Deskins v. Big Sandy Co.

Opinion by Judge Barker Affirming. In 1882 Jackson Deskins was the owner of a tract of land in Pike county, Ky., containing 820 acres, upon which he resided. On the 5th day of August, of that year, he executed and delivered to Harper Phillips a mortgage on the land to secure the sum of $500. Deskins having failed to pay in accordance with the tenor of his obligation, on the 27th day of March, 1886, Phillips brought a suit in equity in the Pike Circuit Court to enforce his mortgage lien. In 1890 a judgment was rendered enforcing the mortgage, lien, and a judicial sale of the property was had, at which it was purchased by James Hatcher for the sum of $775, being the original debt, with interest and cost of suit added: Before sale the land was appraised at $3,000. Although the sale to James Hatcher was confirmed by order of court, no deed was delivered to him until 1903. While the foreclosure suit of Phillips v. Deskins was pending, Jackson Deskins, — 603 — on the 8th day of December, 1887, sold .to the Virginia Mining & Improvement Company all of the coal and mineral rights underlying his tract of land for the sum of 50 cents per acre, one-half of which was paid cash, and a lien reserved for the balance until the question of an outstanding title to one-half of the mineral rights, not necessary to be here set forth, was settled. The deed to the mining and improvement company was at once recorded. On .the 29th day of January, 1894, this actibn was instituted by Jackson Deskins against the Virginia Mining & Improvement Company for a judgment for the unpaid balance of the purchase money for the mineral rights theretofore sold it by him. On November 12, 1895, the company filed its answer and cross-petition, in which it admitted the debt, as claimed, so far as the amount was concerned, but alleged the subsequent purchase by James Hatcher of the land at the judicial sale had in the case of Phillips v. Deskins, and that Hatcher, at the time of the purchase in question, had a verbal agreement with Jackson Deskins by which the latter had the right to redeem the property by the payment of the purchase money, and was,' therefore, in reality the trustee of the latter. Although served with summons, Hatcher made default, and a judgment was rendered against him, determining that he had only a lien on the land, and the Virginia Mining & Improvement Company had a good title as against him for the mineral rights they had purchased, and it thereupon paid into court the amount of money due on its purchase, the right of which was after-wards to be adjudicated between Jackson Beskins and James Hatcher. After this action was instituted (to wit, on May, 1894), Jackson Deskins and James Hatcher, by a — 604 — joint deed sold and conveyed a part of the original tract of 820 acres to William Deskins for $600 cash, all of which was paid to Jackson Deskins. In the deed it was recited that Hatcher was the real owner and that Jackson Deskins joined, in the conveyance 'merely to convey the naked legal, title, which was still in him. On the 23d day of July, 1895, William Deskins sold and conveyed the property so purchased by him to his brother, Tom Deskins. This land is a part of the tract overlying the mineral rights of the Virginia Mining & Improvement Company, and is the subject in dispute in this case. On the 4th day of February, 1903, Tom Deskins filed an intervening petition in this case, praying that it be taken as his' answer, and making it a cross petition against all of the parties claiming adversely to himself, and setting up the conveyance by his. father and Hatcher to his brother William, and the subsequent conveyance by William to him; alleging himself to be the owner of the land, and that the judgment of the court theretofore rendered in favor of the Virginia Mining & Improvement Company against his remote vendors was invalid as to him; and praying that his rights be protected, and his title quieted, etc. Subsequently the Big Sandy Company, which, by regular devolution of title now owns al the mineral rights of the Virginia Mining & Improvement Company, also filed an intervening petition, denying the title of Tom Denskins as set out in his petition, and alleging title in itself to the mineral rights underlying the property purchased by William Deskins from Jackson Deskins and James Hatcher, and conveyed thereafter to his brother Tom. The question presented for adjudication is whether Tom Deskins, remote vendee of Hatcher and Hacks on — 605 — Deskins, or the Big Sandy Company, the remote vendee -of Jackson Deskins, has the better title to the mineral rights underlying the land