Fenno v. Sayre , 3 Ala. 458 ( 1842 )

COLLIER, C. J.

It was no ground of demurrer to the bill-, that the promissory note which the mortgage from Paulling to the complainants was intended to secure, is not made an exhibit. The mortgage itself is exhibited, in which the note is described and this was sufficient to authorise its admission as evidence.

■ In respect to the omission in the bill to offer to refund to' Fenno, or the persons authorised to receive it, the money paid by him to Paulling, it may be remarked, that the complainants do not admit the liability of the lands in controversy to reimburse his advances; but the bill is framed upon the hypothesis that their mortgage is not only prior in point of time, but is a lien, paramount to the claim of each of the defendants. If the complainants are not entitled to all the relief they ask, or can only obtain a decree of foreclosure and sale sub modo, their bill should not have been dismissed on demurrer, especially as it- contains a prayer for such relief as is consistent with the case stated. It was entirely competent at the hearing, for the Chancellor to have ascertained the rights of the respective defendants, and to have directed by his decree, that the proceeds of the land subject to sale, should be applied to the-payment of the claims of the litigants, according to their legal preference. The land then being liable to the payment of the incumbrances, whether they were complainants or defendants, it was’ not indispensable to the complainants right to go into equity, that they should assume a personal responsibility to a defendant whose lien was superior to their’s.

The allegation in the bill, that the complainants were proprietors of the note intended to be secured by Paulling, is quite sufficient. .It is entirely immaterial whether they hold, it under an indosement or not, if they are entitled, to the money which may be collected thereon, they were authorised to take a mortgage for its security, and may well maintain a bill for its foreclosure.

The equity of the bill, it seems to us, will not admit of serious question. It alleges the existence of a forfeited and unsatisfied mortgage.to secure a debt due to the complainants; states that other persons,, who are made defendants, set up claims to the premises, which it is insisted, are invalid; prays.that the adverse claims may be examined-, and the complainants mortgage foreclosed, &c. A mere statement of the case shows that the questions proposed to be litigáted, could only be settled in chancery. ,

. The interest acquired by Paulling, in virtue of his purchase from Glover, and payment of the. greater, part of the purchase money, might be transferred or mortgaged, so as to invest the mortgagee with all the right tq the land that Paulling had. But one claiming by purchase from a person who had nothing more than' a bond for title, will stand in the- same situation as his vendor did,.and.will be subject to the same equities in favor of the obligor or original vendor. The,want of'complete titles and the possession of the bond, though. its condition may not show whether full payment has been made, are enough to induce inquiry, and to prevent a divestiture of an equitable lien. We have not- had access to the case, of Frazier v. Center, 1 McC. Ch. Rep. 278, which has . been cited, to show, that the complainants mortgage is invalid in consequence of the imperfectness of the title of Paulling, but we apprehend it will be found to be strictly in harmony with the jaw, as we have stated it:

Subject to the lien of Glover for the payment of the purchase money due him', the complainants mortgage, if duly recorded, would be an available security, so long as Paulling retained the actual possession of the premises. Possession is a fact, which should induce one; to inqui’ie whether the possessor-has title, arict if he has incumbered it. It gives to one-proposing to purchase, sufficient information, to enable him to examine ‘understandingly into the state of the title; and whether, the purchaser prosecutes the inquiry or not, he is chargeable with notice. Sugden on Vend. 542; Peters v. Goodrich, 3 Conn. Rep. 146; Jackson, ex dem. Merrick v. Post, 15 Wend. Rep. 588; Sterns v. Arden, 1 Johns. Ch. Rep. 260, Harris, et al. v. Carter’s administrators; et al. 3 Stewart’s Rep. 233. But whether the registration of the complainants mortgage, would operate as constructive' notice to a purchaser from Fenno, after the relinquishment of possession by Paulling, is a question, by no means free from difficulty: and its solution must depend upon, the construction of our registry acts. By the second section of the act of 1823, “to legalize registering and recording certain ' deeds of conveyances of land, in this State, and for other purposes,” it is enacted, that “any deed, or conveyance'of lands, tenements, or. hereditaments, lying and being-in -this: State, which shall be made and executed after the passage of- this act, shall be void, and of no effect against a subsequent bona fide purchaser, or a mortgage for avaluable consideration, not having notice thereof, unless such deed or conveyance shall be acknowledged, or proved- and certified, and lodged, within six calender months after the time of signing, sealing and delivering the same, with the clerk of the county court in the county in which the saidJands, tenements, or hereditaments are situated, to be recorded by the said clerk: Provided, nevertheless, that such deed or conveyance, shall as between the parties and their heirs be valid and operative.” ■ The first section of the act of 1828, “ concerning the registration of deeds and patents,” is as follows: “All deeds recorded within six months ffrom the date of their execution, shall have force and be valid and operative between the parties thereto, and subsequent purchasers and creditors, and-all deeds recorded after the expiration of six months, shall be valid and operative, from the date of their registration, as to creditors and subsequent purchasers : Provided, that the same shall be valid at all times between the contracting parties.”

