Daughaday v. Paine , 6 Minn. 443 ( 1861 )

By the Court —

Atwater, J.

— In Selby vs. Stanley et als., 4 Minn., 65, this Court recognized the doctrine of the vendor’s lien for the purchase money under certain limitations, and laid down the following as the correct rule on this subject, viz., “that whenever the vendor shall take any security for the purchase money upon the land sold, or upon any other land, or by pledge of chattels, or by the absolute or conditional obligation of a third person, or any other security than the personal obligation or promise of the vendee, such fact shall be deemed conclusive ot his intention to abandon his equitable lien, unless he retain it by express agreement.” A vendor taking security upon the land sold, does not, therefore, by that act, waive his equitable lien, provided he has expressly agreed with the purchaser that it shall be retained. Where such agreement has been made, the lien will attach to the property in the hands of the vendee, and all persons claiming under him, with notice of the agreement. The facts found by the Court below show that it was expressly agreed by and between the Plaintiff in Error, and Sarah E. Daughaday, to whom he conveyed the premises, that the amount of $1000 should be and remain a lien on the premises for that amount of purchase money, and that it was not intended to waive the same by taking the mortgage. As between the Plaintiff in Error and his vendee, Sarah E. Daughaday, there can be no doubt but that the vendor has retained his lien upon the property, and the only question is whether subsequent purchasers have bad such notice of this lien, that their rights in the premises must be postponed to those of the Plaintiff in Error.

The mortgage from Sarah E. Daughaday to the Plaintiff in Error was not filed for record at the time Goodrich mortgaged to Bennett. But the deed from Sarah E. to Mary E. Goodrich recited this mortgage for the purchase money, or at least the deed in terms was given subject to the mortgage. The Court below held that this reference in the deed to the mortgage of the Plaintiff in Error, was not constructive notice to Bennett and assigns of the existence of that mortgage, and that consequently the mortgage of the Defendant in Error took precedence of that given for the purchase money as a lien on the premises.

The first question presented on the facts here disclosed is, what estate passed to the grantee of Sarah E. Daughaday under the deed above mentioned? That deed could convey no greater interest than the grantor herself possessed, which was the legal estate subject to the equitable lien or right of the Plaintiff in Error to the premises, to the extent of one thousand dollars. Mary E. Goodrich therefore did not take the whole legal and equitable interest in the premises, nor did the deed from her grantor purport to convey the entire estate, but expressly excepted from the grant this equitable lien for the purchase money. And the same rule must of course apply to the grantee of Mary E. Goodrich. This principle was recognized in Greenleaf vs. Edes, 2 Minn., 264, and we think is applicable to all like cases of the transfer of real estate, where the recording acts have not given rights to subsequent purchasers not actually acquired from the grantor. The owner in fee of land, in conveying the same by deed, may limit or restrict the estate granted, in any manner he chooses (not repugnant to the grant intended), and the grantee will take only the estate as limited.

But although the Plaintiff in Error may have retained a vendor’s lien on these lots, he cannot enforce the same as against the mortgage to Bennett, unless the latter has had actual or constructive notice of the same. The Court has found he had no actual notice of the existence of the mortgage in favor of the Plaintiff’ in Error, and it remains to consider whether the recital of this mortgage in the deed from Sarah E. Daughaday to Mary E. Goodrich was such notice as should postpone the lien of the Respondent’s mortgage to that of the Plaintiff in Error. The reference to that mortgage in the deed to Mary E. Goodrich, is as follows, viz.: After the description of the lots, the instrument proceeds': “subject to a certain indenture of mortgage bearing even date herewith, made and executed by the party of the first part hereto, to Caleb O. Daughaday of the said town of Ripley, to secure the payment of the sum of $1000, parcel of the purchase money of the land above described, and interest thereon, payable, the said principal sum at or before the expiration of five years, and the said interest annually from the date of said mortgage,” and warranting and defending against all, “ except as against said mortgage above referred to.” The Court has found as a fact that Bennett “ had no actual notice or knowledge of the recital of said mortgage in the deed from said Sarah E. to said Mary E., but took the same in good faith, believing it to be a first lien on said premises.” And the ground of the decision of the Court below as we understand it, was not that the recital was not in terms sufficient to give notice of the mortgage, but that the mortgagee was not bound to take notice of the recital in the deed. If he was, then the finding that the mortgage was taken in “ good faith,” will not aid the Respondent, but he will be equally concluded as if the mortgage itself were on record.

