Case ID: ohio-cc-dec_15/html/0781-01.html
Source: Caselaw Access Project
Author: {"author": "WINCH, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CONTRACTS — MORTGAGES—NOTICE—LiS PENDENS.
    [Cuyahoga (8th) Circuit Court,
    November 23, 1903.]
    Hale, Marvin and Winch, JJ. ■
    Wood Sash, Door & Paint Co. v. A. W. Burrows et al.
    1. Executory Land Contract or Mortgage From Executory Vendee not Entitled (ro Record — Not Constructive Notice.
    Neither an executory contract for the sale and purchase of real estate, nor a mortgage given by a vendee in possession before receiving a deed, is entitled 1 c record under Secs. 4133 and 4134 Rev. Stat., nor is a mortgage given by the vendee, before receiving a deed and which has been recorded in the office of the county recorder, constructive notice to a subsequent assignee of the contract or to those claiming under him.
    2. Bona Fide Purchaser Claiming Through Executory Contract Given in Judicial Proceeding Protected Against Prior Mortgages.
    Where a trustee, appointed by the court in a proceeding commenced under Sec. 5803 Rev. Stat., to sell an entailed estate, executes an executory contract for the sale of the land, which is confirmed by the court and recorded upon the court record, and possession is given thereunder to the vendee, and such vendee, before completing his contract and receiving a" deed, gives a mortgage upon the land to a third person, which is recorded but is not brought to the notice of or confirmed by the court, and thereafter the vendee, with the approval of the trustee, assigns his contract to another who has not actual knowledge of the mortgage, which assignment is confirmed by the court, and such assignee completes the contract and receives a deed from the trustee, which is confirmed by the court, and the land is subsequently conveyed to a tona fide purchaser who is without actual knowledge of the mortgage: Held, such tona fide purchaser is not bound to search the records for mortgages from a vendee who has not received a deed for the land, nor is he charged with constructive notice thereof, but takes the land free and clear from such incumbrance.
    3. Prior Equitable Right Lost by Laches.
    The rule in equity that he who is first in time is first in right has no application where the former has been guilty of laches which vitiates his right to enforce it against the other who has been more vigilant; and a fortiori where the latter has perfected his title in law. Hence, although in the case above stated, the mortgage was an equitable assignment to the mortgagee of the interest of the vendee in the land, and was prior in time to the assignment of the contract and the delivery of the deed, yet the mortgagee lost his priority in failing to bring his mortgage to the attention of the court and having it confirmed and entered upon the record of the court proceeding before the assignment of the executory contract and the execution and delivery.of the deed to the assignee.
    
