Case Name: WELLS, FARGO & CO., Respondents, v. CHARLES F. SMITH and SAMUEL NESLIN, Appellants
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1880-06
Citations: 2 Utah 39
Docket Number: 
Parties: WELLS, FARGO & CO., Respondents, v. CHARLES F. SMITH and SAMUEL NESLIN, Appellants.
Judges: SoHAEFFEK, J., COnCUl’S.
Reporter: Utah Reports
Volume: 2
Pages: 39–54

Head Matter:
WELLS, FARGO & CO., Respondents, v. CHARLES F. SMITH and SAMUEL NESLIN, Appellants.
1. Tbansper op Securities Held by Indorser. — An indorser holding securities from the maker of á note, may transfer such securities to the payee, who can, upon failure to pay the notes indorsed, proceed to make the money out of the securities before suing upon the note. The rule is not changed by the fact that such securities are other notes and mortgages.
2. Recordation op Conveyances. — In this country the rule of common law has been so far changed that the registration of deeds has generally taken the place of livery of seizin, and the latter has been dispensed with •either by usage or by statute.
S. Livery op Seizin Unknown in Utah. — In this Territory livery of ■seizin is unknown, and prior to the adoption of the statute requiring conveyances to be recorded, it had been dispensed with, because the public had recognized the recording system as its substitute.
4. Constructive Notice op Record. — Constructive notice exists when a party, by any circumstance whatever, is put upon inquiry — and records •of deeds and mortgages, which are authorized, but not required to he kept by statute, are of sufficient importance to put parties upon inquiry as to their contents.
5. Constructive Notice op Record. — The American doctrine, universally held, is that the registration of a conveyance operates as constructive notice to all subsequent purchasers of any estate, legal or equitable, in the same property.
Appeal from the Third Judicial District Court.
The facts are stated in the opinion of the court.
Sutherland dk Kimball, for appellant Neslin.
Defendant Neslin’s mortgage should be treated as a first lien, being prior in date, as there are no facts stated in the complaint or proved on the trial, to postpone the prior mortgage in favor of the plaintiff or John W. Kerr.
It is a maxim of very extensive application that “ he has the better title who was first in point of time.” Broom’s Maxims, 236-260; 9 Paige, 61, note.
Tbe principle is believed to be universal, that a prior lien gives a prior claim, which is entitled to prior satisfaction out of the subject it binds, unless the lien be intrinsically defective, or be displaced by some act of the party holding it, which shall postpone him in a court of law or equity to a subsequent claimant. Weaver v. Toogood, 1 Barb. 238; Embree v. Hanna, 5 John. 101; Mui/r v. Schenck, 3 Hill, 238; Watson v. LeRou, 6 Barb. 481; Lynch v, Utica Ins. Co., 18 Wend. 236; Poillon v. Martin, 1 Sandf. Ch. 559; Berry v. Mutual Ins. Co., 2 John. Ch. 603.
Defendant Neslin’s mortgage, besides being first, is shown to have been executed wholly to secure purchase money of the very premises covered by both mortgages.
We insist the prior recording of the plaintiff’s mortgage has no effect, for no law existing in 1872 or 1873, requiring’ the recording of mortgages or defining the consequences of omitting to record them. There was established a recorder’s office — see Laws of Utah, pp. 80, 81, 92, 93.
By these acts only the duty of recorders is defined.
An attempt was made to show a custom to record mortgages.
The law is well settled everywhere, that the recording acts apply only to the instruments therein required to be recorded, and that the record or non-record has only the consequences prescribed. A law arising from custom can have no other effect, and in the nature of things there can be no custom of losing securities by omission to record. Wing v. McDowell, Walk. Ch. 175, 182; Sparks v. Slate Bamk, 7 Blackf. 469; Rcmgon v. McClellan, 24 Ind. 165; Read v. Cole, 4Ind. 283; Bescher v. Baldy, 7 Mich. 488; Q-alpin v. Abbott, 6 Mich. 17, 37; Dalton v. Ives, 5 Mich. 515; Cooh v. McChristian, 4 Cal. 23; Deminy v. Slate, 23 Ind. 416; Farmers’ and Mechanics’ Ba/nk v. Bronson, 14 Mich. 361; Hall v. Redson, 10 Mich. 21-23.