Prom as careful an examination as I have been able to give to this question, I am of the opinion that a purchaser of real estate is bound by notice of a vendor’s lien, disclosed in the instruments forming his chain of title. Looking at the question as an original proposition, aside from authority, it seems contrary to reason and good sense that a party should be excused from knowing the contents, and the whole contents of his title deeds. The purchaser has possession of these title deeds (through the records) to all intents and purposes as fully as if they were delivered into his own hands. The law requires them to be recorded in full, and not merely certain portions, as names of parties, consideration or description. If this statement in the deed of the incumbrance existing on the premises, bad the effect to limit the estate in the hands of Mary E. Goodrich, so that she could not have held the entire estate free from the equity of the Plaintiff in Error, then it is difficult to see how the Defendant in Error stands in any better position than she does. For Bennett and his assigns had precisely the same notice both in manner and substance that Mrs. Goodrich had. It is admitted by - the Counsel for the Defendant in Error, that a as between the immediate parties to the deed the recital had the effect of placing Mrs. Goodrich in the precise position of her grantor, and she held the land-subject to the mortgage.” It is true Mrs. G. was not a purchaser for a valuable consideration, but that is not given as the reason why she is bound by the recital in the deed, but because (in the'language of counsel,) “this recital is no part of the deed; it is not a description or adjunct of the grantor, grantee, or thing granted.” This position we hold not tenable, as the recital is in the nature of an exception or limitation of the estate granted.

The point here raised is, not whether the mortgage of Bennett, having been first recorded, takes precedence of the unrecorded mortgage of Daughaday; for if there were no question of notice, there could be no .doubt under the statute as to priority ; but whether the recital in the deed of Mrs. Goodrich, of the mortgage to Plaintiff in Error, was constructive notice to Bennett and his assigns. And upon this point an examination of several of the authorities cited by the counsel 'for the Respondent,-shows that they are not applicable. The doctrine discussed in 4 Kent's Com., 169, 173, is that of the effect of prior registry, with or without notice, and not as to what constitutes notice. In 4 K&rd's Com., 460, it is stated that “ the general rule is, that all parties to a deed are bound by the recitals therein, and they operate as an estoppel, working on the interests in the land, if it be a deed of conveyance, and binding both parties and privies, in blood, in estate, and in law.” And see also 1 Greenleaf's Ev., sec. 23, and eases cited. In the reference to Dart on Vendors and Pwrohasers, 402, it is stated that “ notice of an unregistered security must, in order to affect a purchaser claiming under a registered instrument, be actual notice affecting him with fraud,” but the question bere is not as to actual but constructive notice from the record, wbicb if it exists is equivalent to actual notice.

In White vs. Moore, 1 Paige Ch. P. 551, it was held that “ a deed absolute on its face,' if intended only as a mortgage or security for the payment of money, whether accompanied by written defeasance or not, must be recorded as a mortgage in order to protect the holder against a subsequent Iona fide mortgagee or purchaser of the premises,” a principle which is not here applicable, as it is not contended that the deed to Mrs. Goodrich was intended as a mortgage. The same doctrine is stated in Grimstone vs. Carter, 3 Paige Ch. R. 421, and in Willard's Eq. Jur. 254, and 15 J. R., 555; but neither those cases, nor those of Jackson vs. Elston, 12 J. R., 452, and Jackson vs. Given, 8 John. 137, meet the point as to whether a recital in a deed is a notice of an unregistered mortgage.

In Dart on Vendors and Purchasers, 407, et seg., numerous cases are cited as to the extent of notice by way of recitals, and some of them go farther than is claimed in this case, in behalf of the Plaintiff in Error. It is there stated that “ in all cases where a purchaser cannot make out a title but by a deed which leads him to another fact, whether by description of the parties, recital, or otherwise, he will be deemed conusant thereof; for it was crassa negligenUa that he sought not after it,” citing 2 Binn., 466; 6 Binn., 119. And also, “ if a man agrees to purchase under limitations in a deed which makes it necessary upon that transaction, for him to look into that deed, and that deed contains recitals of judgments affecting the lands he had so agreed to purchase, he is bound by those j udgments, for he had a right to see the whole deed under which he purchased, and therefore must be taken to have seen the whole, and must consequently be presumed to have taken notice of everything contained in it, affecting his purchase ;” citing Morris vs. Vanderen, 1 Dall. Rep. 64-67. In Cuyler vs. Bradt, 2 Caines’ Cases in Error, 326, it was held that a conveyance, with a recital of the intent of a purchase, is a conveyance with notice, and the grantee takes, subject to trusts implied as well as expressed.” In Jackson vs. Neely, 10 John., 374, it was held that “where a deed, reciting a letter of attorney by virtue of which the conveyance was made, was duly deposited with the Clerk of Albany, according to the act of the 8th of January, 1794, it wa^ held to be sufficient notice of the power, by means of the recital, to a subsequent purchaser who was equally affected by it, as if the power itself bad been also deposited.” It is true that in Jackson vs. Bowen, 6 Cow. 141, it is stated that the case of. Jackson vs. Neely is virtually overruled, but not on a ground affecting the question here raised, the Court, in Jackson vs. Bowen holding, that the object of the deposit was to detect frauds and forgeries; whereas in the other case, the Court held the object was merely to give notice, which a record or registry would have done as well; and where such is the purpose it is not claimed that the decision in Jackson vs. Neely is incoi’rect.

