The Chancellor :
I do not deem it necessary to express an opinion upon many of the questions which have been so fully and well argued at the bar by counsel, because in the view I have taken of the case, there is one objection to the title of the complainants to relief, which is altogether insuperable.
The question submitted by the agreement filed on the 22d inst., is, whether the alleged equitable lien of the complainants on the lands of the late 'John R. Dali can be maintained as against the defendant, McAttee, the purchaser of those lands ? and for the purpose of raising that question, several facts have been agreed upon by the parties, and reference made to certain papers filed in the cause, which are to be taken as evidence, and have effect according to their true import and operation.
By the agreement it appears, that Mr. William Schley was, on the 13th of January, 1845, appointed by the decree of this court, trustee to receive and invest under its directions, the funds arising under the will of the late John McKim, jr., and that John R. Dali was surety in his bond as trustee. That on or after the period of his appointment, and prior to the date of the judgments under which the defendant, McAttee, purchased, Schley, as trustee, had received large amounts of the trust money, as specified in the complainant’s bill, and that subsequently thereto, and prior to the date of said judgments, Schley agreed with Dali, to lend him $12,000, part of said trust fund, and did some time in the year 1845, advance the sum of $6,000, part of said sum of $12,000, and agreed with Dali to apply the other $6,000 to the payment of the judgment of one Jacob Albert, against said Dali, or as may be shown by the correspondence between Dali and Schley, filed in the cause, and which it was agreed should be considered as if regularly proved under a commission, and that Dali, some time in the year 1845, executed a mortgage to Schley, upon the lands now [260]*260claimed by McAttee, to secure the payment of the aforesaid sum of $12,000, which mortgage never was recorded, or reported to the Chancellor for his approval, but was subsequently, on or about the 1st of January, 1846, returned by said Schley to Dali, and by him destroyed.
It was also agreed, that a schedule of judgments againstDall, prior to those under which the defendant McAttee purchased, filed as exhibit No. 1, should be received as evidence, by which it appeared that the incumbrances subject to which the purchase was made, amounted to nearly sixty thousand dollars, being about the value of the lands, as appraised by the sheriff’s appraisers on the 7th of September, 1847, the sale being made by the sheriff on the 11th of November of that year, for $500, subject to those incumbrances.
The agreement further stipulated, that for the purpose of presenting the question, whether the alleged equitable lien of the complainants could be enforced against McAttee, the purchaser, the matters of fact set forth in the answer of the latter, should be considered as if regularly proved, and that a paper filed and marked exhibit No. 2, should also be considered, as if proved under a commission. This paper, which is the sheriff’s return to the writs offieri facias, under which McAttee purchased the lands, shows the payment of the purchase money by him, and by the certificate of the crier appended to the return, it appears, that the property sold for the sum of $500, subject to all prior claims and judgments, and that McAttee, who was present in person at the sale, heard' the crier give notice that the property would be sold, subject as aforesaid.
It was also agreed, that the answer of McAttee presents the question, whether he, as a bona fide purchaser, without notice of the alleged equitable lien of the complainants, would be bound by said lien, and if so considered, the Chancellor should be of opinion, that the said McAttee would be relieved from responsibility to the complainants, and should be further of opinion, that his answer does not present the case of a bona fide purchaser without notice, then, the said answer may be amended, if, in the opinion of the Chancellor, the said McAttee, prior [261]*261to the agreement, would, under the rules of the court, have been entitled to leave to amend.
The parties further agreed, that the admission on the part of the complainant, in reference to the answer of McAttee, and the admission on the part of the defendant, in regard to exhibit No. 2, and the certificate of the crier thereto attached, should not preclude the complainants from contending before the Chancellor, that said exhibit and certificate is evidence of notice to the defendant, of their alleged equitable claim; nor, on the other hand, deprive the defendant McAttee, of the right of insisting that they do not give him such notice. It was also agreed that the cestui que trusts in this case are married women, and that the complainant Gill was duly appointed and qualified as trustee, by giving bond, as alleged in the bill, and that the authority of Schley as trustee was revoked, as in the bill is likewise stated.
