Title: Tri-State Nat. Bank v. Saffren

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Tri-State Nat. Bank v. Saffren1986 WY 193726 P.2d 1081Case Number: 86-7Decided: 10/23/1986Supreme Court of Wyoming
TRI-STATE NATIONAL BANK, 
a bank in South Dakota, Appellant (Defendant), Thomas E. Worden, and Carol J. 
Worden, husband and wife, (Defendants),

v.

Benjamin SAFFREN, 
Appellee (Plaintiff), Teri W. Matto (Plaintiff).

Appeal from District 
Court, SheridanCounty, James M. Wolfe, 
J.

Robert W. Brown 
(argued), of Lonabaugh & Riggs, Sheridan, for appellant.

William W. 
Harden (argued), Casper, for appellee.

Before THOMAS, C.J., CARDINE, URBIGKIT and MACY, 
JJ., and GUTHRIE, J., Retired.

GUTHRIE, Justice, 
Retired.

[¶1.]     This appeal is from a 
judgment entered by the district court in favor of Benjamin Saffren, appellee, 
who was granted a judgment in the amount of $74,225.00. The judgment established 
a vendor's equitable lien on certain properties located within the United States 
Forest Service area in the BigHornMountains, being a vacation 
cabin, and decreed that the appellee should be allowed to foreclose the lien in 
this amount.

[¶2.]     On July 18, 1980, J. 
Franklin Reed entered into an "Agreement for Sale of Lease and Improvements" 
with Thomas E. and Carol J. Worden covering a substantial cabin built upon land 
owned by the United States and occupied by Reed and his family by virtue of a 
Forest Service Lease or Permit to occupy the land upon which this cabin had been 
built. Some three days prior on July 15th, Reed had delivered a warranty deed 
covering these premises to a friend, Ben Saffren, appellee herein, asking him to 
hold this deed and deliver it to the Wordens when they had completed all the 
requirements of the contract for sale. The contract for sale was executed three 
days later upon July 18, 1980, and at that time Reed as vendor executed and 
delivered a Warranty Deed and Bill of Sale to the Wordens covering the property 
in this action.

[¶3.]     An examination of the 
"Agreement for Sale of Lease and Improvements" reveals these pertinent portions, 
which will be summarized. The total purchase price was $110,000.00 to be paid in 
enumerated installments leaving a balance of $60,000.00 to be paid in annual 
installments beginning on July 18, 1981, with interest at 10%. The lease of the 
land upon which this cabin was situate was to be assigned to the buyers, and if 
the lease was not issued in the buyers' names, this agreement was to be void. If 
buyers sold the property to a third party, the entire balance of the purchase 
price with interest was to become immediately due and payable. This agreement 
does not contain any reservation of title or mention of a lien in Reed, as 
seller, nor does it provide for any other security 
arrangement.

[¶4.]     Prior to his death, 
Franklin Reed assigned his rights to the proceeds due by virtue of this contract 
to his mother, Adeline W. Reed, and Ben Saffren. Adeline Reed's interest in the 
agreement was thereafter assigned to Teri W. Matto who settled this claim after 
trial by agreement with Tri-State National Bank. After the execution of this 
contract and the delivery of the deed and bill of sale, the Wordens moved from 
Sheridan to Belle Fourche, South 
Dakota, in February of 1981. After this move, they 
borrowed some $96,000.00 from appellant Tri-State National Bank. On August 10, 
1981, the Wordens provided to the bank a statement showing this cabin as an 
asset and also showing the payment owed his uncle, J. Franklin Reed, as a 
liability. In February 1982 the Wordens executed to the bank a Security 
Agreement and Financing Statement covering the property which is the subject of 
this litigation.

[¶5.]     On October 19, 1982, 
the Wordens entered into an agreement with the bank to cancel their debt to the 
bank in return for the conveyance or the transfer of the premises in question, 
which was done. The bank claims by virtue of that transfer that its legal title 
to the mountain cabin property should be declared to be free of any 
lien.

[¶6.]     Appellees herein 
commenced this action seeking judgment for the amount remaining due on the 
purchase price, asking that a vendor's equitable lien against the property be 
recognized, established, and foreclosed with priority as against the bank. After 
a trial thereof, the court entered judgment for the remaining balance on the 
contract, established the equitable lien claimed, and ordered foreclosure 
against this property to ensure this payment.

