Case Name: McCarty and Others v. Pruett
Court: Supreme Court of Indiana
Jurisdiction: Indiana
Decision Date: 1853-06-06
Citations: 4 Ind. 226
Docket Number: 
Parties: McCarty and Others v. Pruett.
Judges: 
Reporter: Indiana Reports
Volume: 4
Pages: 226–232

Head Matter:
McCarty and Others v. Pruett.
A. sold, and conveyed to B. and C. a tract of land and took their note for part of the purchase-money. Afterwards, and before the note became due, he sent an. agent to collect it. Upon the proposal of B., the agent agreed to take the individual note of B., with an extension of the time of payment, for a part of his half of the note, upon his paying in hand the residue of such half. The money was thus paid and the note taken, and the agent thereupon entered a credit on the original note for one-half thereof. The land afterwards passed into the hands of J)., an innocent purchaser, for a valuable consideration, without notice of the circumstances under which the credit was made, or the individual note of B. executed. A. received the note of B., acquiesced for several years in the arrangement made by his agent, and did not disapprove thereof; but afterwards filed his bill to enforce his lien, as a vendor, against the land in the hands of D., for the non-payment of the individual note of B. Held, that as to H., at least, A. must be held to have ratified the act of his agent, and that the credit entered on the original note by the agent must be treated as a payment, and that the individual note of B. must be regarded simply as given for money loaned.
A vendor’s lien for unpaid purchase-money follows the land in the hands of a purchaser from his vendee with notice that part of the purchase-money is unpaid; but the burden of proof is on the vendor.
Monday, June 6.
APPEAL from the Franklin Circuit Court.

Opinion:
Roache, J.
Pruett filed a bill in chancery to enforce his lien upon land sold by him, for the balance of the purchase-money. The material allegations of the bill are as follows:
That on the 16th of August, 1839, Pruett sold and con veyed the land to one Harwich and W. M. McCarty for 2,000 dollars, of which sum they paid a portion, and gave their joint note for the residue, 1,150 dollars, due October 1, 1842. That on the 29th day of June, 1840, Harwich and McCarty sold the land to one Samuel White, and took his notes for the whole amount of the purchase-money, secured by a mortgage. White never paid any of the purchase-money, and afterwards absconded to parts unknown. Shortly after'the sale to Harwich and McCarty, Pruett removed to Missouri, where he has resided ever since. In the summer of 1841, he sent one Willis Moor from Missouri to collect the note of 1,150 dollars, as his agent. Harwich proposed to Moor that if he would accept the individual note of said Harwich for 200 dollars, and extend the time of payment on it to March 1, 1843, he would pay the balance of his half of the note in cash, which Moor, "as such agent, agreed to do." Upon this agreement, Harwich executed a promissory note dated August 31,1841, for 200 dollars, payable to the said Willis Moor, March 1, 1843, and paid the residue of his half of the 1,150 dollar note in cash. Moor, in consideration of the cash and the 200 dollar note, entered a credit on the original note, for the one-half thereof. Immediately on Moor's return to the state of Missouri, he delivered the 200 dollar note to Pruett, as its rightful owner. At the February term, 1843, of the Franklin Circuit Court, he recovered a judgment against Harwich and Me Cartyiar 528 dollars and 50 cents, being the balance due on the 1,150 dollar note, after deducting the credits indorsed thereon.
That on the - day of -, 1843, said W. M. McCarty transferred and assigned to one Enoch McCarty his interest, in the White notes and mortgage, and attempted to convey the land with intent to defraud Pruett.
That Harwich becoming insolvent, on the 30th day of June, 1842, attempted to convey his interest in the premises to George Holland and John M. Johnson. Johnson conveyed his interest by quit-claim deed to Holland, and Holland to the said Enoch McCarty, who claims to be the owner and holds possession by virtue of said several con veyances, and had received rents of the value of 1,000 dollars.
The bill further alleges that Barwick, W. M. McCarty, White, Johnson, and Holland, all had full knowledge of the existence and nature of his equitable lien, and charges them with full notice prior to the dates of their respective purchases.
The prayer of the bill is, that the 200 dollar note may be declared to be a lien upon the land, on the ground that it was an unpaid balance of the purchase-money. White, Barwick, W. M. McCarty, and E. McCarty, axe made defendants. White and Barwick made default. The McCartys filed separate answers under oath.
W. M. McCarty denies that he knew of the existence of the lien at the time he sold to his father, E. McCarty. He alleges that he had heard that Barwick had paid his half of the note—he did not inquire nor know how, or in what way, but found it credited on the note—and in making the sale to his father, arranged with him to pay the other half, being his part of the note, which he has since done, tie denies that he ever knew what was the consideration of the 200 dollar note, or the amount, until it was filed in this suit. He alleges that Barwick was solvent at the maturity of the 1,150 dollar note, but had become insolvent before the maturity of the 200 dollar note, and insists that the extension of time releases him from all liability.
M. McCarty also filed a cross bill, making Pruett and Holland defendants, setting up that Pruett, by taking the 200 dollar note and crediting that sum upon the note for 1,150 dollars, had waived his lien, and that While, Holland, Johnson and E. Me Carty were bona fide purchasers, without notice of Pruetts equity. Pruett answered the cross bill, denying that he had intended to or did abandon his lien on the land, admitting that Moor acted as his agent in the transaction, but denying that he had authority to waive-his lien.
Holland answered under oath, denying notice, both at the time of his purchase and of his sale to E. McCarty, and asserts that the whole transaction, so far as he was concerned, was bona fide.
These are all the pleadings having any bearing on the questions raised in the case.
