Wasserman v. Metzger

54 S.E. 893, 105 Va. 744, 1906 Va. LEXIS 85

• Court: Supreme Court of Virginia
• Decided: September 13, 1906
• Status: Published

Opinions

Buchanan, J.,

delivered the opinion of the court.

This is the second time this case has been to this court. Upon the former appeal the merits of the case were not considered, but it was remanded in order that the bill might be amended, bringing in a new party. 102 Va. 836, 47 S. E. 820. The material facts of the case are the same now, however, as they were then, and briefly stated are as follows:

By a deed dated December 10, 1892, Samuel Wasserman. and wife conveyed to L. B. Allen, trustee, a house and lot in. the city of Norfolk to secure to Sophia Metzger the payment of two negotiable notes for $1,250.00 each, payable one and' two years after date, respectively, and dated December 10, 1892. In January, 1902, one P. J. Morris, representing himself to be the owner of one of the notes secured by the deed of trust, and the National Bank of Commerce of Norfolk, claiming to be the holder of that note as collateral security for a debt due it from Morris, informed Allen, trustee, that default had been made in the payment of the note, and directed him to sell the trust subject to satisfy the debts secured. The trustee thereupon advertised and sold the property at public auction, and Morris became the purchaser at the price of $2,200.00, on the 21st day of January, 1902. The trustee conveyed the property to Morris by deed dated as of the day of the sale, which was acknowledged for recordation two days afterwards. On the 25t.h of that month Morris and wife conveyed the property to trustees to secure to the Mutual Building and Loan Association of the city of Norfolk the payment of $2,000.00, which Morris had borrowed from it. On the 30th day of the next month Morris and wife conveyed the property to David Kalberman, as trustee for Mrs. Rikchen Wasserman, the wife of Samuel Wasserman (but who was divorced from him soon afterwards) at the price of $2,400.00, the grantee in the deed assuming the payment of the debt due the Building and Loan Association secured upon the property. After deducting the costs and expenses of the sale made by Allen, trustee, to Morris, the trustee paid one-half of the proceeds of the sale upon the note which Morris and the Commercial Bank claimed to be the owner and holder of, as before described, and notified Mrs. Metzger, the payee and holder of the other note, that he had a sum of money in his hands to be paid upon that note. A few days afterward the agent of Mrs. Metzger, who seems to be quite an old woman, called upon the trustee, pursuant to the notice. The agent denied any knowledge of the sale made by the trustee, stated that the note held by the parties who had directed the trustee to make sale of the house and lot had been paid, and that his mother held the other note, which was still due and unpaid, and declined to receive the money in the hands of the trustee. Subsequently, he did receive and credit it upon the note held by his mother, but at the time he received the money he did not have knowledge of all the facts, nor had he or his mother taken the advice of counsel at that time. The note claimed by Morris and the bank had been paid five years or more before the sale by the trustee, and had been delivered by the payee, or her agent, to Samuel Wasserman, the maker. Mrs. Metzger, who lived in the city of Norfolk, had no notice of the sale made by the trustee, and gave him no direction to sell. Mrs. Wasserman, the vendee of Morris, and the present holder of the house and lot, had no actual notice of the fraud of Morris (who was in collusion with Samuel Wasserman) in claiming the note and causing the property to be sold by the trustee, nor that the sale made by Allen, trustee, was not made in accordance with the terms of the trust.

Upon a hearing of the cause the trial court held that the sale of the trustee and the conveyances subsequent thereto were null and void as to the plaintiff, Mrs. Metzger, and declared that she had a valid and subsisting lien upon the house and lot for the residue of the debt, and decreed its enforcement. From that decree Mrs. Wasserman and her trustee alone appealed.

The question we are to determine, therefore, is whether or not there is any error in that decree to their prejudice.

One of the grounds upon which it is insisted that the decree is erroneous is that Mrs. Wasserman was a purchaser for value and without notice of the fraud or irregularities in the sale made by the trustee.

If she were a complete purchaser it may be that she would be entitled to the protection which she claims; but upon that ■question I express no opinion, as I do not think it is involved in this appeal. Upon the facts of this case I do not think that Mrs. Wasserman is a bona fide purchaser for value and without notice. Ueither she nor her trustee has the legal title, nor has she paid the purchase money.