A portion of the argument has turned upon the frame of the answer of McAttee, it being insisted upon the one side, that it does, and upon the other that it does not, place him in the attitude and clothe him with the rights of a bona fide purchaser without notice, and, perhaps, in view of the authorities which have been referred to, and especially of what was said by the Court of Appeals in Baynard vs. Norris et al. 5 Gill, 481, 482, it would be difficult to support this answer, as presenting that defence in the form in which it must appear to be available.
It may be, however, that the agreement in this case removes the objection to the form of the answer, it being therein stipulated, that the answer presents the question, whether he, (McAttee,) as a bona fide purchaser without notice of the alleged equitable lien of the complainants, is bound by said lien, or whether the land so purchased by him, would be subject to said lien — the qualification in the subsequent part of the agreement having reference rather to the question, whether the exhibit No. 2 and the certificate attached to it furnish evidence of notice in fact or not, than to the question, whether the answer itself, consistently with the rules of equity pleading, places the defendant in an attitude to rely upon that defence.
[262]*262I do not, however, propose to lay any stress upon this view of the agreement, because in another part of it, the question is submitted, whether the answer does present the case of a bona fide purchaser without notice.
One thing is very clear, that the complainants cannot have a decree, unless they can show themselves entitled to an equitable lien upon the lands purchased by the defendant at the sheriff’s sale, and which, upon principles of equity, they may set up and maintain against him, and in order to this, they must make out by satisfactory proofs, a certain, distinct and consummated contract between Schley and Dali for such a lien. In the case of Alexander et al. vs. Ghiselin et al., 5 Gill, at page 182, the Court of Appeals repeat what had been repeatedly said before, “that courts of equity have properly required that every agreement shall be clearly and explicitly established before they will lend their aid to. enforce it.”
Free access — add to your briefcase to read the full text and ask questions with AI
The Chancellor :
I do not deem it necessary to express an opinion upon many of the questions which have been so fully and well argued at the bar by counsel, because in the view I have taken of the case, there is one objection to the title of the complainants to relief, which is altogether insuperable.
The question submitted by the agreement filed on the 22d inst., is, whether the alleged equitable lien of the complainants on the lands of the late 'John R. Dali can be maintained as against the defendant, McAttee, the purchaser of those lands ? and for the purpose of raising that question, several facts have been agreed upon by the parties, and reference made to certain papers filed in the cause, which are to be taken as evidence, and have effect according to their true import and operation.
By the agreement it appears, that Mr. William Schley was, on the 13th of January, 1845, appointed by the decree of this court, trustee to receive and invest under its directions, the funds arising under the will of the late John McKim, jr., and that John R. Dali was surety in his bond as trustee. That on or after the period of his appointment, and prior to the date of the judgments under which the defendant, McAttee, purchased, Schley, as trustee, had received large amounts of the trust money, as specified in the complainant’s bill, and that subsequently thereto, and prior to the date of said judgments, Schley agreed with Dali, to lend him $12,000, part of said trust fund, and did some time in the year 1845, advance the sum of $6,000, part of said sum of $12,000, and agreed with Dali to apply the other $6,000 to the payment of the judgment of one Jacob Albert, against said Dali, or as may be shown by the correspondence between Dali and Schley, filed in the cause, and which it was agreed should be considered as if regularly proved under a commission, and that Dali, some time in the year 1845, executed a mortgage to Schley, upon the lands now [260]*260claimed by McAttee, to secure the payment of the aforesaid sum of $12,000, which mortgage never was recorded, or reported to the Chancellor for his approval, but was subsequently, on or about the 1st of January, 1846, returned by said Schley to Dali, and by him destroyed.
It was also agreed, that a schedule of judgments againstDall, prior to those under which the defendant McAttee purchased, filed as exhibit No. 1, should be received as evidence, by which it appeared that the incumbrances subject to which the purchase was made, amounted to nearly sixty thousand dollars, being about the value of the lands, as appraised by the sheriff’s appraisers on the 7th of September, 1847, the sale being made by the sheriff on the 11th of November of that year, for $500, subject to those incumbrances.