- Although the act of 1823, declares, that any deed or conveyance of lands, &c. shall be void against a subsequent bona fide purchaser or mortgagee, for a valuable consideration .without notice, unless the same shall be acknowledged or proved and recorded'pursuant to its provisions'; yet'it by no means follows that the registrations of every deed shall operate as-a constructive notice of its contents. The object of the registry' acts, was the-prevention of fraud; and in advancement of that end1 the letter has been often made to-yield to their spirit. Thus, although a deed is declared void,-unless it is duly registered, it has been always held, that notice is equivalent to registration, and that a purchaser or incumbrancér with notice, cannot' be permitted to allege -that a deed set up against him was not recorded. Sugden’s Vendors, 511, et post. And upon principle, it would seem that merely placing upon record, a deed from a person, not in possession, or who does not' appear from the records, to have had any connection with the title himself, will not operate as a notice to a subsequent purchaser. There would be nothing to direct a purchaser to such a deed, and he could only acquire a knowledge of its' contents by making a general examination of all deeds' that had been registered in the office. • The law certainly never contemplated that a purchaser should take upon himself such - a task, the performance of which in some 'counties would perhaps require a year of un-remitted labour. This precise question arose-and was considt eredin Ballou v. Murray, 1 Johns. Ch. Rep. 566. In that case, it appears that Winter, the trustee, had ■ sold the estate of his cestui que ■trustl Mrs. Green to Ballou (Mrs. Green herself claiming under-a deed from one.Heatley, for whose use, Winter had previously holden.) The deed from Winter, it-whs insisted, passed no title, because Ballou purchased with a notice of the -trust; addressing himself to the point', the Chancellor, proceeds.- It has been said by the counsel for the plaintiffs,that Ballou was chargeable with notice of the trust, by means of the registry of the deed from Heatley to Mrs. Green, which recitéd the declaration of trust executed by Winter. The deed containing- this recital, was. registered on the 9th of April, 1810, but I cannot perceive any justice in obliging Ballou to take notice of the contents of that deed. ,By what clew was he directed to look into the deed from Heatley to Mrs. Green? He was dealing with Winter, and supposing Winter’s trust to be otherwise totally unknown to him, he might as well be required to examine the contents of every deed on record. If there had been any deed on record to which Winter was a party, he would- have had a specific object and guide for inquiry; coeca regens filo vestigia. I have therefore not thought it reasonable- to charge Ballou with a knowledge of the existing, trust, by reason of the registry of Heatley’s deed.” The registry acts of New York, are doubtless intended to effect the same purpose as those of this State, and the difference in phraseology could not have influenced the decision of the cáse cited. We then consider it as a case in point, and sustained as it. is by sound reasoning, yield to it the force of authority.

According to the testimony of Glover, Paulling must have ceased to occupy the land about the close of the year 1837, or the beginning of 1838, and could not, consequently, have been in possession at the time of Lea’s purchase from Fenno, and at the time the latter executed the mortgage to Cook and Ivorne-gay. This being the case, it follows from what we have said,that the registry of the complainants mortgage, was no notice of its existence, to either Lea, or Cook & Kornegay. .