purchased by the former. From the foregoing apparently complicated statement of facts, we may deduce a few well settled principles which will serve as guides to the correct, adjustment of the conflicting claims. The Big Sandy Company takes only such rights as its vendor, the Virginia Mining & Improvement Company, had under the deed from Jackson Deskins to the latter company;, but it takes all of those rights, whatever they are. The Virginia Mining & Improvement Company purchased from Jackson Deskins after the institution of Phillips’ suit to enforce his mortgage lien. Therefore it was a pendente lite purchaser, and took subject to whatever judgment was rendered in that case, with all of the consequences flowing therefrom. If Hatcher was an independent purchaser on his own. account at the judicial sale had, the company acquired by its purchase no fights whatever as against him; but if he was only the agent in reality of Jackson Deskins, and purchased for him, although this, was in secret trust, yet, as against his trustee and against his subsequent vendees properly chargeable-with notice, the corporation was invested with all. of the rights of its vendor, Jackson Deskins. A vendee'of a vendor who has no title at all becomes the owner of any subsequently acquired title of the vendor. But while these well settled principles are admitted,, it is said that William Deskins and his vendee, Tom are bona fide purchasers for value from Hatcher without notice of the. secret trust (the existence of which is admitted) between him and Jackson Deskins. Admitting, for the present, the soundness of this statement of the legal principle, we will examine — 606 — the facts upon which it is predicated. Although the judicial sale in Phillips v. Deskins was had in 1890, and confirmed to Hatcher in the same year, 1894 (the date of the conveyance’ to William), Jackson Deskins was still in possession, exercising all of the rights of ownership. William Deskins, a son, with this condition of affairs staring him in the face, undertook to purchase a part of the tract sold at judicial sale from (as is now- said) the owner of the beneficial equity, Hatcher, but required the holder of the legal title, Jackson Deskins, to join in the conveyance, to perfect the title, paying all of the purchase money— $600 — not to the real owner, Hatcher, but to the holder of the naked legal title, Jackson Deskins; a procedure exactly opposit.e to what would have taken place if this had been a bona fide transaction, but one eminently proper (from their point of view) if Jackson Deskins were the real owner and James Hatcher the secret trustee. That Hatcher had no beneficial interest in the land is shown by the fact that, when served with summons, he allowed judgment to go by default, and, so far as appears to'the contrary, has never made, and is not now making, any claim under his purchase at the judicial sale. It is no ‘answer to this proposition to say that he, having sold out to William Deskins, had no interest to defend in this action. His purchase at the judicial sale was far more extensive than what he sold to William Deskins. Indeed, what was conveyed to the latter is but a small-part of what was purchased at the judicial sale. Moreover, William Deskins was himself a pendente lite purchaser. Before his purchase, his father had instituted this suit to enforce his vendor’s lien against the Virginia Mining & Improvement Company and to quiet his title against certain adverse claimants, Northup and Carlisle. — 607 — His petition alleges himself to be the owner of the land in question, and seeks, as said before, relief which only an owner in possession is entitled to demand. "William Deskins was bound to take notice of this suit, and the petition describes by metes and bounds the very l'and, a part of which he is claiming, and alleged Jackson Deskins to be its owner and posserror. In addition to this, it is alleged in the pleadings of his adversary, and not denied, that he actually knew of the pendency of this suit at the time of his purchase. Being thus a pendente lite purchaser himself, he was bound to take notice of what his vendor, Jackson Deskins, claimed in his pleadings, and his purchase was subject to the judgment to be thereafter rendered. When we take these admitted facts into consideration, with their legal deductions, and remember that William and Tom Deskins are the sons of Jackson 'Deskins, and that it is admitted they lived néar him, the conclusion is irresistible that they knew all about the agreement between Hatcher and their father, and took subject to the rights of the Virginia Mining & Improvement Company. So