The agreement further stipulated, that for the purpose of presenting the question, whether the alleged equitable lien of the complainants could be enforced against McAttee, the purchaser, the matters of fact set forth in the answer of the latter, should be considered as if regularly proved, and that a paper filed and marked exhibit No. 2, should also be considered, as if proved under a commission. This paper, which is the sheriff’s return to the writs offieri facias, under which McAttee purchased the lands, shows the payment of the purchase money by him, and by the certificate of the crier appended to the return, it appears, that the property sold for the sum of $500, subject to all prior claims and judgments, and that McAttee, who was present in person at the sale, heard' the crier give notice that the property would be sold, subject as aforesaid.
It was also agreed, that the answer of McAttee presents the question, whether he, as a bona fide purchaser, without notice of the alleged equitable lien of the complainants, would be bound by said lien, and if so considered, the Chancellor should be of opinion, that the said McAttee would be relieved from responsibility to the complainants, and should be further of opinion, that his answer does not present the case of a bona fide purchaser without notice, then, the said answer may be amended, if, in the opinion of the Chancellor, the said McAttee, prior [261]*261to the agreement, would, under the rules of the court, have been entitled to leave to amend.
The parties further agreed, that the admission on the part of the complainant, in reference to the answer of McAttee, and the admission on the part of the defendant, in regard to exhibit No. 2, and the certificate of the crier thereto attached, should not preclude the complainants from contending before the Chancellor, that said exhibit and certificate is evidence of notice to the defendant, of their alleged equitable claim; nor, on the other hand, deprive the defendant McAttee, of the right of insisting that they do not give him such notice. It was also agreed that the cestui que trusts in this case are married women, and that the complainant Gill was duly appointed and qualified as trustee, by giving bond, as alleged in the bill, and that the authority of Schley as trustee was revoked, as in the bill is likewise stated.
A portion of the argument has turned upon the frame of the answer of McAttee, it being insisted upon the one side, that it does, and upon the other that it does not, place him in the attitude and clothe him with the rights of a bona fide purchaser without notice, and, perhaps, in view of the authorities which have been referred to, and especially of what was said by the Court of Appeals in Baynard vs. Norris et al. 5 Gill, 481, 482, it would be difficult to support this answer, as presenting that defence in the form in which it must appear to be available.
It may be, however, that the agreement in this case removes the objection to the form of the answer, it being therein stipulated, that the answer presents the question, whether he, (McAttee,) as a bona fide purchaser without notice of the alleged equitable lien of the complainants, is bound by said lien, or whether the land so purchased by him, would be subject to said lien — the qualification in the subsequent part of the agreement having reference rather to the question, whether the exhibit No. 2 and the certificate attached to it furnish evidence of notice in fact or not, than to the question, whether the answer itself, consistently with the rules of equity pleading, places the defendant in an attitude to rely upon that defence.
[262]*262I do not, however, propose to lay any stress upon this view of the agreement, because in another part of it, the question is submitted, whether the answer does present the case of a bona fide purchaser without notice.
One thing is very clear, that the complainants cannot have a decree, unless they can show themselves entitled to an equitable lien upon the lands purchased by the defendant at the sheriff’s sale, and which, upon principles of equity, they may set up and maintain against him, and in order to this, they must make out by satisfactory proofs, a certain, distinct and consummated contract between Schley and Dali for such a lien. In the case of Alexander et al. vs. Ghiselin et al., 5 Gill, at page 182, the Court of Appeals repeat what had been repeatedly said before, “that courts of equity have properly required that every agreement shall be clearly and explicitly established before they will lend their aid to. enforce it.”
The agreement in this case, if it can be made out at all, must be found in the correspondence between Schley and Dali, which commenced on the 13th of December, 1844, and terminated on the 13th of December, 1845; and having read that correspondence with great attention, I do not find in it that clear and explicit evidence of a contract for a mortgage, which a court of equity should, in my opinion, set up, to the prejudice of creditors or purchasers. The first letter in the correspondence, is from Mr. Schley to Mr. Dali, under date of the 13th of December, 1844, in which the latter is informed, that the parties interested in the fund then paid in, and thereafter to be received, are anxious that the writer should become trustee for the purpose of investing it, and that he had consented to do so upon certain conditions; and further informing him, (Dali,) that if the arrangement was made, he (Dali) might count on a loan of $30,000, to be secured as therein mentioned, for five years at least, or perhaps for fifteen, if desired. The arrangement proposed by this letter not having been perfected, and having been subsequently abandoned, it cannot, in my judgment, have any material influence upon the decision of the cause.