In Murray vs. Ballou, 1 John. Ch. R. 566, it was held that' “ a purchaser of A, a trustee, is not chargeable with notice of -the trust, by means of the registry of a deed from H to B, reciting that A had never executed a declaration of the trust.” It will be observed that the deed containing the recital in that case, was not one in the regular chain of title from the trustee, and had it been, there is a strong intimation that the recital would have been good notice, the Chancellor remarking that “ this 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 clue was he to be directed to look into the deed from Heatly 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.” This is hardly less than saying that a purchaser is bound by recitals contained in deeds constituting his chain of title.

In Spence’s Egmtable Ju/risdicUon, 756, the doctrine is laid down that “ a purchaser — and, as before observed, a mortgagee is a purchaser pro tanto — who has actual notice of one instrument affecting the estates, has constructive notice of all other instruments to which an examination of the first could have led him, and if he do not examine into them, his conduct amounts to that degree of negligence which will charge him with all the consequences of notice. In all cases where a person cannot make out a title, but by a deed which leads to another fact, whether by description of the parties, recital, or otherwise, he will be deemed cognizant of it; for it was crassco negligentia that he sought not after it; and for the same reason, if a purchaser has notice of a deed, he is presumed to have notice of the whole contents of it.” The relevancy of this doctrine to the case at bar will be apparent, when it is considered that it is admitted that Bennett had notice of the deed to Mary E. Goodrich, but denies notice of the contents of the same, or at least the recital of the mortgage to the Plaintiff in Error. To the same effect is Adams- Equity, 326; and in Ooote on Mortgages, 377, it is also stated that if a party have notice of a deed, he ñas notice of all its contents. And in Story’s Equity Jm\, seo. 400, it is stated that “ an illustration of this doctrine of constructive notice is where the party has possession or knowledge of a deed under which he claims his title, and it recites another deed which shows a title in some other person, there the Court will presume him to have notice of the contents of the latter deed, and will not permit him to introduee evidence to disprove it; And, generally, it may be stated, as a rule on this subject, that when a purchaser cannot make out a title but by a deed which leads him to another fact, he shall be presumed to have knowledge of that fact. And see Jackson vs. Hoffman, 9 Cow. 271; Dunham vs. Dey, 15 John., 555; 6 B. Monroe, 67; Andrews vs. Wolcott, 16 Barb. 21; 1 Eden, 351; 2 Ves. J. 457; Sugden on Vendors and Pur., 1056; 2 Hare, 261.

The doctrine to be deduced from these authorities seems to be that whenever the instruments forming the purchaser’s chain of title disclose an incumbrance, he is equally bound by such notice as by the record of the instrument itself, creating or evidencing the incumbrance, or actual notice of the same as in case of vendor’s lien without mortgage. And the doc-. trine seems not only supported by the weight of authority and consonant with sound reason and good sense, but a different one would be likely to lead to inequitable results. If this recital may be disregarded, as not being a material part of the deed, (as is claimed), how often would embarrassing ' questions arise as to the materiality of phrases of limitation or exception in deeds, either as to the effect of the ■ terms used, or the manner and form in which they are introduced ? In Martin vs. Brown, 4 Minn., 382, it was held that the fact that a party gave only a quit claim deed, with a nominal consideration of one dollar, for valuable property, was a sufficient circumstance to put a purchaser on inquiry as to the vendor’s title. The consideration and form of the deed were in that case deemed material parts thereof, and though it did not appear that the Defendant had actual notice of these facts, he was held concluded by the record. And we think the authorities use none too strong an expression in declaring it to be crassa ñegligentia, where a purchaser takes title without an examination of the title deeds relating to the estate. In the case at bar the deed disclosed the mortgage to all intents and purposes, as fully as the record of the instrument itself could have done, and showed that the mortgage was not due, and no presumption in favor of payment could be entertained. The exercise of even the most ordinary degree oí prudence would have disclosed the lien of the Plaintiff in Error, to Bennett and his assignees. The Court has found that the assignees of Bennett had no actual notice of the existence of said mortgage to Daughaday, but relied upon an abstract of title to said premises, which did not exhibit the contents of said conveyances in the chain of title to "said premises; but this fact does not raise any equities in favor of the respondent calling for the interposition of the Court in his behalf, not even had it further appeared that such is the usual custom of the country, in transfers of real estate. The gross carelessness which here prevails with reference to such transfers, has become proverbial, and is the fruitful source of litigation, and should be sanctioned by courts of justice no further than may be absolutely required by the true construction of statutes relating, thereto. And instead of encouraging the practice of relying upon abstracts of title, made without reference to the . contents of recorded instruments, (as the counsel seems to think desirable) it should be regarded with extreme disfavor.

Entertaining these views of the effect of the recital of the mortgage to Plaintiff in Error in the deed from Sarah E. to Mary E. Goodrich, it, becomes unnecessary to examine the position of the counsel for Defendant in Error, with reference to the recording acts. If this recital be constructive notice of the mortgage, then Bennett and his assigns are not bona fide purchasers within the meaning of those acts, and consequently not protected by them, by virtue of a prior record. Those statutes do not purport, or attempt to define what constitutes notice, whether actual or constructive, but leave that question to be determined by the rules of law applicable to the case, independent of the statute.

The judgment below is reversed, and let judgment be entered in accordance with the prayer of the complaint.