Salisbury Savings Society v. Cutting ( 1882 )

Park, C. J.

TMs case has been argued before us as if it necessarily involved the question whether a deed given with covenants of warranty before the grantor acquires title to the land conveyed, is to prevail over a deed given, after the title is acquired by the grantox*, to a purchaser who takes it in good faith and with no knowledge of the previous deed and for value. If we were called upon to decide this question we should regard it as one of very serious difficulty, inasmuch as in sustaining the later deed we should have to dexiy the controlling application to the case of the well settled principles of estoppel, while in sustaining the prior deed we should have to violate the entire spirit of our registry systexn, which it is the policy, and we may say in every other case the unyielding policy, of the law to sustain.

But there are two points in the present ease, either of which we thixilc delivers it from the control of that question, and which will enable us to decide it upon its special facts.

1. It does not appear that the defendant was a purchaser for value. The judgment below was for the plaintiffs, and as the defendant has brought the proceeding in error, it is necessary that this fact should appear, expressly or by necessary implication, upon the record. All that is found is that “the greater portion” of the defendant’s claim accrued’after the deed was given to the plaixitiffs. It is clear therefore that, so far as the portion which accrued before is concerned, the defendaxit was not a purchaser for value, and that so far there is no error in the judgment. Row what is fouxrd with regard to the remainder of the defendant’s claim ? He sets up in the answer, and this part of his answer is found true, “that on the 5th day of December, 1874, said Cutting owed him $2,483, as evidenced by his promissory note for that axnount, dated at Ashley Falls, Massachusetts, December 1st, 1874 ”; and that “ on said 5th day of Decexnber, 1874, the said Cutting, to secure said note, xnortgaged to him ” the land in question. By turning to the deed, a copy of which is annexed to the finding, it appears that the mortgage to the defendant was executed at Salisbury in this state, the presumption being that it was sent to the defendant in the state of Massachusetts after it was recorded, and that he was not present at its executioxi; this point however not being important. Here then, in the defendaxit’s statement of his own case, the most that is averred is, that on the first day of December, 1874, the mortgagor gave him a note for the mortgage debt—but it does not appear that the debt had not all accrued before the note was given. The fact that a considerable part of it had accrued three years before makes it very probable that the rest accrued by occasional loans or advances, and that at the time the note was given no additional advance was made. At any rate it is clear that we can not assume, for the purpose of finding error in the record, that any money was then advanced, when no such fact appears, either upon the finding or upon the defendant’s answer. If, as we must infer, the defendant was not a purchaser for value, it is very clear, upon well settled principles, that he can not prevail in equity over the plaintiffs, who advanced the whole amount of their mortgage debt when they took their mortgage.

- 2. We think that upon the facts found the defendant was fairly put upon inquiry as to the plaintiffs’ mortgage, and does not stand before the court as a bond fide purchaser without notice. It is true that he avers in his answer “that the mortgage was taken by him in good faith and without any knowledge or notice on his part that there was any incumbrance on said land in favor of the Salisbury Savings Society or any other person; ” and that the committee has found this part of his answer true. But without such actual knowledge the facts may be such as to have made it his duty to inquire after such prior mortgage, and sufficient to charge him in law with notice of what on such inquiry he would have found. Let us see what these facts are. The defendant was the father-in-law of Cutting, the mortgagor, and while from this relation and his residence in the vicinity he would be likely to be better informed than most men with regard to his property and business, it appears that he was in fact, during all the time covered by these transactions, making him advances or loans of money, having, as we have seen, advanced him a considerable part of the $2,488 for which he finally took his note, before the plaintiffs took their mortgage. It is hardly possible that his pecuniary interest in Cutting’s prosperity should not have led him to inform himself, with his special opportunity as well as reason for asking the information of Cutting, as to the property transactions of the latter. He would thus have known of his contracting for the purchase of the lot in question, and of its small value, found to be only $200 at the time of the purchase ; of Cutting’s entering into possession, an indication of itself of his having acquired some kind of right; of his erection of a building thereon, which was found to be of the value of fourteen hundred dollars; of his having no means of his own for such an outlay and of the money necessarily having been procured as a loan; and it may be inferred from all the facts that he must have known that if he had procured such a loan it must have been on some security, and almost necessarily upon the property. How when, in these circumstances, he took his mortgage, as it is found, without making any inquiry of Cutting as to any prior incumbrance, it seems almost like an intentional avoidance of an inquiry, and as if he desired to take his chance for the securing of his accumulating debt on the property, taking what he could get and holding what he could hold.

