Bank of Hoxie v. Meriwether

Hart, J?, (after stating the facts). The first question to be decided is, does the party wall agreement between C. J. 'Saenger and E. P. Richardson, executed on the 14th day of May, 1913, constitute a covenant running with the land? The agreement was in writing, and provides for the erection of a party wall thirteen inches wide, one-half of which was to be on the lots of the respective parties, and was to be owned in common. Inasmuch as Saenger was to erect his store building first, it was provided that the party wall should be erected by him and constitute a part of his store building. When Richardson desired to erect a building on his lot, the party wall became a part of such structure, and he was immediately to nay for one-half of the cost of it. The agreement further provided that it was binding upon the heirs or assigns of both parties. While the authorities are in conflict with respect to the legal effect of agreements providing for the construction of party walls between adjacent landowners, the question is no longer an open one in this State. • In the case of Rugg v. Lemley, 78 Ark. 65, it was held that, under an agreement of an adjacent proprietor to. pay part of the cost of a party wall when he commenced to use it, a charge is created in the nature of an equitable lien upon the lot upon which the wall is erected, which is enforceable in equity. The court recognized that there was a conflict in the authorities, and, after due consideration, adopted the rule that, where the covenant is similar to the one in this case and contains a clear manifestation of an intent that it should run with the land and bind the parties and their assigns, such party wall agreement creates an equitable charge, easement, and servitude upon the lots upon which it is built. In short, it was held that agreements of this sort, when duly acted upon, create cross-easements in the respective owners of the adjacent lots with which the covenants in the agreements will run so as to bind the parties and their' assigns. The distinction between real and personal covenants is that the former relate to the realty, having for their main object some benefit to the realty and inuring to the benefit of and becoming binding upon subsequent grantees, while the latter do not run with the land. In the case before us, the contract between Saenger and Richardson was not.merely personal to them. The wall erected on the boundary line between the two lots was intended to be, and was, a part of the freehold. It was erected for the use and benefit of future, as well as the present, owners of the lots. The agreement under which the party wall was built did not restrict the right to use the wall to E. P. Richardson and C. J. Saenger. On the other hand, it expressly provides that the entire agreement was made binding on the heirs and assigns of both parties. The wall was intended for the use and convenience of both lots. Each of the adjacent owners had an equal interest in the wall. It was as firmly attached to, and became as much a part of, each lot as any other part of the buildings ere'cted on them could be, and the benefits and burdens attaching to the wall followed the ownership of the respective lots. We have not set out the written agreement providing for the construction of the party wall in full, but we have, set out the material portions thereof. It is clear, from the portions which we have specially referred to, that the agreement for the party wall contains a covenant running with the land; for a covenant runs with the land when either the liability to assume its burdens or the right to use its benefits passes to the assignees of the landowners. The chancellor was right in holding that T. J. Sharum had no notice, actual or constructive, of the agreement providing for the erection of the party wall, at the time he took the two mortgages from Mitchell which are sought to be foreclosed in this suit. The agreement for the party wall was in writing, but was not acknowledged or recorded. Therefore Sharum had no constructive notice of its execution or contents.. Crawford & Moses ’ Digest, § 1536. It is admitted that Sharum had no actual knowledge of the claim of Saenger arising out of the agreement between him and Richardson for the erection of the party wall. The fact that. he might have known that Saenger had built the wall and that afterwards Mitchell, the grantee of Richardson, had used it as one of the walls of his building on his lot, would not 'constitute notice. The reason is that it is not shown that Sharum knew that Mitchell did not contribute his share of the cost of the building of the party wall, when he erected his store building in the summer of-1920, and made the party wall one of the walls of his building. In the absence of notice to the contrary, Sharum had a right to presume that Mitchell had paid his share in the cost of the wall, since the ' agreement provided ' expressly that he should make the payment immediately upon the completion of his building of which the party wall became a part. Kells v. Helm & Yerger, 56 Miss. 700. It is true, as contended by counsel for appellant, that one-half of the party wall was upon the land of Mitchell, and this would put any one upon notice of any matters affecting his title that an inquiry would disclose. This court has repeatedly held that actual possession of land at tbe time of another’s purchase is sufficient to put the purchaser upon inquiry of the possessor’s title. In the application of this rule Sharum, as a purchaser from Mitchell, would have no right to require the removal of the wall as a trespass upon his realty. In Hawkes v. Hoffman, 24 L. R. A. (N. S.) 1038, the Supreme Court