Summary
In Davis, all three claimants had actual title claims — Davis as a mortgagee, and Brown and Fleming as fee holders — and they were all innocent even of constructive knowledge at the time they acquired title.
Summary of this case from Lewis v. Superior CourtOpinion
Department Two
Hearing In Bank Denied.
Appeal from a judgment of the Superior Court of Tulare County and from an order denying a new trial. W. W. Cross, Judge.
COUNSEL:
A purchase in good faith and for value, is an affirmative defense, and must be pleaded and proved by the defendants. (Landers v. Bolton , 26 Cal. 393; Eversdon v. Mayhew , 65 Cal. 163; 85 Cal. 1; Boone v. Chiles, 10 Pet. 210; Pomeroy's Equity Jurisprudence, secs. 784, 785; Cunningham v. Erwin, Hopk. Ch. 54; Rorer Iron Co. v. Trout , 83 Va. 397; 5 Am. St. Rep. 285; Kerr on Fraud and Mistake, 370, 371; Thomas v. Stone, Walk. Ch. 117; Wilhoit v. Lyons , 98 Cal. 409.) The defendant must prove the absence of notice. (Pomeroy's Equity Jurisprudence, secs. 738-62.) The facts were sufficient to charge the defendants with notice or to put them on inquiry. (Civ. Code, secs. 1213, 1215; Pol. Code, sec. 4236; Pomeroy's Equity Jurisprudence, secs. 601-13, 615, 616, 626-28, 649, 654, 658, 665, 669, 676, 691, 750-55; McPherson v. Rollins , 107 N.Y. 316; 1 Am. St. Rep. 826; Brush v. Ware, 15 Pet. 111; Green v. Slayter, 4 Johns. Ch. 44; Erickson v. Rafferty , 79 Ill. 209; Stewart v. Matheny , 66 Miss. 21; 14 Am. St. Rep. 538; Bright v. Buckman , 39 F. 247; Slater v. Breese , 36 Mich. 77.)
J. A. Hannah, for Appellant.
Bradley & Farnsworth, for Respondents.
The record of the mortgage was constructive notice only of its contents, and nothing else, and could not give notice of any mistake in its description. (Civ. Code, secs. 1213- 15; Chamberlain v. Bell , 7 Cal. 292; 68 Am. Dec. 260; Frost v. Beekman, 1 Johns. Ch. 288; Sanger v. Craigue , 10 Vt. 555; 5 Lawson's Rights, Remedies, and Practice, sec. 2279; White v. McGarry, 2 Flipp. 572; 2 Pomeroy's Equity Jurisprudence, sec. 654.)
JUDGES: McFarland, J. Temple, J., and Henshaw, J., concurred.
OPINION
McFARLAND, Judge
This action was brought to have reformed (and foreclosed) a certain mortgage, executed October 8, 1891, by the defendant Ward to one Vancil, and duly recorded April 8, 1892, and by Vancil assigned to plaintiff. Brown, Fleming, and the Visalia Savings Bank were made defendants as claiming some interest in the mortgaged premises. It is averred in the complaint that the mortgage was intended to be of the southwest quarter of the southeast quarter of section 13, and the northwest quarter of the northeast quarter of section 24, in township 18 south, range 25 east, Mount Diablo base and meridian; but that by mutual mistake of the parties the mortgage was made to describe the lands as situated in range 24; and the prayer is to have the mortgage reformed so as to describe the premises as being in range 25. Ward made default. Brown and Fleming answered, setting up that after the execution of said mortgage said Ward had sold and conveyed to Brown about one-half of the said land in range 25, and the remainder to Fleming; and that they were bona fide purchasers for a valuable consideration and without notice of the mistake in said mortgage. (The description in the mortgage would have corresponded with lands bought by Brown and Fleming if the range had been 25 instead of 24.) The bank set up that it was the assignee and holder of two negotiable promissory notes given by Brown to Ward, and also assignee of a mortgage given by Brown to Ward upon the said land purchased by Brown from Ward as aforesaid to secure said notes; and that it purchased said notes and mortgage for value and without notice, etc. The court granted a nonsuit as to Fleming, Brown, and the bank, and rendered judgment in their favor. From this judgment and from an order denying his motion for a new trial plaintiff appeals.
Appellant contends that purchase in good faith without notice, etc., is an affirmative defense, and that therefore the granting of the nonsuit was erroneous. But appellant put Brown and Fleming on the stand as his witnesses, and it was proved affirmatively by their testimony that they had no notice nor information of any kind in reference to the said mortgage by Ward to Vancil. It was also proven that Fleming was a purchaser for value, and that he had made full payment of the purchase money at the time of his purchase. The only question, therefore, as far as notice is involved, is whether or not they had constructive notice; and this question must, beyond doubt, be answered in the negative. They were concerned only with the land which they purchased, and were chargeable with constructive notice of whatever the record showed as to that land; and the record showed an unencumbered title to that land in Ward. If it was their duty to have known of the record of the mortgage to Vancil, an examination of that record would merely have shown that the mortgage there recorded was upon land six miles away from the land purchased by them; and the record of that mortgage was constructive notice only of "the contents thereof." (Civ. Code, secs. 1213, 1214.) It was not constructive notice of any mistake. (Chamberlain v. Bell , 7 Cal. 293; 68 Am. Dec. 260; Frost v. Beckman, 1 Johns. Ch. 288; Sanger v. Craigue , 10 Vt. 555; 5 Lawson's Rights, Remedies, and Practice, sec. 2279; Pomeroy's Equity Jurisprudence, sec. 654.) The case of Erickson v. Rafferty , 79 Ill. 209, cited by appellant, is not in point. There the subsequent purchaser in that case was so circumstanced as to be put on inquiry, and had been informed that there was a mortgage on the land.