[¶7.]     We must reverse this 
holding.

[¶8.]     Appellant raises 
several questions directed at whether such lien could attach to the property 
herein contending that it was personal property, that the facts herein did not 
justify the attachment of said lien, and being an equitable remedy against lands 
owned by the United States and occupied by virtue of a license that this was not 
such property that could be covered by such a lien. It is further asserted that 
appellees, as assignees, cannot have or enforce a vendor's equitable 
lien.

[¶9.]     The trial court, after 
hearing this matter, affixed and attached an implied vendor's lien upon this 
property, so we will treat this as such property as would be subject to an 
implied vendor's lien in our disposal hereof and shall not proceed with the 
questions of the nature of this estate but deal with whether such lien could 
attach or whether the vendor's lien would be applicable under the factual 
situation herein. The question whether assignees of a so-called implied vendor's 
equitable lien can enforce the same as could the original vendor is decisive in 
our disposal. It is immaterial whether this is such property to which a lien 
would attach if these plaintiffs as assignees cannot assert such 
right.

[¶10.]  The court in its final judgment set out 
the following conclusions of law, which directly cover this question, and 
clearly decide that the appellant as assignee herein could have proceeded to 
foreclose a vendor's equitable lien as Reed, the original landowner, could have 
done. They are as follows:

"1. That the property and 
improvements upon the land consist of chattels, real or 
fixtures.

"2. That J. Franklin Reed retained a 
vendor's lien or equitable charge against the property for the unpaid purchase 
price.

"3. That Plaintiffs' 
purchase money security interest by assignment from Reed gives them superiority 
over other claimants except bona fide purchasers for 
value.

"4. That Plaintiffs have 
a vendor's lien superior to the bank's rights."

[¶11.]  If this lien was not assignable, these 
conclusions, particularly 3 and 4, are in error, and any judgment against the 
appellant cannot be sustained. An assignment of a vendor's equitable lien 
recognizes an assignment of an unwritten agreement being an equitable inchoate 
right, uncertain in its terms, and not based upon any agreement between the 
original parties. It appears upon its face to be a rather unusual thing, being a 
lien, which does not exist until it is attached as a result of the application 
by an equity court of equitable principles to determine that such lien should be 
attached.

[¶12.]  The parties herein have agreed that the 
case of Waechter v. Wilde, 47 Wyo. 363, 38 P.2d 321 (1934),1 recognized and brought into our law 
an implied vendor's equitable lien upon real estate in favor of the vendor, thus 
we are able to and must proceed directly to the matter of the rights of the 
assignees of the original vendor.

[¶13.]  We are compelled to a most-careful 
examination and analysis of the Waechter v. Wilde case, supra, to determine, if 
possible, just what is the nature of the vendor's equitable lien which was 
contemplated and which was brought into our law as a result of that decision. 
This so-called lien is an equitable device, not dependent on contract or 
agreement of the parties, and is not similar to other liens not 
being:

"* * * a specific, or 
absolute charge upon the property, but rather a simple right to resort to the 
same upon failure of payment by the vendee. * * *" Waechter v. Wilde, supra, 38 P.2d  at 322.

This would, in 
effect, appear to be more of an aid to execution or collection of the remainder 
of the purchase price of the land by granting a right to proceed against the 
particular land and to justify this by saying the court has established a lien, 
which exists after it has been judicially declared or 
attached.

[¶14.]  Careful reading of the Waechter case 
clearly sets out the nature of the right, which the court was then recognizing 
and bringing into our jurisdiction. It is, also, quite persuasive that the 
recognized right was confined to the original vendor and vendee, i.e., a right 
which was purely personal to and vested only in the vendor. A reading of that 
case clearly demonstrates that the writer of that opinion viewed and recognized 
the vendor's equitable lien only as a personal privilege applicable to vendor 
and vendee. The words in this opinion are rather persuasive as set out below. It 
is altogether possible that the justice writing that opinion anticipated some of 
the difficulties which might result from honoring such assignments and wished to 
confine its application.

[¶15.]  The language of Lord Eldon, which is 
quoted in the Waechter case with approval, is as follows:

"`It goes upon this; that 
a person, having got the estate of another, shall not, as between them, keep it, 
and not pay the consideration.'" (Emphasis added.) 38 P.2d  at 
322.

