Lowry v. Tew

The Chancellor.

Upon the facts stated in this bill it .must be presumed that Lowry, the complainant, was in the open and notorious possession of the mortgaged premises, by his tenant, at the time the proceedings to foreclose the mortgage were'instituted. I think also, upon the face of this bill, it appears that the verbal agreement for the sale of the premises had been so far consummated, by a part performance, at the time of the institution of the foreclosure suit, as to give to Lowry an equitable right to redeem the premises from the "mortgage as well as from the sheriff’s sale. For he had not only taken possession of the premises, in conformity to the •terms of the agreement, but had actually rented them fora year upon the faith of that verbal contract of purchase. So that if the vendor had resiled from his contract, instead of giving the deed in conformity with tile terms of that contract, it was not in his power to place the purchaser in the same situation in which he was previous to the taking possession under the agreement.

The principle upon which courts of equity hold that a part ■performance of a paroi agreement is sufficient to take a case out of the statute of frauds, is that, a party who has permitted another to perform acts on the faitli of an agreement, shall not be allowed"to insist that the agreement is invalid, because it was not in writing, and that he is entitled to treat those acts as if the agreement, in compliance with which they were performed, had not been made. In other words, upon the ground of fraud in refusing to execute the paroi agreement after a part performance thereof by the other party, and where he cannot be placed in the same situation that he was in before such part performance by him. Taking possession under a paroi agreement, and in compliance with the provisions of such agreement, accompanied with other acts which cannot be recalled so as to place the party taking possession in the same situation that he was in before, has always been held to take such agreement out of the operation of the statute of frauds. (See 2 Story’s Eq. § 761, and the cases there referred to ; Keats v. Rector, 1 Pike’s Ark. Rep. 419.)

It is true a party who has gone into possession of premises under an agreement to purchase the same, is at law a tenant at will to the holder of the legal title. But if he is in under a written agreement, made by the owner, to sell and convey the premises to him, or under a paroi agreement which has been so far consummated as to entitle him to a specific performance, he is in equity considered as the owner of that title for which he contracted, and which the vendor is able to give him. And if that is an equity of redemption, he has the same claim to redeem, except as against bona fide purchasers without notice of his equitable rights, as if the equity of redemption had been conveyed” to him at the time his equitable rights accrued under the contract. This complainant, therefore, should have been made a party to the foreclosure suit, in order to cut off his equity of redemption in the mortgaged premises. And if the complainants in the foreclosure suit, at the time of the commencement of such suit, had either actual or constructive notice of his rights, and if the defendant Tew, at the time of his purchase of the premises under the decree, had such notice of those rights, the equity of redemption was not foreclosed as against Lowry.

The deed from Sherman to Lowry, and which was long subsequent to the commencement of the foreclosure suit, was sufficient to account for the possession of the latter at the time of the master’s sale. Such possession at that time0, therefore, was not constructive notice to the purchaser of the complainant’s equity. But it is a general rule of equity pleading that «a defendant who claims protection as abona fide purchaser without notice, must deny such notice, although it is net distinctly charged in the bill. A plea or answer, therefore, denying such notice, appears tobe necessary in order to protect the defendant as a bona fide purchaser at the master’s sale.

It is alleged by the defendant’s counsel that the complainant was present at the master’s sale, and concealed from t.he bidders at such sale the fact that he claimed that the foreclosure was invalid, as against him, because he had an equitable right to the premises, subject to the incumbrances thereon, and was in possession, by his tenant, at the time the foreclosure suit was commenced. That fact, however, if it is a fact, does .not appear in the bill. But if set up and insisted on in the defendant’s answer, and established by the proofs, in connection with the fact that Lowry subsequently claimed and received the surplus moneys as a judgment creditor of the owner of the equity of redemption, I should not hesitate to declare such silence a fraud upon the bidders at the master’s sale, and intended to increase such surplus for his own benefit; and that he had no equitable claim to relief as against the purchaser at such sale.

This is a question, however, which does not properly arise upon the demurrer, but must be brought before the court by answer to the bill. The order of the vice chancellor overruling the demurrer was therefore right, and must be affirmed with costs.

It appears by the bill that the defendant had given a mortgage to The North American Trust and Banking Company for a part of the amount due them out of"the proceeds of the sale. And I am inclined to think they should have-been made parties to this bill, to redeem the premises on the ground that the foreclosure and sale were invalid as against him. But es that objection was neither specified in the demurrer, nor urged ore tenus upon the argument before the vice chancellor it cannot benefit the defendant on this appeal.