      4. Doctrine of Lis Pendens.
    The doctrine of Us pendens is notice to the world of the rights claimed by the parties in the subject matter of an action during its pendency, and rights acquired therein during the pendency of the action are bound by the final judgment; but such doctrine has no application to persons acquiring rights ill accordance with, and relying upon, the final decree.
    Appeal from the court of common pleas. ,
    Samuel Williamson, executor of the estate of Thomas Bolton, deceased, began proceedings in the court of common pleas for the purpose of selling some entailed real estate belonging to said estate.
    The court found upon due hearing that it would be for the best interest of the estate and of all parties interested therein to sell said property, and appointed C. C. Bolton trustee to plat and sell the same and r.eport his proceedings to court for confirmation. This order was made in July, 1895.
    On October 8, 1897, said C. C. Bolton, trustee, contracted to sell to the defendant, A. W. Burrows, sublots Nos. 1 to 22 for $20,800 and agreed to give deeds for each sublot separately upon payment for that sublot. The price of'sublot number nine in question in this case was $1,000.
    The contract between Burrows and Bolton was reduced to writing and signed and witnessed and on October 11, 1897, was duly approved by the court of common pleas as being for the best interest of all parties and was duly confirmed. That contract was recorded in Vol. 541, page 25 i of the records of said common pleas court.
    Burrows took possession of said property under this contract and began the erection of certain houses thereon.
    In February, 1898, he paid Bolton the sum of $600, of which $300 were to be applied to the payment of sublot number nine.
    He began the erection of a house upon lot No. 9 as well as other houses on other sublots of this same property.
    While in possession of the property under this contract, BurroXvs gave to the plaintiff, in this action, a note for $580, and to secure the payment thereof, executed and delivered to plaintiff a mortgage on sublot No. 9. The mortgage was executed in all particulars in accordance with Sec.' 4106 Rev. Stat. and was handed to the county recorder for record, on the same day and was duly recorded.
    At -the time of giving this note and mortgage the house being erected on sublot No. 9 was reasonably worth $2,000.
    After the execution and delivery for record of this mortgage, Burrows assigned to Clark and Benton all his right, title and interest in his land contract and this assignment was duly approved by the court of common pleas. He delivered possession of the premises to Clark and Benton.
    Thereafter Clark and Benton paid to' Bolton the balance of the $1,000 purchase price of sublot No. 9 and received from him a deed therefor, reciting his authority under the aforesaid order of the court.
    To secure money to pay this balance due for this sublot under the contract, Clark and Benton gave a mortgage to The Permanent Savings & Loan Co. and afterwards sold the house and lot to defendant, Grace Heyner, and she, to pay Clark and Benton and The Permanent Savings & Loan Cov gave a mortgage, to The Cleveland Trust Co.
    Clark and Benton gave Grace Heyner a warranty deed.
    At the time Clark and Benton took possession of these premises, they knew of the possession of Burrows and of the buildings which were in process of erection by him, but there is no evidence that Grace Heyner had any actual knowledge of either the land contract or the mortgage which Burrows had given to plaintiff.
    Plaintiff claims that this mortgage executed to it by Burrows was such a paper as was entitled to record, and that the record of the mortgage is constructive notice to the world of the rights of plaintiff therein, and that, therefore, all who succeeded to the title to sublot No. 9 after this mortgage had been left for record took subject to plaintiff’s claim.
    Defendants claim that this mortgage is not an instrument that was required to be recorded and that, therefore, no constructive notice could be chargeable to defendant, Grace Heyner; that the land contract between Bolton and Burrows was not entitled to record, and that, therefore, this mortgage, having for its source only this contract, stands necessarily upon the same ground; that, if the contract is not entitled to record, neither is the mortgage.
    Allison M. Gibbons, for plaintiff:
    The land contract was entitled to record. Section 4134 Rev. Stat.; 16 Am. & Eng. Enc. Law (2 ed.) 158; Newcomb v. Fiedler, 24 Ohio St. 463; Jones v. Lewis, 8 Re. 368 (7 Bull. 211) ; Baldwin v. Boole, 74 Ill. 97; Smith v. Price, 42 Ill. 399; Kicker v. Moore, 77 Me. 295.
    Vendee’s interest in the land. Sites v. Keller, 6 Ohio 483, 484; Pollard v. Kinner, 6 Ohio 528; Brock v. Hidy, 13 Ohio St. 306; Jones v. Lewis, 8 Re. 368 (7 Bull. 211); Thayer v. Howard, Wright 700; Churchill v. Little, 23 Ohio St. 301.