But there is a further fact in this connection that deserves notice. The mortgage to the defendant refers for fuller particulars about the property to the probate records, giving the volume and page. These records, at the place referred to, show a petition of Cutting, dated July 16th, 1874, stating the contract of Coffing, (who had owned the property and who had since died,) dated January 8th, 1872, for the conveyance of the lot in question to him for the consideration of $200, and praying that Coffing’s administrators might be directed to give Mm a deed of the premises. The defendant may properly be held chargeable with notice of all that appears upon this record. He therefore knew that three years before his own mortgage was taken Cutting had a contract for a conveyance of the land in question, and consequently an equitable title; and that this equitable title he might have conveyed or incumbered. Indeed under a statute which, had then been in force many years, Cutting could have had his contract recorded and thus his equitable title made secure. It was the defendant’s duty to search the records and make sure that this equitable title, which for aught he knew had thus been put on record, had not been conveyed away or incumbered, and was especially his duty to make inquiry with regard to the matter of his son-in-law, who presumably would not have deceived him, especially in view of the fact that the latter had, immediately after taking the contract, entered into possession and expended fourteen hundred dollars in the erection of a building on the lot.

Upon all the facts of the case we can not regard the defendant as a purchaser either for value or without notice of the title of the plaintiffs.

"We do not find any error in the judgment complained of.

In this opinion the other judges concurred.

Note. The question which the court leaves undecided in the foregoing case—whether a deed given with covenants of title before the grantor has acquired any title to the laud conveyed, is to prevail over a later deed given, after the grantor has acquired title, to a purchaser who takes it in good faith and with no knowledge of the previous deed and for value—is of great interest to the profession and importance to the public. As the Chief Justice well remarks, if the later deed is sustained it violates the well settled principles of estoppel; if the prior one, the entire spirit of our registry system.

The weight of authority is in favor of the prior deed. There is a question made as to the precise mode in which that deed operates in drawing to itself the title, whether it be by the covenants which it contains and which estop the grantor and his privies in estate, or by the warranty operating as a bar to the later title; but the authorities generally treat the case as one of estoppel, and give the estoppel its usual force not only against the grantor but against his privies in estate.

The prevailing doctrine on the subject is thus summarized by Mr. Wash-burn in his work on Real Property, (hook 3, ch. 2, sec. 6, art. 50):—“ So where one conveys land with warranty, but without title, and afterwards acquires one, his first deed works an estoppel, and passes an estate to the grantee the instant the grantor acquires his title. And such title would enure to the benefit of the first grantee by estoppel, to the exclusion of a second grantee, to whom the grantor shall execute a deed after having acquired a title; though it has been insisted that such a construction does violence to the spirit of the system of registration of deeds, which ordinarily requires that in taking a title one should only go back to the time his grantor acquired it and see that no intermediate incumbrance or conveyance shall have been made by him.” And in the next paragraph he says:—“The doctrine here stated * * is probably too well settled to be now controverted; ” but he proceeds to state that it has been repeatedly called in question by recent commentators and in some judicial opinions.

That the doctrine here laid down is in direct conflict with the entire spirit of our registry system can hardly be questioned. It is the policy of the law that all conveyances of title to land shall appear upon the public records, and in such a place and manner that a searcher of titles would readily find his way to them. Now it would not be claimed for a moment that the most expert searcher is in fault for not discovering the record of a conveyance made by a person who had no title. The rule clearly is, and must be, that the searcher is expected to look only to the chain of title, beginning in the case of each particular grantor only with the conveyance to him, and inquiring for any later conveyance made or incumbrance created by him. This is all that could be required of the utmost diligence, for it is not merely the immediate grantor who may have given a aeed to some party before he acquired title, but any prior grantor may have done it, and its effect on the chain of title would be equally fatal, unless an adverse possession of fifteen years had established the title. There may have been twenty conveyances during that period, and any one of the grantors may have created an estoppel, while the grantee under the estoppel may have been in such a condition, from coverture, or infancy, or other cause, that an adverse possession may not have been able to settle the title within the ordinary period. It of course can not be required of a searcher of titles that he carry his investigation so far as to make sure that no such untraceable and really secret estoppel shall be anywhere lying in ambush to entrap the title.

