Wertheimer v. Thomas

Opinion by Mr. Justice Fell, The general rule is that notice of a lease will affect the purchaser of real estate with notice of the covenants contained in it. If with knowledge of a lease he buys without examining it he cannot afterwards object that he had no notice of a particular covenant. The equity of a tenant in possession may extend still further, and notice of unusual covenants and even of a collateral agreement to purchase may be imputed to the vendee. This equity however rests upon the fact of possession, which is notice to the purchaser of the occupant’s title and of the fact that the property is affected, and imposes upon him the duty of inquiry. The purchaser is therefore chargeable with notice not only when the evidence raises a presumption that he knew, but also when there is just ground for inferring that reasonable diligence would have led him to discover the truth. But this rule of constructive notice by tenancy does not apply to controversies between the vendor and the vendee. Facts which in a controversy with a third party whose rights have been prejudiced by the sale would affect the vendee with constructive notice will not charge him with defects in the vendor’s title: Leading Cases in Equity, vol. 2. part 1, p. 145. While the vendee is put to inquiry as to the tenant’s title, the duty of inquiry arises because of the possession. In protection of innocent parties the doctrine of implied notice has been carried to its fullest extent. As between the vendor and the vendee, the latter is held to have had notice of the covenants of a lease of which he knew but had not examined, and-as to the contents of which he has not been misled, but he is not charged with notice of a distinct collateral agreement. When the agreement in this case was made the plaintiff’s agent knew that the property purchased was in the possession of a tenant under a lease from the defendant. The agreement was made expressly subject to this lease. Actual notice of the lease carried with it constructive notice of all its covenants and conditions relating to the tenure or intended to secure or enforce the rights and duties of the parties to it as landlord and [171] tenant; but there does not seem to he ground as between the parties for carrying the implication of notice further. The agreement giving the tenant an option to purchase, although incorporated in the lease, was not a part of it. It was a distinct agreement having no necessary connection with the lease. It was unusual and not to be expected. Had this agreement been separate and distinct from the lease in form as it was in substance, it clearly would not have been as between the parties to this action notice of the tenant’s equity. We are of opinion that the case should not have been withdrawn from the jury on the ground that the plaintiff was charged with notice of the agreement to sell. That his agent had actual notice, or purposely avoided it, and in fact secured by the agreement only the right to take title to the property in the event of the failure of the tenant to do so, the jury might well have found from the testimony. The judgment is reversed and a venire de novo awarded.