Price v. McDonald

| Md. | Dec 15, 1851

Eccleston, J.,

delivered the opinion of the court.

The instrument on which this suit is founded, bears date the 21st of November 1808, and was executed as a deed of trust, or mortgage, for the purpose of conveying certain lands to Henry Dangeriield, by John McDonald, in trust, to secure the payment of the sum of $453.85, to William McGuire; giving the trustee, power to sell the land and pay the claim, provided it should not be paid, on or before the 21st of November 1811. On the 5th of September 1817, after the decease of Henry Dangerfield, the original bill was filed, praying for the appointment of a new trustee, and for the sale of the land, to pay the claim.

In the original bill, Wm. McGuire was complainant, and John McDonald, the only defendant. On the 16th of April 1823, after the decease of Wm. McGuire, his administrator, Wm. Naylor, filed a bill of revivor; in which it was stated, that the intesest of John McDonald, in the land, included in the deed of trust, had been sold by George Bruce, as sheriff of the county, and by McDonald to John Folck; and that Andrew Bruce as sheriff, had sold the same land to William Harness. The said John Folck, William Harness, George Bruce and Andrew Bruce, were made parties.

In April 1825, an amended bill was filed, alleging that John Folck, had knowledge of the deed of trust; that he was told of it by John McDonald, and that he consulted an attorney at law, about the deed. That he purchased the land, from the sheriff, after taking advice in regard to the deed. That after the land was struck off to him, and before he paid for it, he was informed, that such a paper, purporting to be a deed of trust, existed. Notwithstanding which information, he paid the money, and took a deed from the sheriff, subject to the claim of Wm. McGuire. And that the circumstances of the deed of trust, were known to Folck and the sheriff, before Folck bought the land.

In the argument, it was admitted by the solicitor for the appellants, that he must abandon all claim, to any benefit-from the Us pendens, in consequence of the exceedingly dilatory manner in which this case was conducted. It is therefore unnecessary to make any reference to what is said in the-amended bill, or in the answers, in relation to a knowledge on the part of Folck, as to the pendency of this suit, at the time of his purchase.

By an agreement filed, it is admitted, that the land sold to Harness, is no part of the land, included in the deed of trust; and his answer is not sent up in the record.

On the 24th April 1827, John Folck filed his answer. In which he alleges that he had no personal knowledge of the execution of the deed of trust from John McDonald to Henry Dangerfield, mentioned in the bill. He admits that he purchased all the right, title and interest of John McDonald, in and to a tract of land at sheriff’s sale, which land he believes lo be the same land conveyed by deed from McDonald to Dangerlield. He admits also that he had heard some person or persons, whose names he does not recollect, speak of the existence of this deed of trust before his purchase; hut he asserts that he has no recollection of bis ever having taken counsel about the effect and operation of the deed of trust, prior to the sale; and that he had no knowledge of the existence of the deed before his purchase, except that collected from the conversation above mentioned. He states, that on day of the sale of McDonald’s interest in the land he purchased the same, at the instance of McDonald and George M. Swann; that on the same day, and just prior to the sale, he, (Folck,) enquired of Bruce, the sheriff, if any such deed of trust from McDonald to Dangerlield did exist, and Bruce informed him that he had no knowledge of any such deed; that then the land was offered for sale, and he (Folck,) became the purchaser. He denies that John McDonald ever did, at any time before the sale of the land, disclose the existence of any such deed of trust; hut admits, that shortly after the sale, and before the payment of the purchase money, John McDonald did inform him of the existence of such a deed. He states, however, that at the same time, McDonald, assured him that the money secured by such deed of trust was fully paid, and that there was no claim against the land for any money due and unpaid under said deed of trust.

The agreement of counsel shews that the deed from McDonald to Folck, which is referred to in the hill of revivor, was executed as confirmation of the sheriff’s deed.

After the decease of Wm. Naylor, the appellants, as administrators de bonis non of Wm McGuire, were made parties complainants, on the 7th of March 1848.

On the 19th of April 1830, John Folck filed a further answer,, which is very much the same as the one already mentioned. John Folck died in January 1841, and his administrators and heirs at law were made parties defendants.

