Court Opinion

ID: 6531873
Source: CourtListenerOpinion
Date Created: 2022-07-19 20:19:52.954954+00
Date Added: 2024-06-11T15:55:23.036434
License: Public Domain

THORNTON, J.
In the decree pronounced in this case, the Court is unanimous, and on the points raised and discussed in the opinion filed, the luminous view of Judge Saffold, is cheerfully adopted, by the other members of the Court. There is one point, however, upon which the majority feel disposed to express their views; because the present decision of it is at variance with the doctrine contended for, both on the one hand and on the other, in the argument at the bar.
It was insisted, on the one hand-, that the notice of Frenaye’s mortgage, though unregistered, reaching Dufphey before he had paid all the consideration money of his purchase, as well as obtained the deed of conveyance, the land should be sold, irrespective of any negotiations between him and M’Kinne, and its proceeds ail applied to the satisfaction of Fre-*252iiaye’s mortgage, if so mucli should be realised from the sale, and nothing but the residuum, .if any, be paid to Bufphcy ; giving him the option, in the mean while, to pay the mortgage money. On the other hand, it was contended, that, as the notice was not given, till after a considerable portion of the purchase money had been paid, by Dufphey, and his legal title obtained, all the complainant could demand, was the balance of the purchase money, which was . due from Dufphey to M’Kinne. ,'
Wow, our decree conforms to neither of these opposite views — and, as both were contended for upon authority, which seemed, I acknowledge, to maintain the respective doctrines, I feci it due, to furnish distinctly, the reasons of the Court, on the point, as intended to be settled by the decree.
The doctrine contended for, by the counsel for Frenaye, is supposed to be deduced from the decided cases referred to — as laid down by Sugden, (p. 520,) thus: “ Notice before actual payment of all the money, although it be secured, and the conveyance actually executed, is equivalent to notice before the contract.”
If this sentence be understood to mean, notice before payment of all the money, though it be all se cured, and the conveyance be executed in fact, it presents a proposition entirely equitable to my apprehension ; because, not being compelled, in such a case, to pay a single sous to the vendor, no injury .can be done to the second purchaser. If, however, it mean, that though part of the money be paid, before notice, and the deed executed, notice will be equivalent, in such a case, to notice before any con*253tract, it is not conformable to my views of equity, unless the words, i-equivalent to ndice before the contract" be iutcrprclLed thus — that, as notice before any contract, stops or prevents the party from moving towards the purchase, so, notice, at the supposed-stage of the transaction, .stops or prevents him from moving any further towards the completion of the purchase, and, in that sense, is equivalent to notice before the contract — the question here arises between a mortgagee, who has failed to record his mortgage -in the time prescribed by the act, and a purchaser, who, without notice of the mortgage, had contracted for the mortgaged premises, paid part of the purchase money and secured his conveyance, before he had any notice of the incumbí anee.
The provision of our statute is, that such mortgage shall be void and of no effect, unless duly recorded, as against a subsequent bona fide purchaser, without notice. Now I concede that from analogy to the doctrine established in equity, concerning innocent purchasers without notice, the character of purchaser must be completed; that is, that all the money must be paid, and the title deed received, before notice, in order to avoid and render of no effect the prior mortgage. The total defeat of all his security can only be effected by the completion of the second purchase. But on the other hand, I feel sustained both by reason, and authority in this position, that his security in its extent, may be affected’ though not annihilated, by bona fide acts of a second purchaser, not amounting to a completion of the character of purchaser. When it is conceded that the rights of the prior mortgagee, may be totally defeated by the *254honest completion of the contract of purchase — that is, if Bufphey in this case had paid the remainder of the purchase money, his purchase would have been fully maintained, I cannot perceive upon what principle his conduct at any particular stage of its progress, and his rights thus far acquired, can be impugned. If he could by taking the conveyance, and paying all tire purchase money, have totally defeated the mortgage, and maintained his purchase, is it not demonstrably clear, that upon principle, his honest advance to pari payment, and receiving the conveyance, should operate proportionality upon the rights of the mortgagee. If it would be unjust to make Bufphey lose the whole, advanced in this purchase, would it not be equally unjust to make him lose any part, advanced in the same good faith'? It seems so to my apprehension. The situation of Bufphey, is surely entitled to as full a ¡.hare of the indulgent consideration of the Chancellor, as Frenaye — if not, his character as completo purchaser, would not be so peculiarly regarded, as it is admitted on all hands, it is in Equity.
