Court Opinion

ID: 4912810
Source: CourtListenerOpinion
Date Created: 2021-09-22 00:00:30.656921+00
Date Added: 2024-06-11T08:13:43.618894
License: Public Domain

Hawkins, Justice,
delivered the following opinion :
The questions arising in this case for the decision of the. Court, 'are these : 1st. Can a vendor enforce a specific lien in equity against a vendee for the land sold, the vendor giving the vendee an absolute deed in fee simple, and in return therefor, taking the promissory note of the purchaser, with a third person thereon as security i
2d. Can the surety, without having paid the purchase money, be entitled to have the lands (so sold) set apart as a specific fund for the payment of the note 1
We have given the subject the consideration due to its importance, and more especially as it is the first case that has arisen in our courts involving a solution of the above propositions.
The right of the vendor to an equitable lien upon the property sold, seems to have derived its source from the civil law, and constituted-what was termed a tacit hypothecation, or secret mortgage". It has been much discussed in the courts of England and this country, and the doctrine exists and is fully sustained in England and in most of the States of the Union ; but difficulties have arisen out of the *471question, what shall constitute a waiver of the implied lien 1 Thiss indeed, is the very question before the Court.
During the argument, all the British cases pro and con, both before the Revolution and since, having a bearing upon the question, were cited and commented upon with.great ability, and it seems they cannot be very easily reconciled with each other. Judge Story, however, remarks, in Gilman v. Brown, that “on a careful examination of all the authorities, he does not find a single case in which it has been held, if the vendor takes a collateral security, binding others as well as the vendee — as for instance a bond or note with a surety or an endorser, or a collateral security by way of pledge or mortgage — that, under such circumstances, a lien exists on the land itself.” If such be the case, the American authorities are not contra but ultra merely those of England.
Without going into detail as to the British authorities, it will be sufficient as to them to quote the neat and precise summary of Chancellor Kent. He remarks: “It has been a question much discussed as to the facts and circumstances, which would amount to the taking of security from the vendee, so as to destroy the existence of the lien. In several cases it is held, that, taking a bond from the vendee for the purchase money, or the unpaid part of it, affected the vendor’s equity, as being evidence that it was waived ; but the weight of authority and the better opinion is, that, taking a bond, note, or covenant from the vendee for the payment of the money, is not of" itself an act of waiver of the lien, for such instruments are only the ordinary evidence of the debt. Taking a note, bill, or bond, with distinct security, or taking the distinct security by itself, either in the shape of real or personal property, from the vendee, or taking the responsibility of a third person, is evidence that the seller did not repose upon the lien, but upon independent security; and it discharges the lien. Taking the deposit of stock is also a waiver of the lien, and, notwithstanding the decision of the Master of the Rolls, in Grant v. Mills, holding that a bill of exchange, drawn by the ven-dee, and accepted by him and his partner, did not waive the lien, the sounder doctrine and the higher authority is, that, taking the responsibility of a third person for the purchase money, is taking security, and extinguishes the lien.” 4th Kent’s Com., 152, 153.
The text of Chancellor Kent is fully sustained by the American authorities. Indeed, so far as we have been able to extend our re*472searches, there appears a uniform current of decisions going to establish the doctrine, that the taking of independent or collateral security is a waiver of the lien.
In Virginia, it has been decided directly; Judge Pendleton observing, that' “ If he (vendor) hath taken a security, or the vendee hath sold to a third person without notice, the lien is lost.” Cole v. Scott, 2 Wash. Reps., 141. So, too, in the case of Wilson v. Graham’s Ex’rs., 5 Mumford, 297, 299. 2 Tucker’s Notes, 454.
The doctrine of lien and this principle of waiver certainly exists in several other States, viz : Tennessee, Ohio, Kentucky, Alabama, Georgia, Indiana, Mississippi, New York, and probably others beside. See Eskridge v. McClure & Walker, (Haywood & Whyte Justices,) 2 Yerger Rep., 84. Williams v. Roberts, 5 Hammond R., 35. Cox v. Fenwick, 3 Bibb, 183. Hardin Rep., 48. 3 Alabama (N. S.,) 302. 3 Kelly’s Georgia Rep., 345. 1 Blackford, 249, 416, Evans v. Goodlet. Lagon et al., v. Badallet and others. Clower v. Rawlings, 9 Smedes & Marshall, 128, and Fish v. Howland, et al., 1 Paige Ch. R., 20, where the British authorities are all reviewed, and the subject ably discussed by Chancellor Walworth.
Judge Story, a portion of whose opinion we have already quoted, (Gilman v. Brown, 1 Mason, 191,) has given the sanction of his name — a name carrying with it the greatest possible respect and veneration — to this principle of waiver, by the taking of collateral security. The case of Gilman v. Brown was taken to the Supreme Court of the United States, where the doctrine of Judge Story, as to this waiver, received confirmation from that Court, Chief-Justice Marshall delivering its opinion. He remarks : “ The notes, too, for which the vendors stipulated, are to he endorsed by persons approved by themselves. This is a collateral security, on which they relied, and which discharges any implied lien on the land itself for the purchase money. We think this, on principles of English law, a clear case of exemption from lien.” Brown v. Gilman, 4 Wheat., 455. We have already seen that Chancellor Kent adopts an adverse principle to that of Lord Eldon, as to waiver of’ the lien, and coincides with the Supreme Court and Judge Story.
With such an array of opinions and decisions pronounced by judges, eminent for all that is great and illustrious in jurisprudence, a court can feel no diffidence, difficulty, or solicitude, as to arriving at a proper conclusion.