As a general rule, in order for a vendee to be protected as a purchaser for valuable consideration and without notice, he must have received a conveyance and paid the whole of the purchase money before notice of the defect in his title. But there is a qualification. of that general doctrine, viz: “That where the first purchaser has not the legal title and the subsequent one has paid his money and has not received the legal title, but the best right to call for the legal title, before he receives notice, he shall he entitled to priority, notwithstanding he has not actually acquired such title.” 2 Minor’s Inst. 1029-30 (1st ed.) ; Mutual Assur. Soc. v. Stone, 3 Leigh 218, 236; Doswell v. Buchanan, 3 Leigh 365, 23 Am. Dec. 280; Cox v. Romine, 9 Gratt. 27, 29; Lamar v. Hale, 79 Va. 147.

It is true, as insisted, that Judge Christian in his opinion in Preston’s Admr. v. Nash, 75 Va. 949, 956-7, does state that he was of opinion “that a complete purchaser is one who has paid the purchase money and who, though he has not received a conveyance of the legal title, is entitled to call for it.” But that opinion was not the opinion of the court, though erroneously so stated in the report of the case in 75 Va. The case was afterwards directed to he reported again (76 Va. 1, 11) so as-to correct that mistake. Judge Moncure did not sit in the case; Judge Anderson concurred in Judge Christian’s opinion; Judges Staples and Burks concurred in the result, hut not in the reasoning of Judge Christian, and based their conclusion upon the doctrine of equitable estoppel. The view expressed by Judge Christian as to what will constitute a complete purchaser is not only contrary to the decisions of this court, above cited, but is in conflict with the maxim which prevails in equity, as well as at law, that he who is prior in time is prior in law—■ that where two equities are equal the prior equity shall prevail. Bor if the mere fact that a subsequent purchaser has paid his purchase money and has the right to call for the legal title makes him a complete purchaser and entitles him to the protection which complete purchasers receive at the hands of a court of equity, the fact that another has an equal or superior-equity, prior in point of time, will he of no avail.

In no view of this case can Mrs. Wasserman he regarded as a complete purchaser. It does not appear that she has ever paid more than one-sixth of the price which she agreed to pay. It. is true that in Morris’ deed to her she assumed the payment of the debt due the Building and Loan Association.- But she has not paid that sum, nor is she bound to pay it, if the consideration for her undertaking to pay fails. The only ground upon which the Building and Loan Association can hold Mrs. Wasserman liable for its debt is that of equitable subrogation. She made no contract with the association, nor did it furnish any consideration for her assumpsit. As was said by Judge Staples in Willard v. Worsham, 76 Va. 392, 401-2, “Where the grantee of lands assumes the payment of a mortgage thereon, as between himself and his grantor he becomes in equity the personal debtor and the grantor the surety, and the latter may insist that the grantee shall pay the debt for his relief and protection. The creditor, upon familiar principles, may claim the benefit of all collateral securities held by his debtor, by way of equitable subrogation. In doing so, however, he stands in his debtor’s shoes, and is substituted to the rights and remedies of the latter,, but nothing more. In other words, the new creditor takes the place of the old one and succeeds to his rights.” Osborne v. Cabell, 77 Va. 462, 468.

As between Mrs. Wasserman and Morris, if the consideration for her undertaking fails and she does not obtain what she purchased, Morris could not compel her to pay the Mutual Building Association debt. And as that association stands in his shoes and has no greater rights against her than Morris had it cannot compel her to pay. Mrs. Wasserman not having paid that debt is, for the purposes of this case, in no worse condition than if she had not assumed to pay, because she can he fully protected against the debt assumed if she loses the house and lot.

Actual payment of the purchase money is required in order to constitute a vendee a complete purchaser, as a general rule. Lamar v. Hale, supra; 2 Minor’s Inst. 1029-30. Giving security for its payment—not even the giving of negotiable notes— is not sufficient, unless the parties are so circumstanced that a court of equity cannot prevent their enforcement. 23 Am. & Eng. Ency. Law (2d ed.), 489, 490; 2 Pom. Eq. Jur., sec. 751.

Mrs. Wasserman was, therefore, not a complete purchaser, hut the purchaser of a mere equity which had not been paid for, and she had no right to call for the legal title when she received notice of the fraud of Morris and the irregularity in the trustee’s sale. A payment after notice would give her no right to call for the- legal title, for whatever she does to perfect her title after notice is done mala fide and does not avail. 2 Minor’s Inst. 1029-1031, and cases cited.