The next is from Dali to Schley, dated the 22d of the same [263]*263month and year, in which, after making some objection to giving personal security in addition to the mortgage, he says, if required to mortgage his whole landed estate, he will confine himself to 15 or $16,000.
The succeeding letter is also from Dali to Schley, dated the 7th of February, 1845, in which, after speaking of some private pecuniary ‘transactions between them, he uses language from which it may be inferred, that the negotiation in regard to the loan had failed, or was likely to fail. On the 24th of the same month and year, Dali again wrote Schley. In this, he makes first a statement of a transaction he had with Mr. Stonebraker, to whom he had given a mortgage, and then referring to an acceptance which Schley was under for him for $6000, to become due on the 27th, he expresses a wish that Schley would pay it out of the money he was to get from the trust estate, and then adds — “this draft and $6000 I owe Mr. Albert, makes $12,000 I expect to get from this source. If, however, I cannot succeed through you in getting it, I would then prefer you not to pay my draft for $6000. But, if that loan can be effected, I will then give you a mortgage on 772 acres of land for the $12,000, and be quite easy hereafter. If this, however, cannot be done, I will retire the $6000 draft and make such arrangements as I can to meet my engagements here. Your paying this draft on the 27th instant, I shall view as an accomplishment of my wishes without putting you to the trouble of writing expressly for that purpose, and so soon as notified, will hold myself ready to forward the mortgage as above.”
The next letter is also from Dali to Schley, dated the 2d of April, 1845, in which he says — “In relation to McKim’s affairs, it is entirely beyond my desire to embarrass your movements, and do not feel any uneasiness about the responsibility. I am not at all anxious to cancel the bond, provided I get the money agreed upon; so that if you can compass my draft for $6000 in thirty days, and can provide for Albert’s judgment when due, at the furthest, say in December, it will answer my purpose, and probably suit you as well, so that you can do as you please.” From this letter it is quite obvious, that Schley [264]*264had not paid the draft for $6000 at its maturity, or even at the date of the letter, and that difficulties, the nature of which the correspondence does not explain, had arisen, from which it was supposed Dali might he uneasy on account of his responsibility as surety in Schley’s bond as trustee.
Then follows a letter from Dali to Schley, dated the 23d of May, 1845, in which he acknowledges the receipt of three letters, from Schley to him, the last dated the 22d instant, (which letters, however, are not filed.)
In this letter, Mr. Dali states, “that in this last letter from Schley he received his check for $6000, which he should send to Baltimore for collection. He then proceeds as follows : “In your letter enclosing this check, you observe, that you are endeavoring to get the parties interested to consent to the extension of the loan for five years, and think they will so agree. I sincerely hope you will be able to succeed in this effort, for as I have always considered this loan as a permanent one, I fear it would be inconvenient to return the money so soon.” In relation to the remainder for Albert, I desire you so to arrange as will be most convenient to yourself. If Albert is paid his $6000 by the 5th of December ensuing, it is all he can ask for; but if paid before, I suppose it will be more agreeable to him. So soon as you can arrange this latter, I shall be ready to execute the mortgage as agreed upon.”
This letter shows, conclusively, that no certain definite contract had then been made. The time for which the money was to be loaned had not been agreed upon, but was a subject of negotiation between Schley and the parties interested.
The next letter, bearing date the 2d of September, 1845, is from Schley to Dali: in it he expresses his desire to close the transaction in relation to the loan of $12,000, so as to make that sum due him from the first of July of that year, and he suggests how the calculation shall be made for that purpose, and asks to be informed how much is due to Mr. Albert, so that the difference to be paid by Dali, in satisfaction of Albert’s judgment may be ascertained; and then specifies, particularly, the terms and conditions upon which this loan is to be made.
[265]*265In the reply of Mr. Dali to this letter, under date the 9th of the same month and year, he furnishes the calculations suggested by Mr. Schley, showing that, calculating interest to the 20th of the month, there would be required from the writer, the sum of $66 29 to pay the judgment of Albert, the balance to be furnished by Schley ; and, that when the judgment should be so paid, there would be due from Dali to Schley, as of the 1st of July, 1845, the precise sum of $12,000. He also states in this letter, that he has no objection to the provisions of the mortgage mentioned by Schley, though he does object to the introduction of some other provisions.