In Calder v. Chapman, 52 Penn. St., 359, the question was whether, when the records showed an absolute conveyance to Calder from Chapman, it was necessary, in searching Calder’s title, to go back of the conveyance of Chapman to him, so as to take in any possible conveyance made by Calder before he acquired title. The court say (p. 362):—“ In searching for incumbrances or conveyances, the search against Calder would begin with his title from Chapman, and the search beyond would be against Chapman and those through whom he claimed; and a search against Calder during the same period would be considered an utter absurdity.” In Wood v. Farmere, 7 Watts, 385, Gibson, C. J., says:—“By the English principles of notice a purchaser is presumed to have known nothing which lay out of the course of his title; and I see nothing in our registry acts by which he is presumed to have known anything which lay not in it or was not connected with it.” And in M’ Lanahan v. Reeside, 9 Watts, 510, the same learned judge says that a creditor in search of a clew to the title, would not be bound to take notice of a conveyance not lying in the channel of the title, though actually recorded. In Loan & Trust Co. v. Maltby, 8 Paige, 361, it is said that a purchaser “ is not required to search for mortgages upon the premises purchased, as against his grantor, previous to the time such grantor obtained his title thereto.” And we have seen that Mr. Washburn, in his work on Real Property, says that “ the system of registration ordinarily requires that in taking a title one should only go back to the time his grantor acquired it, and see that no intermediate incumbrance or conveyance shall have been made by him.”

It may therefore be taken for granted that the registration system does not require the later grantee to search the records for any possible conveyance made by the grantor or any of his grantors before he or some of them acquired title, and that he is therefore in no fault for not knowing of the existence of the prior conveyance. The record of that conveyance can operate against his title only in a technical way, and upon ground which is utterly unsupported by equity or reason. That ground is this:—¡By the estoppel the defendant is not permitted to deny that the mortgagor had a title when he made the first conveyance. He stands therefore, so far as the defendant’s rights are concerned, as if he had a title at that time. If he had had a title when he made that conveyance, that conveyance would not have been good against the later grantee unless it was recorded, or he had actual notice of it. But it was recorded; so that the prior grantee’s title became complete try reason of his record, when that record was one that the later grantee was not bound to look for, and could not have found upon any reasonable amount of search. The prior grantee’s entire title, both by estoppel and by the record of this deed, rests upon mere fiction— a mere theory. To sustain his claim of title practical justice must be sacrificed to a mere artificial rule that has no foundation in reason. But law was intended to be a practical thing, the perfection of reason, doing justice among men and protecting substantial rights; breaking through, so far as possible, all mere matters of form for the sake of the substance.

The law has no policy which it cherishes more than the one that favors and upholds our registry system; and it would seem as if, in a conflict of that system with a mere theory, the whole current of professional opinion would be in favor of sustaining that system at the sacrifice of the theory. Indeed the theory was established as a part of the common law before the registry system was known, and therefore without reference to it. That system as the later established and as an outgrowth of the progress of society and the product of riper experience, should prevail over everything, no matter how embedded in the ancient law, that would defeat or embarrass its operation.

