Case Name: Lyman Churchill et al. v. Lyman Little et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1872-12
Citations: 23 Ohio St. 301
Docket Number: 
Parties: Lyman Churchill et al. v. Lyman Little et al.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 23
Pages: 301–311

Head Matter:
Lyman Churchill et al. v. Lyman Little et al.
When an executory contract for the purchase of laud is assigned by the purchaser, either absolutely or as a 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, etc. (S. & C., Vol. 1, 458), has no application.
Error to the District Court of Cuyahoga county.
The original action was brought by the defendant in error to quiet his title to a lot in the city of Cleveland.. The facts, so far as it is necessary to state them, are as follows :
February 7, 1853, John Black made a contract with the Cleveland, Columbus and Cincinnati Railroad Company for the purchase of the premises in question at $1,000, one-fourth of which was paid at the date of the contract, and the remainder was to be paid in deferred installments, the last falling due October 1, 1859. Upon the payment of all the purchase money and interest, the railroad company agreed to convey the premises to the purchaser. The contract was executed in duplicate, each party retaining a copy. It contained no stipulation in regard to the possession of the premises. Black, however,, took possession and made improvements.
June 7, 1859, Black assigned and delivered his duplicate copy of the contract to defendant Little, to secure the payment of a judgment and two notes.
About February 22, 1866, Black being indebted to the plaintiffs, the latter applied to him for payment or security. Black informed them that he had a contract with the railroad company for the purchase of the land in question;, that not more than $750 remained unpaid thereon; that his duplicate copy of the contract had been accidentally burned, and that he had not assigned it to any one. Plaintiffs examined the county records ; found the title of the railroad company good, and found no incumbrance as against Black. They therefore took from the latter a mortgage of the premises, executed in due form as a mortgage of land, and put it upon record.
At the request of Black, they made no inquiry of the railroad company and said nothing to the company upon the subject until September or October, 1866, when they gave the company notice of their mortgage. Neither the plaintiffs nor the railroad company had any knowledge of the assignment to defendant, nor had he any knowledge of the plaintiffs’ mortgage until about February 14, 1867.
At the date last named, Black, by indorsement on the contract in defendant’s possession, relinquished to defendant his interest in the contract, and directed the company to make him a deed of the premises. Defendant immediately applied to the company for a conveyance. Learning of the mortgage to plaintiffs, he had, before he obtained .a conveyance, several interviews with them upon the subject. It does not appear that they, at any time, offered to perform the contract, or that they took any steps to acquire the title of the railroad company. On the 14th of March, 1867, defendant paid to the company the’remainder of the purchase money, then amounting to $1,600, took a deed of the premises, and went into possession. The deed was in the ordinary form of a warranty deed, except that the habendum was in these words, “ To have and to hold said premises, . . subject to such rights therein, as may have been granted to third parties by said Black, if any such there be, unto said Lyman Little, his heirs and assigns forever, but so as not to affect or change the prior rights of the grantee.” The consideration named in the deed was $1,000, the original contract price; and it was stamped accordingly. Upon the trial in the District Court, the deed was offered in evidence by the defendant in error, and was objected to by plaintiffs, on the ground that it was not suf ficiently stamped. The objection was overruled, and the plaintiffs excepted.
The District Court ordered the premises to be sold, and in marshaling the liens the indebtedness of Black to defendant, to secure which the contract was assigned, as wed as the amount paid by defendant to the railroad company, was preferred to the mortgage claim of the plaintiffs, and was ordered to be first paid. The plaintiffs filed their motion for a new trial, which being overruled, they excepted, .and took a bill of exceptions setting out all the testimony.
Prentiss, Baldwin & Ford, for plaintiffs in error:
1. Churchill & Co., having taken their mortgage in good faith without notice of any claim of Little, and having notified the railroad company, the holder of the legal title, .and Little having received his deed with full notice of the facts and expressly subject to the rights of Churchill & Co., his interest or lien must yield to theirs.
