Parks v. Smoot

JUDGE BURNAM delivered the opinion of the court. W. N. Smoot, a citizen of Bath county, died intestate in September, 1891, leaving a widow and two sons as his only heirs at law. He owned a large landed estate and considerable personal property, and soon after his death, in a proceeding instituted in the county court, dower was alloted to his widow, and the residue of his lands divided between his sons. Deeds were made pursuant to this division, and the parties took possession of their respective shares. One tract of land, containing 218 acres, was allotted and conveyed to the sons jointly, and they so used and occupied it until the 4th day of- September, 1893. On that day one of the sons, J. J. Smoot, sold his undivided half interest in this tract of land to the appellant, Parks, — 65 — at the price of $50' per acre; the written contract of purchase reciting that $50 was paid cash, and that the balance of the purchase money was to be paid on the 1st day of March, 1894, when possession was to be given. By a subsequent arrangement the balance of the purchase money was paid on the 17th day of October thereafter, deed executed,-and the purchaser put in possession. On September 5, 1893, the day after the contract for the sale of the land was entered into, J. J. Smoot and J. W. Emmons, the administrators of W. N. Smoot, instituted a suit, for a settlement of the estate, making the heirs and some of the creditors defendants; stating the amount of the personal property owned by decedent which had come into their hands, and describing the real estate. They alleged that they did not know the amount of the debts due by decedent, and asked a reference to the master commissioner to ascertain them, and prayed the court, if found necessary, that enough of the land be sold to pay them. An order was made pursuant thereto, and the commissioner filed his report, which made it evident that it would be necessary to sell all the real estate of deceased to pay his debts. On October 10, 1895, appellees Brooks, Waterfield & Co., large creditors of W. hi. Smoot, deceased, filed their answer, which they made a cross petition against appellant, Parks, and sought to have subjected to the payment of their debt the land purchased by him of J. J. Smoot, on the ground that there was a Us pendens against the land at the time appellant accepted the deed, and paid the purchase price therefor, on the 17th day of October, 1893. They further allege that he had knowledge of the pendency of the suit for settlement of the estate of W. N. Smoot, and was not an innocent purchaser. Appellant answered, denying all the allegations of appellees’ pleading, and al — 66 — leging that he acquired title by executory contract before the institution of the suit for settlement and that he paid for and accepted the deed to the land without knowing of the institution of the suit by the administrators, and insists that the petition of the administrators did not state facts sufficient to create a Us pendens against the land purchased by him. The proof in the case is undisputed that appellant acted in good faith in the transaction, and that he did not know of the pendency of the suit for settlement when he paid J. J. Smoot for the land, on October 17, 1893. Upon the question of Us pendens, Mr. Freeman, in his work on Judgments (volume 1, sec. 198), says: “Lis pendens is notice of all facts apparent on the face of the pleading, and of those other facts by which the facts so stated necessarily put a purchaser on inquiry,” and the averments of the petition in this case were sufficient to give notice to the public of the purposes of the suit. The main question, therefore, to, be considered, is, was the executory contract for the purchase of the land in contest entered into between appellant and J. J. Smoot, one of the heirs at law, on September á, 1891, an alienation thereof? Sec. 2087, Ky. Stat., provides that: “When the heir or devisee shall alien, before suit brought, the estate descended or devised, he shall be liable for the value thereof, with legal interest from the time of alienation, to the creditors of the decedent or testator; but the estate so aliened shall not be liable to the creditors in the hands of a dona fide purchaser for valuable consideration, unless action is instituted within six months after the estate is devised or descended to subject the same.” Nearly two years had elapsed after the death of intestate before suit for the settlement of his estate was instituted; the widow and — 67 — heirs had, by the county court proceeding, obtained deeds of partition to their shares, and had been in the undisturbed possession thereof for more than eighteen months; and appellant, under his purchase from J. J. Smoot, had been in possession of the land bought by him for nearly a year before he was made a party to the litigation by the cross petition of Brooks, Waterfield & Co. It is a rule of the common law, that has obtained for centuries, that during the pendéncy óf an equitable suit neither party to the litigation can ,alienate the property in dispute so as to affect the rights of his opponent; and the doctrine of lis pendens applies only when a third person attempts to intrude into a controversy by acquiring an interest in the matter in litigation pending the suit. See 2 Pom. Eq. Jur. Sec. 663. But neither the rule nor the reason of the rule applies where a person takes by conveyance prior to the commencement of the suit, without actual notice; and this is true whether the interest be acquired by deed, or only by executory contract. In Clarkson v. Morgan’s