| 9th Cir. | Feb 13, 1899
after stating the facts as above, delivered the opinion of the court.
The deed which was placed in escrow with the cashier of the Commercial Bank was delivered to the attorney of the appellants in violation of the conditions stipulated in the agreement of the parties. The cashier had in his possession a writing referring expressly to the mortgage, the bond, and the preliminary agreement between Hopkins and Parkinson. The preliminary agreement was not deposited with him, but the mortgage, which was placed in his- possession, was sufficient to advise him of the condition upon which he was to deliver the deed. The escrow card, it is true, did not clearly define the condition. It instructed the bank to retain the custody of the deed until Parkinson should procure a loan of $60,000, and place that sum in the bank, subject to its control, and to be used in the construction of a building upon lot 7. By the agreement of the parties, however,' the deed was not to be delivered unless Parkinson should procure the loan upon a first mortgage on lots 7 and 8, leaving Hopkins with a first mortgage on the property lying to the westward thereof. That condition was not fulfilled. But it is urged that the appellants stand in the attitude of innocent purchasers; that their attorney had no actual notice of the terms of the agreement, nor of the terms of the mortgage, which was with the papers in escrow, and that his only information was that which
In Provident Life & Trust Co. of Philadelphia v. Mercer Co., 370 U. S. 593, 604, 18 Sup. Ct. 788, 793, the supreme court distinguished between the ease of a bona fide purchaser of negotiable paper which had been wrongfully delivered by a depositary and that of a purchaser of real estate under like conditions, and quoted with approval the language of Chief Justice Bigelow in Fearing v. Clark, 16 Gray. 74, as follows:
“The rule is different in regard lo a deed, bond, or other instrument placed in file hands of a third person as an escrow,' to be delivered on the happening of a future event or contingency. In that case no title or Interest passes until a delivery Is made in pursuance of the terms and conditions upon which, it was placed in the hands of the party to whom it was intrusted. But the law aims to secure the free and unrestrained circulation of negotiable paper, and to protect the rights of persons taking it bona fide, without notice.” "
But it is not necessary to”determine whether the title passed to Parkinson at the time of the delivery of the deed. When Hopkins placed his own mortgage upon record, he undoubtedly ratified the delivery of the deed, and acknowledged that the legal title to the property had vested in Parkinson. We are unable to agree with the earnest contention of counsel for the appellants that, in admitting the legal title to be in Parkinson, he admitted the priority of their mortgage over all the property. When he found that the deed had been delivered, and that a mortgage had been placed of record which violated the rights that had been reserved to him, it is evident that, by placing his mortgage of record, he sought only 1o protect his own interests, and to give notice of his rights. It does not follow that, by ratifying the delivery of the deed., he ratified (lie inequitable use which Parkinson had made of the title which he thereby acquired. He gave immediate and positive no-
equivalent to notice before the contract, even though the unpaid balance is secured. Blanchard v. Tyler, 12 Mich. 338; Brown v. Welch, 18 Ill. 342; Kohl v. Lynn, 34 Mich. 360" court="Mich." date_filed="1876-06-21" href="https://app.midpage.ai/document/kohl-v-lynn-7928343?utm_source=webapp" opinion_id="7928343">34 Mich. 360; Lewis v. Phillips, 17 Ind. 108" court="Ind." date_filed="1861-11-29" href="https://app.midpage.ai/document/lewis-v-phillips-7035405?utm_source=webapp" opinion_id="7035405">17 Ind. 108; Boone v. Chiles, 10 Pet. 211; Everts v. Agnes, 4 Wis. 343. At the time when the appellants received notice in this case, they had paid but $20,000 of the $60,000 which they had contracted to advance upon the mortgage.' The $20,000 so paid still remained in the bank, from which it was to be disbursed in the erection of the building. The appellants undoubtedly had the right, at this point, to rescind the contract; for both Parkinson and the bank had violated the escrow agreement, and Parkinson had executed a mortgage upon property which' he had no right to incumber. Instead of rescinding, the appellants chose to pay the bank the remainder of the loan. This they did with full knowledge of the facts. By electing to proceed and pay over the remainder of the money, they must be deemed to have assented that their mortgage should stand as a lien upon the property only which Parkinson could rightfully mortgage to them under his agreement. It may be conceded that, if they were innocent purchasers to the extent of the $20,000 which they had paid before notice of the rights of Hopkins, they had the right, while declining to make further payments on the mortgage, to hold the mortgage itself as security pro tanto for the amount already paid, provided that sum had been paid beyond their power to recall it. But it is not shown that the bank, which held the money, and had given a bond for its disbursement for a specified purpose, declined to surrender the money to’ .the appellants, or that it was requested to do so. No ground is perceived upon which the bank could have resisted such a demand, since the money which it held had been obtained in violation of the escrow agreement of which it was the depositary. The burden of proving all the facts necessary to constitute themselves innocent purchasers rested upon the appellants. Not only have they failed to show that they could not have rescinded the loan, and recovered the $20,000 so paid to the bank, but the evidence in the record is insufficient to convince us that they were in fact innocent purchasers, even to the extent of said sum so paid to account upon the loan. In entering into the contract of loan, as it is disclosed in the record, the appellants were not in the attitude of dealing with one whom they found apparently clothed with the muniments of title. They had notice that Parkinson had no title. They found a deed which was in the possession of neither the grantor nor the grantee, but in the hands of a depositary. They knew that the
The appellants point to various acts and conduct on the part of Hopkins which they contend establish against him an estoppel to deny that their lien is first upon lots 9 and 30, and amount to a ratification upon his part of their mortgage in all its terms. These are the fact that Hopkins received the bond of the bank, conditioned upon the disbursement of the money in the construction of the building upon lot 7, and subsequently sued the bank upon the bond, alleging that not more than $30,000 of the $60,000 loan had * been thus used; the fact that he wrote the letter of January 30, 3,893; the fact that he foreclosed his mortgage, and bought in all of the property which he had sold to Parkinson, in a foreclosure suit to which the appellants were not made parties; and the fact that he demanded of, and received from, Parkinson additional security upon property in Oregon for the unpaid balance of the purchase price which Parkinson owed him. All of these circumstances, except the delivery of the bond to Hopkins, and the letter of January 10, 1893, occurred after the appellants had parted with