State Bank v. Frame

20 S.W. 620, 112 Mo. 502, 1892 Mo. LEXIS 234

• Court: Supreme Court of Missouri
• Decided: November 29, 1892
• Status: Published

Opinion

Macfarlane, J.

The suit is ejectment, commenced in Morgan county, to recovér two hundred and forty-two and one-half acres of land situate in said county. The answer of defendant Frame was a general denial. Samuel C. James, trustee for Lucy Doran, Lucy Doran herself and her husband, Benj. F. Doran, were made defendants on their own motion and filed an answer setting up a general denial and an equitable defense. Defendant Frame was the tenant of defendant James, who claimed the land as trustee for.Mrs. Doran. By their equitable defense they charged that plaintiffs’ only claim of title was under a deed of trust mude by defendant, Benj. F. Doran, on December 22, 1885, and filed for record July 12, 1887, to secure the payment of a note of $20,000, payable to the order of' W. C. Bartle ninety days after date, and a sale thereunder and deed by the trustee to plaintiff, dated June 14, 1888. The answer then sets up in detail a state of facts under which it is claimed that the trustee’s sale and deed should be set aside and canceled, which defendant, asked should be done. The case was taken by change-of venue to Saline county, where it was tried, a judgment rendered for plaintiff, and defendants appealed.

On the trial both parties claimed title under defendant, B. ■ F. Doran, plaintiff under the sale by the trustee under deed of trust before mentioned, and defendant under a deed directly from Doran to James-,, as trustee for Mrs. Doran, dated January 6, 1887, and recorded January 8, 1887, for an express consideration of $3,500.

After the introduction of these deeds defendant offered evidence showing that on the twenty-second day of December, 1885, B. F. Doran made two deeds of trust to secure the note of $20,000, payable to Bartle, one on the land in dispute, situate in Morgan county, and under which plaintiff claims, and the other on about six hundred acres of land in Cooper county.

The evidence tended to prove that these deeds were both withheld from record at the request of Doran, who was an extensive dealer in live stock, to avoid injuring his credit. Bartle was a brother of Mrs. Doran and James was a son-in-law. About the first of January, 1887, Doran recognized his own insolvency and inability to continue his business. He owned the two farms held under the two deeds of trust and personal property valued at about $8,000. His debts largely exceeded the value of his property. Among his debts, as claimed, was a note to his wife for $6,000, dated March 2, 1884. At the request of Mrs. Doran, her son-in-law, James, went to St. Louis on the fifth of January, 1887, to see Bartle, who lived there, and to try to make some arrangement about securing ■ her debt. Mr. Doran went to St. Louis at the same time. The $20,000 note made by Doran to Bartle had been assigned to the plaintiff bank before its maturity. On January 6, Bartle, Doran and James met in St. Louis and talked over the matter, and the evidence of defendants tends to prove that they came to an agreement and understanding that the deed of trust on the Morgan county land should not be recorded or enforced, and that Doran should convey to James, as trustee for Mrs. Doran, the land in dispute, and in consideration therefor she would satisfy Doran’s note to her to the extent of $3,500. Bartle at the time had in his possession the deed of trust, which all the parties saw. The next day the.parties all went to the residence of Doran, in Cooper county, and the deed was executed and acknowledged conveying the land to James, as trustee, in pursuance of the previous agreement, and Mrs. Doran entered a credit for $3,500 on the note. After that James took possession of the land, paid delinquent taxes amounting to $100 and made some improvements. Neither James nor Mrs. Doran knew the note had been transferred to the bank, nor did they make inquiries about it.

The evidence of plaintiff tended to prove that there was no agreement to withhold the deed of trust from record; that it never agreed not to set up any claim on the Morgan county land, and never authorized Bartle to make such an arrangement. It also tended to prove that the only talk about releasing the deed of trust was on condition that Mrs. Doran would release her dower in the Cooper county land, which she had afterwards refused to do.

The court at the request of plaintiff declared as a matter of law that upon the pleadings and undisputed evidence plaintiff should recover.