So far, therefore, [41 P. 1011] as respondent Fleming is concerned the nonsuit was properly granted as to him, for it was shown that he was a purchaser without notice, and had paid the purchase money in full. But the turn which the case took left Brown and the bank in a different position.
The authorities leave somewhat doubtful the point whether one setting up the defense of subsequent purchase in good faith without notice must show that he had no notice (Pearce v. Foreman , 29 Ark. 568); but the general rule clearly is that he must affirmatively show a purchase for value and that the purchase money had been paid before notice. There might perhaps be peculiar circumstances -- such as investments for improvement of the property, etc., so that a purchaser could not be put in statu quo -- which would take a purchase made wholly or partly upon credit out of the rule, but the general rule is as above stated. (Eversdon v. Mayhew , 65 Cal. 167; Scott v. Umbarger , 41 Cal. 419; Combination Land Co. v. Morgan , 95 Cal. 552; Isenhoot v. Chamberlain , 59 Cal. 639; Boone v. Chiles, 10 Pet. 210; Wells v. Morrow , 38 Ala. 128; Jewett v. Palmer, 7 Johns. Ch. 68; 11 Am. Dec. 401.) In Eversdon v. Mayhew, supra, this court speaking of one claiming protection as bona fide purchaser declares that he must aver and prove "the payment of the purchase money in good faith, and without notice, actual or constructive, prior to and down to the time of its payment, for if he had notice, actual or constructive, at any moment of time before the payment of the money, he is not a bona fide purchaser." In Jewett v. Palmer, supra, Chancellor Kent says: "A plea of a purchase for a valuable consideration, without notice, must be with the money actually paid; or else, according to Lord Hardwicke, you are not hurt. The averment must be, not only that the purchaser had not notice at or before the execution of the deeds, but that the purchase money was paid before notice.. .. . Even if the purchase money be secured to be paid, yet if it be not in fact paid before notice, the plea of a purchase for a valuable consideration will be overruled." There are numerous cases to the same effect in addition to those above cited.
Now, in the case at bar, while the evidence did show that Brown purchased without notice, it also showed that the purchase price was something over thirteen hundred dollars, and that Brown had actually paid only about two hundred dollars, and had given his promissory note to Ward for the balance of the purchase money, with a mortgage on the land which he purchased from Ward as security for the note. Nothing had been paid when this suit was commenced except "about two hundred dollars," and no circumstance is shown that would take the case out of the rule above stated. He made the purchase about October 14, 1892, and says he heard of the mortgage about two months afterward; and this present action was brought within three months after his purchase, and when he had notice of the commencement of the action he had paid only two hundred dollars of the purchase money.
As to the bank, there is no evidence whatever of the condition or validity of its claim, no evidence at all upon the subject. The bank joined with Brown in an answer in which it is alleged that Brown made two promissory notes to the order of Ward, each for five hundred and seventy-three dollars, and executed to him a mortgage upon the land in question to secure said notes; that Ward assigned said notes and mortgage to the bank; and that the bank took said assignment without notice of the mistake in the mortgage to Vancil. There is also, we think, a sufficient averment in said answer that the bank purchased said notes and mortgage for a valuable consideration. If these averments had been proven the case would have assumed a very different aspect. If the notes and mortgage were actually assigned to the bank for value paid to Ward by the bank before any notice, then Brown's defense to the notes of failure of consideration was cut off, and the defense of both Brown and the bank to this action would be complete, for in that event, the notes would have been payment. (Partridge v. Chapman , 81 Ill. 137; Freeman v. Deming, 3 Sand. Ch. 327; Baldwin v. Sager , 70 Ill. 503; Pomeroy's Equity Jurisprudence, sec. 751, and notes.) But there is no proof whatever that these averments were true.
Therefore, as the case stood at the time of the nonsuit, the evidence merely showed that Brown had paid only a small part of the purchase money. No other facts material to the subject were shown. Under these circumstances he was entitled to protection only to the extent that he was -- to use the expression of Lord Hardwicke -- "hurt." The rule therefore applies "that where a part only of the price or consideration has been paid before notice, either the defendant should be entitled to the position and protection of a bona fide purchaser pro tanto, or that the plaintiff should be permitted to enforce his claim to the whole land only upon condition of his doing equity by refunding to the defendant the amount already paid before receiving the notice." (Pomeroy's Equity Jurisprudence, sec. 750.) In Combination Land Co. v. Morgan , 95 Cal. 552, Beatty, C. J., speaking for the court in bank, said: "The authorities cited in appellant's brief amply sustain the proposition that notice before payment is equivalent to notice before purchase, and that when there has been a partial payment before notice to a second vendee of the original vendor's lien, he is affected pro tanto as to the residue." Of course, the principle is as applicable to an unrecorded mortgage as to a vendor's lien. (See, also, Burton v. Reagan , 75 Ind. 77.)
The judgment and order denying a new trial should be affirmed as to respondent Fleming; but the order granting a nonsuit in favor of respondent Brown and the bank was erroneous, and as to them the judgment must be reversed and a new trial granted. The new trial should be conducted in [41 P. 1012] accordance with the views hereinbefore expressed; and the parties should be allowed to make proper amendments to their pleadings if they so desire.
The judgment and order appealed from are affirmed as to the respondent George A. Fleming; and as to the respondents Thomas Brown and the Visalia Savings Bank, the judgment and order are reversed, and the cause remanded for a new trial.