Lamont v. . Cheshire , 65 N.Y. 30 ( 1875 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The question to be decided in this cause concerns the true construction of the one hundred and thirty-second section of the Code, as it stood in the year 1859. This section then provided that, "in an action affecting the title to real property, the plaintiff, at the time of filing the complaint, or at any time afterward, or whenever a warrant of attachment under chapter 4 of title 7, part second of this Code, shall be issued, or at any time afterward, the plaintiff, if the same be intended to affect real estate, may file with the clerk of each county in which the property is situated, a notice of the pendency of the action, containing the names of the parties, the object of the action and the description of the property in that county affected thereby. * * * From the time of filing only shall the pendency of the action be constructive notice to a purchaser or incumbrancer of the property affected thereby, and every person whose conveyance or incumbrance is subsequently executed or subsequentlyrecorded shall be deemed a subsequent purchaser or incumbrancer, and shall be bound by all proceedings taken after filing of such notice, to the same extent as if he were made a party to the action."

The attachments under which the plaintiff claims title were levied and the lis pendens filed before the deed executed by John S. Harp to Cheshire, one of the defendants, and under whom Martin, the other defendant, claims, was recorded. The question is thus directly presented as to the meaning of the provision in the section of the Code above cited, that a person whose conveyance is recorded subsequent to the filing of a lispendens shall be deemed a "subsequent purchaser orincumbrancer."

The plaintiff contends that the effect of this clause is, that if a purchaser has acquired a title regular in all respects except that his conveyance is not recorded, a creditor with full knowledge of his title may commence an action by attachment, file a notice of lis pendens, and thus obtain a lien superior to the title of such purchaser, and that accordingly a sale to effectuate the attachment proceedings would destroy and cut off the unrecorded conveyance.

This is certainly an extraordinary proposition in the law of real property, and contrary to the analogies of that law. Our law has hitherto been careful to preserve equitable liens against legal owners, having knowledge of the equities; to prefer an unrecorded deed or mortgage to a subsequently docketed judgment, and generally to uphold every existing lien or title in good faith, though irregular in point of form, against a mere creditor of one holding subject to the equitable lien or other imperfect title. The plaintiff should plainly be held to establish his position, so different in its character from the usual legal theories, by clear and manifest proof of the legislative will.

For a clear and comprehensive view of this highly important question, it is necessary to consider the nature of a notice of the pendency of an action, and the office which it is designed to fulfill. Its function is to carry out the well known legal maxim,pendente lite, nihil innovetur. It was found to be necessary to the administration of justice that the decision of a court of equity in a suit should be binding not only on the litigant parties, but on those who derive title from them pendente lite, whether with notice of the suit or not. It is simply a rule of law to give effect to the rights ultimately established by the decree. (Bishop of Winchester v. Paine, 11 Ves., 194.) The theory of a lis pendens was much discussed in the recent case of Bellamy v. Sabine (1 De Gex Jones, 566). It is there said that the correct doctrine is, that the law does not allow to litigant parties to give to others, pending the litigation, rights to the property in dispute, so as to prejudice the opposite party. Another form of statement is, that where a litigation is pending between a plaintiff and a defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court shall be binding not only on the litigating parties, but also on those who derive titles under them by alienations made pending the suit. If this were not so, there could be no certainty that the litigation would ever come to an end. The rule largely has its roots in public policy, and does not rest, as is sometimes supposed, on the equitable doctrines of notice binding on the conscience. The doctrine is not peculiar to courts of equity. In the old real actions, the judgment bound the lands, notwithstanding any alienation by the defendant pendente lite, and it cannot be claimed that this is on any other ground than that which has been already stated. Were it not for the doctrine in question, the plaintiff would be liable in every case to be defeated by the defendant's alienating before the judgment or decree, and would be driven to commence his proceedings de novo, subject again to be defeated by a similar course of proceeding. (Story on Eq. Jur., §§ 405-908, and note 5 to last section; Murray v. Lylburn, 2 Johns. Ch., 441;Gaskell v. Durdin, 2 Ball. Beatty, 167; Hayden v.Bucklin, 9 Paige, 513.)