The heirs at law of Henry Dangerfield were also made parties.

As the decision of the case must rest almost exclusively upon the bills, the answer of John Folck, and the proof in regard to the execution of the instrument, (which by common consent has been called the deed of trust,) it is unnecessary to notice the other answers in the cause.

The proof offered to establish the execution of the deed of trust is quite sufficient. This was not denied by the solicitor for the defendants. But it was conceded by the counsel on both sides, that the acknowledgment was defective ; and that although the instrument had been actually recorded among the land records of the county, it must be considered in every respect, as if it never had been put upon record.

Two principal objections were urged against this claim. The 1st, that the deed is defective, because it was not acknowledged and recorded according to the provisions of our registry laws; and even in a court of equity the complainants can have no relief as against the defendants, except upon the principle recognized in the act of 1785, ch. 72, sec. 11. And as the purchase by Folck was, since the deed, and the original cause of action, on which the judgment was rendered, under which the sale was made to Folck, came into existence after the deed of trust, his title under the sheriff’s deed cannot be affected by the claim of the complainants.

The second objection is, that if the deed of trust is not rendered nugatory upon the grounds taken in the first, it still cannot avail the complainants, because Folck was a bona fide purchaser for valuable consideration, without notice.

It is very true that our registry laws would seem strongly to sustain the position assumed in the first objection. But whatever weight it might have been entitled to formerly, it is now too late to be relied upon as a ground of defence. The decisions in England, in the different States of the Union, and in our own State, are too numerous and too pointed in the opposite direction to require an argument, to shew, that an equitable claim, like the one under the present deed of trust, will be enforced in a court of equity, except against a bona fide purchaser without notice. See 2 White and Tudor’s Equi. Ca., in 71 L. L., top-p., 163, in notes to the case of Le Neve vs. Le Neve. 2 H. & G., 415, Hudson vs. Warner and Vance. 1 G. & J., 216, Tiernan vs. Poor, et ux. 5 Gill, 180, Alexander, et al, vs. Ghiselin. 5 Gill, 468, Baynard vs. Norris, et al. 5 Gill, 59, Wilson vs. Turpin.

The second objection is one of more difficulty, and will require some examination. It involves the question whether Folek had notice of the prior equity of McGuire. On this subject, the authorities are not uniform, and especially in regard to the precise point arising in this case, which is, whether information given to a purchaser, which ought to put him on inquiry, will, in equity, be considered sufficient notice? The decisions in some of the States have held, that to set up an outstanding prior equity against a recorded deed, constructive notice would not avail, hut actual notice clearly proved, would be required. The Supreme Court of the United States, however, have said in Vattier vs. Hinde, 7 Peters, 271: “Vattier’s original purchase then, cannot avail him, because lie was bound to notice the equity of Doyle. But there is, we think, much reason to believe, that he had actual notice of that equity, or at any rate, was informed of circumstances which ought to have led to such inquiry as would have obtained full notice.” And this is the language of Chief Justice Marshall. The same principle is fully recognised in Graff, &c., vs. Castleman, &c., 5 Randolph, 207. Pendleton vs. Fay, 2 Paige, 202, and Hardy and Talburt vs. Summers and Wife, 10 G. & J., 324. The three last cases are cited in Baynard vs. Norris, et al., 5 Gill, 483.

And immediately following the reference to those cases, the Court of Appeals manifest their decided approval of them, by saying: “For the establishment of so well settled a principle, a reference to further authorities cannot be necessary.” Although this species of notice may be opposed by the decisions of distinguished judges in some of the States, we do not feel authorised to go in opposition to the Supreme Court of the United States and our own express adjudications.

The complainants having offered no proof on the subject of notice, we must look to the answer of Folck, to ascertain whether it contains any thing which will supply the want of evidence on the part of the complainants. We there find it admitted, that after the sale, but before payment of the purchase money, Folck was informed of the existence of the deed of trust by McDonald, but immediately following that information, McDonald declared, that the money intended to be secured by the deed had been fully paid. Here there is positive and actual notice as to the existence of the deed. Did the accompanying information as to the payment of the money, release Folck from the necessity of making further enquiry in relation to the truth of that matter? is the important question.