It is insisted for the defendants in. error, that the contract between Paulling and Fenno, being founded on a gaming consideration, was void in its inception; the latter acquired no title to the land, and that those who claim under him cannot occupy a more favorable position. By the act of 1807, it is enacted that “all promises, agreements, notes, bills, bonds or other contracts, judgments, mortgages or other securities, or other conveyances whatsoever, made, signed, given, granted, drawn or entered into, or executed by any person, or persons whatsoever, after the passing of this act, where the whole, or any part of the consideration of such promise, agreement, conveyance, or security, shall be for money or other valuable thing whatsoever, laid or betted at cards, dice, &c. or for reimbursing or repaying#ny. money knowingly Jent or advanced at the time or place of such play, &c. to any person or persons so gaming, &c. shall be utterly void and of no effect, to all intents and purposes whatsoever.” This enactment is very similar to, and was. doubtless suggested by a statute of Kentucky,-passed in 1798; under- which, several decisions, pertinent to the point we are considering have been made. In Jones &c. v. Sevier, 1 Litt. Rep. 50, it was held, where a person who has lost money at unlawful gaming, executes his note to a third person, for the amount,.and such person pays the winner an adequate consideration therefor, the note is not within the statute, and therefore valid; and a knowledge of the whole-transaction by the party to whom the note was given, will not vary the ease. See also Chambers v. Thompson’s administrator, 1 Monroe’s Rep. 115: So, in Wooldridge v. Cates, 2, J. J. Marshall's Rep. 222, a note was executed for money' lost at gaming, and assigne d to a person -ignorant of the transaction, for a valuable consideration. The assignee afterwards surrendered the note to the obligor and-took from him a new note, payable to-himself within twelve months: Held, that the new note was binding on the obligor, and that .he could not be. relieved-in-equity, from, its payment. -And in Chiles v. Coleman, 2 Bibb’s Rep. 300; it was decided, that a bond for the conveyance of land given on a gaming 'consideration, imposed no duty on the obligor; but if fora valuable consideration, it comes into the hands of an innocent purchaser, and the obligor conveys to him,, the consideration eannot.be questioned by the obligor-or his heirs-

Notwithstanding the generality of the terms employed in the ■ act qitéd, we have seen that a Court of Equity will not- avoid every contract which has its origin'in, a- gaming transaction, but there are 'cases in which relief wílí'ñot be afforded against a bona fide assignee or purchaser-, who has paid' a -valuable consideration.1' It-must be conceded, as-the proof would seem to, show, that Fenno’s contract with Paulling, by. which he acquired an-assignment of Glover’s bond, -was intended, to secure to him the. money he had won of Paulling, and.in that view, it .was void, and being so, did not transfer a right paramount to the complainants mortgage. Nor did the execution of a deed •by Glover,-give him a better title. - i-The complainants lien supposing it -n’ot to have-been registered, .could only have been divested by.'a: subsequent purchaser, or incumbrancer,dn food faith and for a valuable consideration, without notice. - The question then arises, can a bona fide purchaser for. a-valuable Consideration, from-Fenno, assert a right-against-the complai-pants. Fenno’s title, we have seen, was invalid, and the registry of the complainants mortgage was no • notice to one par-chasing the land, after Paulling relinquished the possession,-so that it must be wholly immaterial, whether that mortgage. W'as recorded before the contract between Paulling and Fenno was made, if the former had ceased to occupy the land -before Lea’s purchase or Cook & Kornegay’s-mortgage was executed.