No custom to' have the effect to reverse a maxim of the Common Law can exist in this Territory.
■ In Cox v. O’Reill/y, 4Ind. 368, it was held, that a usage in conflict with plain and well established rules of law is not admissible in. evidence in any case, and must be disregarded. A custom must be certain.
The doctrine of bona fide purchase, under registry laws, is the equity doctrine on that subject.
In Wood v. Robinson, 32 N. T. 564, Deiíio, J"., said: “The expression in the statute (bona fide purchaser) is borrowed from the language of courts of equity, and must be interpreted in the sense in which it is there understood; and it is well settled that a grantee or incumbrancer who does not advance anything at the time, takes the interest conveyed subject to any prior equity attaching to the subject.’5 Thomas v. Graham,) Walk. Oh. 117; Gremstone v. Carter, 5 Paige, 421; Dickerson v. TilUnghast, 4 Paige, 215.
In Warner v. Barden, 49 N. Y. 291, where the claim of bona fide purchase was made by the defendant, AlleN, J., said: “A purchase without notice of the plaintiff’s claim alone, would not protect the defendant, and that something more than a good consideration, which would be sufficient as between the parties to the transaction, was necessary to shield him against the claim of the plaintiff.”
The following authorities deny the sufficiency of a past consideration or an antecedent debt: Root v. French, 13 Wend. 570; Butler v. LLawrison, Cówp. 565; Padgett v. Lawrence, 10 Paige, 170; Cary v. White 52 N. Y. 138; Jennison v. Stafford, 1 Cush. 168; Weaver v. Barden, 49 N. Y. 286; Wood v. Robinson, 22 N. Y. 564.
The following authorities hold an executory consideration insufficient: Dixon v. Hill, 5 Mich. 404; Hardington v. Hieholls, 3 Atk. 304; Wigg v. Wigg, 1 Atk. 384; Story v. Lord Windsor, 2 Atk. 630; TourviUe v. Ffaish, 3 P. Wms. 306; Warner v. Whittaker, 6 Mich. 133; Thomas v. Graham, Walk. Ch. 117; Blanche,rd v. Tyler, 12 Mich. 339; Stone v. Willing, 14 Mich. 51N525; Everts v. Agnes, 4 Wis. 343; Wormley v. Wormley, 8. Wheat. 449.
Tbe facts found in favor of the plaintiff not having been alleged, the plaintiff can have no benefit of them, for the relief must be founded on and confined to the allegations as well as the proof. Ilm'tog v. Tibbets, 1 Utah R 328; Battier v. Hinde, 7 Pet. 252-274.
Second. The findings do not support the judgment, and the complaint does not cover the facts found.
It appears by the findings, that the note and mortgage were given for indemnity, and that there had been no damage or loss; hence there was no right of action on the note when this suit was brought. Sedgw. on Dam., 378, 379, 379; Bed-field v. Haight, 27 Conn. 31; Hodson v. Bell, 7 T. R. 97; Port v. Jaekson, 17 John. 239-479; Thomas v. Allen, 1 Hill, 145; Wilson v. McEvoy, 25 Cal. 169; Mayne on Dam., 244; Ohio Life Ins. <& Trust Go. v. Ruder, 18 Ohio, 35- 46; Bishop v. Fetch, 7 Mich. 371.
Marshal <& Boyle, for respondents.
There are some well established rules at law on this question of bona fide purchaser, to which we desire to call the attention of the court. In the case of a particular assignment to specified creditors for their security, they take as purchasers for value, strictly so-called, and not as mere volunteers, and if without notice are not bound by vendor’s lien, and are entitled to same protection as other bona fide purchasers. Story Eq., vol. 2, § 1229; Mitford v. Mitford, 9 Yesey, 100; Bayley v. Oreenleaf, 7 Wheat. 56.
