Wells, Fargo & Co. v. Smith

BoeeMAN, Justice, delivered the following opinion of the court: Defendant (Smith) bought of appellant (Neslin) a parcel of ground in Salt Lake City. He paid a portion of the purchase money, and gave Neslin a mortgage to secure the residue, and Neslin gave him the possession. Some months afterwards Smith became indebted to the respondents for $17,000, and they desired security. He asked Kerr to indorse for him, offering to secure Kerr in part by mortgage on the property referred to, claiming that there were no liens or other incumbrance on it. Smith had now been occupying the property for some months, and the record showed the title to be in him, the Neslin mortgage not having been recorded or filed for record, nor did Kerr know of its existence. Under these circumstances Kerr endorsed the note of Smith for $17,000, and Smith afterwards complied with his agreement by giving his note to Kerr for $13,000, and giving a mortgage on the property to secure Kerr the payment of the note. The residue of the $17,000 was otherwise secured. [44] Kerr had his mortgage recorded, and thereafter, on the same day, the appellant (Neslin) had his mortgage also recorded. Kerr transferred this note and mortgage, which he had received from Smith, to respondents. Smith having failed to pay the amount secured thereby, the respondents bring this suit to foreclose. Default was entered against Smith, who never appeared to the action; but Neslin filed answer, setting up his mortgage, and claiming that it was entitled to priority over the Kerr mortgage, etc. The court below gave judgment for the respondents, and thereupon Neslin appealed to this court. The mortgagees in both of these mortgages acted in good faith in taking their respective mortgages. The appellant maintains that the note in question was given to indemnify the payee therein against loss upon another note —that no loss has occurred, and that, therefore, no cause of action exists on the note thus given to indemnify. This is plausible upon its face, but we do not think that it is the law. It seems to be indisputably settled that an indorser, holding securities from the maker of a note, may transfer these securities to the payee, who can, upon failure to pay the note indorsed, proceed to make the money out of the securities before suing upon the note. If such securities happen to be other notes and mortgages this does not change the rule. 1 Hilliard on Mortgages, p. 345. In the case before us the evidence shows that the $17,000 was not paid. The payees of this note, therefore, had the right to exhaust the security delivered to them by the indorser before proceeding upon the note. It was not necessary for Kerr to pay the original note of $17,000 before this could be done. Kerr acted in good faith in taking the note and mortgage. They were to secure him against loss. His indorsement of the $17,000 note was a valuable consideration, and the indorsement and the giving of the mortgage were intended to be as parts of one and the same transaction, to be performed at the [45] same time. That there was a delay in the execution of the mortgage was not due to anything that Kerr did. He gave no extension of time, and this arrangement contemplated no delay. The mortgage, therefore, was not given to _ secure an antecedent debt as understood in the books. There was no subsequent arrangement to give security for a past consideration. Bona fide purchasers, without notice, are favored in equity. Story’s Eq. Juris., §§ 108, 165, 381, 434, 436. It is claimed that the Neslin mortgage, being of prior date to the one sought to be foreclosed, should have the priority. If no other question than that of the date were involved in settling the priority, the Neslin mortgage would take precedence. But there is another question: Neslin waited a year after receiving his mortgage before he put it upon record. The Kerr mortgage had then been recorded. The appellants, however, maintain that the recording made no difference, as no statute required it. Neslin deemed it advisable, after the other mortgage had been recorded, to have his also, on the same day, recorded. At common law, down to the time of Charles, the Second, no writing was necessary to pass title to land, but the form of conveyance was by an actual or symbolical livery of seizin. Afterwards, in carrying out the intention of the parties, it became customary to make written deeds, but these did not obviate the necessity of livery of seizin. 3 Washburn’s Beal Property, 603-4. This livery of seizin was necessary in order “to prevent subsequent and fraudulent pledges of the same land.” 2 Bl. Com. 160. And it was retained as a public and notorious act that the country might take notice of the transfer of the estate. 2 Bl. Com. 311. Afterwards, the system of recording was adopted to take the place of livery of seizin, and it is recognized as having the same effect. Bouvier’s Law Die., title “Livery of Seizin.” But, in most of the States, registration is not essential to [46] passing the estate, but as a substitute for livery of seizin, it is only intended to give notice. 1 Gr. Ev., § 573, note 3. In this country the recording of deeds has generally taken the place of livery of seizin, and the latter has been dispensed with either by usage or by statute. 1 Washburn’s Real Prop-perty, 14, 15. In Utah livery of seizin is unknown. No statute has expressly abolished it, but by usage it is dispensed with. Why dispensed with? Simply because the public have recognized the recording system as its substitute. The Territorial statutes in force at the time of the execution of the mortgages in question, authorized the recording of such paper but did not require it, just as Greenleaf, as above quoted, says is the rule in most of the States. Our Territorial statutes required the establishment of recorders’ offices in every county, and required record books to 'be kept therein, in which the recorders should record deeds and other writings. Compiled laws of Utah, § 216 to 219. These boobs were open for the recording of mortgages as well as other transfers, and they were of the character of public official registers. 1 Greenleaf’s Ev., § 496. And such books are, as the law says, entitled to an extraordinary degree of confidence, and are admissible in evidence, by reason of the credit due to the officer, and of the public nature of the documents themselves. 1 Gr. Ev., § 483. It would seem, therefore, that they were of sufficient importance to put parties upon inquiry as to their contents, and to give constructive notice of what was upon record. Constructive notice exists when a party, by any circumstance whatever, is put upon inquiry. Bouvier’s Law Die., title “ Notice.” At the time the mortgages in question were executed, it was a common thing, one of public notoriety, to record mortgages and other conveyances, and the fact that there were offices in each county for the purpose of making such recorda-tions, was also a matter of public notoriety. Under such circumstances, it would seem that common prudence would [47] have dictated to Neslin that bis mortgage should be recorded, and thus, as far as be could, give public notice of bis lien. Sucb recording would have been constructive notice to Kerr, and this contest.would bave been avoided. Tbe American doctrine, “ universally beld, is that tbe registration of a conveyance operates as constructive notice to all subsequent purchasers of any estate, legal or equitable, in the' same property.” Story’s Eq. Juris. §§ 401, 402, 403, 404; 4 Kent’s Com. 174, (side page,) note “ .D.” Neslin failed to give sucb constructive notice. He was, therefore, negligent of his duty, and bis lien should be postponed to tbe subsequently acquired rights of tbe respondents. His equity was not equal to that of tbe other mortgagee, and bis own negligence has lost him his precedence. Bayly v. Greenleaf, 7 Wheat. 46. We are therefore of tbe opinion that tbe judgment of tbe court below was right, and it is therefore affirmed, with costs. SoHAEFFEK, J., COnCUl’S.