Swan v. Moore , 14 La. Ann. 833 ( 1859 )

Land, J.

This is an hypothecary action, in which the plaintiff alleges, that on the 25th day of January, 1856, he obtained a judgment against one J. H. Cruse, for the sum of $931 38, and that on the 2d day of February, 1856, he caused his judgment to be duly recorded in the mortgage office of New Orleans. That on the 24th of July, 1854, the said J. H. Cruse, by public act of sale, conveyed and sold unto George Moore, the defendant, the undivided half of four certain lots of ground situate iu the Second District of said city ; and that although said act of sale was executed on the 24th of July, 1854, the same was never registered in the office of the Register of Conveyances in said city, until the 4th day of December, 1856, and more than ten months after the registry of his judgment. And that, by reason whereof, he has obtained-a lien and mortgage on said real estate, and that the same now stands hypothecated in law for the payment of his judgment, the interest thereon, and costs of suit.

The defendant’s answer, admitting the purchase as alleged, contains a special averment, that at the time the plaintiff pretends to have acquired the mortgage and lien, he was well aware that he, defendant, had become the bona fide purchaser and owner of said property, for a valuable consideration, and that it is in bad faith on the part of the plaintiff, to attempt to exorcise the lien claimed in his petition. The answer contains a further averment, that the non-registry of the act of sale was in consequence of the neglect of duty of the notary before whom it was passed, and calls in warranty the notary, and the sureties on his bond, and prays for judgment over against them, in solido, in the event of the plaintiff obtaining judgment against him.

Upon the issues thus presented by the pleadings, there was a judgment in favor of the plaintiff, and a judgment dismissing the call in warranty, from which the defendant has appealed.

Before considering the case on the merits, it may be observed that the reality aud good faith of the sale from Cruse to the defendant, are not put at issue by the pleadings, nor called in question upon the evidence.

For the purpose of proving the fact of knowledge alleged in the answer, the defendant propounded interrogatories on facts and articles to the plaintiff who answered the second interrogatory as follows : “ I have heard it said that Moore claimed this property; at what time I heard this, I do not recollect, bnt it was about the time that a case was pending between Johnson and Cruse, and the property was in the bauds of the Sheriff, so I understood, at the time I heard this report, I did not believe it. I have no recollection that I knew this previous to the 2d of February, 1856. I have no recollection that I was informed of this anterior to the month of February, 1856.”

This answer is ambiguous as to the date at which the plaintiff received notice of the defendant’s claim or title; but by reference to the suit of Johnson v. Cruse, mentioned in the answer, we find that suit was commenced on the 14th of January, 1854, and the property was in possession of the Sheriff, under a seizure, on the 8th of December, 1855, nearly two months prior to the registry of the plaintiff’s judgment, which was by confession subsequent to the seizure by the Sheriff; and we also find, by reference to the suit of the defendant, Moore, v. Hufty, Sheriff, that he had judicially claimed, and that the Sheriff had been enjoined from selling the property now in dispute, prior to the registry of the plaintiff’s judgment, on the ground of the defendant’s ownership of the property seized. And as the plaintiff has referred in his answer to the suit of Johnson v. Cruse, and the seizure of the Sheriff, as facts or circumstances fixing the date at which he heard it said that the property .was claimed by defendant, it is reasonable to presume, that he heard of the defendant’s claim prior to the registry of his judgment on the 2d of February, 1856. His want of recollection is not a negation of the fact, which is rendered reasonably certain by the circumstances to which he referred in his answer. His want of belief did not impair the effect of the notice which he received of the defendant’s title.

There are but two modes in which persons not present can acquire a knowledge of an unrecorded sale of real estate: first, by information from others of the fact, and secondly, by an examination or inspection of the act of sale itself. 'Whether the information is received from hearsay, or from inspection, the party may well be said to have a knowledge of the sale. Indeed, it is almost universally the case, that knowledge of an unrecorded title, or claim, is acquired from information, or hearsay, and if the plaintiff could free himself from the legal effects of notice, or knowledge of an unrecorded title, by saying, that he did not believe it, although he had heard it, then there would be but one mode by which his knowledge of the fact could be established, and that is, by evidence of his inspection of the act itself. This would be tantamount to holding that knowledge of the existence of a sale, not derived from the registry of the act, is without any legal effect. For a party who does not believe what he hears touching an unrecorded claim, or title to real estate, may decline to inspect the act of sale, and thus put himself beyond the reach of all notice of title, except that which results from the registry of the act itself. The plaintiff was informed of a fact which was true, and evidenced by a notarial act — but without any inquiry or investigation on his part, says, that he did not believe it. How, then, could notice of defendant’s title have been brought home to him, except by registry, as he declined to inspect the act of sale, if it be true that his incredulity freed him from the legal effect of his knowledge of title derived from other persons ?