The general rule is that the purchaser of a mere equitable title must take the place of the person from whom he purchases. He stands in his vendor’s shoes. He gets the title of his vendor and nothing more. Yancey v. Mauch, 15 Gratt. 300, 306; Briscoe v. Ashby, 24 Gratt. 454, 475, and cases cited; Evans Bros. v. Roanoke Savings Bank, 95 Va. 303, 304, 28 S. E. 323; Sands, &c., v. Stagg, ante, p. 444, 52 S. E. 633. See, also, 2 Pom. Eq. Jur., sec. 756. The principle underlying this doctrine is stated as follows, in Briscoe v. Ashby, supra: “The reason of the distinction between the purchaser of a legal and an equitable interest seems to he that the protection accorded to bona fide purchasers is a departure from the general rule of jurisprudence, which holds that no man can transfer a greater right than he possesses, and regards the vendee as standing in the same position as the vendor under whom he claims. This exception was made in equity against the rights and remedies which it had called into being, and in favor of purchasers who bought in good faith and under the impression that they were acquiring the legal title. But when the purchase is of a mere equity, which owes its existence to a court of chancery and cannot be enforced without its assistance, the reason for departing from the general maxim, 'Nemo plus juris in aliwm transferre potest quam ipse habet,’ is at an end and the right acquired by the vendee is limited to that of the vendor. When, therefore, a purchaser buys an equitable estate or interest with a knowledge of its real character and without obtaining a legal title he can found no claim on the mere fact of the purchase, and must stand or fall by the title of his vendor. 2 Lead. Cas. in Eq., 95, and cases there cited. So it was declared in the most unequivocal manner by Ch. J. Marshall, in Shirras v. Craig, 7 Cranch (U. S.), 34-48, 3 L. Ed. 260, that the purchaser of an equitable title takes it subject to all existing equities; . . . In Chew v. Barnett, 11 Serg. & R. (Pa.) 389, Ch. J. Gibson said: ‘When it is asserted that a purchaser for valuable consideration takes the title free of every trust or equity of which he has no notice, it is intended of a title perfect on its face; for every purchaser of an imperfect title takes it with all its imperfections on its head. It is his own fault that he confides in a title which appears defective to his own eyes, and he does so at his peril. How, every equitable title is incomplete on its face. It is in truth nothing more than a title to go into chancery to have the legal estate conveyed, and, therefore, every purchaser of a mere equity takes it subject to any clog that may lie on it, whether he has notice or not.’ ”

This language of Chief Justice Gibson, in Chew v. Barnett, was again quoted approvingly by this court in Evans Bros. v. Roanoke Savings Bank, supra.

If the contest here was between Morris and Mrs. Metzger alone, there would be no question of her fight to have the trustee’s sale set aside for the sale was not only made in violation of the terms of the trust, which of itself would be sufficient to justify the court in setting the sale aside at which he became the purchaser (Taylor v. King, 6 Munf. 358, 8 Am. Dec. 746; Harris v. Harris, 6 Munf. 367; Pownal v. Taylor, 10 Leigh 172, 34 Am. Dec. 725; Norman v. Hill, 2 P. & H. 676; Sulphur Mines v. Thompson, 93 Va. 315, 25 S. E. 232; Preston v. Johnson, ante, p. 238, 53 S. E. 1; Shears v. Building, &c., Asso. (W. Va.), 52 S. E. 860; but he was also a party to the fraud by which the trust sale was procured to be made. Mrs. Wasserman standing in his shoes, as under the authorities quoted she clearly does, can, under the facts of this case, make no defense as against Mrs. Metzger that he cannot make. The fact that she had no notice of the irregularity in the sale, or of Morris’ fraud, is wholly immaterial, as she acquired only such rights in the property as he had; for, as already shown, the purchaser of a mere equitable title takes it subject to all prior equities, and this, too, without regard to the question whether he had notice of them or not, where the holder of the prior equity was not required to and could not give notice of it under the registry law. Briscoe v. Ashby, supra, and authorities cited; Yancey v. Mauch, supra.