Can it be supposed, that a man of ordinary prudence would have made the purchase, under the circumstances, without obtaining more satisfactory information as to the payment of the money ? The man by whom he was informed of the payment, was, of all others, most likely to be tempted to misrepresent. The fact of his land being sold under execution, is evidence of his embarrassed condition, and, of course, of the improbability of his having paid or discharged the incumbrance, intended to have been created by the deed. His situation rendered it highly important that the land should bring as much as possible at the sale. And he was urging Folck to purchase, as the answer shews. There is not a word about having any receipts for the money, nor is there any excuse or reason assigned for not having them.

In Jones vs. Smith, 1 Phillips, 244, in 19 Eng. Ch. R., T. Smith, the intestate of the defendant, lent David Jones, the father of the plaintiff, a sum of money, and took a mortgage for the same on Jones’ land. Whilst the treaty for this loan was going on, David Jones informed Smith that there had been a marriage settlement, which included his wife’s estate, but not his own.

This assertion, both Jones and his wife offered to verify, by swearing to it, if necessary. And when Smith asked to see the settlement, Jones told him that it was in the possession of his wife’s brother, and he was afraid he could not get it without displeasing his aunt, who was a rich old lady.

The lord chancellor held, that - this evidence did not constitute notice to the mortgagee. He considered the question before him to be, whether, where a party is informed of the existence of a deed, which may, but does not necessarily affect the property about to be mortgaged, and it is stated at the time that the property is not affected by the instrument, but that it relates to some other property, whether, acting fairly and honestly, he believes the statement is true, but he is misled, and, in reality, the instrument does relate to the property, he is to be considered as having notice of the contents of the instrument? On this point he says: “Undoubtedly, where a party has notice of a deed, which, from the nature of it, must affect the property, or is told at the time that it does affect it, he is considered to have notice of the contents of that deed, and of ail other deeds to which it refers ; but where a party has notice of a deed which does not necessarily — which may or may not — affect the property, and is told, that in fact it does not affect it, hut relates to some other property, and the party acts fairly in the transaction, and believes the representation to be true, there is no decision that goes the length of saying that if he is misled, he is fixed with notice of the instrument.”

This case was first decided by Sir J. Wigram, V. C., 1 Hare, 43. His opinion, like that of the lord chancellor, was in favor of the defendant on the point of notice. His decision is based upon the ground, that a marriage settlement does not of necessity include the husband’s estate, and that information of a settlement, accompanied by an assurance, from husband and wife, that the husband’s estate is not affected by it, does not impose upon a purchaser the obligation to make further enquiry, so fhai; his failure to do so will fix upon him constructive notice of the true character of the settlement, if, in fact, the husband’s estate is included. He thinks if this would be notice, it might, with equal propriety, be said, that the marriage itself, should be sufficient to create the necessity of enquiring whether there is not a settlement. And if so, then if a man deals with his neighbor, without knowing he is married, the vice chancellor seems to think, that a purchaser should, upon the same principle, be affected with notice of his marriage, and thence with notice of the marriage settlement, (if any,) and thence with notice of the contents of the settlement. Thus it will be seen that this case, in the very point on which it turned, was essentially unlike the one before us. Here the information was of a deed, which the purchaser was informed, included the very land about to be sold to him.

In Whitbread vs. Jordan, Coote’s Law of Mortgage, 375, in 69 L. L., Boulnoes, one of the defendants, received from Jordan, the other defendant, a legal mortgage of copyholds, to secure a former debt, and a fresh advance. At the time, Boulnoes knew, that Jordan was indebted to the plaintiffs, who were brewers, and that it was their practice, to take a deposit of title deeds, to secure the money due to them. Boulnoes, enquired, whether there had been such a deposit, and was informed, there had not, but was assured, “that the plaintiffs had taken a note of hand merely, and that the property was unincumbered.” He was also informed by Jordan, that the copies of court were absent, because he had lost, or mislaid them. Boulnoes was held bound, in consequence of his not having enquired of the plaintiffs.