It has been held, that actual knowledge of a prior unrecorded title, is equivalent to notice resulting from the registry of the act, from whatever source such knowledge may have been derived. Splane v. Mitcheltree, 2 An. 265. It is well settled, that the formality of recording is for the purpose of giving notice to individuals, and that if a party have knowledge of that of which it is the purpose of' the law to notify him, by causing an act or instrument to be recorded, the effect is the same, and he is as much bound by his knowledge, as if his information were derived from an inspection of the record. Planters’ Bank v. Allard, 8 N. S, 144; Rachal v. Normant, 6 R. 88; Robinett v. Compton, 2 An. 846. In the cases of Crear v. Sowles, 2 An. 598, and of Toulane v. Levinson, ibid 788, on which the plaintiff’s counsel relies as establishing a contrary doctrine, there was no proof in either case, that the creditor of the vendor had any knowledge or notice at the time he acquired his right of mortgage in the one case, by the registry of his judgment, or his right of privilege in the other, by the levy of his attachment, that the property of his debtor had been sold, and they are not, consequently, adverse authority to the cases cited. So true is this, that Chief Justice Eustis, who delivered the opinion of the court in the case of Toulane v. Levinson, and Judge Rost, who delivered the opinion in the case of Crear v. Sowles, concurred in the decision of the case of Splane v. Mitcheltree, which declared the doctrine of notice in relation to conveyances of real property to be a principle in the. jurisprudence of this State.

It is however contended, that the doctrine of notice does not apply to creditors. In the case of the Planters’ Bank v. Allard, 8 N. S., which is a leading case on the subject, the doctrine was fully considered, and it was declared to be a settled rule, that actual knowledge is equivalent to notice resulting from registry. And after reviewing the decisions of the court announcing the same doctrine, under the old Code, Judge Martin says : “ These last decisions in construction of the old Code have not escaped the attention of the Legislature, and the spirit of them lias been incorporated in Art. 2242 of the new Code.” In the case of Martinez v. Layton, 4 N. S. 368, referred to by Judge Martin, as a decision under the old Code, it had been expressly decided that the doctrine of notice applied to creditors.

Article 2242 of our present Code is in these words : “ Sales or exchanges of real property and slaves, by instruments made under private signature, are valid against bona fide purchasers and creditors, only from the day on which they are registered in the office of a notary, or from the time of the actual delivery of the thing sold or exchanged.”

This Article of the Code, so far as it establishes the doctrine of notice, was not repealed by the Act of 1855, “ relative to registry,” nor by the Act “ creating a Register of Conveyances for the Parish of Orleans,” because the repealing clause in each of said acts excepts what is contained in the Civil Code on the same subject-matter. See Acts 1885, pp. 335, 345.

If Judge Martin and his colleagues were right in the conclusion, that the Legislature had established the doctrine of notice by the enactment of Art. 2242 of the Code, then it follows, as a necessary consequence, that creditors arc as much bound by actual knowledge of a prior unrecorded title, as subsequent purchasers are,' — for so the Legislature has expressly declared, and by the force of its will, has put the question beyond the reach of opinion or argument. But if these learned Judges were in error, and Art. 2242 be repealed, it remains to consider whether there be any decision of this court against the doctrine, as applicable to creditors, and if not, whether the doctrine is well founded in principle. The cases of Crear v. Sowles, 2 An. 598, of Toulane v. Levinson, ibid 788, of Williams v. Hogan, 2 La. 125, of McManus v. Jewett, 6 La. 541, of Mary v. Lampré, 6 R. 314, and of Poydras v. Laurans, 6 An. 772, decisions cited against the doctrine, are but declaratory of our registry laws, as they are forrad in the statute books, the last ease deciding that possession is not evidence of a sale not recorded. In none of these cases were there allegations and proof that the creditor had actual knowledge of the vendee’s unrecorded title, before, or at the time he acquired his right of mortgage, or privilege. It is true that the dictum in the caso of Toulane v. Levinson is sufficiently strong and broad to expunge from our jurisprudence the whole doctrine of notice in regard to purchasers as well as creditors, and that the same dictum is reiterated in the case of Poydras v. Laurans, but this dictum was not necessary to the decision of either of these cases, and has not, therefore, the effect of a judicial decision, nor the force of authority. Indeed, one half of the doctrine announced by the dictum in the case of Toulane v. Levinson vms conceded, in the case of Poydras v. Laurans, to be against the decisions of this court.

The question under consideration is not, whether an unrecorded title is without effect as to third persons, for that is fully admitted, and our registry laws are so plain on the subject, that argument but obscures and clouds the text — but the question is, whether actual knowledge of an unrecorded title, on the part of a creditor, is equivalent to knowledge or notice resulting from the registry of the acts, for if this be so, then the act of sale is, in the eye of the law, a recorded title, in relation to the creditor having knowledge of its existence. As this question has not been decided in any of the cases referred to, under the Oode of 1825, or the legislation subsequent thereto, nor in any case which has come to our knowledge, and as the dictum of a Judge, or what is said in arguendo, has never been regarded as having the force and effect of a judicial decision, the question is, therefore, an open one, and has to be considered and decided on legal principles.