    Vendee is in possession under land contract. Ives v. Commissioners of Insolvents, Wright 626; Jaeger v. Hardy, 48 Ohio St. 335 [27 N. E Rep. 863] ; Alemania L. & Bldg. Co. v. Frantzreb, 56 Ohio St. 493 [47 N. E. Rep. 497] ; Coggshall v. Bank, 63 Ohio St. 88 [57 N. E. Rep. 1086] ; Sinclair v. Armitage, 12 N. J. Eq. 174, 177; Jones v. Lapham, 15 Kan. 540; Laughlin v. Braley, 25 Kan. 147; Baker v. Bishop Hill Colony, 45 Ill. 264; Avery v. Dufrees, 9 Ohio 145, 147; Brush Elec. Co. v. Electric Mfg. Co. 6 Dec. 475 (4 N. P. 279) ; Loewenstein v. Townsend, 2 Circ. Dec. 424 (4 R. 69) ; Manley v. Hunt, 1 Ohio 257; McCombs v. Ploward, 18 Ohio St. 422, 436; Smith v. Loewenstein, 50 Ohio St. 346 [34 N. E. Rep. 159] ; Brock v. Hidy, 13 Ohio St. 306 ; Manhattan Life Ins. Co. v. Smith, 44 Ohio St. 156 [5 N. E. Rep. 417; 58 Am. Rep. 806] ; Whittier v. Stege, 61 Cal. 238.
    Purchaser from vendor takes subject to rights of vendee. Mutual Aid Bldg. & L. Co. v. Gaslie, 56 Ohio St. 273 [46 N. E. Rep. 985] ; Manley v. Hunt, 1 Ohio 257; Butler v. Brown, 5 Ohio St. 211; Warvelle, Vendors 219, 221; Moretón v. Reese, Wright 381, 382.
    Purchaser with notice of right to possession in another does not take bona fide and without notice. Jones v. Lewis, 8 Re. 368 (7 Bull. 211).
    Right to possession may be express or implied. 1 Warvelle, Vendors 183; Holt v. Hemphill, 3 Ohio 233; Baldwin v. Bank, 1 Ohio St. 141, 148; Mitchell v. Ryan, 3 Ohio St. 377; Dukes v. Spangler, 35 Ohio St. 119, 125; Woolsey v. Seeley, Wright 360; Martin v. Scofield. 41 Wis. 167; Chappell v. McKnight, 108 Ill. 570; Williams v. Forbes, 47 Ill. 148; Druse v. Wheeler, 22 Mich. 439 ; Drake v. Barton, 18 Minn. 462.
    Equitable estates can be mortgaged. Stover v. Bounds, 1 Ohio St. 107, 108; Paine v. Mason, 7 Ohio St. 198; Wright v. Bank, 59 Ohio St. 80 [51 N. E. Rep. 876] ; 20 Am. & Eng. Enc. Law. (2 ed.) 915; Brush Elec. Co. v. Electric Mfg. Co. 6 Dec. 475 (4 N. P. 279) ; Loewenstein v. Townsend, 2 Circ. Dec. 424- (4 R. 69) ; Manley v. Hunt, 1 Ohio 257; Ives v. Commissioners of Insolvents, Wright 626; McCombs v. Howard, 18 Ohio St. 436; Jaeger v. Hardy, 48 Ohio St. 335 [27 N. E. Rep. 863] ; Smith v. Loewenstein, 50 Ohio St. 346 [34 N. E. Rep. 159] ; Alemania L. & Bldg. Co. v. Frantzreb, 56 Ohio St. 493 [47 N. .E. Rep. 497] ; Coggshall v. Bank, 63 Ohio St. 88 [57 N. E. Rep. 1086] ; Jones v. Lapham, 15 Kan. 540; Sinclair v. Armitage, 12 N. J. Eq. 174, 177; Baker v. Bishop Hill Colony, 45 Ill. 264; Crane v. Turner, 67 N. Y. 437.
    Such mortgage is entitled to record. Sections 4106 and 4133 Rev. Stat.; Wright v. Bank, 59 Ohio St. 80 [51 N. E. Rep. 876| ; Churchill v. Little, 23 Ohio St. -301; Bulklev v. Stephens, 29 Ohio St. 620.
    Such record is notice to the world. 2 Dembitz, Land Titles p. 127, n. 25.
    Other court records as notice. 21 Am. & Eng. Enc. Law (2 ed.) 001, n. 2; Roberts v. Doren, 10 Re. 349 (20 Bull. 391); Omwake v. Jackson, 8 Circ. Dec. 235 (15 R. 615) ; 11 Am. & Eng. Enc. Law (1 ed.) 445; Cooley, Taxation 238; 11 Am. & Eng. Enc. Law (2 ed.) 1010, 1012; Williamson v. Jones, 43 W. Va. 562 [21 S. E. Rep. 411; 38 L. R. A. 694; 64 Am. St. Rep. 891]; Peto v. Hammond, 30 Beav. 495: Pomeroy, Eq. Jurisp. Secs. 626 to 628; Wade, Notice Secs. 46, 251, 252, 261; Rorer, Jud. Sales.Secs. 113, 114; Scott v. Douglass, 1 Ohio (pt. 1) 221; McChesney v. Wainwright, 5 Ohio 452; Larrowe v. Beam, 10 Ohio 498; Bonner v. Ware, 10 Ohio 465; Piatt v. St. Clair, 6 Ohio 227; Mattoon v. Clapp, 8 Ohio 248; Reeder v. Barr, 4 Ohio 446 -[22 Am. Dec. 162] ; Woods v. Dille, 11 Ohio 455; Nellons v. Truax, 6 Ohio St. 91; Betz v. Snyder, 48 Ohio St. 492 [28 N. E. Rep. 234; 13 L. R. A. 235] ; Cunningham v. Buckingham, 1 Ohio 264; Williams v. Sprigg, 6 Ohio St. 585; McKinzie v. Perrill, 15 Ohio St. 162; Morris v. Daniels, 35 Ohio St. 406, 414; see, also, Bodely v. Ferguson, 30 Cal. 511; Sellers v. Corwin, 5 Ohio 398, 409 [24 Am. Dec. 301] ; Reynolds, In re, 16 Nat. Bank Reg. 158; Van Gorder v. Lundy, 66 Iowa 448 [23 N. W. Rep. 918] ; Wagner v. Cohen, 6 Gill (Md.) 97, 102, 104 [46 Am. Dec. 660] ; Procter v. Farnam, 5 Paige 614.
    Henderson & Quail, for The Cleveland Trust Co. and Grace E. Ileyner:
    A mortgage upon the equitable interest created in a vendee by a land contract is not an instrument entitled to record under our recording-statutes (Secs. 4133 and 4134 Rev. Stat.), and, if recorded, is not constructive notice of the rights of the mortgagee. Section 4106 Rev. Stat. contains the only pertinent provisions found in the chapter for the execution- of instruments, viz., “A deed, mortgage or lease of any estate or interest in real property shall be signed by the grantor, mortgagor or lessor, and such signing shall be acknowledged,” etc.
    The mortgage given by Burrows to the plaintiff operated simply as an assignment of the land contract which he had with Bolton, but it is claimed that, being- executed in conformity with Sec. 4106 Rev. Stat., it is entitled to record as a -mortgage upon some “estate or interest in real property.” We maintain that the interest which Burrows had could not be enlarged by the form or character of the instrument by which it is conveyed. Churchill v. Little, 23 Ohio St. 301, 308.
    If the contract itself was not entitled to record, no- assignment of it, however formal, is entitled to record. Indeed, the Supreme Court, in this’ same case, has said, in substance; that if the contract is not entitled ty record, “the instrument by which the contract is assigned stands necessarily upon the same ground.”
    The land contract was not entitled to record as conveying “any estate or interest in real property.” Churchill v. Little, supra.
    