[¶16.]  Continuing in the Waechter v. Wilde case, 
which cited with approval from the case of Chilton v. Lyons, 67 U.S. 458, 2 
Black, 17 L. Ed. 304 (1863), appears the following 
language:

"`When one person has got 
the estate of another, he ought not, in conscience, to be allowed to keep it 
without paying the consideration. It is on this principle that Courts of Equity 
proceed as between vendor and vendee. * * *'" (Emphasis added.) 38 P.2d  at 
323-324.

[¶17.]  Justice Riner, writer of the Waechter 
opinion, reiterated and recognized this right and made it applicable to the 
parties, i.e., as a personal right, when he said:

"There is no provision in 
the statutes of this state, to which our attention has been called, which in 
terms interferes with the operation of so beneficient a principle between the vendor and the vendee 
themselves. * * *" (Emphasis added.) Id. 38 P.2d  at 
324.

[¶18.]  It is hard to conceive of an opinion 
which more clearly states that the principle is adopted only as applicable 
between the vendor and vendee, i.e., the parties, and that it was a personal 
right inuring to the vendor.

[¶19.]  In its appeal, appellant poses the 
question directly of possible assignability of this lien and whether it would 
follow assignment of the debt, as follows:

"5. If an implied 
vendor's lien could have been imposed on the property, may such a lien be 
assigned?"

[¶20.]  In seeking an answer to this query, it is 
revealed that there are divergent views on this matter, but it appears that the 
view that such lien is not assignable is most prevalent in this country. This 
condition is well illustrated by these quotations which appear in 
texts:

"In the majority of the 
states, however, in which the lien is recognized, it is regarded as personal to 
the vendor, and not capable of transfer." Tiffany, 5 Real Property, § 1569, p. 
678 (3d ed. 1939) "Whether the vendor's lien is assignable with the debt which 
it secures is a question upon which the authorities are not agreed. Generally, 
in the United States, the lien is considered personal to the vendor, and not 
assignable except under peculiarly equitable 
circumstances."

(Footnotes 
omitted.) 10A Thompson on Real Property, § 5261, p. 545 (1957 Replacement, John 
S. Grimes).

For further 
citations expressing this view, see 92 C.J.S., Vendors and Purchasers, § 390, p. 
330, and 77 A.J.S., § 448, pp. 578-579, which state substantially the same 
thing.

[¶21.]  It is of interest that II Warvelle on 
Vendors, Second Edition, several times cited and relied upon in the Waechter 
case, cites this rule, as follows:

"The great preponderance 
of authority, however, maintains the contrary, and announces the rule that the 
lien which arises by implication of law in favor of the vendor is personal in 
its nature, and not assignable or transmissible, even by express language; that 
it is not only personal to the vendor, but can be enforced only by him and for 
his own benefit." II Warvelle on Vendors, § 697, pp. 825-826 (2d ed. 
1902).

[¶22.]  This writer does infer that the justice 
writing the Waechter opinion being familiar with the subject and the text of 
Warvelle, in the area of these liens, thought it was wise to emphasize the 
personal nature of the lien and did so for that reason by reiterating that it 
was personal. This certainly brought it clearly within the rules before 
cited.

[¶23.]  Because the appellate court in the 
following cited case was faced with the same situation that we face, its 
jurisdiction having theretofore approved and recognized the existence of the 
vendor's equitable lien and in a case involving the validity of an assignment, 
we think the case of Hammond v. Peyton, 34 Minn. 529, 27 N.W. 72 (1886), is 
particularly applicable. The court said:

"We have referred to 
these matters for the purpose of showing the standing of the doctrine of a 
grantor's lien, and the disposition and tendency of the courts and of 
legislation towards it, and contenting ourselves with a reference to the 
authorities already cited, without here entering into a detailed presentation of 
them, we feel warranted in saying that this disposition and tendency is at least 
not to extend the doctrine beyond 
what may be regarded as the comparatively well-settled and established rules of 
equity in reference to liens of this kind. In other words, the doctrine is not 
one to be fostered or encouraged, or allowed to spread, but rather to be kept 
strictly within limits; and this upon the grounds that it is unnecessary for the 
protection of a grantor, who may readily, cheaply, and conveniently secure 
himself by a mortgage which can be put upon record; that the lien is in the 
nature of a secret and invisible trust, and therefore opposed to the policy and 
spirit of our registration system; that a sale subject to it is calculated to 
give a false appearance of credit; and that it is contrary to the spirit and 
policy of our laws, which favor the free transmission of real estate under such 
conditions that a purchaser may, with reasonable certainty, know what is the 
precise state of the title which he acquires, and without being subject to the 
doubt and uncertainty which will be occasioned by such questions as whether 
there was a grantor's lien, or whether, if there was one, it has been waived or 
discharged, and whether it has been assigned or not, or whether, if assigned, it 
still continues, - all questions dehors any record.