-The court refused to declare the law to be, as asked by defendants, that if Doran was indebted to Mrs. Doran, and the deed to James, trustee, was accepted by her in part payment and satisfaction of her debt, then she was a purchaser for value of the lands in controversy; that if, when they bought the land, the only notice they had of the existence of the deed of trust was from the statements of Bartle and seeing him have the deed of trust, and that Bartle stated that said deed of trust would never be filed for record, but would be surrendered, and that no lien was claimed on said land by virtue of said unrecorded deed of trust, then there was no such notice that said deed of trust was an existing and valid lien upon said land, as to make defendants, James and Mrs. Doran, purchasers with notice of, and subject to, said deed of trust.

The court entered judgment for the plaintiff for the possession of the land and for rents and profits. Defendants appealed. , ■

I. Whether the satisfaction of a pre-existing debt is a consideration sufficient to protect a purchaser of real estate against a prior unrecorded deed, of which he has no notice, has never been definitely and directly passed upon by this court, so far as we are advised. A strict and liberal interpretation of the statute' would make any consideration which might be sufficient between the parties to uphold the deed sufficient also-to protect the purchaser. The statute provides that, every, instrument in writing that conveys any real estate shall be recorded (sec. 2418), and shall thereafter impart notice to all persons of the contents thereof, “and all subsequent purchasers and mortgagees shall be-deemed, in law and equity, to purchase with notice.”' Sec. 2419. Section 2420 is as follows: “No such instrument in writing shall be valid, except between the parties thereto, and such as have actual notice-thereof, until the same shall be deposited with the recorder for record.”

A strict legal construction has not generally been placed upon such statutes. While it is held that the instrument itself may be invalid until recorded, it is also held that the purchaser acquires, by his purchase, an equitable right in the land, which will not be defeated except by a purchaser for value without notice.

The chancellor in Dickerson v. Tillinghast, 4 Paige Ch. 215, gives the construction placed upon the English statute, which he approves thus: “The English registry acts made the unregistered deed or incumbrance at law wholly inoperative and void, as against a subsequent grantee or incumbrancer. But the court of chancery, in accordance with the manifest spirit and intention of the statute, at an early'day adopted the principle of considering the prior deed, or incumbrance, as an equitable title or lien. It, therefore, applied to such cases the equitable principles which had previously been adopted by that court, in relation to other contests between the holder of an equitable title or lien and a subsequent grantee or mortgagee of the legal title.”

This construction is equitable and just, and has ever been recognized by the profession and trial courts of the state as applying to our recording act. The same rule is clearly recognized by this court in Davis v. Ownsby, 14 Mo. 176, where the judge says: “There must be title for value under the grantor to admit the question [want of record] being raised.” Also in McCamant v. Patterson, 39 Mo. 110, and Aubuchon v. Bender, 44 Mo. 565.

To entitle one then to the protection of the statute against an unrecorded deed, he must have been a purchaser for value. The question recurs whether one who takes a conveyance of land in consideration of the release and discharge of a precedent debt from the grantor is a purchaser for value. It is necessary that he should be such, in order to secure the protection of the statute. The courts of the states are not in harmony on the question, though it is believed that a majority of them hold that such a consideration alone is insufficient, though they seem generally to agree that, if a definite forbearance of an antecedent debt is given, or if the creditor gives up any security, divests himself of any rights, or does any act to his own prejudice on the faith of the title before he has notice of the prior deed, he will be regarded as a purchaser for value. 2 Pomeroy on Equity Jurisprudence, sec. 749; Devlin on Deeds, sec. 632, and authorities cited by each.