The rules of the English equity courts on this point are fully recognized in the jurisprudence of this State. (Murray v.Lylburn, supra; Hayden v. Bucklin, supra.)

The Laws of 1823 (p. 213, § 11) recognized this doctrine and simply regulated it by providing that the filing of a bill should not be constructive notice unless the complainant should file a notice with the clerk of the county in which the land is situated. The same provision was found, in substance, in the Revised Statutes.

There are no expressions in the Code which can be supposed to have changed the rules of equity on this subject, except in mere matters of form, until we reach the clause now under consideration.

It has been seen, in the course of this discussion, that the theory of a lis pendens is that there must be no innovation in the proceedings so as to prejudice the rights of the plaintiff. It is simply a rule to give effect to the rights ultimately established by the decree. Applying this doctrine to the present case, it would be impossible to claim that a lis pendens could give a creditor under an attachment a lien superior to the title of a purchaser under an unrecorded conveyance. The statute distinctly provides that a person whose conveyance is executed or recorded subsequent to the filing of a notice shall be deemed a subsequent purchaser, and bound by the proceedings to the sameextent as if he were a party to the action. It is necessary to ascertain, therefore, what would have been the effect if the defendants had been made parties to the action. Had the plaintiff made the defendants parties to the action, his attachment proceedings would, of course, have been nugatory. As soon as the whole case had been disclosed it would have appeared that he was making a claim against a person who was in no respect liable to him, and his complaint would have been dismissed. How can he, under the statute, have any greater claims by omitting him? The words "to the same extent as if he were a party to the action" cannot be omitted in construction.

The scope of the clause is quite apparent. The case of conveyances executed after the filing of the notice comes within the ordinary rules of equity. What is new in the one hundred and thirty-second section of the Code is the provision in respect to a conveyance executed prior to and recordedsubsequent to the filing of the notice. The clause as to this matter was introduced mainly to provide for a class of controversies where a title inferior in right and subordinate to that of the plaintiff had not been put on record, but had accrued prior to the commencement of the action or of the filing of the notice. Under the former rules, it would be necessary to make the owner of such a title a party, as his right did not come to him during the pendency of the action. It might frequently be difficult for the plaintiff to ascertain the fact that such a sale had taken place. The section of the Code, as modified, makes all such inquiry unnecessary. While it also applies to cases of rights superior to those of the plaintiff, it only affects them in such a way as they would be influenced if the owners were parties to the action. Thus, if a second mortgagee should desire to foreclose, his omission to make the holder of a prior unrecorded mortgage a party, would not enable him, with full knowledge of the facts, to gain a superior title. On the other hand, if there should be a purchaser in good faith, he would, in all probability, acquire a perfect title, and the holder of the prior unrecorded mortgage would be remitted to an equitable claim upon the purchase-money as against any person holding a position subordinate to his own. Each case would thus be governed by its own peculiar circumstances. There is but a single underlying principle. This is, that the holder of the unrecorded instrument is affected to the same extent "as if he were a party to the action," and had not appeared or made any defense.

A single instance, showing the correctness of this rule, will suffice. Suppose that a second mortgage is unrecorded, and the holder of the first and recorded mortgage commences to foreclose, after the execution of such second mortgage, at the same time filing a regular notice of the pendency of the action. The second mortgagee is accidentally or purposely omitted as a party. Has he no rights, whatever, or may he appear before a referee appointed to ascertain the rights of parties to surplus moneys and make his claim? It would be absurd to say that he cannot. If he can, he is precisely in the position that he would have been in, had he been made a party to the action and had not answered or taken other steps in the cause.

These views are not opposed to the case of Stern v.O'Connell (35 N.Y., 104). In that case, the lis pendens was filed before the mortgage in controversy was given. The present case was therefore not under consideration. The remarks of HUNT, J., on pages 109 and 110, must be confined to the case then before the court.