"The application of the 
foregoing considerations which we propose to make in this case will appear 
hereafter. We have been unable to find any adjudication in the English courts 
(where the doctrine of vendor's lien originated) squarely to the effect that a 
grantor's lien is assignable. The case of Dryden v. Frost, 3 Mylne & C. 670, 
cited by counsel and by many text writers, does not, in our judgment, got to 
that extent. While there is in this country a diversity of opinion, in most of 
the states the lien is held to be personal to the grantor, and not assignable, 
and it would of course follow that in those states the transfer to the debt, 
either with or without an assignment of the lien, would not pass the lien to the 
transferee. This result of the authorities in this country may be verified by 
reference to the cases cited in 3 Pom.Eq.Jur. § 1254, note; and see, also, 1 
Lead. Cas.Eq. (4th Am.Ed.) 492; Tiedm.Real. Prop. § 294; 2 Sugd.Vend. 398, note 
by Perkins; Bisp.Eq. § 356; Philbrook v. Delano, 29 Me. 410; Ahrend v. Odiorne, 
118 Mass. 261; Simpson v. Mundee, 3 Kan. 172; Baum v. Grigsby, 21 Cal. 173; 
Wellborn v. Bonner, 9 Ga. 82; Briggs v. Hill, 6 How. (Miss.) 362; 1 Jones, 
Mortg. § 212." (Italics in original.) 27 N.W.  at 73.

[¶24.]  We find these words most persuasive and 
applicable to our present-day modern society. Vendors almost universally protect 
their own lien by the delivery of a deed and the redelivery of a mortgage, by a 
contract of sale providing for delivery of a deed upon payment of the agreed 
price or by an escrow device which provides for the delivery of the title 
instruments, if and when the amount due thereon be paid. This leaves a record 
nice, clear, and clean without any overhanging shadow of a so-called vendor's 
lien, which is not only not recorded but exists only in the mind of the equity 
court. It would, also, appear that an inference is possible that the widespread 
fact that this lien has been completely ignored, not only in this jurisdiction 
but in other jurisdictions, is a recognition of the fact that modern-day 
conveyance practices makes it belong in another age. It might appear arguably 
that the recognition of such rights in a vendor and his total failure to take 
any steps to protect himself is an absolution from negligence, not an equitable 
remedy to which he is entitled, particularly because of the possibility of 
setting in motion such a controversy as has arisen in this 
case.

[¶25.]  Other courts have recognized and applied 
the rule that such a lien is personal and not one which can be assigned, in the 
following cases: Alabama-Florida Co. v. Mays, 111 Fla. 100, 149 So. 61, 91 
A.L.R. 139 (1933), adopts and discusses this rule. This rule was reiterated by 
the same court in Hedlund v. Jones, Fla.App., 114 So. 2d 220 (1959), and White v. 
White, Fla.App., 129 So. 2d 148 (1961); Powers v. Johnson, 71 F.2d 48 (8th Cir. 
1934), cert. den. 293 U.S. 596, 55 S. Ct. 111, 79 L. Ed. 689 (1934); Perry Coal 
Co. v. Richmond, 287 Ill. App. 298, 4 N.E.2d 891 (1936).

[¶26.]  This being viewed solely as an equitable 
remedy, this writer has trouble finding the overriding equities which would rest 
in Benjamin Saffren, appellee herein, an assignee who received the assignment 
for nominal or no consideration, as against the Tri-State National Bank, 
appellant, who has parted with a substantial consideration. That it must give 
way to the preference established as a result of the operation of and the 
attachment of the lien does not appear to serve equity in this 
case.