Little’s interest was an equitable mortgage — imperfect, because it was not witnessed or acknowledged, nor was it recorded or entered for record. As between perfect mortgages, the one first left for record takes precedence ; surely an imperfect one can not hold a better position than it would have occupied if it had been perfect. Paine v. Mason, 7 Ohio St. 204; Holliday v. Franklin Bank, 16 Ohio, 533; Mayham v. Combs, 14 Ohio, 428; Erwin v. Shuey, 8 Ohio St. 509; White v. Denman, 16 Ohio, 110; Bloom v. Noggle, 4 Ohio St. 45; 1 Hilliard on Vendors, 4, 5; Russell’s Appeal, 15 Penn. 319; Northrop’s Lessee v. Brehmer, 8 Ohio, 392; Stansel v. Roberts, 13 Ib. 148; Philly v. Sanders, 11 Ohio St. 490; Kyle v. Thompson's Adm’r, 11 Ohio St. 616; Lloyd v. Quinby, 5 Ib. 262; Merritt v. Horne, Ib. 308; Bellas v. McCarty, 10 Watts, 13; Jarvis v. Dutcher, 16 Wis. 307, 25 U. S. Dig. 366, No. 44; Grandin v. Anderson, 15 Ohio St. 286; Sugden, Letters on Sales, etc., 41, 42; Judson v. Corcoran, 17 How. 612; Dearle v. Hall, 3 Russ. 1; Loveridge v. Cooper, Ib. 60; Mangles v. Dixon, McNaghten A Gordon, 437; Bayley v. Greenleaf, 7 Wheat. 46; Murray v. Gilburn, 2 Johns. Ch. 442; Moore v. Holcombe, 3 Leigh, 597; Mott v. Clark, 9 Barr, 399; Phillips v. Bank of Lewistown, 6 Harris, 394, 403; Connecticut v. Bradish, 14 Mann. 296; Smith's Leading Cases in Equity, 52, 53, 58, 76, 78, 82, 96; Ohio Life Ins. Co. v. Ross, 2 Md. Ch. 25; U. S. Ins. Co. v. Shriver, 3 Ib. 383; Correy v. Caxton, 4 Binney, 140; Bellas v. McCarty, 10 Watts, 13; Springle v. Morrison, 3 Litt. 52; Landes v. Brant, 10 How. 348; Garland v. Harrison, 17 Mo. 282.
But if what Little claims as a mortgage is not one, what’ is it? It is not an assignment of the whole interest of .Black — an absolute assignment — because it is only as “collateral security” for a specified debt; and one of the transfers provides that the bond, as it is called, “ shall be held as-collateral security for the payment of two notes,” describing them. There is no pretense of assigning the instrument. What is this but a mortgage, to all intents and purposes? What constitutes a mortgage ? Hilliard ’on Mortgages, 24; Story Eq., sec. 1018. The contract was delivered; and together, the delivery and writing did not put Little in the place of Black, and so failed to be an assignment. Black kept his own place as he had it before : he was still the owner of the equitable estate. If Black assigns nothing,, but creates a mere lien, although a specific one which affects bis entire interest, he creates something which, if the statute has an office to perform, must be inscribed, registered, or recorded. .
The second writing merely agreeing that the “bond shall be held,” etc., as security with the delivery or possession of the so-called bond, made nothing but an equitable mortgage by deposit, like a deposit of title deeds.
Again, Black had a legal estate in the premises, which we got, and Little did not. Paine v. Mason, 7 Ohio St. 204; Kelly v. Stanbury, 13 Ohio, 408.
It does not follow, if the court hold that, as to mortgages-of all descriptions, the registry act must be complied with, io give a preference, that the same doctrine will be held as-to transfers of absolute interests. It is the settled policy everywhere to give publicity to a state of indebtedness,, secured by lien on property, whether real or personal, to-guard against delusive credit, and to reduce to simple and intelligible order the various claims on the property, to-avoid litigation aud enable all to understand their business-relation to the property in question.
But it is said the transfer of the land contract was not a mortgage in the sense of the statute, and so not required' to be, and could not be, recorded; or if recorded; the record would have been of no efficacy. This may be granted substantially, but how does it affect the question ? The act provides for record of “all mortgages executed agreeably to the provisions of this act,” and the next section provides-for record of “ all other deeds and instruments of writing,, for the conveyance or incumbrance of any lands, tenements, or hereditaments executed agreeably to the foregoing provisions,” within six months from the date thereof. Neither the land contract nor transfer was “executed agreeably to-the act.” Neither, then, was entitled to record. But is defendant in error any better off for this ? Is his weakness-his strength? Is it true that a mortgage or deed with one witness and not acknowledged, and so not qualified for record, and not recorded under our registry law, should prevail over a mortgage or deed, with every legal requisite and duly recorded ? No one will claim this, if the interest professed to be conveyed is according to the first section of the act, undertaken to be conveyed by an “ instrument of writing, by which any land, tenement, or hereditament shall be-conveyed, or otherwise affected, or incumbered in law.”' Then it should be executed agreeably to the act, and if not so executed, it is not operative to “ convey, or otherwise to-affect or incumber,” and is not qualified for record. Then the question is, doés the transfer to Little undertake to, or rather, does it in fact, “convey or otherwise affect or incumber any land, tenement, or hereditament ?” If it does not, we are not afraid of it; it has no effect upon our-rights, and we have no reason to apprehend any injury from it. If it does, then it can not operate to our injury; for it does not conform to the requirements of law, which is the rule to govern, or we are without a rule. As well may it be said, a transfer without writing would be operative against our mortgage. The proposition certainly seems a clear one, that a disqualification for record is a disqualification for efficacy, as against a qualified instrument.