It cannot be predicated with certainty, of any of those parties, that they acted fraudulently, but of M’Kinnc. But, it must be admitted, that the conduct of Frenaye is, at least, highly neglectful; and, if Bufphey were not indemnified by the decree of this Court, from all loss,.he might well impute to Fre-naye, if not a participation in the fraud of M’Kanne, at least the negligence of leaving in his hands a weapon, whereby he might inflict an injury on the community.
The act of registration gives a peculiar privilege *255to Frenaje, of perfect immunity, from tlie date of Ills mortgage, until the time allowed for recording it. For that indemnity, it ought to be exacted of every mortgagee, that he then, comply with its requisitions, and at least, if he omit to do so, the injury which is done by the omission, ought to be borne by Mm alone.
Here no diligence could have protected Dufphey. His vendor was in possession of the land, and of the muniments of title. Caveat emptor does not apply to him. The deeds were in his vendor’s possession, and the only source of knowledge to him, of the latent equity of Freo aye, was from the registration, which the law enacts, but which Frenaje has omitted, or from personal communication.
I concede, that notice is the. only object of registration, and that notice actually given, is equivalent, at least with regisrration, which is only constructive. The failure to record in timo, is no penal forfeiture ; but the notice actually given, shall save all the rights, which have not been honestly acquired by another, during the dormancy of his claim. Whenever it comes to light, from that moment, I would say, it .shall be enforced as far as it can consistently with the principle, sic utere tuo, ut alienum non lcedas.
How, then, can the lien, in this case, be used, so as not to injure Dufphey. In no other way, (without giving the notice a retro-active operation,) but by considering it, though not defeated, yet impaired to the extent of the honest advance, made by Dufphey, upon the same subject matter.
The character of purchaser not having been acquired by Dufphey, in the meaning of the act, so as *256to render v:del the mortgage, I consider it still in life, and binding ; to "be enforced, however, subject to the honest advance made by Dufphey, upon the same subject.
I have had less difficulty, in reconciling the decree' pronounced in this case, wig'll the decisions referred to as sustaining the doctrine contended for, by the counsel for Drenaje,a than in reconciling it- with ise cases, which, on the oilier side have been ad- ¶ duced, to ¡maintain the position, that the purchase by Dufphey ought to be maintained; and that the only relief afforded to Frenayc should be a lien upon the' balance of the marchase money, due by Dufphey to MThiane, at the time of the notice. The establish-moot of this latter doctrine does, in effect, destroy the lien in tolo, as if regards the subsequent purchaser ; and.only lea too it to be enforced against his vendor, by subjecting his funds, in the hands of such subsequent purchaser, to-the payment of the residue.
The prominent case referred to, and relied upon, as sustaining this doctrine, is the case of Frost vs Beckman.b There, there was a mortgage for three thou- ' o o sand dollars; but, by mistake in the registry, entered' as for three hundred dollars. The mortgagor sold without communicating the fact of any mortgage whatever. The lien for the three hundred dollars was holdcn to be clear, and it was further held, that the actual mortgage should also bind the land ; so that it was only to be relieved from it, by the payment of whatever amount of the purchase money, was due at the time of the notice given to the subsequent purchaser, of the actual mortgage. The doctrine is laid down, that the notice arrests any further *257proceedings towards the completion of the purchase, after the notice, and that any payments, made after-wards would be in his own wrong.