While, as was said by Judge Carr, in Doswell v. Buchanan, 3 Leigh 365, 382, 23 Am. Dec. 280: “The plea of a purchaser for value without notice, if sustained, is a perfect defense, and that against such purchaser equity will not take the slightest step, not even to perpetuate testimony against him or take from him any advantage the law gives him . . . it is equally clear that this defense is a complete defense or no defense at all,” unless the purchaser can bring himself within the protection of section 2472 of the Code, which provides that, although a subsequent purchaser* is not a complete purchaser, “as against any person claiming under a deed or other writing which shall not have been admitted to record before payment by a subsequent purchaser for a valuable consideration of the whole or a part of his purchase money, such subsequent purchaser, notwithstanding such deed or other writing be admitted to record before he becomes a complete purchaser, shall in equity have a lien on the property purchased by him for so much of his purchase money as he may have paid before notice.”.

It is insisted that Mrs. Metzger’s equity, although prior in time to that of Mrs. Wasserman, is inferior to it because Mrs. Metzger surrendered the note held by her against Louis Wasserman when it was satisfied without marking it paid, and thus enabled him, in collusion with Morris, to perpetrate the fraud • which resulted in the sale to Mrs. Wasserman without fault on her part. The payee in the note had the right to it when paid, and it was not negligence in her not to mark it satisfied to prevent the owner of it from perpetrating a 'fraud upon some one by the úse of his own property—an act which no one would • anticipate, and which could> not be done without the collusion' of another. ’ Certainly her failure to mark it satisfied, if negli-' gence at :all, was not such negligence as will deprive her of her: prior equity.

In discussing the question, Mr. Pomeroy says: “The rule extends fo. grós’s'negligence; which is tantamount in its effects to fraud; An equity otherwise equal, or even prior in point • of time, may, through the gross laches of its holder,-be postponed to á subsequent interest which another' person was enabled to acquire by means of such negligence. To admit the' operation of this rule in either of its jihases, and to displace the - otherwise natural order of priority, there must be intentional • deceit; that is, intentional misrepresentation or suppression of the truth, or else gross negligence. In the one case, the party possessing the claim which it is sought to postpone must' both • know of‘"his oivn right and also of the other person’s intention to acquire,-or of liis acts ill acquiring, an interest in the same subject-matter. Iu the other case there must be gross laches, for mere carelessness or ordinary negligence will not suffice, according to the weight of modern authority.”

In the note to Bassett v. Nosworthy, Vol. 2, Pt. 1, "White & Tudor’s Lead. Cas. in Eq. (4th Am. Ed) 54, it is said: “It should, nevertheless, be remembered that a rule by which one is precluded from asserting a right which is indispiitably his own, operates as a forfeiture, and should not be enforced, unless he has been guilty of gross negligence, which, if not collusive,' prepares the way for fraud. Evans v. Beckwell, 6 Veasey 190; Plumb v. Fluitt, 2 Anstruther 432; Colyer v. Finch, 19 Beavan 500; 5 House of Lords Cas. 905. A man may fall short of the care which a large experience of life and business would siiggest without being responsible to third persons for a loss which they might have avoided if he had been more cautious,” citing, among other cases, Biddle v. Bayard, 13 Pa. St. 150.

In that case the plaintiff lost a pocket-book containing a negotiable certificate of stock endorsed in blank. The certificate was purchased by the defendant from a third person and without notice that the vendor had no title. The plaintiff brought trover, and it was contended for the defense that the plaintiff should have endorsed the instrument to his own order; that by carrying it about with him endorsed in blank, he had enabled the finder to mislead the defendant, and should consequently bear the resulting loss. This argument was overruled and judgment entered for the plaintiff.

The action of Mrs. Metzger in receiving a portion of the proceeds of the trust sale cannot, under the facts and circumstances of the case, be regarded as a ratification of the sale made by the trustee, nor does it estop her from objecting to the validity of the sale. "When she received the money she was not fully informed of all the facts connected with the sale (Smith's Ex'or v. Miller, 98 Va. 534, 541-2, 37 S. E. 10, and no prejudice has resulted to anyone hy reason of her receiving the money which was paid her. Smith v. Powell, 98 Va. 431, 36 S. E. 522. Prior to that time the trustee had conveyed the property to Morris, Morris had executed the deed of trust to secure the Building and Loan Association the payment of the money loaned him; and Mrs. Wasserman had purchased the equity of redemption in the property from Morris, assumed the payment of the Building and Loan Association debt, and had paid the residue of the purchase price in cash. The only effect of Mrs. Metzger’s refusal to receive the money paid her by the trustee would have been to leave it in his hands until after the controversy in this case was settled.

I am of opinion that there is- no error in the decree complained of to the prejudice of the appellants, and that it should be affirmed.