This case, Coote says, has been questioned, and refers to Sug. on Ven., 1054, 11th ed. However, he proceeds to remark: “But the decision was approved by Lord Lyndhurst, on the hearing of the case of Jones vs. Smith, on appeal.” In commenting upon Whitbread vs. Jordan, the lord chancellor evidently approves of the conclusion of the learned judge, who, in deciding the case, said, that “the facts of the case were such, as to amount to negligence of so gross a nature, that it would be a cloak to fraud, if it were permitted.” 19 Eng. Ch. R., 255.

We do not design, either to affirm or deny the principle, involved in the point of this case, arising from the habit of the brewers. It has been referred to, for the purpose of shewing the extent to which the English courts have gone, on the subject of constructive notice, in consequence of a failure to make proper enquiry. This case, and the reasoning of the lord chancellor, in Jones vs. Smith, we think, establish the principle, that if a party has knowledge of the existence of an instrument, which, actually, does affect the land, but not being one of such a character, that there may be some doubt, whether the land is included or not, he will be charged with full notice of the instrument, in regard to its contents and effect, if he fails to make suitable enquiry. And that although the party, whose interest would prompt him to misrepresent, should assert that the incumbrance was paid off, or discharged, without furnishing any proof whatever, or referring to any circumstances in support of his assertion, the purchaser or mortgagee, who fails to make further enquiry, will, nevertheless, be guilty of such a degree of negligence, that he will be considered as having notice.

The principle here advanced is very fully sustained, in the case of Hudson vs. Warner and Vance, 2 H. & G., 415. There W. Warner and W. Vance obtained from J. and T. Vance a mortgage on personal property, which they neglected to have recorded. Afterwards a mortgage was given upon the same property, or a part thereof, to Hudson & Co., which was recorded immediately upon its exection. The suit was instituted to enforce the first mortgage, upon the ground of notice, to the second mortgagees, which was expressly charged in the bill. The answer of Hudson denied, that when he received the bill of sale, he had any notice of any prior, legal or equitable incumbrance upon the property, in favor of the complainant, or either of them. He also alleged that he had no notice of any delivery or pretended delivery to the complainants, or either of them, or to any person on their account; except only the book of accounts of the firm of J. and T. Vance, and other evidence of debts due the firm, which were referred to in the defendant’s bill of sale, as being in the possession of W. Warner, and which T. Vance represented to the defendant, amounted to $40,000 and upwards, and as being more than enough to satisfy all the debts of the firm: but that the books and evidences of debts, were then unjustly withheld from him (the said Vance,) by W. Warner. The answer also asserts, that previous to the execution of the second bill of sale, the defendant (H. Hudson,) inquired of T. Vance, whether there were any outstanding incumbrances on the property, “and was informed by him, that endorsements had heretofore been made by Warner for J. and T. Vance, and a contract given to him, accompanied with a bill of sale upon some part of their property, but what part he did not state, but said that Warner had never been called upon to pay any of the notes of J. and T. Vance, and that the security which had thus been given to him, and the said pretended bill of sale, were of no avail, and had not been recorded, but were null, fraudulent and void.” The defendant further stated that Vance asserted there was no valuable consideration for the first bill of sale: that it “could not impair the security he then proposed to give to the defendant, even as to the books of accounts and securities then in the hands and possession of Warner, and much less incumber in any way, the books and stationery then in the store No. 178, Market street, and the rooms and warehouses adjacent thereto; which he then agreed to transfer to the defendant, by the bill of sale as aforesaid, and whereof the said Vance then appeared and represented himself to be in the sole and exclusive possession for and on account of the firm of J. and T. Vance.” And the defendant asserted, positively, that he believed the information so given to him by Vance.

