Dennis v. Atlanta Nat. Building & Loan Ass'n

NEWMAN, District Judge (after stating the facts). We are unable to agree with the conclusion reached by the learned judge who decided this case in the Circuit Court. In the view we have taken of this case, the question raised as to the sufficiency of the description of the property in the tax deed recorded and relied upon here is unimportant. In January, 1892, a bill was brought by Mrs. Susan W. Gilmer and her children not named as defendants against A. Campbell Jones, Susan W. Jones (his wife), Eleanor E. Gilmer, and Annie E. Pentecost, in the chancery court of Montgomery county, Ala. Mrs. Gilmer died pending the suit, and it was prosecuted to a conclusion by her administrator and the other complainants. The suit resulted in an adjudication by the Supreme Court of Alabama (Waller, Adm’r, et al. v. Jones et al., 107 Ala. 331, 18 South. 277) that the title of Mrs. Gilmer to the property in this case had never been divested by the tax sales in question, and that she was entitled to a decree adjudging the property to be hers, subject to the amount expended by Jones and the other defendants for taxes and certain improvements. It being thus determined by the state court that as between her and her son-in-law, Jones, and the542 daughters to whom Jones conveyed the property in 1882, Mrs. Gilmer had the title to the property, subject to certain charges, the real question we have to determine is whether or not the complainant here, the building and loan association, could have ascertained this fact by the exercise of proper diligence on its part. No question whatever was made that Mrs. Gilmer lived on the property in controversy. There is some difference as to the character of her occupancy of the property. She was getting old, and had surrendered the active management of the house to her daughters; but she had a room, and occupied it continuously until her death, subsequent to the execution of the mortgage. A tax sale was made and a tax certificate was issued in 1882, and yet Jones, who became the holder of the tax certificate, took no deed to the property from the probate judge until 1890. The amount paid for the property, as set out in the tax deed, was $175; and yet the property was valuable enough to enable the parties to whom Jones conveyed it to obtain a loan on it for $5,000 within a year after the deed from Jones to the ladies was made. This, it seems to us, should have been sufficient to have caused special inquiry on the part of any one about to take a conveyance of the property. The deed from Jones to the ladies, -as therein recited, was for $10 and love and affection. Charles Wilkinson, who was examining the title on behalf of the building and loan association in June, 1891, wrote to the general counsel of that association in Atlanta as follows: “Enclosed find abstract of Gilmer, Jones property. The tax sale has been critically examined and found perfect. The parties have been holding under the State since 1882. Although the tax deed was made in 1890, the [they] had the certificate. Mrs. Gilmer did not care for it was bought by her son-in-law, deeded by him to his sisters-in-law, the children of Mrs. Gilmer.” This letter shows two things: In the first place, that Wilkinson had the abstract of title and the facts connected therewith, showing how Jones obtained the property, and how it was conveyed by Jones to his wife and her sisters. It also shows that Wilkinson understood that the natural inquiry would be, on the part of any one examining the title, does Mrs. Gilmer still claim to be interested in the property, and what does she say about this loan? The evidence in the case shows conclusively, we think, that, if Mrs. Gilmer had been consulted, it would have ben ascertained that she objected most strenuously to the execution of the mortgage on this property, and that she claimed then, as she did in the suit brought soon thereafter, that she still had the legal title. Wilkinson, in his testimony, says that: “At the time of the loan secured by Jones and others in this case, from the complainant, the Atlanta National Building & Loan Association, Í was the local representative, adviser, and also secretary and treasurer — id est, Poo-bah — of said complainant in the city of Montgomery. I had general supervision and advisory powers in reference to any loan, advancement, or the general policy of their business in this territory.” There can be no question, therefore, that whatever knowledge Wilkinson had, and what he might have ascertained by reasonable [543] inquiry, must be charged to the building and loan association. He stood in such relationship to it in Montgomery as that it is certainly bound by what he knew or could have known. The law in Alabama applicable to this case (and it is not materially different, as we understand it, from the law elsewhere) is stated by the Supreme Court of that state in Wilson v. Wall, 34 Ala. 288-305, as follows: “It is well settled that, If the purchaser be put in possession of such facts concerning the title which the vendor offers to sell as would cause a prudent man to inquire further before he would proceed with the purchase, he cannot claim the protection which is accorded to an innocent purchaser without notice. Center v. P. & M. Bank, 22 Ala. 755; McGehee v. Gindrat, 20 Ala. 101. Information which makes it the duty of a party to make inquiry, and shows where it may be effectually made, is notice of all facts to which such inquiry, if conducted with ordinary diligence and prudence, would have led. Carr v. Hilton, 1 Curt. 390 [Fed. Cas. No. 2,437]; [Williamson v. Brown] 1 Smith (N. Y.) 354; Ringgold v. Bryan, 3 Md. Ch. 488; Wilson v. McCullough, 23 Pa. 440 [62 Am. Dec. 347]; Kennedy v. Green, 3 Md. & K. 699. A purchaser has notice of what appears upon the face of every title deed which constitutes a necessary link in his chain of title, and will not be allowed to deny notice by asserting that he had not read the deed. Johnson v. Thweatt, 18 Ala. 747; Wailes v. Cooper, 24 Miss. 208; Tiernan v. Thurman, 14 B. Mon. 277.” See, also, Hodges Bros. v. Coleman & Carroll, 76 Ala. 103-113. To the same effect is the -decision in Lockwood v. Tate, 96 Ala. 353-356, 11 South. 