The decree orders an account tó be taken, to ascertain what amount was due from the subsequent purchaser, at the time fixed upon as the date of the notice ; and declares that the land be only relieved from the mortgage, by the payment of that amount. The same result would always be arrived at, by pursuing the principiéis of that decree, and of the one-pronounced by this Court, whenever the land had been sold for its full value; for, in such case, by the principle of both decrees, the land is only subjected to the mortgage, to the extent of its value, after deducting bona fide payments, made by the subsequent purchaser.
If, in the case in Johnson's Reports, the sale from Cost to Frost and Goddard, was for the full value of the land, and the doctrine be settled, that they shall be indemnified to the amount paid before notice, the balance due would be all that the mortgag- or could have obtained — and it was clear equity, to require only that balance to be paid, to relieve the land from'the mortgage. . But the result would be widely different from the two decrees, if the decree in Frost vs Beekman is understood as applying universally, equally to cases where the subsequent sale was for its full value, as where it was for a very inconsiderable portion of its value.
The decree in Frost vs Beekman extended, so as to embrace a -case of the latter description, is irreconcilable with the principles which we feel bound *258to .adopt, and which wo sanction by the decree in this case. We mean to enforce the doctrine, that the lien in this case, as the whole of the purchase money was not paid by the subsequent purchaser as well as ills conveyance obtained prior to notice, still exists upon.the land; but that it must yield, pro tanto as to the bona fide payments of such subsequent purchaser.
Let us- consider the relative situation of the parties, and what adjustment of the difficulty, arising in such cases, would be most conformable to equity, and best calculated to promote fair dealing and good faith in the community. If that which we propose,, best subserves those ends, and is not forbidden by some fixed rule or precedent, which we are bound to-respect, then we should not hesitate to adopt it.
The holder of the prior claim, may be the original vendor of the land, who has not been paid a sous for his property, but has tafeen a mortgage for the purchase money ; he may be a mortgagee for a sum loaned; or he may be a vendee, with bond for title.
In this case, it is not certain, in what predicament Frenaye stands, though, as I consider the case, it makes no manner of difference, whether his mortgage was taken to secure the purchase money, or money due to him, upon another score. In every such case, confidence is repoosed in the mortgagor, ven-dee or vendor. He is, in fact, a trustee, though of a secret trust. In breach of good faith, finding that he can impose upon some .one, and lawlessly realise something by the sale of the premises, he proceeds to do so. Here, it must be obvious, that, generally this second sale will be made, under circumstances *259calculated to prevent its full value from being obtained. The vendor, knowing that publicity may defeat his fraudulent purpose, offers it to but few. Thus the market is limited. Fearing detection, despatch 'is required, and to insure a saie lie sells for much less than he knows the vendee, on inquiry, would be willing to give ; for inquiry might disclose the project, and thus defeat his illicit design.
Under these circumstances, a contract is made with an honest and bona fide purchaser, who sees the vendor in possession of both the land and title papers. A profitable contract is offered to him, and as delay might interrupt it, he honestly co-operates in the fraudulent haste of his vendor, and closes the bargain.
Now, if all the money be paid, and the deed executed — by all the authorities, the sale is complete, and all prior claims are totally defeated. If, however, the transaction be not closed — if" the whole of the purchase money be not paid, on the one hand, and the deed executed, on the other; and before suclx consummation, he is notified of the prior claim, is it a matter of greater hardship to him, that he should be there arrested, indemnified for his misplaced confidence, but deprived of a great bargain, than that the prior claimant should be bereft of every thing 1 We say to the subsequent purchaser, in the language of Lord Hardwick,a “ You can not be hurt.” If the vendor is insolvent, it is the loss of the prior claimant, for you shall be indemnified to the extent of all your advances ; but, not being a complete purchaser., you can not claim- the profitable bargain which you proposed to yourself, as its enforcement *260would injure one equally honest with yourself, though not so alert in his dealings.