Upon the hypothesis that Lea and Cook & Kornegay acquired their interests in the lands ingood.faith and for a valuable consideration; we think it clear that they cannot be prejudiced by the invalidity ofFenn.o’s title. Fenno was invested with a regular legal title, evidenced by the usual writings, was himself in possession, and there was no such registry of an in-cumbrance as was-constructive notice of.its existence. This being the case, one proposing to purchase, would very naturally conclude that his title was unquestionable, and that a purchaser under such circumstances, should be preferred to a secret incumbrancer. It has accordingly been holdenfthat a derivative purchaser -without notice, cannot be affected by .amo-tice to him under whom he claims; and if he purchase with notice, he -may "protect himself by the want of notice in his-immediate vendor: Lacy v. Wilson, 4 Munf. Rep. 313; Curtis v. Lunn, 6 ibid 42; Lindsey v. Rankin, 4 Bibb’s Rep. 482; McNitt v. Logan, Litt. Sel. Cases, 69; Demarest v. Wynkoop, 3 Johns. Ch. Rep. 147; Cressey v. Phelps, 2 Root’s Rep. 420; Sugden on Vendors, 531.

Sugden says, “although a deed be merely voluntary or fraudulent in its creation, and voidable by-a purchaser, viz ,: (would become void by a person purchasing the estate,} yet-it may become good by matter, ex post facto, as if a "man make a feoffment by covin,, or without any valuable consideration, and then the first feoffor enter and make a feoffment for a valuable consideration ; the feoffee of the first feoffee shall hold the lands, and not the feoffee of the first feoffor: for although the estate of the first feoffee, was in its creation, covinous-or voluntary, and therefore voidable, yet when he enfeoffed a person for valuable consideration, such person shall be preferred before the last.” Sugden on Vendors, 471.

Chancellor Kent, in Bumpass v. Plainer, 1 Johns. Ch. Rep. 212, thus exemplifies the principle, “ where A, gave a usurious note to B, who sold it to C, for a valuable consideration, without notice'of the usury, and A took up the note and gave a bond to O’for the amount, it was held good.” On the same principle he says, “ a purchaser without notice from a fraudulent purchaser, is not affected by the fraud.” See Cuthbert v. Haley, 8 T. Rep. 390; Coleman v. Cocke, 6 Rand. Rep. 618; Sweet v. Southcote, 2 Bro. Ch. Rep. 66; Lowther v. Carlton, 2 Atk. 139, 242; Jackson v. Henry, 10 Johns. Rep. 185; Garland v. Rives, 4 Rand. Rep. 282 ; Hagthorp, et ux. et al. v. Hook’s admr’s, 1 Gill & Johns. Rep. 270; Durell v. Haley, 1 Paige’s Rep. 492; Vermonet v. Delaire,2 Dess. Rep. 323; Jackson v. Anderson, 4 Wend. Rep. 474.

So it has been held, that chancery will not take the legal title from an innocent purchaser for a valuable consideration, to give it to one who has only an equitable estate. Benzien v. Lenoir, 1 Caro. L. Repo. 508; Dennison v. Robbinett, 2 H. & Johns. Rep. 55. In Frost v. Beekman, 1 Johns. C.h. Rep. 300, it was said to be “ an established rule in equity, to ■ give no assistance. against a purchaser for a valuable consideration without notice:” see also Wallwyn v. Lee, 9 Ves. Rep. 24. And in Whittick v. Kane, 1 Paige’s Rep. 202, it was adjudged that a bona fide purchaser without notice, who had. actually paid the.purchase money, could not be divested of .the title to: the premises, by showing, that although.the-deed under which his vendor claimed, was absolute on its face, yet it was intended as a mortgage. - These’ citations will suffice to show that a'purchase in good faith and upon valuable consideration, cannot be defeated; if the vendor had the legal title, by proof ©f an older, title outstanding in a third person.