The next letter is from Schley to Dali, dated the 23d of October, 1845, in which he says — “I go to Annapolis to-morrow, and shall return on the then ensuing Saturday, &c. As soon as I return I will pay Mr. Albert the amount of his judgment, and will forward you his receipt, so that you may have it entered satisfied. If he approves the deed, I will forward that also, and you will please have it recorded, and send me by mail a certified copy under the clerk’s seal of office, so that I may file it in chancery. At the same time, I shall need his certificate that there are no liens on the property covered by the deed of trust.”
The next letter in the series, is from Dali to Schley, dated the 27th of October, 1845, in which he acknowledges the receipt of Schley’s letter to him of the 23d, and another letter written from Annapolis. (This letter is not filed.) I do not deem it necessary to make long quotations from this last letter from Dali, but the conclusion is clear, from a perusal of it, that Schley, in his letter from Annapolis, had made propositions which Dali would not accede to, and that these propositions were made at the instance, and upon the suggestion, of the parties beneficially interested in the money.
This letter from Dali, after explaining the situation of the writer’s landed property, proceeds to say — “I hope this will satisfy your friends, and show that you have stated nothing but what is fully carried out in the mortgage. You must not be exorbitant in your demands of security, and I cannot give any [266]*266more. Indeed I would prefer to cancel the whole matter than give another cent’s security. It is enough in all conscience, and I can give no more than I have already. The terms shall be adhered to by me, so far as possible, and I, at present, see nothing to make me doubt of a strict compliance on my part. Should you think proper to confide the papers to my care, to have them recorded, I will send you the necessary certificate of the clerk. In the meantime, I hope you will send me Mr. Albert’s receipt that all is right, for I prefer that, and the recording of the mortgage, should go together at least.”
That the contract was not complete when this letter was written, is very apparent. Terms had been proposed with which Mr. Dali would not comply, preferring even the cancellation of the entire arrangement.
The last letter is dated the 13th of December, 1845, and is from Schley to Dali. In it, he acknowledges the receipt of a letter from Dali to him, which is not filed, but in which it is manifest from the letter of Schley, Mr. Dali proposed to see him in person, and then after some matters which are not deemed material, he says, “If the object of your visit is to have the whole arrangement cancelled, I shall be very willing to accede' to such a course, being heartily desirous to resign the appointment, and which the Chancellor has informally told me he would accept. As soon as I had closed the loan to you, I intended to apply to him to be released. The bond you executed to me and the mortgage are still in my possession, and if the arrangement is cancelled, I am prepared to surrender them to you.”
The statement of facts which has been already referred to, shows that the mortgage was on or about the 1st of January, 1846, returned by Schley to Dali, and by the latter destroyed. Now, taking all this correspondence into view, coupled with the fact of the actual surrender to and cancellation of the mortgage by the mortgagor, and I cannot well understand upon what ground it can be contended, that the complainants have succeeded in showing a consummate and binding agreement for a mortgage, which shall be enforced as against creditors and purchasers.
[267]*267It seems to me very clear, that the terms had never been complied with by Schley, upon which the mortgage was to be registered, nor could they be complied with, without first paying the judgment to Albert, because until it was paid, the certificate which Mr. Schley said he should require that there were no liens on the property, could not be procured.
But, even if there ever was a period in the whole course of this negotiation when the contract could be considered so far per" feet as would have justified the placing the mortgage upon record, it is evident that for some cause or other, it was after-wards abandoned, and the mortgage given up to be cancelled, and that it was cancelled accordingly.
If it be said that Schley, the trustee, had no right to surrender the mortgage after he had actually loaned Dali §6000, of the trust fund, the answer is, that if he was guilty of a breach of trust in so doing, his bond was responsible for it, and although the parties to the bond may not be good, that is no reason why the consequences of a violation of his duty as trustee, should be thrown upon innocent third persons who had nothing to do with taking it, and who had no right, at any time, to object to its sufficiency as the cestui que trusts had.