A mortgagee is a purchaser pro tanto. Story’s Eq., vol. 2, ~§ 1502, note 2.
In the hands of creditors, without notice, a note taken as collateral is valid against equities. McOarty v. Bods, 21 How. U. S. 432; Swift v. Tyson, 16 Peters, 1-20, et seq.; Parsons on Notes and Bills, vol. 1, p. 223, and cases cited in notes.
The rule in equity is that between two parties having equal equities, the prior equity prevails, but if the party having sub sequent equity first clothes himself with legal title without notice, he must prevail. JVexoton v. MeLecm, 41 Barbour, 285.
A judgment creditor, with lien, takes precedence of holder of unrecorded deed. Semple v. Bard, 7 Serg. & K. 293.
A deed made pursuant to a prior parol promise is not a voluntary conveyance, and cannot be impeached as such by subsequent judgment creditors. Dyg&rt v. Hamer selmider, 32 N. T. 629.
Appellant claims that the plaiptiff has not in its complaint sufficiently set forth the facts upon which it claims that its mortgage was prior to the lien or claim of the defendant Nes-lin. This position of appellant is fully and completely overthrown by the California decisions. Poett v. Stearns, 28 Cal. 226; Anthony v. Nye, 30 Cal. 301; Himmelmann v. Spanagel, 39 Cal. 391.

Opinion:
BoeeMAN, Justice,
delivered the following opinion of the court:
Defendant (Smith) bought of appellant (Neslin) a parcel of ground in Salt Lake City. He paid a portion of the purchase money, and gave Neslin a mortgage to secure the residue, and Neslin gave him the possession. Some months afterwards Smith became indebted to the respondents for $17,000, and they desired security. He asked Kerr to indorse for him, offering to secure Kerr in part by mortgage on the property referred to, claiming that there were no liens or other incumbrance on it.
Smith had now been occupying the property for some months, and the record showed the title to be in him, the Neslin mortgage not having been recorded or filed for record, nor did Kerr know of its existence.
Under these circumstances Kerr endorsed the note of Smith for $17,000, and Smith afterwards complied with his agreement by giving his note to Kerr for $13,000, and giving a mortgage on the property to secure Kerr the payment of the note. The residue of the $17,000 was otherwise secured. Kerr had his mortgage recorded, and thereafter, on the same day, the appellant (Neslin) had his mortgage also recorded.
Kerr transferred this note and mortgage, which he had received from Smith, to respondents. Smith having failed to pay the amount secured thereby, the respondents bring this suit to foreclose.
Default was entered against Smith, who never appeared to the action; but Neslin filed answer, setting up his mortgage, and claiming that it was entitled to priority over the Kerr mortgage, etc. The court below gave judgment for the respondents, and thereupon Neslin appealed to this court.
The mortgagees in both of these mortgages acted in good faith in taking their respective mortgages.
The appellant maintains that the note in question was given to indemnify the payee therein against loss upon another note —that no loss has occurred, and that, therefore, no cause of action exists on the note thus given to indemnify.
This is plausible upon its face, but we do not think that it is the law. It seems to be indisputably settled that an indorser, holding securities from the maker of a note, may transfer these securities to the payee, who can, upon failure to pay the note indorsed, proceed to make the money out of the securities before suing upon the note. If such securities happen to be other notes and mortgages this does not change the rule. 1 Hilliard on Mortgages, p. 345.
In the case before us the evidence shows that the $17,000 was not paid. The payees of this note, therefore, had the right to exhaust the security delivered to them by the indorser before proceeding upon the note. It was not necessary for Kerr to pay the original note of $17,000 before this could be done.
Kerr acted in good faith in taking the note and mortgage. They were to secure him against loss. His indorsement of the $17,000 note was a valuable consideration, and the indorsement and the giving of the mortgage were intended to be as parts of one and the same transaction, to be performed at the same time. That there was a delay in the execution of the mortgage was not due to anything that Kerr did. He gave no extension of time, and this arrangement contemplated no delay. The mortgage, therefore, was not given to _ secure an antecedent debt as understood in the books. There was no subsequent arrangement to give security for a past consideration. Bona fide purchasers, without notice, are favored in equity. Story's Eq. Juris., § 108, 165, 381, 434, 436.