We find that creditors and purchasers are put on the same footing by our registry laws, whether contained in the Civil Oode, or in the Session Acts of the Legislature. We find that an unrecorded title is without effect as to purchasers, as well as creditors, and that a recorded title takes effect from the day of registry against creditors as well as purchasers, and that, consequently, the law has made no distinction between them as to the effect of notice, or knowledge, derived from the registry of an act of sale, or mortgage. Why should the courts make a difference between them, when the Legislature has made none? Cannot a creditor commit a fraud on the rights of a vendee, as well as a purchaser, and is not the former bound by the obligations of good faith, as well as the latter ? If a creditor witnesses an act of sale, and afterwards acquires from the vendor a special mortgage on the property sold, and attempts to enforce it by virtue of a prior registry, against the property in Jhe hands of the vendee, does he not thereby commit an act of fraud on the rights of the vendee ? If a creditor is present when an act of sale is passed, and afterwards obtains a confession of judgment from the vendor, and causes his judgment to be registered before the act of sale is recorded, and subjects the property to the payment of his judgment, does he not thereby perpetrate a fraud upon the rights of the vendee? If a creditor has actual knowledge of a sale, from whatever source derived, and afterwards goes to the vendor, and acquires a special mortgage on the property, or obtains a confession of judgment, and records the former, or registers the latter, before the act of sale is recorded, and claims a right of mortgage on the property, does he not like, wise commit an act of fraud on the rights of the vendee ? If the doctrine of notice is not applicable to the creditor, he may do any or all of these acts, which have been held to be fraudulent, and without effect, as to the vendee, in the case of a purchaser, who stands on the same footing with the creditor, in relation to the registry laws.

But, it may be said, that the want of good faith on the part of a creditor, in these instances, would prevent him from availing himself of the non-registry of the vendee’s title. If so, then the same reasons which have induced the court to apply the doctrine of notice to a purchaser, exist in full force against a creditor. For, if the creditor is in lad faith, what is it that constitutes his bad faith ? It is certainly his knowledge of the vendee’s unrecorded title, because if the mortgage were acquired without knowledge, or notice, it would be a legal right under the registry laws, which could be enforced in good faith. His knowledge, therefore, of the unrecorded sale necessarily constitutes his bad faith — which knowledge is all he could derive from the registry of the act, and which is the whole object of the law in requiring the act to be recorded, and he therefore stands with a purchaser upon the same grounds, in relation to the vendee, whether his knowledge be derived from registry, or from other sources, and the same law, and the same reasons which have induced the courts to apply the doctrine of notice to a purchaser, exist in full force against him.

The right to purchase property and to record the title, is not less absolute on the part of a purchaser, than the right on the part of the creditor to sue, and cause his judgment to be registered; and the former could with as much legal propriety urge his right to purchase, as a reason why the doctrine of notice should not be applied to him, as the latter could his right to sue, and to cause his judgment to be recorded; and therefore, no distinction can be made between them on this ground.

The maxim of our law, that the property of the debtor is the common pledge of his creditors, does not affect the question, because a sale in good faith is as valid and binding, under the registry laws, against creditors, as purchasers, and whenever notice, under these laws, is binding on purchasers, it is also made binding on creditors.

If, on the other hand, it be said that a creditor, with actual knowledge of an unrecorded title, may acquire a special mortgage, or obtain a confession of judgment, from the vendor, and by virtue of a prior registry, subject the property to the payment of his debt, the consequences of such a position would be these : although the Legislature has enacted a registry law which places creditors and purchasers on the same footing of equality, as to the formality of the registry of acts of sale and mortgage, and as to the effect of the notice resulting therefrom, and has, in plain and unambiguous language, declared that a registry of title as to purchasers, shall be valid as to creditors, yet the law of registry applicable to purchasers is different from the law of registry applicable to creditors; that purchasers are bound by their actual knowledge of title, from whatever source derived, and, consequently, bound by the obligations of good faith, but that creditors are not. The first of these consequences, is a disregard of the legislative will, which places creditors and purchasers on a footing of perfect equality as to the effect of notice resulting from registry. The second consequence is at war with the first element of jurisprudence, which is, that all men should live honestly. If it is dishonest for a purchaser, with knowledge of the vendee’s title, to defraud him by a subsequent purchase, it is equally dishonest for a creditor with knowledge to acquire and enforce a mortgage on property which he knows does not belong to his debtor.

Hence we conclude, that as the law has made no distinction between these two classes of persons, as to the character and effect of notice resulting' from registry, none can be made on principle; and that, if the doctrine is applicable to the one, it is applicable to the other.

It is, therefore, ordered, adjudged and decreed, that the judgment, as between plaintiff and defendant, be reversed; and it is now ordered, adjudged and decreed, that there be judgment in favor of defendant, with costs in both courts. And it is further ordered and decreed, that the judgment dismissing the call in warranty be affirmed with costs.