Court Opinion

ID: 7280800
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:08:16.868237+00
Date Added: 2024-06-11T16:19:01.798906
License: Public Domain

Concurrent opinion,
McFarland, J.
The question, in substance, is this: A vendor sells and conveys land by deed absolute, upon its face acknowledging the full payment of the purchase money, and this deed is duly registered. A creditor of the vendee, desiring to obtain security for a pre-existing debt, procured the vendee to execute a deed of trust upon the land to secure the debt, the deed stipulating for delay as usual upon the part of the creditor. The benefits of this deed were formally accepted by the trustee and creditor joining in its execution, and the deed was then duly registered. Some years afterward, when the trustee was proceeding to adveriise the property for sale under the deed, the vendor files his bill claiming a lien for unpaid purchase money, and claiming priority over the trust creditor. This is the question to be settled.
The question is very important, and if it is to be regarded as an open one, should receive a thorough consideration in all its aspects. The case of Green v. Demoss, 10 Hum., decided more than twenty-five years ago, announced a doctrine upon the subject which has been regarded by many of the profession as settling the question, though in fact it may have *17been but a dictum in that case; it was, however, approved by this court in the case of Ellis v. Temple, 4 Col., and in Fain v. Inman, 6 Heis., and repeatedly recognized in other cases — see Lincoln v. Purcell, 2 Head; Dishmore, v. Jones, 1 Col — and we think has been generally accepted as the law; but the question now having been reopened, we must determine whether to adhere to the rule thus adopted, or go back to the doctrine which it is insisted was established by the earlier cases.
I am of opinion that the rule, as substantially announced in Green v. Demoss, should be adhered to; that it is sound in principle, and supported by reason and authority, and is in every view just and equitable. That rule is, that a vendor who has thus conveyed without reserving an express lien, has no specific and fixed lien upon the property, and acquires none until his bill is filed for the purpose; and if, before this be done, any other creditor secures a fixed or specific lien upon the property, he will prevail over the vendor. . And a creditor who accepts a deed of trust to secure a debt, stands in this attitude. This rule, in some of its applications, is conceded on all hands — it was conceded in the argument of this case that the lien of a judgment given by statute will prevail over a vendor, and so the lien acquired by the levy of an execution or attachment, where such liens are acquired before the vendor’s bill is filed.
The first question to settle is, what is the nature' *18of the vendor’s equity or lien in such a case? Is it a fixed and specific lien attaching to the land from the date of the sale? That it is not, seems to me to-be definitely settled. For if it be a fixed lien attaching to the land before the bill is filed, I see no reason why it should not prevail over all other liens to which it is prior in time, either the lien of a judgment execution or attachment, and even after a sale under execution or attachment, but as early as Gann v. Chester, 5 Yer., it was said this lien could not prevail over other creditors who might acquire rights to the properly. In that case other creditors had obtained mortgages that they had foreclosed, and under which they had bought the property. The same was held in Roberts v. Rose, 2 Hum., where the land had been sold under execution and bought by a party having full notice that the purchase money was unpaid. And in Brown v. Vanlier, 7 Hum., in the argument of Judge Cooper, which was adopted as the opinion of the court, it is conceded that “ by our registration laws and the policy of .this State in subjecting lauds to sale by execution for the payment of debts, the lien, as it existed at common law, has been modified, and that by the registration laws the vendor’s lien, as every other unregistered lien, is postponed to the rights of judgment creditors and bona fide purchasers without notice, . . . that is to say, creditors may acquire rights aud enforce them, if they are diligent, without noticing the vendor’s lien.” That the lien of a judgment execution or attachment, if prior in time to the filing of the vendor’s bill, will *19prevail; I think, has long been regarded as settled, anft in fact was not denied by the learned' counsel who I argued this cause. See also Ellins v. Temple, 4 Col.
It- was argued, however, that the lien of' judgment' execution' or attachment is superior* to the' lien 'of a*vendor-before bill filed,- only- because máde so by "statute; But this is evidently a-’mistake; as there is' no statutory provisions declaring SU’ch"'’ lretís- supériot to ■afiy-other. Such liens .are given- by- law, but' ate’? nott declared- superior- to- any- other í-li'etí. This results'* from the nature and - force- of th'e,! conflicting claims.* If;!, however, the vendor’s equity-be"a'* fixed lien- on the land,■-it- should certainly1-prevail''over'the lien ojf: a,-¿judgment execution or attachment!;''and I» am likewise; unable -to -see why it should- nob prevail over a-trust creditor or mortgagee" who Has'* foreclosed hie-deed of trust or.- mortgage" arid bought' tite land" for bis > debt,- or over- a puf chaser'’at' execution' sale. IP the i vendor’s lien - was- superior to the ' mortgagee' before he h'ád foreclosed and" bought the- land, or had begun proceedings- for that purpose; why. is'if not1 equally so afterward-? Ho®- is the mortgagee's rights’ as against-the vendor, after he’ has thus bought the land, any stronger than before, as hé has not- become-' an innocent -purchaser? An express lien retained by' the vendor ■ in ■ his deed would not be thus defeated”'by a mortgagee; and if the implied lien be regarded as a fixed and- specific lien, it certainly could" not be thus' defeated? by a - sale and purchase by "the'•"'mortgagee, oi 1 by á sale under execution or aítachmént. But this *20court decided in Fain v. Inman, 6 Heis., without dissent, that where the trust creditor had caused the-ti’ust deed to bo foreclosed, and had bought the land-for his debt before the vendor’s bill was filed, that the former should prevail. It seems to me that if the mortgagee’s claim be inferior to the vendor, he cannot make his claim superior by taking steps to-foreclose his mortgage or deed of trust, unless possibly such superiority be acquired by force of judicial proceedings instituted, but in Fain v. Inman, the creditor caused his deed of trust to be executed, and became purchaser without judicial process.
