Moyer v. . Hinman

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 182 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 183 The counsel for the parties in this case agree that the plaintiff, being in possession under his contract at the time of docketing the judgment under which the defendant claims, is to be protected in equity as to his rights which existed at that time; and the position is so well established by authority as to have become an elementary doctrine in this branch of the law of real estate. I consider it equally well settled that the docketing of a judgment against the vendor affords no notice of its existence, either actual or constructive, to the prior vendee of the judgment debtor. Parties who deal with the debtor respecting his lands subsequently to the docketing of the judgment, are affected with notice. Such persons may make themselves perfectly safe in that particular, by searching the docket book of judgments in the proper office; and they will, of course, abstain from purchasing if they find the land which they are proposing to buy, encumbered by a judgment. So, it may be said, a party holding a contract upon which payments remain to be made, may, before making such payments, examine for judgments against the vendor; but it would be an intolerable inconvenience to require this, where the payments, as is usually the case, are to be made annually or oftener; and should such examination ever be strict, the vendee would have to run the risk of an incumbrance intervening, while he was going from the office where the search was made to the residence of the vendor, to make the payment. It has been repeatedly decided that the docketing of a judgment or the recording of a mortgage is no notice to a prior purchaser or mortgagee of the premises *Page 184 whose conveyance is on record, or of which notice was had, the object of the recording acts, and of the law requiring judgments to be docketed, being, it is said, to protect subsequent purchasers and incumbrancers against previous deeds, mortgages,c., which are not recorded and of which they had no notice, and to deprive the holder of the prior unregistered conveyance or mortgage of the right which his priority would have given him at the common law. (Cheesebrough v. Millard, 1 Johns. Ch. R., 409; Stuyvesant v. Hall, 2 Barb. Ch. R., 151.) The plaintiff in this case being in possession under his contract, that circumstance was notice to all persons who might subsequently become interested in any way in the premises, not only of such possession, but of the terms of the contract and of all his existing rights under it. In the view of a court of equity, his condition was like that of a party having a prior conveyance or lien which was duly recorded. When, therefore, Corning had recovered his judgment against Schroeppel, the situation of the respective parties was this: The plaintiff was the equitable owner of the land, subject to future payments to be made by him, and the judgment creditor had notice of his situation and of his rights; but the plaintiff had no notice and was not chargeable with notice of the lien of his creditor. The creditor had at law the right to acquire the legal title to the land by means of a sheriff's sale and a purchase by himself; but in equity his rights were limited to the future payments to be made by the plaintiff. But as the vendee had no notice of the judgment creditor's lien, and the creditor had full notice of the vendee's situation, it would seem to be reasonable that in order to intercept those payments and divert them from the vendor's hands into his own, the creditor ought at least, to inform the vendee of the existence of his lien and of his right to the unpaid purchase money. In accordance with this view, it was held, in a case in Maryland, that where the vendee, subsequently to the recovery of a judgment against *Page 185 the vendor, but without actual notice thereof, had paid over a balance of the purchase money and taken a conveyance from the judgment debtor, such vendee was, in equity, entitled to be protected against the claim of the judgment creditor. (Hampson v. Edelen, 2 Har. and Johns., 64.) And we have the deliberate judgment of the court of errors of this state upon the same point in an action at law. In Perks v. Jackson (11 Wend., 442), Parks, the plaintiff in error, was in possession of a tract of land which had been purchased by one of these executory contracts and possession had been taken by the vendee upon the contract being executed, which was continued down to the time the controversy arose. Judgments were recovered against the devisee of the vendor, and afterwards the party holding under the vendee, without actual notice of the judgments, paid the whole purchase money, took a conveyance and conveyed to Parks. Then the judgment creditor sold the land on the judgment, obtained a sheriff's deed, and brought ejectment against Parks. The court of errors held that the plaintiff could not recover. The chancellor who alone dissented from the judgment, put his opinion on the ground that the remedy of Parks was in equity. There were a variety of other facts in this case, but they tend to strengthen the decision as an authority upon the point under consideration. The purchase money for the land was paid to, and the deed under which Parks held was executed by one Henry Franklin, to whom the devisees of the original vendor had conveyed the premises, and the judgments under which the plaintiff in the ejectment suit claimed, were against these devisees. The judgment creditor claimed that the conveyance to Henry Franklin was void as against the creditors of the grantors, and commenced a suit in chancery against the parties to that conveyance, and obtained a decree setting it aside for