In Hovey v. Hill (3 Lans., 167) it was held that an assignee of a mortgage is an incumbrancer within the Code (§ 132) and taking by an assignment executed after, or recorded after, the filing of a lis pendens, in an action to set aside the conveyance of the mortgaged premises to the mortgagor as fraudulent against the creditors of his grantor, was bound by the judgment therein recovered. This decision was put upon the ground that the assignee takes, subject to the equities affecting the mortgagee, and the evidence showed that the mortgage was fraudulent. This case can be sustained on the ground that the holder of the unrecorded assignment was placed by the court exactly in the position that he would have been in had he been a party to the action, and had the case gone against him, or had he made no defense to a prima facie case made by the plaintiff.

The result is, in the case at bar, that the plaintiffs in the D. Harp and Dennison judgments could gain no title as against Cheshire, and their attachments were no lien.

The plaintiff Lamont stood in their position. The evidence shows that he was aware of Cheshire's rights, as it appears by undisputed testimony that Cheshire was all the time in possession, claiming as owner. The judge was bound to take this testimony into account when he was asked by the defendants to direct a verdict in their favor, as well as when he was called on by the plaintiff either to grant a nonsuit to him, or to direct a verdict in his favor.

But, even supposing that the present plaintiff took the legal title under the sheriff's deed, there is another fatal objection to his recovery in the present action. His title was subordinate in equity to the claim of the defendants. Having constructive notice of the defendant's equitable rights by his possession under claim of title, as has been already shown, if he chose to purchase the land, he took it subject to whatever rights it might turn out that the defendants were entitled to in equity. It is scarcely necessary to cite authorities for a proposition so consonant with justice. The rule of construction, that a statute is not to be interpreted so as to work a fraud, has been regularly followed in the chancery courts. A few references will be sufficient.

Under the English enrollment act (27 Henry VIII, c. 26), it is provided that no lands or hereditaments shall pass from one person to another whereby any estate of inheritance or freeholdshall be made or take effect in any person or persons by reason of any bargain or sale, except it be enrolled as provided in the act. It was held by Lord Chancellor HARDWICKE, in LeNeve v. Le Neve (cited in 4 Cruise's Dig., 456), that, notwithstanding the words that the bargain "shall not be made or take effect," that if there be a prior bargainee whose deed is not enrolled, and a second whose deed is properly enrolled, if this last had notice of the prior deed, the prior shall prevail in equity. So under the registration acts. (2 and 3 Anne, c. 4; 6 id., c., 35; 7 id., c. 20; 8 George II, c. 6.) These provide a system of registration for the counties of York and Middlesex, and enact that no unregistered deed shall be adjudged fraudulentand void against any subsequent purchaser for a valuable consideration, unless the deed be registered, etc. The English courts have uniformly held, notwithstanding the generality of the words of these acts, that an unregistered deed is to be preferred, in equity, to a subsequent registered deed taken by a subsequent purchaser with notice. (Forbes v. Deniston, 4 Bro. Parl. Cas., 189; Blades v. Blades, 1 Eq. Ab., 358; 3 Atkyns, 654; Cheval v. Nichols, 1 Strange, 664; Le Neve v. LeNeve, Ambler, 436; Whitbread v. Boulnois, 1 You. Coll. [Exch.], 303.)

Under these acts, the view taken has been, that though the legal estate passed to the subsequent purchaser, yet he took it charged with an equity in favor of the holder of the prior unregistered conveyance.

