Court Opinion

ID: 3494784
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:02:42.872661+00
Date Added: 2024-06-11T13:43:42.988471
License: Public Domain

The plaintiff recovered a judgment for $8,606.50 against defendant Homer E. Bailey on his promissory note given as part payment of the purchase price of a farm in Chippewa county. The purchase price of the farm was $48,000. An execution was levied on the land, and this bill was filed in aid of execution. The defendant Wiger answered and claimed affirmative relief. The Farmers  Merchants State Bank was permitted to intervene as a party defendant on its petition. It appears that plaintiff, for some time, has had the title to the farm. He conveyed it to his brother, Albert A. Stegeman, in pursuance of a contract. Albert A. Stegeman then sold it to Homer E. Bailey in exchange for an interest in an apartment house in Minneapolis, $10,000 in cash, and a promissory note for $8,000, and conveyed the title to defendant Wiger at Bailey's request, to secure the repayment of the $10,000 loan which he had made to *Page 510 
Bailey. Albert A. Stegeman transferred the $8,000 note he received from Bailey to plaintiff to cancel his indebtedness for the farm. The defendant bank claims that Bailey was indebted to it in a considerable amount for loans when Wiger loaned him the $10,000, and that it was agreed between Wiger, Bailey, and White, the bank's president, that Wiger should hold the title to secure the bank loans as well as his own. Out of these facts the question of priorities arose. Plaintiff claims, as holder of the note for purchase price, he is entitled to a vendor's lien. Wiger claims a first lien for his loan, and the bank claims its loans to Bailey should be equally protected with Wiger's loan. The trial court was of the opinion that the Wiger lien and the bank lien should take precedence over plaintiff's vendor's lien. The plaintiff has appealed from that holding.
This State has recognized vendors' liens for purchase price of real estate from a very early date. In Michigan State Bank
v. Hastings, 1 Doug. 225, 258 (41 Am. Dec. 549), it makes use of the following language:
"Such liens exist independently of any express agreement, and courts of equity enforce them, on the principle that a person having gotten the estate of another, ought not in conscience, as between them, to be allowed to keep it, and not pay the consideration money."
It was observed in Dunton v. Outhouse, 64 Mich. 419, 425, that:
"The vendor's lien upon sale of real estate has always been recognized in this State; the earliest reported case being that of Carroll v. Van Rensselaer, Har. Ch. 225. The doctrine, generally stated, is that the vendor of land who has taken no security, although he has made an absolute deed and acknowledged the receipt of the purchase price, yet retains an equitable lien for the purchase money, unless there be an express or implied waiver and discharge of it, which will be enforced in *Page 511 
equity against the vendee, volunteers, and all others claiming under him with notice; that is, against all persons exceptbona fide purchasers without notice.
"The equity arises independent of contract, and it is therefore immaterial that the seller had no intention to reserve such a lien. 2 Sugd. Vend.  P. 675. And if the purchaser alleges that the lien does not exist, for any reason, in a particular case, the burden is on him to show the circumstances which repel the presumption of its existence or rebut the equity."
See, also, Biddle v. Biddle, 202 Mich. 160, 165; Lavin v.Lynch, 203 Mich. 143 (2 A.L.R. 804); 2 Jones on Liens (3d Ed.), § 1094.
There is little doubt that Albert A. Stegeman had a vendor's lien on the land for the amount of his promissory note which he took as part payment of the farm. The question then is whether plaintiff to whom the note was assigned may enforce the lien. The authorities are not in harmony as to his right, but the great weight of authority is that the lien follows the note. Assignment of note given to secure purchase money of land carries with it the vendor's lien on the property.Kern v. Hazlerig, 11 Ind. 443 (71 Am. Dec. 360); Griffin v.Camack, 36 Ala. 695 (76 Am. Dec. 344) Hassell v. Hassell,129 Ala. 326 (29 So. 695); Upland Land Co. v. Ginn,144 Ind. 434 (43 N.E. 443, 55 Am. St. Rep. 181); State Bank of IowaFalls v. Brown, 142 Iowa, 190 (119 N.W. 81); Honore's Ex'r v.Bakewell, 6 B. Mon. (Ky.) 67 (36 Am. Rep. 493); Sloan v.Campbell, 71 Mo. 387; 39 Cyc. p. 1808; 27 R. C. L. p. 584. We are of the opinion that under these authorities the vendor's lien followed the note and was enforceable in the hands of plaintiff, if no other equitable rights intervened.
The Bank's Claim. There seems to be more than one reason why the contention of the bank cannot be sustained. (a) It does not appear by the proofs that any consideration was passed to Bailey for the security. If there was no consideration for tacking the bank's *Page 512 
loans on to the Wiger loan, the bank's loans would certainly not be held to take precedence over plaintiff's vendor's lien. (b) It appears also that the loans to Bailey from the bank were antecedent debts. They were all owing at the time this deal was entered into, and this class of debts is not superior to a vendor's lien, especially when the bank officers knew, as they did in this case, of the note which Bailey had given to Stegeman. Dunlap v. Burnett, 5 Smedes  M. (Miss.) 702; Shirley
v. Sugar Refinery, 2 Edw. Ch. (N.Y.) 505, 512. Plaintiff had no notice of this arrangement between Wiger, White, and Bailey. Neither had the brother, Albert A. We are of the opinion that the defendant bank has no rights that are superior to plaintiff's vendor's lien.
Wiger's Claim. Wiger is, undoubtedly, a mortgagee to the extent of his loan. He loaned this money to Bailey to pay on the farm. Had he been a bona fide mortgagee without notice of plaintiff's vendor's lien, his claim under the authorities would take precedence of the vendor's lien, but he was not such mortgagee. He knew Bailey was purchasing the farm and giving Stegeman a promissory note for $8,000 in part payment on the purchase price. He knew the note was not secured, and he must be presumed to have known that Stegeman would have a vendor's lien for the unsecured note of $8,000. But defendants say Albert A. Stegeman had notice that the conveyance to Wiger was to secure the Bailey loan for $10,000. He perhaps did, but knowledge as to how Bailey got the money with which to purchase the farm in part would not estop him from insisting on his vendor's lien. The vendor would waive nothing by such knowledge. The important question is, What notice did the mortgagee have? In this case it is conceded that the mortgagee knew of the $8,000 unsecured note. The rule of priority in such cases is: *Page 513 
"As a general rule, whether or not a vendor's lien takes precedence over a mortgage, deed of trust, or other conveyance given by the purchaser by way of security, depends upon whether the grantee takes such mortgage or other conveyance in good faith without notice of the existence of such lien, and for a valuable consideration." 39 Cyc. p. 1817, and authorities cited.
Equitable Features. Wiger was assisting Bailey to buy this valuable farm. He took a deed of the farm to secure his loan of $10,000. He knew of the unsecured note given to Stegeman before he made his loan. His security is ample even if plaintiff's vendor's lien is declared superior to his. If plaintiff's lien is declared to be inferior to Wiger's it leaves him without any security and forces him to take care of secured creditors in a large amount of indebtedness in order to make his own claim. This does not appear to us quite equitable.
We think the rights of the plaintiff are superior to those of the defendants, and the title from Stegeman to Wiger should be set aside to the extent of satisfying Stegeman's execution. Defendants should have 30 days from the filing of this opinion in which to make payment of Stegeman's claim, in default of which Stegeman should proceed with his execution and sell the farm or such part of it as is necessary to satisfy his claim. The plaintiff should be entitled to his costs.
FLANNIGAN, C.J., and WIEST, J., concurred with BIRD, J.