As has been said,-the precise question has not been decided by this court, though expressions bearing out both sides of the proposition or expressing doubt are found. In Hoyt v. Oliver, 59 Mo. 189, it is.said: “The existing indebtedness of the grantor was a valuable and sufficient consideration for making the deed to secure such indebtedness.” The rights of subsequent purchasers was not involved. In Martin v. Jones, 72 Mo. 25, the court, by Judge Napton, says: “Another point made in this case is that there was no proof of notice on the part of Austin, the beneficiary in the deed of trust, of the previous conveyance to Williams by McCarty. This was alleged in the petition and denied in the answer. I doubt whether such allegation was necessary, since Austin was not a purchaser for value, in the sense in which such phrase is used in regard to questions of notice, but merely the cestui que trust in a conveyance made to secure a previous indebtedness on the part of the debtor.” The question was involved here, but was not decided, as the purchaser was found to have had notice.

It was held in Aubuchon v. Bender, 44 Mo. 565, that, to entitle one to the protection of the statute, he must have parted with something of value; otherwise he is not injured. A deed of gift was, therefore, held not to have been for value. See also Davis v. Ownsby and McCamant v. Patterson, supra; Fox v. Hall, 74 Mo. 317. In the last case the court says: “This protection is only afforded to an innocent purchaser for value.” It is also held that one purchasing from the heir of the grantor of an unrecorded deed will be protected. Youngblood v. Vastine, 46 Mo. 240. Also, a purchaser by quitclaim of the “right, title and interest of the grantor,” if for value and without notice, will prevail over such prior deed. Willingham v. Hardin, 75 Mo. 429; Fox v. Hall, supra.

Analogous cases, growing out of commercial transactions, involving the question of what is necessary to constitute one a bona fide purchaser for value of negotiable securities are, we think, better settled. These eases were reviewed by Black, J., in Crawford v. Spencer, 92 Mo. 509. The conclusion, as applied to the case in hand, is thus expressed: “Where there is a new consideration at the time the collateral is given, such as the extension of the time of the payment of the principal debt, there can be no doubt but the transferee of the collateral takes it freed from equities existing between the original parties, of which he has no notice, the collateral not being due when transferred. Where there is no such new consideration, there is much conflict in the authorities. But, in this case, we are satisfled that the notes, amounting to $12,000, were taken in actual payment of that amount of the indebtedness of Harlow, Spencer & Co., and, that being so, Francis & Brother took the note freed from the equities existing as between plaintiff and Harlow, Spencer &■ Go.”

The same conclusion was reached by Sherwood, J., in Fitzgerald v. Barker, 96 Mo. 664, and by the courts of appeals in the following cases: Redpath Bros. v. Lawrence, Manning & Cushing, 42 Mo. App. 101; Lawrence, Manning & Cushing v. Owens, 39 Mo. App. 318; Feder v. Abrahams, 28 Mo. App. 454; Hess v. Clark, 11 Mo. App. 492.

We think the rule deducible from these authorities is that a deed made in consideration of the absolute discharge of a pre-existing debt of the grantor, or by an adequate portion of it, will constitute the grantee a purchaser for value so as to protect him against a previous unrecorded deed of the same grantor. By the satisfaction of the debt the creditor divests himself of the right of an action, or of securing the original liability, and places himself in a worse condition than he-would have done by a definite forbearance of the debt.

II. Did the court rule correctly on the question of actual notice by Mrs. Doran or her trustee of the prior-mortgage? It is conceded that, as a general proposition, actual notice of the prior deed would defeat the subsequent one. The, equitable rule is also not disputed that positive information brought directly home to the party to be charged therewith is not required, but that knowledge of any fact which would put an ordinarily prudent man on inquiry, and which, if followed up, would lead to notice will he sufficient. Meier v. Blume, 80 Mo. 183; Drey v. Doyle, 99 Mo. 467.