    The mortgage (to use the words of Judge Hale in Wiggins v. Campbell, 4 Re. 122 [2 Clev. L. Rep. 122]) “not being an instrument that was required to be recorded, no constructive notice can be chargeable ” to the defendants, The Cleveland Trust Company, or Grace E. Heyner.
    Arnold Green, for Grace Heyner, cited:
    12 Am. & Eng. Enc. Law (1 ed.) 208; Secs. 5803, 5807, 5813 Rev. Stat.; Rorer, Jud. Sales Secs. 29, 64, 76, 10C, 108, 109, 128, 962, 963, 964, 965.
    A purchaser will not be aided in equity when there is no confirmation, although he has paid the purchase money. Dickey v. Beatty, 14 Ohio St. 389; Lieby v. Ludlow, 4 Ohio 469, 493; Rorer, Jud. Sales Secs. 130, 131, 148, 166, 182, 498: Reynolds v. Coddington, 1 Gaz. 108; 12 Am. & Eng. Enc. Law (1 ed.) 219, n. 2.
   WINCH, J.

Thomas Bolton died years ago, leaving certain of his real estate entailed. His executor began proceedings under the statutes regulating the sale of entailed estates, pursuant to which the court appointed Charles C. Bolton trustee, with directions that he plat and sell said real estate.

