Grimstone v. Carter

The Chancellor. Upon the final hearing of this cause, the complainant will .be holden to strict proof of the agreement set up in his bill, on which he founds his claim to the equitable interference of this court; and if he does not succeed in establishing such agreement, bis bill must be dismissed, whatever may be the result of the present application. In this stage of the cause, however, and before he has had an opportunity to examine his witnesses, every allegation positively sworn to in the bill, and which is not substantially denied in the answer, upon the defendant’s own knowledge, must be taken as true. The case then presented on the appeal is this: The complainant was in possession of the north half of lot No. 54, at the time of the purchase by Seymour and Welles, under a written agreement from Carter to reconvey that part of the lot to him, upon the payment or security of the small belance due on the mortgages over and above the $1600 which Carter was to pay for the south half of the lot. And these purchasers from Carter took their conveyance, and paid the purchase money for the whole lot, after they had actual notice of the complainant’s possession ; and without making any inquiries as to the extent of his rights, or the nature of that possession. It is the settled doctrine of this court that where the equities of the parties are equal, and neither has the legal title, the one who has the prior equity must prevail. Nor will this court permit the party having the subsequent equity to protect himself by obtaining a conveyance of the legal title, after he [437] • has either actual or constructive notice of the prior equity. (Tourville v. Nash, 3 Peer Wins. 307. More v. Mayhem, Freem. Ch. Rep. 175. Wigge v. Wigge, 1 West’s Rep. 680. 1 Atk. Rep. 384, S. C.) To protect a party, therefore, and to enable him to defend himself as a bona fide purchaser for a valuable consideration, he must aver in bis plea, or state in his answer, not only that there was an equal equity in himself, by reason of his having actually paid the purchase money, but that he had also clothed his equity with the legal title before he had notice of the prior equity . And if the person claiming the prior equity is in the actual possession of the estate, and the purchaser has notice of that fact, it is sufficient to put him on inquiry as to the actual rights of such possessor, and is good constructive notice of those rights. (Chesterman v. Gardner, 5 John. Ch. Rep. 33. Mien v. Anthony, 1 Meriv. Rep. 282. Taylor v. Baker, Daniel’s Rep. 80, note a.) These principles are all distinctly recognized by the vice chancellor in his decision in this case; but he supposes there is a distinction between a purchaser in good faith, under the recording act, (1 R. S. 756, § 1,) and a bona fide purchaser, within the decisions of courts of equity in other cases. In reason there certainly can be no foundation for such a distinction. And if this case depended upon the construction of the words subsequent purchaser in good faith, as used in the recording act, the result would he the same. My opinion on that point is fully expressed in the case of Tuttle v. Jackson, ex dem. Hills, in the court for the correction of errors, (6 Wend. Rep. 213;) which opinion I believe was concurred in by all the members of the court who joined in the decision which was made in that case.(a) I apprehend, however, that the vice chancellor is under a mistake in supposing that this is a question of notice under the recording act. The object of that statute was to protect a subsequent bona fide purchaser against a previous conveyance of the legal estate, or of some part thereof; and which [438] conveyance would be valid as against the subsequent purchaser or mortgagee, if the recording act had not been passed. But a subsequent bona fide purchaser needed not the aid of the registry act to protect him against a prior equity, or a mere agreement to convey. Having the legal title under his conveyance, he would be able t.o defend his title at law; and the plea that he was a bona fide purchaser for a valuable consideration, would afford him a full protection against an equitable claim of which he had no previous notice. In the case under consideration the legal estate was absolutely vested in Carter, by the deed of July, 1830; and although by the executory agreement to reconvey, such deed, in equity, was nothing but a mortgage as to the north half of lot No. 54, yet a bona fide purchaser from the holder of the absolute deed would have been protected, both at law and in equity, if no recording act had ever been passed. (Whittick v. Kane, 1 Paige’s Rep. 202.) Therefore, as to the equitable claim of this complainant, it was perfectly immaterial whether the deed from him to Carter was recorded or otherwise. The only benefit to be derived from the recording of that deed would be to protect the purchaser, claiming under the same, against a subsequent grantee of the complainant, who might, perhaps, become a purchaser of the property without notice of the existence of such a deed. If that deed could be considered as coming within the provisions of the third section of the recording act, (1 R. S. 756,) so as to constitute the relation of mortgagor and mortgagee between the complainant and Carter, no benefit could be derived from the recording thereof; because it was not recorded in the book of mortgages. Neither was the writing explanatory of its being designed only to have the effect of a mortgage recorded with it, and at the same time. The object of that section of the statute was to protect bona fide purchasers from the mortgagor. It is therefore the duty of the person who receives such a mortgage to have the defeasance recorded with his absolute deed, in the book of mortgages; otherwise he derives no benefit from the recording of such deed. But the rights of the mortgagor are the same, whether the deed and defeasance which constitute the mortgage are recorded or not. [439] I apprehend, however, that at law this must be considered as an absolute and valid conveyance of the whole lot; with an agreement to resell and reconvey the north half, upon the terms and conditions specified in the contract. And such an agreement, being a mere equitable claim upon the estate which could not affect the title of a bona fide purchaser without notice, is expressly excepted from the provisions of the statute requiring conveyances to be recorded. (1 R. 8. 762, § 38.) .This is undoubtedly a hard case for the purchasers, who supposed they were getting a good title. But as the complainant was not aware of their negotiation for the purchase of the property, and therefore had no opportunity to apprize them of his equitable claim to a re-conveyance of the north half of the lot, it would be equally hard to deprive him of his property without consideration. Seymour and Welles1, were informed he was in possession, which by the settled law 1 of the land was sufficient to put them on inquiry, and to de- i prive them of the defence of bona fide purchasers without no- f tice of his rights. And they, in the language of Lord Eldon, \ having neglected to take the obvious precaution of inquiring i as to the nature and extent'of the tenants interest in the property, they must suffer the consequences of their neglect. The order appealed from must be reversed, with costs; and the injunction must be retained until the hearing. But it must be without prejudice to the right of the respondents Seymour and Welles, to bring an ejectment suit, and to proceed to judgment therein, unless the complainant shall, within thirty days stipulate to deliver up the peaceable possession of the property to them, and pay the value of the mesne profits to be ascertained by a master under the direction of the court, if he does not succeed in establishing his equitable right to a re-conveyance upon the final hearing of this cause. Footnotes [(a)] In Buck v. Halloways Devisees, (2 J. J. Marsh. Rep. 180,) the court say, “The only sensible rule is, that actual’residence upon the land is notice to all the world of every claim which the tenant may legally assert in defence of his possession.”