That both Mrs. Doran and her trustee, James, had notice of the outstanding deed of trust, cannot be disputed; indeed, both of them admitted that Bartle had it present with him at the time Doran executed the deed to his wife’s trustee, and she placed the credit upon the note. At the time these grantees received this notice, and the deed was exhibited to them, however, they were also informed by Bartle that it would not be recorded, but would be surrendered, and no lien would be claimed on the land under it. It is now claimedby defendants that, the notice and the representations being contemporaneous, the representations neutralized, as it were, the effect of the notice. We do not think such to have been the result. The notice, under the terms of the statute, imparted to the deed the same validity, force and effect as between these parties that filing for record would have given. What was before notice a mere equity becomes clothed with the legal title. The representations operated upon a deed otherwise valid. If plaintiff, as the assignee of the note and mortgage, is to be postponed to any rights acquired by defendants under their deed it must be upon some ground other than want of notice.

III. Defendants pleaded an equitable estoppel as a defense to the action. This plea was predicated upon the alleged statements and declarations of Bartle, at ' the time the deed was made to the trustee, to the effect that no lien would be claimed on this land under the deed of trust.

It is a well-settled principle of equity that one who makes representations upon which he expects another to act, and upon which such other relies and is induced to act to his detriment, will not afterwards be heard to question the truth of what was represented, to the injury of the one who had been induced thereby to change his condition. Moore v. Bank, 52 Mo. 377; Schenck v. Sautter, 73 Mo. 46; Chouteau v. Goddin, 39 Mo. 229; Garnhart v. Finney, 40 Mo. 449.

If plaintiff made such representations to defendant as are attributed to Bartle, intending or knowing that defendants would act upon them, and release a part of the debt the wife held against the husband, and. had stood by and seen the parties acting upon such representations without objection, then such words and conduct would clearly bring plaintiff within this equitable rule, and it would not be permitted to set up any title acquired under the deed of trust as against the deed defendants were induced to take.

IV. There is no doubt under the evidence before us that the note was assigned before maturity to the plaintiff, and, at the time the alleged representations by Bartle were made, he had no interest in the note, unless it should have been as an indorser, or power or control in his own right over the deed of trust. The deed of "trust was only incident to the debt, and the assignment of the note carried with it the right to its control, and it was out of the .power of Bartle, either as payee or indorser of the note, to release or discharge any portion of the mortgaged premises. Hagerman v. Sutton, 91 Mo. 531, and cases cited; Mayes v. Robinson, 93 Mo. 118.

V. The evidence tending to prove that the unrecorded deeds of trust were retained by Bartle; that when Bartle thought best to have them recorded he went at once to see and consult Mr. Parsons, president of the bank, about so doing; that the deed of trust on the Cooper county land was taken from St. Louis and placed upon record by a messenger under the directions <of Bartle; that the deed to ■ the Morgan county land was carried by Bartle to the residence of Doran in Cooper county, though the bank was then advised that it had not been recorded; and that said deed was not in fact recorded for six months thereafter, are all circumstances tending, with more or less force, to prove authority from the bank to Bartle to control the deeds of trust and notice of any understanding that may have existed between Doran and Bartle in reference thereto. If such authority was given, and the representations attributed to Bartle were made by him, then plaintiff would be estopped to assert the contrary.

VI. There was also evidence tending to prove that, at the time the deed of trust was made, there wás •an understanding between Doran and Bartle that, in •order to avoid publicity and injury to the credit of Doran, it should not be placed upon record unless sanctioned by him. A similar understanding and agreement between the same parties and plaintiff bank, in regard to withholding from the record the deed of trust to the Cooper county land, was held to be fraudulent by this court in the recent case of Bank v. Doran, 109 Mo. 40. The court says: “The authorities cited by the plaintiff bank fully bear out the position that in circumstances similar to those related a court of equity will postpone, or set aside as fraudulent, an instrument whose recording has been clandestinely delayed.”

While there was no direct evidence in this case connecting the plaintiff bank with the alleged agreements, we think the circumstance's also tended to prove notice to it of such, an understanding and acquiescence therein.

The case was tried as one at law. The first instruction asked by defendants and refused by the court properly declared the law. -The declaration of law that there was “no evidence of any authority from said hank to Wm. Gr. Bartle to make the representations set forth in defendant’s answer” should not have been given.

We think there should be a new trial, and the judgment is reversed and cause remanded for that purpose.

All concur.