It will not fail to be seen, by close observation, that the equitable principle endeavored to be enforced by this opinion, must sometimes require a difference in the details of the decree, according to the peculiar features of the case. Suppose, for example, that in this case, in addition to the’ money actually paid by Dufphey, he had, with the same good faith, prior to notice, invested large capital in improvements, as in the erection of machinery, &c.; and that the sale of the premises, thus ameliorated, would bring the amount of the mortgage, though, without the improvements, they would he worth no more than the price agreed to be given by him. — - Here, compensation for the improvements, must, in some way be made. If a sale were ordered, in the event that the second purchaser did not pay off the mortgage, which he certainly would not do, in the case supposed, it would be impossible to determine how much of the sale money was to be considered as produced by the improvements, and how much by the land, exclusive of the improvements.
I merely make this suggestion, to shew, that, in in pursuing the equitable principles advanced in this opinion, a difference in the details of the decree must be made to suit the exigencies of the case in judgment.
In the case above cited, (from 1st Johns.,) it was admitted, that very valuable improvements were made by the second purchasers, before notice; and much embarrassment might be avoided in such a *261case, by adopting the sale to the subsequent purchaser, as the value of the land, exclusive of the improvements ; and decreeing the balance due at the time of notice, to be paid to the prior claimant.
In none of the cases, cited by the counsel for Fre-naye, does the question arise, as here, from the insolvency of MTCiime — 'who is to lose the amount of the amount of money actually paid by the second bona fide purchaser ¶ St is often decided, that, the contract not being completed, by the payment of all the consideration money and the execution of the deed — the pica of innocent purchaser, &c., can not be maintained, so as to defeat in toto, the prior claimant; hut the question, who must lose the honest payment, is not expressly raised, and decided, in those cases.
In a case, in 5th Litt. 62, the defendants relied upon the plea, and had paid only two thousand dollars of the purchase money, before notice: they, there, however, filed a cross bill, and prayed a decree against the fraudulent vendor, who had sold the same premises twice. The Court overruled the plea, on the principle that the purchase was not complete, only part of the money having been paid before notice. But the question, as to the payment already honestly made, being allowed to be satisfied out of the land, was not raised, in as much as the defendants sought, by a cross bill, its re-payment, from the fraudulent vendor, to which they were clearly entitled.
If, instead of that feature of the case, the insolvency of the vendor had been alleged and proven, and a repayment of the amount honestly advanced, *262had been insisted on, as a condition precedent to the surrender of the legal title, obtained from the vendor, the question would have arisen directly,, and I can not doubt but the decree would have been in conformity with the principles herein recognised— that the sum thus honestly advanced, should become a preferred lien upon the land. If the vendor is solvent, his liability may be enforced by either party, and it is not very material, in that case, who shall be thrown upon him.
. But, if insolvent, as here, the question is, who, of two innocent persons, shall lose. The doctrine, “qui prior est tempore,portior est jure,” only applies where, in other respects, the parties are equally faultless.— In such a case as this now under the consideration of the Court, I would say, he should lose, who, by a compliance with the law, requiring registration, might have protected himself; and not he, whom no diligence could have protected.
It is not necessary, in this case, nor do we mean, to say, what would be our determination, in a case, where the title or claim of the person assuming the attitude of first purchaser, was an equity merely, which our statutes of registration do not embrace— as, for example, the equitable lien of a vendor, without mortgage for the purchase money, he having-made title and given possession. We acknowledge, that the preponderance of our inclination,' is to extend the principle, in this decree, to that class of cases ; in as much as in all such, there is a looseness of dealing, very like the omission to record, in the present — which is calculated to enable a fraudulent *263vendor, to impose upon the community. But, as a modest caution is, in our opinion, the safest observance of a judicial tribunal, we forbear any anticipated judgments.
LIPSCOMB, C. J.
This opinion also contains the views of the Chief Justice, as expressed, in an opinion delivered by him, upon a former argument of the cause — which need not be published, as they are substantially the same.

 See Sugd. on Vend. 520; 8 Wheaton 288.

 Johns.C. R. 288

 1 Atk. 538; 3Ib.304.