that, even if Hatcher had held the legal title, instead of only an apparent equity, the conclusion of the chancellor would have been incontrovertable. But James Hatcher, at best, held only an equitable title to the property by his purchase at the judicial sale, not having received a deed therefor; and the doctrine of bona fide purchase without notice applies only in favor of the purchaser of a legal title. If does not apply in favor of a bare equity. In 2 Pomeroy’s Equity, sec. 785, it is said: “From these decisions it necessarily follows that while a defendant, who really acquired only an equitable estafé, which, however, purported to be a legal — 608 — estate, and which he in good faith believed to be such,, may be a bona fide purchaser within the meaning of such doctrine, a defendant who knowingly and intentionally purchases an equitable estate or interest can not avail himself of the defense.” In support of this proposition, the following Kentucky cases are cited in the note: Nantz v. McPherson, 7 T. B. Mon., 597, 18 Am. Dec., 216; Hunter v. Simrall, 5 Litt., 62; Blight’s Heirs v. Banks, 6 T. B. Mon., 198, 17 Am. Dec., 136; Halstead v. Bank of Kentucky, 4 J. J. Marsh., 554. To hold otherwise is to say that a man may acquire title as a bona fide purchaser without notice from the holder of a bare equity, when the fact that the vendor has only a bare equity is notice to him that secret, trusts may be outstanding. No authority can be found for applying the doctrine of bona fide purchaser without notice to such a state of ease. In this case, in so-far as Tom or William Deskins claims the superior rights which Hatcher apparently had, he can claim these rights only as the vendee of Hatcher. The case would be the same if Jackson Deskins had executed one deed, and Hatcher had conveyed by a separate instrument. In so far as William Deskins holds, the land as the grantee of Jackson Deskins, he takes it subject to the rights of the coal company, who holds under a prior recorded conveyance from him; and in so far as he takes the land as the grantee of James Hatcher, he takes only such rights as Hatcher had, and any defense that might have beén made against Hatcher may be made against him. As no part of the consideration which William Deskins; paid went to Hatcher, the former took nothing from the latter which he can enforce against the coal company. The land has been redeemed from Hatcher. — 609 — as must be presumed from the long continued possession by Jackson Deskins. If this suit were between Hatcher and the coal company, he would have no standing in court. William Deskins can stand in no-better right than he, except upon the ground that he was a bona fide purchaser from Hatcher without notice of the secret agreement between Hatcher and his. father; but the fact that Hatcher had only an equity gave him notice of all secret trusts binding the land in Hatcher’s hands. So Tom Deskins had notice, too, of the same facts from the deed to William Deskins, for the vendee must take notice of all facts shown by deed to his vendor. In addition to this, the answer of Tom Deskins, upon which his claim is based, does not contain the necessary allegations to sustain a judgment. In 2 Pomeroy’s Equity, sec. 785, it is said: “The allegations of the plea, or of the answer, so far as it relates-to this defense, must include all those particulars, which, ás has been shown, are necessary to constitute a bona fide purchase. It should -state the consideration, which must appear from the averment to be ‘valuable’ within the meaning of the rules upon that subject, and should show that it has actually been paid, and not merely secured. It should also deny notice in the fullest and clearest manner, and this denial is necessary, whether notice is charged in the complaint or not. The denial must correspond with the settled rules upon the subject of notice, so as to bring the case within the operation of those rules. Concerning the foregoing averments there has been, and can be, no doubt.” (23 Am. & Eng. Ency. of Law, pp. 522, 523.) A stream rises no higher than its source. Ordinarily a vendee gets no more than his — 610 — vendor has. But an exception is made in favor of a bona fide purchaser without notice. He is not bound by secret trusts existing against his vendor. To entitle him to this advantage, however, he must plead the facts showing that he is a bona fide purchaser without notice. This Tom Deskins failed to do. He does not allege that he paid anything for the land. He does not allege that either he or William was ignorant of the real condition of the title. For the foregoing reasons, the judgment is affirmed.