406. In the opinon in this last case it is said: “Information which makes it the duty of a party to make inquiry, and shows where it may be effectually made, is notice of all facts to which such inquiry, if conducted with ordinary diligence and prudence, would have led. Hodges v. Coleman, 76 Ala. 113; 2 Brick. Dig. p. 520, § 183. Good faith is an essential element of a valid claim to protection as a purchaser without notice, and lack of good faith is to be imputed to one who, having such information as-would put a prudent man on inquiry, failed to pursue the inquiry, which, if diligently followed up, would have led him to a knowledge of the superior right of another. Taylor v. Agricultural & M. Ass’n, 68 Ala. 229; Whelan v. McCreary, 64 Ala. 319; Craft v. Russell, 67 Ala. 9; Barton v. Barton, 75 Ala. 400.” The property in controversy in this case at the time of this transaction must, from the evidence in the record, have been worth something like $10,000 — at least that much. Counsel for complainant admits, as stated by Judge Shelby in his opinion, that it was worth last year $20,000; and, as the loan was made on it for $5,000, we may reasonably admit, in view of the margin usually required in loans of this character, that it was worth considerably more than the amount of the loan. The title which the complainant accepted was a tax deed made to the son-in-law of the owner eight years after the tax sale was made, in consideration of $175, and the subsequent conveyance to the daughters for $10 and love and affection. We are unable to understand how any one in the exercise of reasonable diligence in examining the title to this property before making a loan on it would not have most carefully questioned Mrs. Gilmer as to her interest. We think the facts were sufficient to put Wilkinson, as the representative and attorney of the building and loan association, on inquiry of Mrs. Gilmer. If Wilkinson had made this inquiry, it would have elicted facts and information from [544] Mrs. Gilmer which would undoubtedly have caused him to decline the loan for the building and loan association, if he properly regarded its interests. Mr. Wilkinson was a witness in behalf of the complainant in this case, and at one point in his testimony he says this: “It was never brought to my notice, incidentally, inferentially, or otherwise, that Susan W. Gilmer or ¿ny other person whatsoever had any claim, right, interest, equity, legal or otherwise, in and to said property, conveyed by said mortgage, other than said mortgagors mentioned. My best recollection is that at the time of the execution of said mortgage said Susan W. Gilmer was living with'said mortgagors.” Afterwards in his testimony he makes this statement: “I do not state positively that I ever had any exclusive or personal conversation with Mrs. Gilmer, although I remember distinctly going to the residence and seeing the parties generally in reference to this loan. I went down there myself. While it is true that I do not remember (it being several years anterior to the present) of a personal conversation with Mrs. Gilmer, still, as a basis of my recollection on the letter that I have just read, I must and will state that I do not believe that I would have written the letter of date 8th April, 1891 (Exhibit E) unless I had hád a conversation with Mrs. Gilmer upon which to predicate said letter; and, as refreshed by said letter, I am of opinion that such conversation, the concrete of which is included in said letter, was had between me and the said Susan W. Gilmer.” In view of what this record shows Mrs. Gilmer’s attitude to have been all along as.to the transaction in question here, we do not think this evidence sufficient to show that Mrs. Gilmer was informed of the purpose of her daughters to mortgage the property, or had any notice of it when it was done. While the agreed statement of facts concedes that the tax deed from the city of Montgomery was recorded in the office of the probate judge, it -is not set out in the abstract of title furnished by Wilkinson to the building and loan association, and could not have been relied upon by the association in making the loan. Even if it had been so set out and relied upon, it would not have materially strengthened the complainant’s case, as we regard it. We put our decision in this case upon two grounds: First, that, the legal title to the property in question at the time the mortgage to complainant was executed was, as between Mrs. Gilmer and the mortgagors, in Mrs. Gilmer, as determined by the Supreme Court of Alabama; second, that the facts shown in the record were such as to have made it incumbent on the representative of the building and loan association to have made inquiry of Mrs. Gilmer as to her interest in the property in question, and that any reasonable inquiry would have informed him of the real situation as it was afterward determined in the state court. The decree of the Circuit Court must be reversed, and the case remanded, with directions to dismiss the bill, with costs against the complainant.