Kruse v. Conklin

The opinion of the court was delivered by Porter, J.: The defendant challenges the correctness of the fourth, fifth and sixth conclusions of law. The challenge must be sustained. The fourth and fifth conclusions upon which the court predicates the judg [362] ment in substance amount to this: Cyrus Ritchie having purchased the note and mortgage for value and without notice, he and the plaintiff, who claims under him, are protected by the recording act, and because of the failure of the defendant to record his deed the plaintiff’s title is superior. But that part of the fifth conclusion of law which holds that Ritchie purchased the note and mortgage for value is not supported by the findings of fact. In the eighth finding of fact it is said: “There is no evidence as to the actual consideration for said assignment, and no evidence as to whether Ritchie had actual notice of the conveyance to Conklin, defendant.” The court’s error was holding that, in the absence of any evidence to the contrary, Ritchie must be presumed to have purchased for value and without notice. While there is some conflict in the authorities, the rule appears to be settled by the better reasoning as well as the weight of authority that, the burden of proof as to the payment of a valuable consideration rests upon the subsequent purchaser. (Coon v. Browning, 10 Kan. 85; Morris v. Daniels, 35 Ohio St. 406; Roseman et al. v. Miller, 84 Ill. 297; J. D. and D. Halstead v. the President, Directors and Company of the Bank of Kentucky, 4 J. J. Mar. [Ky.] *554; Lake v. Hancock, use of Payne, 38 Fla. 53; Nickerson v. Wells-Stone Mercantile Co., 71 Minn. 230; 23 A. & E. Encycl. of L. 522, 523; 24 A. & E. Encycl. of L. 140.) Although the language of our recording act has been changed since the decision in Coon v. Browning, supra, the present statute has exactly the same force and effect as the former. This, in effect, was held in Holden v. Garrett, 23 Kan. 98. The reason of the rule that the burden of proof as to the payment of a valuable consideration rests upon a subsequent purchaser is that while the recital in a deed that the consideration has been paid is prima facie evidence, as between the parties, it is no evidence against a stranger. (King v. Mead, 60 Kan. 539; Doty v. Bitner, post.) [363] Other reasons given for the rule are that the knowledge and means of proving the consideration are more reasonably and naturally in the possession of the grantee and the difficulty which ordinarily arises where an attempt is made to prove the negative rather than the affirmative of a proposition. As to notice, it will be observed that the rule is equally well established that the burden is on the one who claims under the prior unrecorded deed. At least, this is true as soon as it is established that the subsequent purchaser parted with value. Many of the courts take the view that the burden of proof as to the good faith of the subsequent purchaser shifts as soon as the last purchaser has shown that he paid a valuable consideration. (Morris v. Daniels, 35 Ohio St. 406; Iron Co. v. Iron Co., et al., 105 Iowa 624; 23 A. & E. Encycl. of L. 523, and cases cited in note.) As soon as it appears that a valuable consideration has been paid the presumption arises that the purchaser acted in good faith and without notice of the rights of the parties who claim under the unrecorded deed. In Morris v. Daniels, supra, it was said: “The rule in such case is entirely analogous to that which obtains in relation to commercial paper, and rests on the same principle. The indorsee of negotiable paper before due must prove the payment of a valuable consideration as soon as it is shown that the instrument was made without consideration, or was obtained by fraud.” (Page 417.) In the present case the court assumed, in the absence of evidence to the contrary, that the subsequent purchaser paid value and took the title to the note and mortgage without notice of the defendant’s interests. This was error. • Until there was proof that the purchaser paid a valuable consideration there was no presumption of good faith. Of course, before the subsequent purchaser can take advantage of the failure of the prior purchaser to record his deed, he must be [364] himself a purchaser for value and without notice. (Grocer Co. v. Alleman, 81 Kan. 543; Morris v. Wicks, 81 Kan. 790; Doty v. Bitner, post.) From the findings of fact it appears that the bankruptcy court ordered the note and mortgage sold as personal property at public sale in May, 1900, and that it was offered for sale at that time in pursuance of the court’s order, but no sale of it was made because of lack of bidders. It does not appear by what authority the trustee proceeded to sell the same more than a year afterward at private sale, and the question of his authority to sell it when he did may have a bearing in determining the good faith of the plaintiff in the transaction. The whole case turns upon this proposition, and, since there was no evidence to support the conclusion of law that the plaintiff purchased for a valuable consideration and without notice, the judgment must be reversed and a new trial ordered.