right to enforce the collection of the debt, so recovery may be had for any other consideration parted with for the property, where the title for any cause fails.

If it be said Sternberg’er could have the satisfaction of his judgments vacated and new process issued for the collection of the judgments out of any property of the judgment debtor, so, any stranger who might have become the purchaser at the sale, would be entitled to the same remedy. Revised Statutes, sections 5410, 5412. The necessity of resorting to such a remedy is sufficient, of itself, to show that a substantial change occurred in the situation of the parties by the satisfaction of the judgments on the confirmation of the sale; and the neglect of Ragland to have his deed placed on .record, does not entitle him to drive the purchaser, in either case, to that remedy. Had Sternberger made his purchase at private sale, instead of at a judicial sale, there could be no doubt, we think, of the superiority of his right to the property over that of Ragland; and his right in that respect is none the less, because the conveyance was made through the instrumentality of the sheriff and the forms of judicial proceedings, instead of immediately from the judgment debtor. The deed of the sheriff conveyed a title as good and complete as the judgment debtor could have conveyed.

In the note to Basset v. Nosworthy, 2 Leading-Cases in Equity, 110, 111, the conclusion reached after a full discussion of the subject, and review of the cases, is that the weight of authority in this country is “in favor of the proposition that a purchaser at a judicial sale, stands on the same footing with a purchaser directly from the debtor; and, that a purchaser at such sale will take the land discharged of any claim or title, whether arising under an unregistered deed, or a mere equity, of which he had no notice at the time of the purchase, and which would be invalid as against an ordinary purchaser;” and furthermore, that the rule is the same “when the judgment creditor becomes the purchaser, because the money which he pays goes in satisfaction of the debt; and every additional bid is necessarily an advantage to the ' defendant in the judgment. ’ ’ The following, among others, may be added to the cases there cited in support of the rule as stated: Foorman v. Wallace, 75 Cal., 552; Evans v. McGlassen, 18 Iowa, 150; Butterfield v. Walsh, 21 Id., 97; Rorer on Judicial Sales, sections 866, 874.

Judgment reversed and judgment for the plaintiffs in error.

Minshall and Spear, JJ.,

dissent from the last clause of the third paragraph of the syllabus, and from the judgment of reversal.