On October 8, 1897, said Charles C. Bolton, as such trustee, entered into a written contract for the sale to the defendant, A. W. Burrows, of a certain lot in the plat which he had made. The price of the lot was $1,000 and the contract was signed by the parties to it and their signatures attested by two witnesses, but it was not acknowledged. This contract was reported to the court, duly approved and confirmed by it, ordered to be recorded on the records of said court and thereafter duly recorded on said records.

Burrows took possession of the lot pursuant to the terms of his contract and began the erection of a dwelling house thereon. He had paid $300 on the consideration named in the contract and expended $2,000 in the erection of said house, when, on March 3, 1898, being still in the possession of said premises, he executed and delivered to plaintiff a mortgage on said lot to secure the sum of $580 due it for material and supplies theretofore furnished by it towards the erection of said house. Said mortgage was executed in all particulars in accordance with Sec, 4106 Rev. Stat. and was duly left for record vGth the county recorder on the day it was executed and thereafter by him duly recorded.

After the delivery and recording of said mortgage, but on the same day, Burrows assigned his contract for the purchase of said lot to the defendants, Clark and Benton, and delivered possession of the premises to ■them. This assignment of the contract was reported to the court, approved by it and the, trustee was'Ordered to carry out the terms of the contract with Clark and Benton, upon their fulfilling their part of said contract. This they did, paid the balance of the purchase price due thereon and received from the trustee a proper deed of the premises, which they duly recorded.

Thereafter Clark and Benton conveyed said premises for a valuable consideration by warranty deed to the defendant, Grace Heyner.

Neither Clark and Benton nor Grace Heyner had any actual knowledge of the mortgage to plaintiff until after the transactions above stated.

Suit being brought by plaintiff to foreclose its mortgage, the only question presented for the consideration of this court is whether the record of said mortgage was constructive notice to subsequent bona fide purchasers of said premises without actual notice of the mortgage.

We think this case must be decided against the plaintiff upon the authority and reasoning of the case of Churchill v. Little, 23 Ohio St. 301, the syllabus of which reads as follows:

“When an executory contract for the purchase of land is assigned by the purchaser, either absolutely or as collateral security, and the assignor subsequently mortgages the contracted premises, the relative rights of the assignee and mortgagee are not determined by the fact that the mortgage was duly executed and recorded. In such case, and between parties thus situated, the act providing for the execution and recording of deeds, * * * has no application.”

When Churchill v. Little, supra, was decided the statute regulating the execution of instruments for the conveyance' of land included only instruments by which land should be conveyed or otherwise affected or incumbered in law. The court held that an executory contract for the purchase and sale of land is not an instrument of that character; that though it is a legal instrument and forms the basis of legal as well as equitable remedies, it does not convey, or purport to convey, or legally to incumber or affect any estate or interest in the land.-

The statute now in force (Sec. 4106 Rev. Stat.) provides how “a deed, mortgage, or lease of any estate or interest in real property” shall be executed, and there can be no question that the chapter of the statutes treating on conveyances and incumbrances makes no provision for the execution of land contracts.

In said chapter Secs.-4133 and 4134 Rev. Stat. provide that all mortgages and all other deeds and instruments of writing for the conveyance or incumbrance of any lands, tenements or hereditaments, “executed agreeably to the provisions of this chapter,” shall be recorded, etc.

There being no provision in the chapter regulating the execution of land contracts, it follows that such contracts are not entitled to record. The contract between Bolton, trustee, and Burrows, was not acknowledged, in itself a fact precluding its record. The contract not' being entitled to record, it follows under the decision in Churchill v. Little, supra, page 308, that the mortgage, “-the instrument by which the contract is assigned, stands necessarily upon the same ground.”