Depositions were taken and the cause went to a hearing, which resulted in a decree for the amount due on the 200 dollar note, and declaring it a lien upon the land, and in case of default in the payment of the decree, ordering a sale, &c.
The appellants insist that this decree is erroneous, on two grounds:
1. Because Pruett, through his agent, Moor, waived his lien by taking the note of Barwick for 200 dollars, and extending the time of payment, and entering a credit of that amount on the original note.
2. Because it is not shown that either Holland, Johnson, or E. Me Carty had notice of the existence of the lien at the dates of their respective purchases.
The first question to be settled is, whether Pruett is bound by the acts of his agent, Moor, in the arrangement made with Barwick, which resulted in entering the credit on the original note; or, in other words, whether the former is responsible for the legal consequences attaching to the acts of his agent.
The facts, as established by the bill and depositions, are these: Pruett employed Moor as his agent, and sent him to Indiana to collect the 1,150 dollar note. Moor called on Barwick in McCarty's absence and without his knowledge, and agreed to take the 200 dollar note in controversy, payable to himself, extending the lime of payment some five months, and indorsing on the original note a credit, in general terms, for the said Barwick's half thereof, including the note for 200 dollars in the credit. Immediately on his return to Missouri, he delivered both notes to Pruett. There is no evidence tending to show that Pruett expressed any disapprobation of the arrangement from that time until about the commencement of this suit, a period of about four years. There is nothing-in the whole case to show that he ever at any time, be fore the bringing of the present suit, in any mode disavowed the arrangement made by Moor. He was fully informed of the whole transaction shortly after its completion, had possession of the notes, brought a suit on one of them, and so far as is shown, made no attempt to repudiate Moor's acts until after Barwick became insolvent. Admitting that Moor exceeded his authority, Pruett afterwards, with a full knowledge of all the facts, by his acquiescence fully sanctioned them and made them his own. They are to be treated as the acts of Pruett himself. He must be held responsible for all their legal consequences.
In this view of the case, it is unnecessary to decide the question insisted on by the appellants, as to whether the taking of the new note of Barwick was a waiver of his lien. That question is not involved. The indorsement upon the note was prima facie evidence of payment of that amount of the debt, and consequently a discharge, instead of a waiver, of the lien incident to it, pro tanto. It therefore rests upon Pruett to show that the legal consequences flowing from an actual payment shall not attach to his acknowledgment of a payment; and this the more especially, as the rights of third parties have now become involved. In this he has utterly failed.
The arrangement with Barwick was made without the privity or consent of W. M. McCarty, the other payor of the original note. By that arrangement, the 200 dollar note in controversy was taken, signed by Barwick alone, extending the time of payment some five months beyond the maturity of the original note, and crediting it upon the original note as an absolute payment. We can regard it in no other light, so far as the rights of all third parties are involved, than as an actual payment of that amount, and a loaning of the same sum to Barwick. The adoption of a different view of the case would be assisting Pruett to perpetrate a fraud upon all the parties having an interest in the land, as well as upon W. M. McCarty, the joint payor of the original note. The sale was made by W. M. to E. McCarty some months after the giving of the 200 dollar note, and after the trial which resulted in the judgment for the balance due on the original note. There is no proof that on that trial Pruett claimed or pretended that any more of the purchase-money was due, than the balance on the 1,150 dollar note, after deducting the payments indorsed. It is fair to presume that E. McCarty made his contract with reference to these facts, the evidence of which was furnished by Pruett himself.
From.the evidence of payment furnished by Pruett himself by his indorsement on the note, he would very rationally conclude that when he paid the judgment for the balance of the original note (which he is proved to have since done) his land was freed from the incumbrance of the vendor's lien. This was the fair legal inference from Pruetts acts. After a silence of four years, he cannot be permitted to- deny or evade the legitimate consequences of those acts, and subject third parties who may have made contracts in the belief that the indorsement was what on its face it purported tó be, a payment.
The indorsement on the original note, under all the circumstances, must therefore be treated, so far as all third parties are concerned, as an absolute payment. The 200 dollar note embraced in that credit, was not for an unpaid portion of the purchase-money, and was consequently not a lien upon the land, at least as against the defendants below.
From what has been already said, it will be perceived that we regard E. McCarty in the light of a Iona fide purchaser without notice.
The lien of a vendor of real estate for the unpaid purchase-money, follows the land into the hands of a purchaser from his vendee, provided he have notice of the lien—that is to say, have notice that a portion of the purchase-money remains unpaid. But the burden of proof is on the vendor.
The answers of Holland and Johnson, who bought Bartoick's interest, and of E. McCarty, who now owns the whole tract, all deny that they had any knowledge of the lien, under oath. The evidence is not sufficient to show that they had. As to Holland, there is no proof at all. One witness testified that he showed the note to Johnson before it was due, and shortly before Barwick went away, with the view of employing him as an attorney to collect it; but on his cross examination he says, "he did not tell him anything about the consideration of the note, when or how it was given." It was also proved by one witness, that at some time, but whether before or after his purchase does not sufficiently appear, E. McCarty was apprised of the existence of the 200 dollar note, but the witness could not say whether he was informed or knew for what the note was given. This was no notice of Pruetts equity. The proof is, that these defendants had notice of the existence of a note for 200 dollars, payable not to Pruett, the vendor of the land, but to one Moor, due not from the vendees, Barwick and McCarty, but from one of them alone. No one would be led to suspect, even from an inspection of the note, without the explanation, which is not shown to have been given, that Pruett had any connection with the note. It was not even sufficient to put a buyer on inquiry.
G. Holland, for the appellants.
J. A. Matson, for the appellee.
Per Curiam.
The decree is reversed with costs. Cause remanded with instructions to the Circuit Court to dismiss the bill.