Schwarz v. Stein

Alvey, J., delivered the opinion of the court. The question here is, does the vendor’s lien exist for the balance of the purchase money remaining due from Henkel to Mrs. Stein, as against the mortgage and attaching creditor of Henkel, now claiming the fund in court.. Generally, the vendor of real estate has a lien on the property sold, to secure the payment of the purchase money. If the vendor delivers possession of the estate to the vendee, before all the purchase money is paid, equity recognizes and enforces a lien on the land as a security for such unpaid purchase money ; and this is so whether the legal estate be or be not conveyed. Such lien exists independent of any special agreement, and as an incident to the contract of sale of real estate. [119] And it exists not only against the vendee and his heirs, and other privies in estate, but against those claiming as volunteers, judgment creditors, and all subsequent purchasers, for value, having notice that the purchase money, or any part thereof, remains unpaid. What will constitute notice sufficient to charge a party subsequently dealing with the estate, is often a question of some nicety ; but it is now settled that where the vendor claiming the benefit of the lieu, retains the conveyance, and holds in himself the legal title, subsequent purchasers or mortgagees may be affected with notice of the lien for any balance of unpaid purchase money. Worthington v. Morgan, 16 Sim. 547; Hewett v. Loosemore, 9 Hare, 449. And this because that, as the legal estate is outstanding, and the second purchaser acquires only an equitable interest, it must be subject to the prior equitable lien of the vendor, upon the maxim, “ Qui prior est tempore, potior est jure ; " for, in such case the court must assume that the purchaser or mortgagee had made proper investigation of the condition of the title, and would impute to the party all knowledge that such investigation would impart. The general rule is that the purchaser of an equity is bound to take notice of all prior equities. Here, however; the legal title was conveyed by Mrs. Stein to Henkel, and the mortgage from the latter to the Building Association was of the legal estate ; and we find nothing in the record to charge the mortgagee with notice of unpaid purchase money. On the contrary, the proof is clear in negation of such notice. So far, then, as the mortgagee in this case is concerned, the lien of the vendor could not be insisted on. But, as between Mrs. Stein and Schwarz, the attaching creditor, the broader question is presented, whether the lien, under the facts of this case, exist at all. Whether the lien has been waived, is generally a question of intention to be determined from the special circumstances of each case ; and it is always incumbent upon the party resisting the lien to show the facts which repel its existence. Here the facts relied on to negative its existence, are, that the deed was withheld until much the larger portion of the pur*chase money was paid, and a promissory note for the balance, with the indorsement of a third party thereon, as se [120] curity was given. Upon the payment of $1,700, in cash, and the delivery of the promissory note, indorsed, the deed that had been previously executed and withheld, was delivered to Henkel, and he was thus clothed with the legal estate to deal with the same as he pleased. It is contended, from these facts, that the lien was extinguished, and that the vendor must rely alone upon the personal security taken for the balance of the purchase money. And, apart from all authority upon the subject, we think that such is the good sense as well as the common justice of the transaction. Whatever may be the rule maintained elsewhere, it is now too well established in this State to be called into question, that, zvhere the vendor retains the title in himself, but takes the note, bond, or covenant of the vendee, with personal security of a third party, for the payment of the purchase money, this will not be of itself sufficient to justify the presumption of a waiver of the lien. Magruder v. Peter, 11 G. & J. 217. And it is equally well settled that where the title is conveyed to the vendee, and he gives his own individual note or obligation, without other security for the purchase money, it does not effect the extinguishment of the lien, without something more to indicate the intention so to do. But we think the rule should not be farther extended ; and, in a case like the present, where the legal title has been conveyed to the vendee, and he has given his note, with the responsibility of a third person indorsed thereon as security, the lien must be considered as having been waived or surrendered, unless there be an express agreement that it shall be retained. 4 Kent, 153; Gilman v. Brown, 1 Mason, 192, 214; Mackreth v. Symmons, 1 Lead. Cas. in Eq. 275, 276, notes. And there being no such agreement reserving the lien in this case, it follows that the court below was wrong in overruling the exceptions to the auditor’s account, and in ratifying the account, wherein Mrs. Stein was allowed the benefit of the lien 'as against Schwarz, the attaching creditor *of Henkel. The order appealed from will therefore be reversed, and the cause remanded that further proceedings in the premises may be had. Order reversed and cause remanded.