Strong objection is made to the doctrine that the lien of the vendor in such case is only an equity or right to file a bill, and that his lien only becomes-fixed by filing of his bill. Thisy it is said, is giving him the right to file a bill to enforce a lien when he has no lien to enforce that which he has-not. Other instances might be cited in which the-right is given to resort to a court of equity, and a lien acquired only upon the filing of the bill. These-cases are statutory, it is true, but it shows there is nothing objectionable in such a rule. Besides, the rule that the filing of the vendor’s bill fixes his lien, is certainly well settled. As befoi’e stated, it is well settled that the lien of a judgment execution or attachment, if acquired before the filing of the vendor’o bill, will prevail over it; but if the vendor’s bill be filed first, it is equally clear that it will prevail. So that the proposition that it is the filing of the bill that fixes the lien of the vendor, although denied in *21•its application to a case of conflict between such lien and that of a mortgagee, is not denied in its appli-cation to other liens on the property. If the rule be sound in one ease, it must be in the other. Sb that this part of the proposition is undoubtedly sound, -as is virtually conceded in the argument of Judge Cooper in Brown v. Vanlier, 7 Hum., which is the principal authority relied upon to support the contrary view. The only question then remaining is, whether -a creditor who accepts the security of a deed of trust -duly registered to secure a pre-existing debt, thereby acquires a valid and fixed lien upon the property. I maintain that this proposition cannot be resisted. The -argument of Judge Cooper in Brown v. Vanlier was, that our registration laws only protected creditors and bona fide purchasers without notice from the secret or unregistered lien of a vendor, and that the creditor 'claiming under a voluntary assignment made by a failing debtor to secure a pre-existing debt, was neither -a creditor nor a bona fide purchaser without notice j not a creditor because he had no judgment, and not a bona fide purchaser because he has parted with nothing on the faith of the conveyance; but he admits •that there is a clear distinction between creditors who claim under a general assignment made to assignees by a failing debtor for the benefit of all his creditors -and a creditor to whom a conveyance has been directly made to secure contemporaneous advances, or in satisfaction of pre-existing debts, and refers to section 1229, Sto. Eq. Jur. This section, and the preceding, •shows that there is a clear distinction between a gen*22eral assignment, as to assignees in bankruptcy, and a particular assignment to specified creditors for their security or satisfaction. The latter will be protected if yrithout notice, and I should say, even if be to secure pre-existing debts, if further time was given on tbe faith of the security, and upon this ground this ■Tfould be to put the mortgagee upon the footing of a purchaser without notice. But I put the mortgagee upon the footing of a creditor, and not a purchaser, and I apprehend the error in the argument of Judge Cooper is, in assuming that the word creditors, as used in the registration laws, means only judgment creditors. Such, at that time, seems to have been the meaning given to the word creditor, as used in the act of 1801 against- conveyances to defraud creditors. Langford v. Fly, 7 Hum. This was overruled by Farnsworth v. Bell, 5 Sneed and Patrick Ford, note; and this meaning was perhaps attached to the word creditor in other statutes, but no such limited meaning is now attached to the word, at least I think it should not be so limited in its application to a question like the present.
The argument of Judge Cooper concedes that the creditor might acquire rights in the property without noticing the vendor’s lien, but that he is not a creditor unless he has judgment. But this proposition cannot now. be maintained. That a creditor without judgment may, by virtue of a deed of trust or mortgage executed for his benefit and accepted by him, although for a pre-existing debt, acquire a fixed lien upon the property, is now well settled. Such a lien *23has been several times held to be superior to the lien of an attachment, and in a recent case at Nashville of Washington v. Ryan, opinion by Judge Deaderielc, goes so far as to hold, as does also the ease in 4 Col., that the presumption of law that the beneficiaries accept the benefits of the deed, nothing .being alleged .to the contrary, will be sufficient to give the-trust creditors priority over an attachment. Other cases referred to in that opinion left this question in doubt, but all concede that if the creditors in fact accept before the attachment is levied, they will prevail. See Wills v. Harris, 3 Head, 332; Furman & Co. v. Fisher et al., 4 Col., 625; Farquharson v. McDonald, 7 Heis., 404. These cases are not put upon the ground that the mortgagee or trust creditor are purchasers without notice, but they are put upon the footing of creditors. Their claims were pre-existing debts. It is insisted that a trust creditor can only obtain priority over a vendor by executing his deed of trust, or by taking steps • to execute it, not by merely accepting it; that such was the holding of the court in Brown v. Vanleer, and so it seems to have been. But the eases last above referred to distinctly hold that the trust creditor may acquire such a valid-lien on the property as to defeat a subsequent attachment by merely accepting the benefits of the deed;, and in the last case, if nothing else appears, the presumption of law that he accepts will be sufficient.