Devisees, 6 B. Mon. 444, speaking of this subject, this court said: “But, if the contract was executory, it could not be overreached or concluded by a subsequent suit against Parker, without giving those who claimed under it a right to be heard. Nor could the rights of Fowler, or those claiming under him, be concluded, though the contract had been in parol, the same being consummated by a subsequent deed, as was determined by this court in Clary’s Heirs v. Marshall, 5 B. Mon. 266. If a right or interest passed from Parker to Fowler by contract which was obligatory upon the parties, that right or interest can not be overreached or concluded by a subsequent suit against Parker.” And in Parks v. Jackson, 11 Wend. 444 [25 Am. Dec., 656], the Court of Appeals of New York held that: “A purchaser — 68 — of land by contract, who by the terms of the contract has a right to take possession, and has a day for the payment of purchase money, and who accordingly enters into possession, makes valuable improvements, pays the purchase money, and obtains a deed, is not affected by the rule that a conveyance obtained pendente lite is void, although such purchase money be paid and deed obtained subsequently to the commencement of the suit in chancery against his vendor to void the title of his vendor as fraudulently obtained, and in which suit á decree is made adjudging the deed of his vendor to be void in law; such purchaser having entered into contract, under which he took possession, previously to the filing of the bill, without ■ actual notice of the fraud of his vendor.” This doctrine is abundantly • supported by the text writers. Bigelow on Frauds says, in speaking of the doctrine of Us pendens (page 301): “This reason, however, has no application to third persons whose interests existed before the suit commenced, and who might have been parties to the suit.” Story, Eq. Jur. Sec. 212, says: “Where a contract is made for the sale of land, the vendor is, in equity, immediately deeined a trustee for the vendee of the real estate, and the vendee is deemed the trustee of the vendor for the purchase money. Under such circumstances the vendee is treated as the owner of the land, and it is devisable and descendible as his real estate. On the other hand, the money is treated as the personal property of the vendor, and is subject to a like mode of disposition by him.” - So, in Adams, Eq. p. 336, note 1, speaking of Us pendens, it is said: “And it applies only to rights or interests acquired from a party after the institution of the suit, and not to the case of a right previously contingent, or conditionally becoming perfect.” And Mr. Pomeroy (Eq., Jur. Sec. 105), discussing equit — 69 — able estates, says: “The most familiar case in this country is that of the ordinary executory contract for the sale of land. The law recognizes from this transaction nothing but 'personal’ rights and duties. As long as the agreement remains executory, the vendee acquires no right of property in the land, nor the vendor in the purchase money. Each party has the right, against the other, that the contract shall be fulfilled according, to its terms; but for the violation of this primary right the only legal remedy is a pecuniary compensation. The view which equity takes of the juridical relations resulting from the transaction is widely different. Applying one of its fruitful principles (that what ought to be done is regarded as done), equity says that from the contract, even while yet executory, the vendee acquires a 'real’ right, a right of property in the land, which, though lacking as a legal title, and therefore equitable only, is none the less real, beneficial ownership, subject, however, to a lien of the vendor as security for the purchase price as long as that remains unpaid. This property in the land, upon the death of the vendee, descends to his heirs, or passes to his devisees, and is liable to the dower of his widow. The vendor still holds the legal title, but only as a trustee, and he in turn acquires an equitable ownership of the purchase money. His property, as viewed by equity, is no longer real estate, in the land, but personal estate, in the price; and, if he dies before payment, it goes to his administrators, and not to his heirs. In short, equity regards the two contracting parties as having changed positions, and the original estate of each as having been 'converted,’ — that of the vendee from personal into real property, and that of the vendor from real into personal property. Although these primary rights which equity thus creates are very differ — 70 — ent from those which the law recognizes, there is still no conflict or antagonism between the two.” No action having been instituted to subject the land in contest to the payment of the debts of the ancestor within six months after the estate descended to the heirs, it is not liable to the demands of creditors, in the hands of a bona fide purchaser for a valuable consideration, who was invested with the equitable title and right of possession by an executory contract made prior to the institution of the suit of administrators. Having acquired the beneficial ownership of the land, a purchaser has the right to perfect his legal title thereto by the payment of the balance of the purchase money and taking deed, unaffected by the rule of lis pendens; and we are of the opinion that the court erred in subjecting to the demands of creditors the land purchased by appellant from J. J. Smoot. For the reasons indicated the judgment is reversed, and the cause remanded for proceedings consistent herewith.