[¶27.]  It might appear that Reed, as vendor, did 
not intend to claim any lien for his protection, because he earlier, prior to 
the time of the execution of the contract, delivered the deed to Saffren to hold 
until the payments were made, and yet three days later executed this contract of 
sale and deed and delivered them, with no reservation, to Wordens. An argument 
certainly can be made that he had decided to forego this 
right.

[¶28.]  It has not been directly raised, but this 
writer has some curiosity as to the notice which the appellant is presumed to 
have received. An unconditional warranty deed recorded which definitely conveys 
title without reservation of lien of any kind or character might raise the 
inference in a great many people's minds that there was no intention to reserve 
this lien or any conditional lien.

[¶29.]  Because, as an assignee, appellee had no 
right to assert a vendor's equitable lien against the properties, this judgment 
is reversed and remanded with instructions to remove the lien against these 
premises and to find that appellant's interest in this property is not subject 
to any claim of the appellee, Saffren.

[¶30.]  Reversed and remanded with 
instructions.

CARDINE, J., filed a dissenting 
opinion.

FOOTNOTES

1 This case which was 
decided in 1934 may well be considered an anomaly. The writer can find no case 
in this jurisdiction or in any other jurisdiction which either cites or relies 
upon this case for any legal point. It may be that inferentially such a lien has 
become unnecessary in the present conditions with the existence, recognition, 
and employment of many arrangements to give vendors security and not allow 
possible concealed or unrecorded claims against real estate. One who explores 
the field of vendor's equitable liens will discover much confusion and conflict, 
as has been noted:

"No other single topic 
belonging to the equity jurisprudence has occasioned such a diversity and even 
discord of opinion among the American courts as this of the grantor's lien. Upon 
nearly every question that has arisen as to its operation, its waiver or 
discharge, the parties against whom it avails, and the parties in whose favor it 
exists, the decisions in different states, and sometimes even in the same state, 
are directly conflicting. * * *" 4 Pomeroy's Equity Jurisprudence, § 1251, p. 
743 (5th ed. 1941).

CARDINE, Justice, 
dissenting.

[¶31.]  I would affirm the decision of the trial 
judge. The court was here sitting as a court in equity. The critical question 
presented for determination is: what are the equities between the parties, i.e. 
should the bank have the benefit of the unpaid balance on the Reed family 
property or should that benefit go to the Reed family or their designees? Let us 
examine the equities.

[¶32.]  This vacation home on a forest service 
lease had been in the Reed family since the 1930s. J. Franklin Reed sold the 
home to Tom Worden. There was a principal balance of $50,000 still due upon the 
purchase. Before his death, J. Franklin Reed assigned his right to the balance 
of the purchase price to Ben Saffren and his mother, Adeline Reed. The parties 
stipulated at trial that the balance of the purchase price was owed to Saffren 
and Mrs. Reed.

[¶33.]  For the bank, it is undisputed that it 
extended loans to Worden without relying upon or even knowing about the Reed 
cabin; that upon learning about Worden's purchase of the cabin, the bank 
obtained a transfer of Worden's "right, title and interest" in payment of his 
preexisting debt to the bank. Worden took bankruptcy. The court 
found:

"That the Defendant 
Tri-State National Bank had actual, as well as constructive, knowledge of 
Plaintiffs or their predecessors' interest in said property, to wit: that 
Wordens still owed money on their agreement for sale.

"That Defendant Bank had 
actual knowledge through the so called Loan Agreement that all that the bank was 
purchasing from Wordens was whatever interest Wordens had.

"That Defendant Bank is 
not a bona fide purchaser for value."

The findings of the court 
are amply supported by the evidence. The equities weigh heavily in favor of the 
Reed family and their designees. The court's opinion quotes 10A Thompson on Real 
Property § 5261 (1957) at p. 545:

"Generally, in the 
United 
States, the lien is considered personal to the 
vendor, and not assignable except under 
peculiarly equitable circumstances." (Emphasis added.)

[¶34.]  I would find the circumstances in this 
case to be "peculiarly equitable" and recognize the assignment of the equitable 
lien. This lien did not exist only in the mind of the equity court. The bank 
knew of the unpaid purchase price, as did all parties. The bank was not a bona 
fide purchaser nor did it rely upon a record examination for clear title. 
Therefore, I would affirm the trial court.