2. We claim there was error in admitting the deed as evidence, for want of a sufficient stamp.
3. Also, that the railroad company should have been .made a party.
Estep & Burke, for defendant in error:
1. As between Little and Black, the assignment of the land contract to Little created a lien upon the interest of Black in the contract. It constituted a pledge of the contract to Little, and gave Little the right, in order to perfect his security, to pay up for the land and take the legal title.
2. For the purposes of this case, we suppose it may be taken for granted that at the time Black made the mortgage to Churchill he conveyed to him as security all his remaining equities in the land and his right to possession, if any he then had. This much we concede. But we stop here. We claim the mortgage to Churchill deprived Little of none of his rights as assignee of the article.
The cases referred to by the counsel for plaintiffs in error are well enough where applicable, but they have no application here. They beg the whole question, at the opening, in saying that “the interest of Little was as mortgagee.” In the sense that a mortgage is a security this remark is true. The error lies in assuming that such a security is a mortgage of real estate. It is not a mortgage necessarily of real estate. It is rather a pledge of the obligation or contract of the owner of land to ¡deed the property as a security for a debt.
Our statute does not require such contracts to be recorded. There is no law requiring such a contract as Black held from the company to be recorded; why then require the mere assignment of it to be recorded ? The cases of Paine et al. v. Mason et al., 7 Ohio St. 198, and 11 Ib. 490, relied upon by the plaintiffs in error, have no application to this case. There is a very plain distinction between the case at bar and those cases.
A contract for the sale of land is a mere chose in action. It conveys no title and no interest in the land. It is a mere agreement to convey the title upon certain terms. Actual possession of land may ripen into a good title, and is in some sense a legal estate, which may pass by judicial sale, deed, or mortgage, but no such qualities belong to a mere agreement to convey. Such an agreement carves no certain and definite estate out of the land. In the case at bar the possession was not referable to the contract, for no right of possession is conferred thereby. 2 Ohio St. 326; 8 Cush. 575; 6 Barb. 116; 9 Johns. 55; Ib. 331; 3 Paige, 219.

Opinion:
Stone, J.
1. The act of February 22, 1831, to provide for the execution and recording of deeds, etc. (S. & C. 458), has reference to instruments by which lands, tenements, or hereditaments are "conveyed or otherwise affected or incumbered in law." All such instruments, executed with the prescribed formalities, are required to be recorded; and when so executed and recorded, are within the protection the statute was designed to afford. An executory contract for the purchase and sale of land is not an instrument of that character. It is a legal instrument, and forms the basis of legal as well as equitable remedies; but it does not convey, or purport to convey, or legally to incumber or affect any estate or interest in the land. The vendor, suing upon it, may recover the price of the land contracted to be sold, and he, failing on his part to perform it, may be compelled, at the suit of the purchaser, to respond in damages for his default. It constitutes also, in favor of the purchaser, a claim to the title to the land, which, in a proper case, may be specifically enforced through the agency of a court of equity. This right to compel a specific performance of the contract constitutes the purchaser's equity in the land, the vendor being, in equity as to the land, regarded as the trustee of the purchaser; but in either aspect, whether regarded as the basis of a legal or' equitable claim, the right of the purchaser rests in action, and the contract is therefore essentially a chose in action.
The deed of the purchaser purporting to be a legal conveyance of the land, and, as such, executed with the formalities required by the statute, would, of course, convey the equitable interest, and would doubtless be held to operate for all purposes as an assignment of the contract; but it is evident that such assignment may be as effectually made by an instrument no more formal in character than the contract itself. The deed, operating by way of estoppel, may also in certain cases have the effect to pass any larger interest or estate in the land which the grantor may afterward acquire; but the interest which he then has can not be enlarged by the form or character of the instrument by which it is conveyed.
It seems necessarily to follow that where, as in this case, such executory contract, or the mere equitable interest thereby created, is alone the subject of transfer, the recording act has no application. It will not be claimed that it has any application to the contract itself. The instrument by which the contract is assigned stands necessarily upon the same ground. By neither is the land, in law, conveyed, affected, or incumbered. Wing v. McDowell, Walker's Ch. 175; Lewis v. Baird, 3 McLean, 56.