It would, as it seems to me, be extremely difficult to maintain even as against Dali, the specific execution of this contract for a mortgage. In the first place, there is nothing upon the face of this record to show the precise terms and conditions, contained in it; but even if these could be made out, how could the creditor call for the execution of a contract for a mortgage, when after it was executed and placed in his hands he had voluntarily surrendered it to the mortgagor to be cancelled, and he had cancelled it. That the mortgagee was acting in a fiduciary capacity can make no difference, because, for any violation of his duty as trustee, the remedy of the parties injured was upon his bond.
But, if there would be difficulty in enforcing this alleged contract as against Dali, surely the difficulties are increased when an attempt is made to enforce it against his creditors, and more especially against purchasers for value. To enforce it [268]*268against purchasers would be pushing the case of Alexander vs. Ghiselin further than is required by any principle clearly decided by it, and with respect to Dali himself, the whole reasoning of the court shows that it would not be enforced, unless a valid subsisting agreement, definite in all its parts, and explicitly proved, was made out.
As far as the cases have gone in Maryland, it is of course proper for the security of the rights of property, and to avoid confusion and uncertainty, that this court should continue to enforce those equitable contracts for mortgages, as against creditors : but I should very much doubt the policy of carrying the doctrine further than it has already been pressed. Grave doubts have been expressed by eminent judges, whether the doctrine of postponing registered, to unregistered conveyances, upon the ground of notice, should have been introduced ; and though it is now too well established to be unsettled by the courts, it has been so qualified, as only to apply to cases where the notice is so clearly proved as to make it fraudulent in the purchaser to take and register a conveyance in prejudice to the known title of the other. 1 Story, Eq., section, 398 ; Wyatt vs. Boswell, 19 Vez., 439. And if a party who holds a prior unregistered conveyance can only prevail, as against a junior registered conveyance, upon such clear proof of notice on the part of the latter, as to make it fraudulent in him to take his conveyance, it would seem to inculcate the doctrine, that the courts should be cautious how they give expansion to the cases in which secret equitable contracts for liens have been set up, as against innocent third parties. The cases in which these secret equities have been set up, were all cases between the party holding the lien and creditors. That was the case of Alexander vs. Ghiselin, and it is believed no case can be found in which the secret equitable lien has been maintained against a purchaser; and, with my opinion in reference to the dangerous consequences of the doctrine, I am not disposed to make a precedent of the kind. It would be placing the holder of such secret equitable lien in a better situation than a party who has taken his conveyance, but has omitted to record it.
Richard W. Gill and Nicholas Hammond for Complainants.
Wm. B. Clarke and Thomas G. Pratt for the defendant McAttee.
It has been said in this case, that the defendant, McAttee, had notice in fact of the existence of this alleged lien, or if he had not notice in fact, he had sufficient information to put him on inquiry, and in either case is bound by it. But that he had not notice in fact, is, I think, very plain. Nor had he such notice as was even required to put him on inquiry. There can, from the very nature of the case, be no fixed or general rule upon this subject, and each case, therefore, must depend upon its own circumstances. The cases and the doctrine upon the subject are collected and commented upon by Mr. Justice Story, in the first volume of his Commentaries on Equity, section 400, and will be found, I think, not to embrace that now before this court.
The sale to McAttee took place on the 11th of November, 1847, and he admits, in his answer, that about the time of the sale, he heard that Dali was the surety of Schley, and was likely to have to answer for many of his debts. This admission and the statement by the crier who made the sale, that the property was sold subject to all prior claims and judgments, it is supposed fixes McAttee with notice. Such, however, is not my opinion. Suppose Mr. McAttee upon receiving this information had addressed himself either to Schley or Dali, what would they have told him? Certainly not that there was, then, an existing equitable contract for a mortgage. On the contrary, they would have told him that as far back as January, 1846, the mortgage which had been executed, had been given up and cancelled by agreement between them.
I am, therefore, of opinion, under all the circumstances of this case, that the relief prayed by this bill against McAttee, cannot be granted, and I shall, therefore, dismiss it, as to him, though as the complainant Gill instituted this suit in the proper and judicious discharge of his duty as trustee, I shall not subject him to cost.