*473We are not prepared, however, to go as far as some decisions, which declare, that the taking separate or independent security is, per se, or ex proprio vigore, a waiver of the lien of the vendor upon the land sold; but we adopt the maxim of in medias res as most conducive. to justice, and say this, that where a separate or independent security is taken by the vendor, other than the personal security of the vendee, it is prima facie evidence of a waiver of the equitable or implied lien upon the land sold, and the onus is upon the vendor to prove that it ought not to have that effect.
To enable vendors and purchasers to understand their respective rights, it is certainly well that some explicit and general rule, one easily understood and as easily followed, should be declared ; thereby obviating in numerous instances the necessity of a resort to a Court of Chancery by parties, to have their several rights subjected to the construction of that Court, upon the varying and peculiar circumstances of each particular case.
We may here be permitted to remark, that such a rule seems based upon sound policy. It is very true, that when an individual parts with his land, he should receive the purchase money — that is sheer justice; and as long as he indicates by his act — for instance, the simply taking the bond or note of the purchaser — that he relies-upon the land itself as a means of payment, the law says, he shall retain a specific lien upon the property sold, subject, of course, to have it defeated by the intervention of creditors or purchasers without notice. But when he carves out an independent security for himself, in exchange for the land sold — when he creates for himself a distinct and separate fund to which he can look for payment — when he gives an absolute deed for the land, thereby rendering it subject to other claims and the contingency of sale, it does appear that the vendor has no right to complain. The evil, if any, is easily averted by ordinary care, either by taking a mortgage, which on being recorded is notice to all the world, thereby carrying out the policy of our registration laws, and in many cases preventing third persons from giving credits to the vendee, on the faith and security of the very land sold ; or by retaining the title, simply giving a bond for a conveyance, upon the payment of the purchase money. These modes are familiar to every one, and generally are pursued in those every day transactions when real property is bought and sold. If the mode and manner of payment are all' that are intended by the taking of a *474note, with an endorser upon it, it would seem they would be sufficiently indicated without invoking the liability of a third person, who frequently would feel that his contract was something more than mere form; and certainly the simple note or bond of the purchasers would be quite sufficient to set forth the amount, place and time of payment.
It is said, too, that because a party takes one security, it is not a sequitur that he relinquishes another. Very true, but then let him fashion his contract accordingly, and thereby rebut the inference and presumption raised by the law; unless he do so, in the words of Judge Story, “ the rule may properly apply, that expression faeit ces-sare taciturn, and where the party has carried out his own security, the law will not create another in aid.” This was manifestly the opinion of Sir William Grant in a recent case, where he asks, “ If the security be totally distinct and independent, will it not then become a case of substitution for the lien, instead of a credit given because of the lien ?”
An argument upon the plea of the justice of the case was strongly pressed and urged upon the Court. Such an appeal must, at all times, commend itself most favorably to the consideration of a tribunal, whose duty it is to mete out even-handed justice to the parties litigant before it. But the Court cannot enforce a legal or equitable right, where it is clearly waived; and more especially where the rights of third persons are concerned, as the record in this case clearly shows. The administrator of the estate of Reed possesses the character of a trustee for all interested or having claims against it, and he states that there are heavy judgments. Though that fact has exercised no influence upon our decision, yet it affords an argument by way of response to the plea of justice, so strenuously contended for; for where there is equity, there must be equality. Arguments,' too, upon the hardship of a case are, Chancellor Kent says, “ the quicksands of the law,” and if allowed to prevail, would soon choke up and destroy all established precedents.
As to the second proposition, we are not aware that the surety, Martin, can successfully invoke the aid of a court of equity to set apart the land sold by Marvin, as a specific fund for the payment of the purchase money, where the vendor has not retained the title, but parted with it absolutely, and where also the surety has not paid the money or any part of it.
*475Courts of equity hold sureties, entitled upon payment of the, debt due by the principal to the creditor, to have the full benefit of all the collateral securities, both of a legal and equitable nature, which the creditor has taken as an additional pledge for his debt. 1 Story’s Com., 477. So the surety, who has paid the debt of the principal, is entitled to stand in the place of the creditor, as to all the securities for the debt held or acquired by the creditor, and to have the same benefits from them as the creditor. Pr. & Sur., 252. Bing. on Surety, 352.
The surety, if he has apprehension of loss or injury from the delay of the creditor to enforce the debt against the principal debtor, may file his bill, quia timet, to compel the debtor to discharge the debt, provided the surety’s obligation to pay has become absolute. So he may compel the creditor to sue the principal, and collect the debt due from him in discharge of the surety. 2 Story Eq., 144.
Martin, in this case, does not seek to be substituted to the rights of Marvin, upon the plea of having paid the money, but asks that the land be held primarily liable. But suppose he had paid the money, could he, upon the principle of subrogation, have any greater rights than the creditor, MarVin, himself? If Marvin had retained the title in himself, questions involving the specific execution of agreements, and others, might have arisen; but these are not now before the Court.
There were several cases cited by counsel for the appellees, which they contended would authorize a sale of the land to save the surety, Martin, harmless. They were cases, where either the money was paid by the surety, or where the title was retained by the vendor, and turned virtually upon the principle of substitution and subrogation.— We have given them a careful perusal, and do not regard them as at all analagous to the case at bar.
With these views, we are of opinion that the decree of the Court below was erroneous, and should be set aside. It is, therefore, ordered, adjudged and decreed, that the decree rendered in the Court below be set aside, vacated and annulled.
Justice LANCASTER dissented.