Smith v. Lytle

Cornell, J. In paying to the railroad company the unpaid portion of the purchase-money coming to it upon its contract of sale to Lackor, and taking a transfer of the legal title, Smith did not make the advance for or on account of Lackor, or in the way of a loan to him. It was not done in pursuance of any agreement between him and Lackor, and the assignment of the contract of purchase from Lackor to him contained no stipulation obligating him to make the' advance or to procure the title. He did it voluntarily and solely for the purpose of protecting an equitable interest in [190] the property which he supposed he had acquired from Lackor, and was holding as security for a loan of money made to him. He was placed by the transaction, therefore, in precisely the position he would have occupied if he had never had any dealings whatever with Lackor, but had bought of the railroad company all its estate and interest in the property, and had taken a conveyance of the legal title to the lot, subject to the equitable rights of Lackor under his contract of purchase from the company. He has succeeded to all the legal and equitable rights of the company under its contract of sale to Lackor, and has become subject to all its obligations. These rights and obligations are those existing between a vendor and vendee of real property, where a portion of the purchase-money remains unpaid, and the legal title is being withheld until full payment is made. Lackor, as the vendee, became the equitable owner of the lot, and a trustee for Smith as to the unpaid portion of the purchase-money; while the latter, as vendor, ' held the legal title as a trustee for Lackor, with a prior lien upon the lot for the unpaid purchase-money, as against the vendee and all parties claiming under him. 1 Story’s Eq: Jur. § 506; 2 Story’s Eq. Jur. §§ 789, 790,1216,1217, et scq. Plaintiff’s lien, therefore, under his judgment against Lackor, to the extent of said unpaid purchase-money, interest and ■costs, was prior and paramount, and not subordinate, to that which was subsequently obtained by Lytle against the equitable interest and estate of Lackor in the premises, and it •could not be affected by any proceedings taken to enforce payment of the latter; for it is too plain for argument that a second lien, which is only a charge upon an equitable title and estate, cannot be used or made available to cut off or destroy a prior lien, which is a charge upon the land itself, affecting both the legal and equitable title. The judgment under which defendants claim title does not purport to impeach the validity of plaintiff’s prior lien, nor to ■determine any question of priority between it and the me [191] ehanie’s lien which was asserted in that action by Lytle. It only determined the rights of Lytle, under his alleged claim of lien, as against Lackor, on account of the erection of the dwelling-house upon the said lot; the only title to which, that belonged to him, according to the findings in pursuance of which the judgment was rendered, was the equitable one of a vendee, under a contract of purchase, the purchase-money being still in part unpaid; and it adjudged the amount of the lien, by it determined, to be “a specific charge and lien upon said building, and upon all the right, title, and interest of Lackor in and to the land on which it was situated.” This subjected to the lien of the judgment whatever equitable rights and interest Lackor had in the premises, but nothing more. It did not reach the fee of the land, nor any prior lien thereon belonging to Smith; and, upon the findings, that could not properly have been done, as it would in effect have been subjecting to the payment of Lackor’s debt the property of Smith, without his consent. The circumstance that Smith was nominally a party defendant in the action is of no importance; for, as no rights of his, as a prior lien-holder or otherwise, were in any way involved or brought in question, it is evident that he was improperly made a party, and that any adjudication affecting his rights would have been error. Forrer v. Kloke, 10 Neb. 373. But, as already stated, no adjudication of the kind was attempted, and no rights of plaintiff were sought to be passed upon or determined in that action. He stands, therefore, in respect to all subsequent proceedings that have been taken to enforce the judgment, in the same position he would occupy if he had never been made a party defendant; and he may impeach their validity within the same time, in like manner, and upon like grounds as would be permitted to any stranger to the judgment, whose property rights were injuriously affected thereby. The sale of the lot to Lytle on the execution issued upon his judgment was wholly unauthorized and void, aside from [192] any considerations growing out of the provisions of the statute-regulating the manner of enforcing mechanics’ liens when buildings are erected for parties on land to which they have no legal title. The mandate of the process under which the officer here acted in making the sale, required him to satisfy the judgment out of the personal or real property of the judgment debtor, or “out of the property on which the judgment was adjudged and declared to be a lien;” and the direction endorsed upon the writ was “to levy upon the dwelling-house-upon the lot, and all the right, title, and interest of the said. H. L. Lackor in and to said lot of land.” In assuming to sell the lot itself, and to pass the legal title thereto to the purchaser, the officer acted wholly outside the authority of his-writ, and his acts were not merely irregular, but void. Herman on Executions, & 255, and cases there cited; Harris v. Murray, 28 N. Y. 574; Jeffries v. Sherburn, 21 Ind. 112. It is suggested, however, that as Lackor consented to the-sale of the lot on the execution, he cannot now be heard to-question its validity as against Thompson, who has since purchased the property of Lytle and paid a valuable consideration therefor; and that Smith occupies the same position,, because he is a grantee of Lackor under the deed of January, 1877. It is also urged that he has waived all defects and. irregularities in the sheriff’s sale by his laches in not taking, any steps to set it aside for more than a year after the expiration of the time for redemption. The answer to these suggestions is that the rights which Smith is seeking to protect by this action are those of a prior lien-holder, and they were-not derived from Lackor, but from the railroad company. These rights became vested in him before the conveyance-from Lackor and wife in January, 1877, and they were unaffected by it. The prior equitable lien he then had did not become merged in the legal title he then acquired. The-equitable doctrine of merger has no application where it is clearly for the interest of the party holding the two estates-that they be kept separate and distinct, unless a contrary [193] intention is expressly shown. Horton v. Maffitt, 14 Minn. 289, 293. The existence of any such intention in this case is expressly negatived by the findings, and it was clearly for Smith’s interest that the prior lien upon the property, which he got from the railroad company, should not merge in the legal title which he afterwards got of Lackor and wife. It is-also established by the findings that neither the sale upon the execution, nor the purchase by Thompson, was induced or influenced by the conduct or representations of plaintiff, or any act or omission on bis part, and that the former purchased with full knowledge of all the facts affecting his tide, and of the existence of plaintiff’s rights as a prior lien-holder. Under these circumstances, plaintiff is not precluded from asserting his rights against Thompson by reason of any estoppel or waiver. The judgment of the district court must be reversed.