.Itwas insisted by the plaintiffs in error, that it was not pér-missible for the complainants to.adduce evidence to prove that the contract between Paujling and Fenno, was tainted with gaming; that Fenno being called on to disclose the entire transaction, his answer was conclusive, and could not be gainsay-ed. To sustain this argument, the act of- 1812, is relied on.. That statute, so far as-pertinent, is as follows: “The Courts of Equity shall have jurisdiction in all cases of gambling consider ration, so far as to sustain a bill for discovery; or to enjoin judgments at law.” This statute does .not confer -upon our .Courts, of Chancery, the entire-jurisdiction .they possess, in cases of-gaming contracts; independent of legislation upon the subject, they may grant relief in such cases, upon a proper showing being made; Lyon v. Respass, 1 Litt. Rep. 135. But the obvious design of the act, was to increase the facilities for the loser of money, at an unlawful game, to avoid its payment. Previous to its passage, the winner could not be compelled to discover, in answer to a bill in equity, that a contract, the subject of litigation, was founded on a gaming consideration, when an affirmative response would subject him to a penalty, or a criminal prosecution: Story’s Eq. Plead. 466, ’7. To take from the winner, the right to refuse to answer, was one object of the statute. Anterior to the act, a party against whom a judgment was recovered, upon a contract, obnoxious to the law against gaming, was not entitled to go into equity, without showing some excuse for the failure to avail himself of a legal defence; to open the door of chancery, in such cases, although the .opportunity of defending, at law, had been neglected, was the only addi-. tional end proposed by the statute.

The present, is not a bill for discovery, technicallyso called* as the plaintiffs in error have supposed; but it is a bill to fore-' close a mortgage, and to adjust the superiority of the claims of the complainants and some of the defendants who 'Set up an interest in the same property. In this view of the case, it was clearly allowable to adduce proof either to countradict or sus-; tain the answer of Fenno.

It was objected, at the argument, that the answer of Lea, is not responsive, to the bill, so far as it states a purchase by him1 in good faith, and on a valuable consideration, and being put. in issue by a general replication, it should be supported by proof. In the-stating part of their .bill, the complainants say, “that-they have been informed, that one Columbus W. Lea, ' claims some interest in some part of the said land. They will not allege, that: the said Columbus W- Lea received the same-on any usurious or gaming consideration; but, inasmuch as-the said Fenno’s transactions are characterised with usury and gaming; -they will propose interrogatories to' him in regard to thé same.” Further, “ they state to your honor, the said Ben-Glover* Wm. K. Paulling, George W. Fenno, Cook & Korne-gay, and Columbus-W. Lea, all acted with full knowledge -of your orators rights; that your orators caused their mortgage to be recorded in the county of Perry,' before any 'of the defendants rights attached:” upon this statement, interrogatories were proposed to Lea, as follows, “ that the said Fenno and Lea may • set forth their contract in regard to said lands, or any part thereof, when the same took place, the amount-of money paid,, or agreed to be paid by said Lea, whether any note or mortgage was executed by said Lea; the amount, date a fid time of payment of the same; whether part of the consideration was on any usurious or gaming consideration, and what — and that they may fully set forth every fact and circumstance in regard to the same.” :

■ It has been often held, that where an answer is responsive to ' the bill, and within the discovery sought, it is legal evidence in all cases. ’ Woodcock v. Bennet, 1 Cow. Rep. 711; Johnson v. Pearson, Dev. Eq. Rep. 364; Hagthorp v. Hook’s admr’s, 1 G. & Johns. Rep. 270; Stafford v. Bryan, 3 Wend. Rep. 532; Hart v. Ten Eyck, 2 Johns. Ch. Rep. 92; Clark v. Yan Reimsdyk, 9 Cranch’s Rep. 153. The correctness of this rule is not' d'isputéd, but its application is denied as it respects the answer' of Lea, because as it is said the stating par't-of the bill does not require him to disclose how, and upon what consideration he became the proprietor of a part of the land embraced by the • complainants mortgage, although interrogatories are addressed to him calculated to elicit such a disclosure. It is well settled that the interrogating part of the bill must be foundéd on what precedes it, and that if there is nothing in the prior part of the bill to warrant a particular interrogatory the defendant is hot compellable to answer it. But although the defendant is not bound to answer an interrogatory which does not grow out of the antecedent matter stated, or charged in the bill; yet if he does answer it, and the answer is replied to, the matter of the interrogatory is deemed to be putin issue, and the informality is cured. 1 Smith’s Chancery, 84; Story’s Eq. Plead 33; Mechanic’s Bank v. Levy, 3 Paige’s Rep. 606. The question then is, are the interrogatories proposed to Lea, warranted by the preceding part of the bill, so as to make his answer to them evidence. A variety of questions it is said may be founded on a single charge in the bill, if they are relevant to it. Thus, if there is a general charge, that money has been paid as the consideration of a contract, that, general charge will: entitle the-plaintiff to put all questions -upon it, which are material to, make out that it was paid, how, when, where, by whom, on- what account, in what sums, &c. and it is not necessary to load the bill by adding to the general charge; that it was paid, all the circumstances in order to justify-an interrogatory as to the circumstances. And if a bill is filed against an executor for an account of the personal estate of the-testator, upon a single charge, that, he has proved ’the will, -every, inquiry may be founded, which may be necessary to ascertain the amount of the estate, its value, the disposition .made of it, the situation of any part remaining undisposed of, the debts of the testator, and any other circumstances leading to the account required. Story’s Eq. Plead. 34 and cases there cited; Mechanic’s Bank v. Levy, 3 Paige’s Rep. 606. If the law be as we have stated it, (and it is well sustained by authority) the interrogatories proposed to Lea, were clearly authorised by the stating part of the bill, which required from him a disclosure of the nature of his. claim, how, when and under what circumstances he acquired it. His answer then; so far .as it alleges that he was a bona fide purchaser for a valuable consideration, without notice of the complainants equity, is responsive to the bill, and evidence of these facts, until disproved by overbalancing testimony. A replication, according to the English practice, does not destroy the effect of an answer as evidence, so far as it is responsive to the bill: but.is intended merely to put in issue the facts stated in the answer, which are considered as irresponsive allegations.