Following the reasoning of Churchill v. Little, supra, on page 310 of said report, if we are right in the above conclusion the plaintiff, as well as the defendants, Clark and Benton, are to be regarded as the assignees of the equitable interest of Burrows, and, as such, they stand upon the same footing, with at least this difference, that the assignment to the plaintiff was prior in time.

“The general rule in such cases is, that he who is first in time is first in right, but this rule is not of universal application. In a contest between equities it is not allowed to prevail, where it appears from any fapt or circumstance in the case, independent of priority of time, that the holder of the junior equity has the better right to perfect his equitable title or interest by calling in the outstanding legal estate. In such case he has the better equity. Prima facie, however, the assignee of an equity must abide the case of the assignor, and the superiority of the equity of the first purchaser is, in general, undeniable, unless he. has been guilty of laches, which vitiate his title or deprive him of the right to enforce it against others who have been more vigilant.”

Confining our inquiries for the present as to the lelations of plaintiff to Clark and Benton, was plaintiff guilty of any such laches as to deprive it of the right to enforce its mortgage against them?

It seems that plaintiff gave no notice of its mortgage to Bolton, trustee, neither did it report the mortgage to the court and ask for its approval of this partial assignment of the contract to it. The record of the mortgage was certainly no notice, constructive or otherwise, to the 'court or to Bolton, trustee, if he may be called the vendor. The better view of the case is that the court, not the trustee or officer appointed by it to make sale, is the vendor; but assuming that Bolton, trustee, was the vendor, there is no rule of lew requiring a vendor to search the records for iucvml.ranees by the vendee before deed is finally delivered pursuant to the contract.

Had plaintiff notified the trustee, actual knowledge of its claim would doubtless have come to Clark and Benton before the trustee accepted them on the contract with Burrows and before the court approved the assignment of the contract to them.

The plaintiff neglected to require Burrows to produce his contract with the trustee and deposit it with the mortgagehad this been done Burrows would have been unable to assign the contract to Clark and Benton or the)’ would have been put upon inquiry as to what had been done with the contract by Burrows.

Not only did plaintiff give the trustee and court no notice of its mortgage, but it at no time paid or offered to pay the balance due on the contract to the trustee.

Plaintiff took its mortgage as security for a preexisting debt, and it would seem that by its laches it lost the better right it may have had by reason of its prior equity to perfect its title.

I f then, as between plaintiff and Clark and Benton, the latter had the better right to call in the outstanding legal title, and did so, in how much better position is the defendant, Grace Heyner, the present owner of the legal title, who is a bona fide purchaser for value and without notice of plaintiff’s claims.

It remains to consider the contention made, by plaintiff that Grace Heyner, holding a title coming through the proceedings of the court for the sale of ap entailed estate, by the record of such proceedings, was advised that Burrows at one time had an interest in the property by way of executory contract and so was bound to search the records for conveyances and incumbrances by Burrows during the time that he held such interest. In other words plaintiff urges the application of the rule of notice from lis pendens.

As we understand the doctrine of lis pendens, a pending suit is notice to all the world of rights claimed by parties to the suit during its pendency. Grace Heyner bought long after final order regarding this property and when the record of the suit had to be examined by her, it showed that the court had approved a contract with Burrows; that he had assigned said contract to Clark and Benton; that they had succeeded to all of Burrows’ rights, had complied with the terms of the contract, became entitled to a deed and had received it pursuant to the court’s orders. She found an adjudication of the court and a decree transferring the title to the property from the Bolton heirs to Clark and Benton. Burrows was as much concluded by this decree as anybody could be. In one sense, as purchaser under the order of sale, he was a party to the case and all his rights, including all rights granted by him during the pendency of the case, were judicially determined therein.

Plaintiff acquiring its rights from Burrows during the pendency of this case which was lis pendens to it, could have applied to the court for an adjudication of its claims. By failing to do so it is bound by the final decree in the case vesting the title in Clark and Benton.'

We find there is no equity in plaintiff’s claim and decree may be drawn accordingly.