It is not intended in this discussion to concede that the correct view is that in such cases the legal title passes to the subsequent purchaser under the registered conveyance, but only to maintain that, if that be so, he must take it charged with the equitable rights of the holder of the prior unregistered conveyance. The better view undoubtedly is, that the holder of the registered conveyance, with notice, obtains no titlewhatever as against the purchaser under the unregistered conveyance. The whole subject is well summed up by Mr Hare, in his notes to Le Neve v. Le Neve (2 Lead. Cas. in Eq., 183, 184 [3d Am. ed.]). He says: "It is held, in general, in this country that a conveyance, duly registered, passes no title whatever when taken with a knowledge of the existence of a prior unregistered conveyance." (Citing cases.) This construction is sustained by the wording of some of these acts, which declare unregistered conveyances void as against subsequent bona fide purchasers, or purchasers without actual notice, and thus sanction the inference that they will be good when notice ormala fides is shown to have existed. * * * But it seems well settled that the construction is the same where no such qualifying words are introduced, and where it is declared that unregistered conveyances shall be void as against purchasers generally, or against all persons who are not parties to the conveyance. (Gilbert v. Burgott, 10 J.R., 457;Van-Rensselaer v. Clark, 17 Wend., 25.) Thus, under the recording acts of Pennsylvania, an unrecorded mortgage is deprived of all operation as a lien on the premises mortgaged, without any saving of the rights of the mortgagee as against parties actingmala fide or with notice. But it has, notwithstanding, been decided that notice of such a mortgage will supply the want of registry, and bind a subsequent purchaser. (Stroud v.Lockart, 4 Dallas, 153; Jaques v. Weeks, 7 Watts, 261; TheManufac. and Mechanics' Bank v. The Bank of Penn., 7 W. S., 335; Solmes v. McCullough, 5 Barr, 473.) And in some of the cases this principle of construction has been held to be one of such general application that notice of an unregistered deed to a creditor, before judgment, will prevent the lien of the judgment from attaching, even where such deeds are made absolutely void as against creditors."

In whatever light the act of the plaintiff in the present action be regarded, whether it be considered that he obtained no title at all as against the defendant Cheshire, or whether he obtained the legal title by force of the attachment proceedings, the practical result will be the same. If the defendant has the equitable estate, he can set it up as a defence to an action of ejectment brought under the provisions of the Code. (Crary v.Goodman, 12 N.Y., 266; Thurman v. Anderson, 30 Barb., 621;Dodge v. Wellman, 1 Abb. Ct. App. Dec., 512; S.C., 43 How. Pr., 427; Carpenter v. Ottley, 2 Lans., 451; Phillips v.Gorham, 17 N.Y., 270.)

As the defendant Cheshire entered upon the premises in litigation under his unrecorded conveyance, his possession, and that of his tenant, Martin, was sufficient notice to the plaintiff of his equitable rights. If the plaintiff acquired the legal title, he was, by reason of the constructive notice derived from possession, converted into a trustee for the equitable owner. (Whitbread v. Boulnois, supra; Tuttle v. Jackson, 6 Wend., 213; De Ruyter v. Trustees of St. Peters, 2 Barb. Ch., 556; Grimstone v. Carter, 3 Paige, 421; Williamson v.Brown, 15 N.Y. 354; Landes v. Brant, 10 How. [U.S.], 348; 2 Lead. Cas. in Eq., 194, 195, and cases cited [3d Am. ed.];Flagg v. Mann, 2 Sumner, 554.) These cases show that the possession of the defendants was sufficient to put the plaintiff upon inquiry as to the nature and extent of their rights. He is accordingly presumed to have made the inquiry and to have ascertained the defendant's rights, or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser. He is accordingly chargeable with knowledge of all that he could have learned by an exact and diligent inquiry.

There is a more technical ground on which the disposition of this cause might be placed. It is an elementary rule that a plaintiff in ejectment can only recover on the strength of his own title, and not upon the weakness of that of his adversary. The source of the plaintiff's title in this action is the sheriff's deed. That is limited to a conveyance of the estate of which John S. Harp was seized or possessed on the 31st day of January, 1869. There was no dispute upon the point that John S. Harp had conveyed his estate to the defendant Cheshire before that day. Accordingly, he was seized of no estate on that day, and the sheriff's deed conveyed nothing to the plaintiff. While recognizing this as a sufficient ground for dismissing the complaint, I desire also to rest the decision of the cause upon the other grounds discussed in this opinion, and principally considered on the argument.

There was no error in the disposition of this cause in the court below, and its judgment must be affirmed.

All concur.

Order affirmed, and judgment absolute ordered against plaintiff.