It is claimed that the Neslin mortgage, being of prior date to the one sought to be foreclosed, should have the priority. If no other question than that of the date were involved in settling the priority, the Neslin mortgage would take precedence. But there is another question: Neslin waited a year after receiving his mortgage before he put it upon record. The Kerr mortgage had then been recorded. The appellants, however, maintain that the recording made no difference, as no statute required it. Neslin deemed it advisable, after the other mortgage had been recorded, to have his also, on the same day, recorded.
At common law, down to the time of Charles, the Second, no writing was necessary to pass title to land, but the form of conveyance was by an actual or symbolical livery of seizin. Afterwards, in carrying out the intention of the parties, it became customary to make written deeds, but these did not obviate the necessity of livery of seizin. 3 Washburn's Beal Property, 603-4.
This livery of seizin was necessary in order "to prevent subsequent and fraudulent pledges of the same land." 2 Bl. Com. 160. And it was retained as a public and notorious act that the country might take notice of the transfer of the estate. 2 Bl. Com. 311.
Afterwards, the system of recording was adopted to take the place of livery of seizin, and it is recognized as having the same effect. Bouvier's Law Die., title "Livery of Seizin."
But, in most of the States, registration is not essential to passing the estate, but as a substitute for livery of seizin, it is only intended to give notice. 1 Gr. Ev., § 573, note 3.
In this country the recording of deeds has generally taken the place of livery of seizin, and the latter has been dispensed with either by usage or by statute. 1 Washburn's Real Prop-perty, 14, 15.
In Utah livery of seizin is unknown. No statute has expressly abolished it, but by usage it is dispensed with. Why dispensed with? Simply because the public have recognized the recording system as its substitute.
The Territorial statutes in force at the time of the execution of the mortgages in question, authorized the recording of such paper but did not require it, just as Greenleaf, as above quoted, says is the rule in most of the States. Our Territorial statutes required the establishment of recorders' offices in every county, and required record books to 'be kept therein, in which the recorders should record deeds and other writings. Compiled laws of Utah, § 216 to 219. These boobs were open for the recording of mortgages as well as other transfers, and they were of the character of public official registers. 1 Greenleaf's Ev., § 496. And such books are, as the law says, entitled to an extraordinary degree of confidence, and are admissible in evidence, by reason of the credit due to the officer, and of the public nature of the documents themselves. 1 Gr. Ev., § 483.
It would seem, therefore, that they were of sufficient importance to put parties upon inquiry as to their contents, and to give constructive notice of what was upon record. Constructive notice exists when a party, by any circumstance whatever, is put upon inquiry. Bouvier's Law Die., title " Notice."
At the time the mortgages in question were executed, it was a common thing, one of public notoriety, to record mortgages and other conveyances, and the fact that there were offices in each county for the purpose of making such recorda-tions, was also a matter of public notoriety. Under such circumstances, it would seem that common prudence would have dictated to Neslin that bis mortgage should be recorded, and thus, as far as be could, give public notice of bis lien. Sucb recording would have been constructive notice to Kerr, and this contest.would bave been avoided.
Tbe American doctrine, " universally beld, is that tbe registration of a conveyance operates as constructive notice to all subsequent purchasers of any estate, legal or equitable, in the' same property." Story's Eq. Juris. § 401, 402, 403, 404; 4 Kent's Com. 174, (side page,) note " .D."
Neslin failed to give sucb constructive notice. He was, therefore, negligent of his duty, and bis lien should be postponed to tbe subsequently acquired rights of tbe respondents. His equity was not equal to that of tbe other mortgagee, and bis own negligence has lost him his precedence. Bayly v. Greenleaf, 7 Wheat. 46.
We are therefore of tbe opinion that tbe judgment of tbe court below was right, and it is therefore affirmed, with costs.
SoHAEFFEK, J., COnCUl'S.