of Washington held that the mere existence, at the time one purchases a lot, of a party wall resting partly thereon and in use by the owner of .the adjoining lot, is not notice of an obligation to contribute to its cost upon making use of it. The reason is that the rule imputes notice only of those facts that are naturally and reasonably connected with the facts known, and of which the known facts can be said to furnish a clue. As we have already seen, the agreement of Richardson and his assigns to pay part of the cost of the party wall, when he commenced to use the wall, became a charge in the nature of an equitable lien upon the lot upon which the wall was erected, and was enforceable in equity. The party wall having become a part of the realty, the charge against it was in equity a lien for the purchase money, not only while the property was owned by Richardson, the vendee, but also by all subsequent purchasers having notice that the purchase money remains unpaid. The principles from which courts of equity have proceeded in establishing this lien, in the nature of a trust, is, that a person who has got the estate of another ought not, in conscience, as between them, to be allowed to keep it and not pay the full consideration money. And third persons, having full knowledge that the estate has been so obtained, ought not to be permitted to keep it without making such payment, for it attaches to them also, as a matter of conscience and duty. Shall v. Biscoe, 18 Ark. 142; Day v. Gaines, 130 Ark. 167. Mitchell built his store upon his lot in the summer of 1920, and used the party wall as one of the walls of it. As soon as he used the party wall, under the agreement of Ms grantor with Saenger, he became immediately bound to pay his part of the cost of it. Saenger testified that, for some time, he was unable to agree with Mitchell about the cost of the party wall or that he was liable to pay any part of the same. During the -course of the negotiations he-frequently talked with Allbright, who was the cashier of the Bank of Hoxie, about the matter, and Allbright well knew that he claimed an equitable lien upon the lot for the payment of one-half of the- cost of the party wall. Allbright was the cashier of the Bank of Hoxie at this time, and also in December of the same year, when the mortgage of Mitchell to the bank in question was executed. Notice to Allbright, who was the cashier of the bank, was notice to the bank. The general rule is that the principal is affected with notice of all that -his agent knows in the line of Ms duty or within the scope of his powers. Peebles v. Columbian Woodmen, 111 Ark. 435. A corporation must necessarily act through agents, and the general'rule is that knowledge -of an agent acquired in the ordinary discharge of his duties for the corporation is ordinarily to be imputed to the principal. Little Red River Levee Dist. No. 2 v. Garrett, 154 Ark. 76, and First Natl. Bank v. Duvall, 156 Ark. 377. Applying the principle decided by these cases to the facts of this 'case, it is manifest, we think, that Allbright, as cashier of the Bank of Hoxie, and in the discharge of his duties as such cashier, acquired knowledge of the terms of the party wall agreement and of the fact that neither Mitchell nor his grantor had paid for half of the party wall, as provided in the agreement. The knowledge acquired by the cashier was present in his mind at the time he took the mortgage on the lot in question from Mitchell to the Bank of Hoxie. That -such knowledge was in the cashier’s mind when the mortgage was executed-may be shown by circumstances as well as by dire’ct evidence. As we have already seen, negotiations looking to a settlement of the equitable lien claimed by Saenger on the lot of Mitchell were pending during the period of the construction of the building by Mitchell in the summer of 1920, and for some time thereafter. During this time Saenger talked with the cashier of the bank about his lien and fully explained the nature of it to him. Finally, in October, 1920, Saenger reached an agreement with Mitchell whereby the value of the wall was placed at $1,068, and Mitchell executed to Saenger a number of promissory notes as evidence of the amount due. He paid two of these notes, amounting in the aggregate to $168. The balance of the amount due was unpaid. The notes given by Mitchell to Saenger were payable at the Bank of Hoxie, and were dated October 20, 1920. The mortgage of Saenger to the bank was executed on the 24th day of December, 1920. These facts: and circumstances clearly show that the knowledge of the equitable lien of Saenger existed in the mind of the cashier of the bank when the mortgage from Mitchell to the bank was executed. It appears from the record that T. J. Sharum acquired the title of Mitchell in the lot in question in April, 1922, and counsel for appellant insist that this created a merger of the estates which extinguished the lien of Saenger. We do not think so. It results from the principles announced above that Saenger had no claim of personal liability against either Mitchell or Sharum. The reason is that neither of them was a party to the contract for the party wall, and became in no wise personally liable by the contract. The contract created a covenant running with the land, and Saenger had the right to enforce his equitable lien against the lot in the manner shown above; but he could not obtain a personal judgment against any of the parties to this suit for'the amount thereof. Saenger had nothing whatever to do with conveying the .land to Sharum, and we cannot see where the doctrine of merger has any application, in so far as he is concerned. It follows that the decree will be affirmed.