Gholston Bros. v. Northeastern Banking Co.

Hines, J. (After stating the foregoing facts.) Where land is sold and a portion of the purchase-money is paid by the vendee, and when the vendor delivers to the vendee a bond for title conditioned to make title upon payment of the purchase-money, both the vendor and the vendee have a beneficial interest in the land which they may sell or assign. Georgia State B. & L. Asso. v. Faison, 114 Ga. 655 (40 S. E. 760); Dunson v. Lewis, 156 Ga. 692, 700 (119 S. E. 846). Where an owner receives purchase-money notes for land and executes a bond obligating himself to execute a deed to the purchaser on full payment of notes given for the deferred payments of the purchase-price, and puts the purchaser in possession, the vendee acquires an equitable interest in the land, while the legal title remains in the vendor as security for payment of the balance of the purchase-money. Carter v. Johnson, 156 Ga. 207 (119 S. E. 22). Under such circumstances the vendor holds the title in trust for his vendee. While he can sell his interest in the land, if he does so and conveys the same to a third person, he can only sell subject to his outstanding bond for title; and the purchaser from him takes the land subject to the rights of the holder of his bond for title. Such purchaser stands in the shoes of the vendor. He acquires no greater or better title than the vendor had. As the vendor held the title in trust for the vendee in the bond for title, the purchaser from him likewise holds the title under a like trust for the obligee in the bond for title. When such obligee pays the ■balance of the' purchase-money, such purchaser from the vendor is bound to convey the land to the original vendee or his assignee. The same is true where a grantee takes a deed from the vendor to secure a debt. In such a case the grantee takes the place of the [294] original vendor, holds the - title in trust for the vendee, and has no greater rights than the vendor had. He is subject to all of the obligations of the vendor under his bond for title, and is bound to convey to the obligee on the payment of the purchase-money notes. Where one purchases from the vendor in a bond for title, with notice thereof, it is not the land but the obligor’s interest in it which such purchaser acquires. Wilkerson v. Burr, 10 Ga. 117. Such purchaser, as between himself and the vendor, would be entitled to the unpaid purchase-money. If at the time of his purchase there was no purchase-money due the vendor, or if notes given for the purchase-money had been transferred by the vendor without recourse, or without guaranty, such purchaser would acquire no title whatever. Georgia State B. & L. Asso. v. Faison, supra; McLeod v. Bank of Abbeville, 147 Ga. 33 (92 S. E. 645). If at the time of such purchase the vendor held negotiable notes for deferred payments of the purchase-money of the land, such purchaser would, as between himself and the vendor, be entitled to such notes or the proceeds thereof when collected. Although the purchaser did not acquire delivery and possession of such notes, the vendor would hold them in trust for the purchaser. What would be the effect of the transaction, if the purchaser does not acquire possession of the purchase-money notes, but leaves them in the possession of the vendor, who thereafter transfers them to a third person for value and without notice of the rights of such purchaser? The bona fide purchaser of negotiable notes, not dishonored, will be protected in his title, though the seller had none. Civil Code (1910), §4118. A bona fide purchaser for value and without notice of an equity will not be interfered with by a court of equity. Civil Code (1910), §§4531, 4535. When the bank took from Smith a deed to his interest in this land to secure an indebtedness due by him to it, and did not acquire and get possession of the oustanding purchase-money notes which fell due in the future, it ran the risk of the vendor trading these notes to some bona fide purchaser for value before due; and a subsequent holder of these notes, who acquired them before due, for value, and without notice, acquired a title superior to that of the bank. Under such circumstances the holder of the notes would be entitled to them and their proceeds in preference to the bank. [295] As the vendor only had title to the land as security for the payment of the purchase-money notes, the grantor only took such title as the vendor had'; and in taking a security deed to the land from such vendor, with notice of the outstanding purchase-money notes, he only obtained title as security for the payment of said notes. He could not' acquire title both as security for the balance of the purchase-money and for the debt of the vendor, for this would be conveying a greater title than the vendor had retained. If this were not so, the purchaser of the land, when his notes given for the purchase-money had been traded to an innocent holder, would have to pay both his notes to such holder thereof, and in addition the debt of the vendor, secured by his deed to the purchaser from the vendor, or lose the land. This would be unfair to the purchaser of the land. To deprive the bona fide holder of these notes of his title thereto would be unjust, under the facts of this case. If the bank, in taking from Smith a deed to this land, to secure a debt from him to it, purposely or negligently omitted to get possession of these purchase-money notes, the bank put it in the power of Smith to collect, trade, or pledge them. If Smith thereafter pledged them to Gholston Brothers who took them in good faith before due, and if either the bank or such pledgees must suffer loss by the action of Smith in the premises, then such loss should fall upon the bank, which put it in the power of Smith to do the wrong. When one of two innocent persons must suffer by the act of a third person, he who put it in the power of the third person to inflict the injury must bear the loss. Civil Code (1910), §4537. If the bank was willing to trust Smith with these notes, to secure which alone Smith retained the title to this land, and to secure which Smith could only convey this land to the bank, and Smith abused the trust thus reposed in him, the bank must stand the loss. There are no recitals in these purchase-money notes which would put Gholston Brothers on notice of the title or equity of the bank therein. If they purchased these notes before due, for value, and without such notice, they acquired a good title thereto; and their title under these circumstances would be superior to the title or equity of the bank to these notes. There was evidence that these parties took these notes before due, for value, and'without notice of the claim of the bank. [296] Applying the principles above ruled, we think that the court erred in directing a verdict in favor of the bank. Judgment reversed. All ike Justices concur, except