Hamilton v. Nutt

Carpenter, J. On the 11th day of February, 1865, Nutt purchased of Leach certain property', and mortgaged the same to secure a part of the purchase money. Subsequently, but on the same day, he mortgaged the same property, with other property, to Hull, to secure an existing indebtedness of $1,400, and an additional indebtedness of $500 for money then loaned. Hull’s deed was first recorded, and must have priority unless under the circumstances it ought in equity to be postponed. It will be observed that there was no improper motive on the part of Leach in withholding his deed from record. It was through “inadvertence” merely; and although it must be regarded as carelessness in him, yet Hull was not injured thereby, as he gave no credit upon the strength of it. If Hull received his deed with knowledge of the existence of the prior unrecorded deed, he is justly chargeable with bad faith. It is found that he did not have actual knowledge. It also appears that his own deed contains the clause, “ excepting two mortgages for $2,000 ;” and the further clause, “ excepting said mortgages.” He was aware of the existence of one prior mortgage, and the terms of his deed will be presumed to have given him notice of the existence of the other, unless the fact, found by the committee, that he had no knowledge of the existence of these clauses in his deed until over a year afterwards, will have the legal effect to repel that presumption. That raises this question : — Shall a grantee in his own right, having had a reasonable opportunity to ascertain the contents of a deed under which he claims title, be permitted to aver that he is ignorant of its contents ? Men of ordinary prudence will use all reasonable means to ascertain the state and condition of their own titles. Hence we may lay it down as a rule, founded upon the experience of mankind, that one who has knowledge of the existence of a deed, to which he has access, and which affects the title to property in which he is interested, will, in equity, be presumed to have knowledge of the contents of the deed. And generally, when a purchaser cannot make out a title but by a deed which leads him to another fact, he shall be presumed [510] to have knowledge of that fact. 1 Story’s Eq. Jur., § 400, and cases there cited. Under our recording system a deed duly recorded is constructive notice to all the world ; and the law conclusively presumes that every person interested has knowledge, not only of the deed, but of its precise language, where that is material. These principles apply in full force to this case. If a man will, under certain circumstances, be presumed to have knowledge of the contents of the deed of another, how much more reasonable is it to presume that he has knowledge of the contents of his own deed. Occasional hardships may result from the application of this rule; but it is believed to be founded in sound policy, and that, in a large majority of cases, it will tend to prevent fraud and promote the cause of justice. Hull then must be regarded as having had notice, at the time he took his deed, that the property was subject to two prior mortgages. That was sufficient to put him upon inquiry, and to charge him with a knowledge of such facts as might have been ascertained by inquiring. The suggestion that no answer or a false answer would have been given, cannot be admitted as an excuse for not inquiring. Such an excuse will hardly be allowed in any case — much less in a case like this, where the circumstances indicate several parties of whom inquiry might have been made, with every presumption that some at least, if not all, would have answered correctly. - But it is said that Hull parted with a portion of the consideration of his deed, $500 in cash, before the deed was executed, and upon an agreement that he was to have this security ; and having parted with his money without notice, he had a right to take and perfect his security, notwithstanding any subsequent notice of a prior incumbrance. In support of this proposition Wheaton v. Dyer, 15 Conn., 307, is cited. In that case Judge Sanford, by way of illustration, says:— “ Thus, if a person were induced to loan his money, upon an agreement that he should be secured by a mortgage of certain lands, he would not be deprived of his security by notice of an outstanding unrecorded deed, given him after he had parted with his money, and before he had obtained his mortgage [511] deed.” The learned judge could not have intended by this to lay down an absolute rule applicable to all cases; for in connection with it he adds, “ The case would be different, if he had the notice before parting with his money, or in time to reclaim it.” If in time to reclaim it, and he neglects to do so, he must take the consequences of his own folly. A party may also be guilty of gross negligence in parting with his money without security, or he may part with it under such circumstances as to indicate clearly that he did not give credit to the security. In these and similar cases it may admit of doubt whether he would be entitled to the protection of this rule. In the case we have before us it does not appear whether Hull might or might not have reclaimed his money at the time he received his deed; nor does it appear whether he did or did not give credit exclusively to the promised security. Perhaps in each case either supposition would be consistent with the facts found. But it does appear that Hull loaned nis money without any examination of the record, and therefore he could not have been deceived or misled by the failure of Leach to record his-mortgage. Whether any or all of these circumstances combined ought to have the effect to defeat Hulks claim in this respect we need not now inquire, for it is expressly found that the $500 thus advanced was repaid on the 11th day of April, 1865, so that the mortgage now stands precisely as it would if it had been given originally as security only for the $1,400 prior indebtedness. But it is said that the rule, if a person with knowledge of a prior unregistered deed takes a conveyance of the same property he takes subject to the prior deed, is founded in the fraud of the party taking the second conveyance, and that whenever the imputation of fraud is removed the rule does not apply; and that it does not apply in this case, as there was no actual knowledge, and therefore no actual fraud. This claim is based upon the idea that there is a distinction between actual and constructive fraud, and that the former is necessary in these cases. Such distinction, if any there be, will not aid the respondent. In cases of constructive [512] fraud courts will protect the injured party by giving him damages commensurate with the injury sustained ; while the existence of an actual fraudulent intent will sometimes require the court to go further, and punish the wrong-doer by way of exemplary damages. All that the party requires in this case is to be saved harmless. His right to that does not depend upon the existence of a wrongful motive in the other party. In all these cases fraud is inferred from the taking of the second conveyance with notice of the first. We have endeavored to show that,, under the circumstances of this case, the respondent is justly chargeable with notice. If so, the legitimate consequences of notice must necessarily follow. The superior court is advised to grant the prayer of the petition. In this opinion the other judges concurred.