Stubbs v. Pyle

McCULLOCH, C. J. This controversy involves conflicting claims to priority of liens against a certain lot or tract of real estate in the city of Conway. The real estate was originally owned by appellee, L. H. Pyle, who created the several liens asserted by the respective claimants. Pyle executed a mortgage to the Georgia State Saving Association, and it is conceded that the lien of that mortgage is superior to all others. On November 1,1913, which was subsequent to the execution of the mortgage to Georgia State Saving Association, Pyle entered into a written contract with M. D. Jones for the sale of the property in question for the sum of $1,841.25, payable in six annual installments, evidenced by promissory notes executed by Jones to Pyle. The written contract provided, in substance, that upon the payment of the notes Pyle would execute a deed conveying the said real estate to him, but it was stipulated that the specified time for payment of the notes was to be of the essence of the contract, and that upon default in payment of either of the notes the relation of vendor and vendee should cease and that the relation of landlord and tenant should thereafter subsist between the parties, and that Pyle should have the right to retake possession of the property. Possession was delivered to Jones under the contract, and during his occupancy Pyle borrowed money from appellant Stubbs and assigned to Stubbs as collateral security for the debt'the notes of Jones and the contract for the conveyance of the property to Jones. Subsequently Jones defaulted in the payment of the notes and surrendered to Pyle the possession of the real estate in question and executed to Pyle a quitclaim deed. Neither that deed nor the contract between Pyle and Jones was ever placed of record. Thereafter Pyle, while in possession of the property, executed a mortgage to appellee Caspar Brun to secure a note in the sum of $500, and still later Pyle sold and conveyed said real estate to one Durham, being in possession thereof at the time of the conveyance, and Durham executed to Pyle certain promissory notes covering the unpaid purchase price, and afterwards Pyle assigned the Durham notes to appellees, St. Louis Union Bank, and Central National Bank of St. Louis, as collateral security for indebtedness of Pyle to those institutions, with whom appellant is now contesting for priority. The chancellor rendered a decree in favor of appellant Stubbs against Pyle for recovery of the debt, but subordinated his lien to the prior claims of Brun, and the Georgia State Saving Association, and St. Louis Union Bank, and Central National Bank of St. Louis.' It is not contended that either Brun, or the Central National Bank of St. Louis, or the St. Louis Union Bank, had actual notice of appellant’s asserted lien at the time the liens in favor of those parties were created. On the contrary no proof was introduced at all to establish notice, or the existence of such facts as would put either of those subsequent lienors on inquiry. The burden of proof was on appellant to show that there was notice to those parties, or that the circumstances were such as was sufficient to put them upon .inquiry at the time they accepted the liens. Osceola Land Co. v. Chicago Mill & Lumber Co., 84 Ark. 1; White v. Moffett, 108 Ark. 490. The written evidences of the transactions between Pyle and Jones and between Pyle’ and appellant were not placed of record, and, although possession had been originally delivered to Jones by Pyle, the former surrendered that possession to the latter, who was in possession at the time of the execution of the mortgage to Brun, as well as at the time he subsequently conveyed the land to Durham. It is argued that the parties who subsequently dealt with Pyle were chargeable with notice of the transactions between Pyle and Jones for the reason, it is said, that those transactions were within the line of title upon which their liens are based. The. argument is not a sound one for the reason that the canceled contract between Pyle and Jones and the unrecorded quitclaim deed from Jones to Pyle were not within the line of title under which appellees asserted their lien. Case v. Caddo River Lumber Co., 126 Ark. 240. Pyle had possession and the record title at the time he mortgaged the property to Brun, and at the time he subsequently executed the deed to Durham, and the parties who dealt with him had the right, in the absence of notice to the contrary, to assume that he was the owner. They were not bound to make inquiry concerning the prior possession of Jones under his unrecorded contract. The parties so dealing ■ with Pyle had the right to treat his possession as referable to his record title. We are of the opinion, therefore, that the chancery court was correct in subordinating the lien of appellant to those asserted by the respective appellees, Georgia State Saving Association, Brun, St. Louis Union Bank, and Central National Bank of St. Louis. We deem it unnecessary to discuss the additional grounds relied on by appellees in support of the chancellor’s decree, that under the peculiar language of the contract between Pyle and Jones converting the relation from one of vendor and vendee to that of landlord and tenant, that the purchaser acquired no vested interest in the land, and that appellant acquired no lien by virtue of the assignment to him of the Jones notes and contract. It is sufficient for the purpose of this case to say that the appellees were innocent holders of the liens without any knowledge whatever of appellant’s asserted lien, or, at least, must be deemed innocent purchasers in the absence of proof to the contrary, and are entitled to the protection which they received under the decree of the lower court. Affirmed.