This view is strongly supported by occasional decisions, by dissenting opinions, and by the remarks of highly respectable commentators, in their consideration of this question. Thus Mr. Have, in his notes to Smith’s Leading Cases, (3 Smith Lead. Cases, 7th Am. Ed., 692, side p. 626.) protests vigorously against the prevailing doctrine, though basing his opinion in part on what he regards as its “ inconsistency with the principles of the common law on which it assumes to be founded.” But with regard to its conflict with the system of registration, he speaks as follows:—“But the strongest argument against permitting the conclusion of the covenants or recitals in a deed to extend beyond the person of the grantor to an estate which he does not hold at the time, is that it necessarily tends to give a vendee, who has been careless enough to buy what the vendor does not have to sell, a preference over subsequent purchasers who have expended tbeir money in good faith and without being guilty of negligence. Such a result seems to be at variance with the recording acts of this country, which are generally held not to require an examination of the record prior to the period at which the title conveyed vested in the vendor. To allow a title to pass by a conveyance, executed and recorded before it is acquired, may therefore be a surprise on subsequent purchasers, against which it is not in their power to guard, and is contrary to the equity which is the chief aim of the doctrine of estoppel as moulded by the liberality of modern times.” Mr. Rawle in his work on Covenants for Title, says, (p. 428, 4th ed.):—“This result, when applied to the case of a bond fide purchaser without notice, can not harmonize with the spirit of the registry acts in force in this country, and leads to the position, which can not be considered as tenable, that a purchaser must search the registry of deeds, not only from the time when his grantor acquired title, but also for a series of years before that time, in order to discover whether he had previously made any conveyance (though without title) to any other person; and if the property has passed through several hands, a similar search must be made with respect to every one through whose hands the title has thus passed. Such a doctrine, thus carried to its logical results, can not stand the test of experience; and it is not to be wondered at that, in recent cases decided since these suggestions were first made, courts have distinctly held that, as against a subsequent purchaser without notice, the after-acquired title does not enure to a prior grantee.” Wade (on the “Law of Notice,” § 214,) says:—“The purchaser is not charged with notice from the record of conveyances from his grantor prior to such grantor’s acquisition of title. In such case the subsequent purchaser would not be estopped by the record of a mortgage from his grantor, prior to the date of his grantor’s deed. To hold otherwise would be to impose upon the purchaser the duty of examining the records indefinitely.” Bigelow also, in his work on Estoppel, p. 331, contends that upon principle, aside from any consideration of the registry system, a former deed of warranty, before the grantor acquired title, does not hold the land against a subsequent purchaser without notice. In Way v. Arnold, 18 Geo., 181, it is held that, under modern conveyances, with or without warranty, title to land subsequently acquired does not pass to the grantee by estoppel, (sustaining the view of Mr. Hare, in his note to Smith’s Leading Cases, before referred to,) while upon the conflict of the opposite doctrine with the system of registration, the court says (p. 193):,—“ We are strongly inclined to the opinion that our registry acts, trader the modern form of conveyancing, are a virtual repeal of the doctrine of estoppel.” The question was recently before the Supreme Court of Rhode Island, in the case of McCuskee v. McEvey, 6 R. Isl., 528. The majority of the court sustain the title of the prior grantee by force of the estoppel, though Dtjrfee, J., who gives the opinion of the court, speaks of the doctrine as “ operating as a snare rather than as a protection to purchasers.” Potter, J., gives a dissenting opinion of great ability, which appears in 10 R. Isl., 606.

But, independently of the view we have been considering, there is another principle which, it would seem, can be properly applied to the case and which would bring us to the same result. It is a weil-settled rule that where a loss must fall upon one of two equally innocent parties it shall be borne by him whose act, however innocent, caused it. Now supposing the prior grantee, in taking a deed from a party who had no title, is to he regarded as equally free from negligence with the later grantee, who did his full duty in searching the records; yet it was the act of the former, in taking a conveyance in such an unusual manner, that caused the whole difficulty. Now does not the application of that well established rule put the loss upon the prior grantee rather than upon the later one ?

But this is upon the supposition that the prior grantee is not in fault. Much more should he bear the loss where he has been clearly guilty of negligence. If he took his deed without knowledge of the want of title in his grantor, he would seem to have been guilty of gross carelessness in not examining the public records. If he knew he had no title and was willing to take his chance for his acquiring one, the case becomes almost one of fraud upon a person who purchases in good faith and for value after a title has been acquired. It would seem to violate every principle of equity to allow a party guilty of either to prevail over the innocent and diligent later purchaser.

In Prince v. Case, 10 Conn., 381, Wixmams, C. J. in giving the opinion of the court, says:—“The policy of our law is that titles to real estate shall appear upon record, so that all may in this way be informed where the legal estate is. But were this new mode of conveyance to prevail, [the acquisition of an interest in land by means of a mere license to build upon it] incumbrances might frequently he found to exist against which no vigilance could guard, no diligence protect. Our records would be fallacious guides; and when we had gained all the information they could give we should remain in doubt as to the title. It is much better to leave those who had ventured to rely upon the word or honor of another to resort to that word or honor for redress [or in this case to the covenant for title] than to suffer a person who had resorted to the official register to be defeated by secret claims of this kind. The law can not prefer the claims of those who take no care of themselves to those who have faithfully used all legal diligence. If a loss is to be sustained it is more reasonable that he who has neglected the means the law put into his power should suffer, rather than he who has used those means.”

If a deed made when the grantor has no title is to he sustained by a mere [estoppel against a bom fide purchaser, who takes his title after the grantor [has acquired one, and with no knowledge, and really no means of knowledge, of the prior deed, it will be putting a premium upon negligence, and allowing an innocent party to suffer for the gross carelessness of another.