The reservation of a greater rate of interest than eight per cent, upon the loan by Cook & Kornegay to Fenno, does not make their mortgage void as against the complainants. By-the act of 1834, it is enacted, that where a higher rate of interest than. eight per. cent, shall be reserved by any contract for the loan of any money, wares, &c. the principal sum of money, or the value of the wares, &e. shall be recoverable, and the interest alone shall be forfeited.

There is then, no pretence for saying that Cook & Kor-negay are not bona.fide incumbrancers, in equity, at least to the extent to which the .act cited, recognizes their contract-as valid. . Besides, usury is an objection to a contract, personal to the party undertaking to pay it,-or those who stand .in his. place as his representatives. Jackson v. Henry, 10 Johns. Rep. 195; Edwards v. Dick, 4 B. & Ald. Rep. 212; Cook & Kornegay v. Dyer, at the present term. See French v. Shotwell, 20 Johns. Rep. 668.

In respect to the money and- property paid by Fenno to Paul-ling, it is. unnecessaiy to consider whether- if the ¡complainants were to subject the land to the payment of their demand, Fen-no could recover of Paulling the amount of his advances; if he purchased without notice of the complainants.lien, equity would not divest the title he had acquired, without a reimbui'sement of what he had paid in good faith, in order to obtain’ it. Fen-no’s claim for indemnity would not rest upon contract; but upon the broad basis of equity and' moral justice. ■ His equity would be equal to that,,of the complainants, and having a legal ’ advantage, his lien for money and property actually advanced would be preferred to their’s.

If however, the money paid by Lea, Upon the footing-of his pufchase and the loan made by Cook & Kornegay, amount to a larger sum than the money, &c. advanced -by Fenno, these must go in satisfaction of such advance, and-extiuguish his right to be paid any thing from the proceeds-beyond what .he has - already received: leaving the rights of Lea and Cook & Kor-negy to be 'settled according to the -principles we have- laid down. We have not though! it necessary particularly to consider, whether the demand of the complainants- was sufficiently established,-the proof to that point being entirely satisfactory to show the indebtedness of Paulling to them.

- It results from what we have said, that the Chancellor erred in adjudging that the mortgage of the complainants was entitled-to be satisfied, in preference to that of Cook & Kornegay, and that the sale to Lea, was invalid as against the complainants.’ But a final decree cannot be hei'e rendered, for the want of a master’s report, showing the amount of money and-property paid by Fenno to Paulling, or his order, the sum :lent by Cook & Kornegay to Fenno, the payments thereon, and amount now. due. That-this cause maybe detennined according to the principles of this opinion, the decree of the Court of .Chancery is reversed, and the cause remanded.