the alleged fraud, having, at the time of filing the bill, filed a notice of lis pendens in the county clerk's office. The payments were made and the deed under *Page 186 which Parks held, was given pending that suit. It was scarcely contended that docketing the judgment against the grantors of Henry Franklin would alone enable the creditor to question the payments subsequently made; but it was insisted that the lispendens affected the parties holding under the vendee in the executory contract, and that the payments were consequently made in their own wrong; and so the supreme court had decided. That judgment was reversed, the court of errors holding that neither the judgments, nor the lis pendens nor both of them, affected the vendees or impaired the effect of the payments or of the deed under which Parks held. This case, therefore, proves something more than that judgments docketed against the vendor do not affect payments subsequently made by the vendee, having no actual notice of the judgment. It establishes, in effect, that payments made by the vendee pursuant to an executory contract, are not to be considered as a fresh dealing with the vendor respecting the land; for if they were so, they would, when made, pendente lite be ineffectual against a decree determining that the party to whom they were made had no right to receive them, it being an established principle that the purchase of any interest in the subject in litigation, is subverted by the ultimate judgment, if adverse to the right of the party selling. The true inference from the case is that such payments are referable to the original contract, and are not the purchase of a further interest in the land. If then, the payment made by the plaintiff to Schroeppel is not affected by the docketing of Corning's judgment, I am not aware of any principle upon which the sale upon the execution and the purchase of the premises by Corning, under which the defendant holds, can prejudice that payment. The sale converted the general lien into a particular one upon these premises. It was still but a lien; for any judgment creditor of Schroeppel might, notwithstanding, redeem the premises. But the consideration which, in my judgment, prevents its having the effect claimed for it, of cutting off *Page 187 the plaintiff's right to pay Schroeppel, is, that the former had no notice of the transaction, while Corning and the defendant must be considered as having full notice of the plaintiff's rights. Admitting that Schroeppel had no right to the money, and that Corning or the defendant had, either the plaintiff or the defendant must lose the money; and the rule in such cases is that the party shall suffer who, by his acts or omission, permitted the money to go into the hands of a party not entitled to it. The defendant could readily have informed the plaintiff of the judgment and of the sheriff's sale; and then if the plaintiff had chosen to pay to Schroeppel instead of refusing so to pay, or to take measures by bill of interpleader or otherwise, if threatened by a suit by Schroeppel, perhaps the payment would have been in his own wrong. As the case stands, he paid the money to the party holding his obligation for the payment without any notice that any other person had become interested in that contract, or had any right to the money which he had engaged to pay to Schroeppel. The case does not call upon the court for a decision upon the question, whether if the defendant had obtained a conveyance from the sheriff before this payment was made, the plaintiff might not still have paid to Schroeppel until he had notice of such conveyance. Individually, I am of opinion that a vendee in possession under such a contract, may safely continue to pay to the vendor until he has notice that some other person has acquired an interest in the land or in the contract. If this is not so, the vendor may, in any case, make a secret conveyance of the land and continue to receive the purchase money from the vendee, and the latter will be without remedy if the vendor be insolvent. The recording of the conveyance would make no difference in the principle, for this is only constructive notice to subsequent purchasers and incumbrancers; and as we have seen, a payment pursuant to a prior executory contract is not to be regarded as the purchase of a new or further interest in *Page 188 the land. The application of the doctrine of equitable conversion, in my opinion, furnishes a solution of the difficulty in this class of cases. By a contract for the sale of land, the vendor becomes the trustee of the legal title for the vendee, and the vendee, the trustee of the vendor, as to the unpaid purchase money. (Story's Equity, § 790 and seq.) This is the view of a court of equity. A court of law looks only at the legal title. Hence it permits a judgment creditor to subject the land to a sale on execution, though the judgment debtor had, before the docketing of the judgment, converted it into personalty by contracting to convey it and receiving the obligation of the purchaser for the consideration. But when the parties go into equity, as they have done in this case, the state of the legal title becomes immaterial, and the question is whether the party claiming the purchase money has the better equity. If it appear, as I think it does here, that he has stood by and permitted it to be paid over to the person originally entitled, without giving notice of the transfer to himself of the right to receive it, he cannot be heard to question the payment made under such circumstances. The judgment of the supreme court should be modified, and a judgment should be given in accordance with this opinion, to besettled by one of the judges of this court. The defendant should pay the costs in the supreme court.