The court held Hudson bound by the notice, notwithstanding the positive statement in the answer, as to his belief of the truth of the information given to him by Vance: which information was in express terms, that no advances or payment had been made upon the endorsements, which were the foundation of the first bill of sale; that the instrument was without consideration; that it was not binding even upon the book of accounts, and other evidences of debt mentioned in the second bill of sale ; and especially, that it was no incumbrance upon the books and stationery then in the possession of Vance, and intended to be transferred to the defendant. Indeed the court, in their opinion, consider the answer as alleging, that the defendant was informed “that nothing was due upon the conveyance.” But they ask the important question, from whom did he derive this information ? And they answer it by saying: “from his creditor,” (which should be, debtor,) “who was then pressed to give him security for his debt. Ought he to have confided in such an interested representation from one, whom, common sagacity might have admonished, would, very naturally, be inclined to rid himself of the pressing solicitations of importunate creditors, by the most favorable representations, of the unincumbered and unshackled condition of his estate ?” It is perfectly evident that the court considered Hudson guilty of great negligence, and by no means excused from the obligation of making further enquiry, in consequence of the information he received from Vance. They say, on this point, “If Hudson could have supported by testimony, what he has set up in avoidance of this notice, his claim would have been presented in a very different view before this court. Could he have established the fact, that he had made the enquiry of Warner, into the nature of his claim and lien, and had been led by Warner to believe, that his incumbrances were removed, equity would never interpose to invalidate his claim. I3ut these facts were necessary to have been established, as they constituted the only effective part of his defence, and it is scarcely necessary to say, that his answer can furnish no evidence of these facts.”

It has, however, been said, that the bill in the present case charges notice, and that the answer in that respect is responsive to the bill, and must be considered as true. And that, therefore, the admission of notice must be taken in connection with the statement, of the simultaneous information, as to the discharge or payment of the claim under the deed of trust, which released Folck from the necessity of enquiring further into the matter.

It will be seen that the bill, in the case of Hudson vs. Warner and Vance, charged notice. The answer, therefore, was as much responsive on that point, as in the case before us. The court, nevertheless, relied upon the answer as admitting notice, to the defendant, before the bill of sale was given to him, that Warner and Vance had received a conveyance. And yet they did not, upon the allegation of a defensive character in the answer, consider the defendant relieved from the obligation to make enquiry. It is true, the court do not rely exclusively upon the admission in the answer as proof of notice, but they lay much stress on that admission. Their language, on page 429, is, “The answer distinctly admits the notice.” And on page 430, they speak of the answer, in connection wilh other matters, as leading irresistibly to the conclusion, that Hudson had such notice as would affect his conscience, and that there existed some pre-existing equity.

A refusal to permit the answer of Folck to excuse him, for not having made further enquiry, does not, at all, violate the rule, which requires that the statements in an answer, responsive to the bill, are to be received as true. We concede it to be true, as stated, that McDonald did inform Folck that the money secured by the deed of trust, was fully paid, and that there was no claim against the land for any money due and unpaid under said deed. But admitting that he was so informed, he was not justified in relying upon such information, coming from such a source. And failing to make proper enquiry, he was guilty of negligence to a degree, which must charge him with notice of the lien and of its continuing existence ; especially as he was informed that the deed was designed to create an incumbrance upon the very land he was about to purchase; and the information he received, as to the discharge of that incumbrance, rested solely upon the naked assertion of McDonald, unsupported, by a particle of evidence or any circumstance whatever, or even an allusion to any.

Notice prior to payment of the purchase money, will bind a party, as effectually as if he had received it before his purchase. 2 White and Tudor’s Eq. Cases, in 71 Law. Lib., top-paging, 77, 78, and 116.

This view' of the subject being sufficient to decide the case, we refrain from saying any thing in regard to the other points presented in argument.

The decree of the county court must be reversed and the cause remanded, with instruction to the circuit court for Allegany county, to pass a decree allowing the claim of the complainants, appointing a trustee for the sale of the land mentioned in the proceedings, so that the proceeds thereof may be applied to the discharge of said claim, so far as the proceeds may be requisite for that purpose, and also to the payment of the costs : provided the claim with the costs shall not be paid or brought into court, within a reasonable time, to be set forth in such decree. And this court will sign a decree in accordance with these principles.

Decree reversed and cause remanded.