By accepting the deed he acquires a lien that will defeat a subsequent attachment, but he acquires no lien against the vendor until he executes his trust *24•deed, or takes steps to execute it. This seems to be manifestly inconsistent, but the inconsistency does not stop here. As said, these cases hold that a trust conveyance thus accepted by the creditor will give him a lien superior to the lien of a subsequent attachment, and certainly it would for the same reason be superior to the lien of an execution, subsequently levied, or a judgment. But as we have before said, a lien fixed by the levy of an attachment or execution, or the statutory lien of a judgment before the filing of the vendor’s bill, will prevail over the vendor. Then how is it possible the vendor is to prevail over the trust creditor who has accepted the benefits of the trust before the vendor’s bill is filed? Suppose we should have a case of conflicting claims between three parties, first, in time a creditor who •has formally accepted the benefit of a deed of trust upon the property to secure his debt duly registered; second, in time an execution or attachment duly levied upon the land; third, in time a vendor who files his bill to enforce his lien for unpaid purchase. The trust creditor’s claim is superior to the attaching creditor, the attaching creditor’s claim is superior to the vendor, and yet we are told that the vendor’s claim is superior to the claim of the trust creditor. There is no escape from the dilemma unless some one of these positions be abandoned. It seems to me that the only way out of the dilemma is to hold the vendor’s lien superior to the others first acquired, simply because it is a secret and unregistered lien. We must either do this or put it upon the ground of a fixed *25lien, and then it should prevail against all others, and prevail against all except innocent purchasers without notice.
If this be regarded as an open question upon which ’the court is required to lay down a rule to be followed in the future, upon which side of the question is the law, the equity? Here is a vendor who sells 'and conveys his land by a deed absolute upon its face acknowledging the full payment of the purchase money. This, goes upon the register’s books as notice to all the world. A creditor of the purchaser, ■desiring to secure his debt, and seeing this deed upon the register’s books, accepts a deed of trust, agreeing to give further time upon his debt. He relies upon 'this security perhaps for years, forbears all other efforts 'to secure his debt, but finally, when he comes to have his deed of trust executed, the original vendor comes forward with a note for unpaid purchase money, of ’which no notice was given, and claims priority. He seeks to set up a secret and unregistered lien against the trust creditor, who has certainly a fixed lien on the land' the creditor certainly has the legal title, •and at least an equal equity. Take the illustration used in Gann v. Chester. Suppose the vendor, after making an absolute conveyance without reservation, immediately takes from his vendee a mortgage or deed of trust to secure unpaid purchase money, but neglects to have it registered. In such case it cannot be denied that he would be postponed to a subsequent mortgage or deed of trust first registered. Upon what principle is it that the secret, unregistered lien, *26resting only in the parol agreement of the parties, or in the mere presumption of law, shall be held as against creditors superior to the mortgage duly executed but not registered. If the vendor takes his. lien in the form of a mortgage duly executed, but not registered, it is bad; but if he allows it to remain in the secret parol agreement of the parties, either express or implied, it is good. It may be .said that the creditor might, by enquiry, ascertain the existence of the unpaid purchase money. In many cases this would be impracticable. There can be no danger of injustice to the vendor; it is quite easy for him to put his lien beyond all question, and give notice to the world either by retaining the title or an express lien upon the face of his deed. Regarding the beneficiary in a trust deed as a purchaser, which he may be, where he advances money or releases other securities at the time, notice or want of notice might be material; but regarded as a creditor seeking to secure his debt, the question of notice is immaterial, as the want of notice cannot help him, to give notice cannot injure him, or affect his conscience-The idea, of converting an absolute sale and conveyance into a trust for the benefit of the vendor, is a purely arbitrary assumption directly opposed to the ■real truth of the transaction. So manifest is the want of equity in such cases that many States have abandoned the vendor’s lien altogether. And Judge Cooper, upon whose argument Brown v. Vanleer was decided, now concedes that the latter is probably the better doctrine, and certainly more in accordance with *27;the-.spirit, of our registration .laws. See note to Eskride v. McClure, late edition of 2 Yerger. The .changes, ,he says, have been made by the judicial legislation of the latter cases, but the whole doctrine of vendor's lien was .established by judicial legislation; it Is the creature of a »court of equity, and -may «properly .be. modified by ’-'the same power that 'created it.
I ¡think the contrary rule would be a decided step .backward, and greatly -hnsettle what is now regarded .as the; settled law, ¡and moreover/ to establish a '.rule-not-pound or equitable in itself. <