Several cases decided by courts of other states, are cited by counsel, which seem-to hold a contrary doctrine; but they all arose under statutes much broader in their scope than the act now under consideration. The statute in question in Jarvis v. Dutcher, 16 Wis. 307, provided for recording "all bonds, contracts, and agreements concerning any interest in lands." In Bellas v. McCarty, 10 Watts, 13, the statute authorized the registry of all writings relating to laud, and was held to embrace both legal and equitable titles. In Parkist v. Alexander, 1 Johns. Ch. 397, Kent, J., delivering the opinion of the court, and speaking of the registry act, under which that case arose, says: " The statute speaks of any writing in the nature of a mortgage, and. those words may reach to any agreement creating an equitable incumbrance." The cases of U. S. Ins. Co. v. Shriver, 3 Md. Ch. Decisions 383, and Ohio Life Ins. Co. v. Winn, 2 Ib. 25, followed Hayes v. Richardson, 1 Gill & Johns. 384; and in the last-named case, the court, speaking of the registry acta then in question, say: " Their design was that all rights, incumbrances, or conveyances, touching, connected with, or in any wise concerning lands, should appear upon the public records."
In Paine v. Mason, 7 Ohio St. 198, the recording act was held to apply as between successive mortgagees of a leasehold for the term of ten years, of which the mortgagor was in possession, under a lease which was defectively executed, not being witnessed or acknowledged as required by the first section of the recording act, and not, therefore, entitled to record.
As the statute expressly excludes from its operation leases for a term of not exceeding three years, the lease in that •case, being for the term of ten years, was clearly within the •statute. It was an instrument, therefore, which the statute required to be executed with the prescribed formalities and to be recorded.
It was not thus executed, but the lessee was in possession ¡according to its terms, and was, upon the facts stated, entitled in equity to such reformation of the lease as would make it, in all respects, a legal instrument. And, moreover, the subject-matter of the controversy in that case was the title of the lessee in the premises, and that alone. Both parties claimed under him by alleged legal mortgages, and no title superior to his, or other than that with which he was invested, was contracted for or acquired by either party, or was in any way involved.
In this case, it is true that Black, at the time plaintiffs obtained their mortgage, was in possession of the contracted premises; but he was not in possession in pursuance of any ¡stipulation of the contract. He had, under the contract, the equitable right, upon payment of the purchase money, to call for the legal title, and this constituted his sole interest in the land. This right he transferred to the defendant by an assignment of the contract; and the defendant as such assignee, having paid the purchase money, and taken a conveyance from the railroad company, held the land by a title which may, or may not, be subjected to-an equitable charge in favor of the plaintiffs, but which no mortgage or conveyance by Black could, in law, incumber or affect.
2. If we are right in the conclusion already reached, the plaintiffs, as well as the defendant, are to be regarded as-the assignees of the equitable interest of Black, and, as such, they stood upon the same footing, with, at least, this-difference, that the assignment to defendant 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 fact or circumstance in the ease, 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.
It is claimed, on behalf of the plaintiffs, that the defendant was guilty of such laches in failing to give notice to-the railroad company, the holder of the legal title, of the-tact that the contract had been assigned to him. But-whatever might have been the effect of the want of such, notice as between the defendant and a subsequent bona fide purchaser of the equity, who had himself exercised due-caution and care, we think the plaintiffs are not in a position to make that claim. Without such notice the title of defendant was good as between bina and Black. The plaintiffs took their mortgage as security for a pre-existing debt, and not upon any new consideration. They had knowledge of the fact that Black claimed no interest in the land except under a contract of purchase between him and the railroad company, a duplicate copy of which they ascertained had been delivered to him, but which he was not able to produce. They made no inquiry of the railroad company, and were, therefore, not prejudiced by the company's want of notice of the assignment to the defendant; and although they did, some six months afterward, make inquiry of the company, and give notice of their mortgage, they did not at any time pay, or offer to pay, the purchase money, the' great bulk of which remained unpaid, and was then long past due. They thus enabled the defendant, and made it necessary for him, in order to protect his interest, to pay the unpaid purchase money, and take a conveyance of the premises. This conveyance, notwithstanding its peculiar phraseology, invested the defendant with the paramount title of the railroad company, and gave him a legal advantage of which he can not, in equity, be deprived.
3. The deed was properly received in evidence. Being given in performance of the contract, the contract price was rightly stated as the consideration. As a deed given upon such consideration it was duly stamped, and it therefore becomes unnecessary to consider any further question upon this subject which might otherwise arise.
Judgment affirmed.'