Opinion
05-06-1891
GREEN v. MORGAN et al.
Edwin R. Walker, for complainant and for defendant Morgan. James Buchanan, for defendant Lydia A. Scott.
Bill to foreclose, and cross-bill.
Edwin R. Walker, for complainant and for defendant Morgan.
James Buchanan, for defendant Lydia A. Scott.
BIRD, V. C. The bill of complaint in this cause was filed on the 28th day of June, 1890. The cross-bill of Lydia A. Scott, one of the defendants, was filed on the 23d day of October, in the same year. The following December, Harriet Morgan filed an answer to the original bill and to the said cross-bill. The answer of both of these defendants admit the principal allegations of the original bill, and ask that a reference be made to ascertain the amount due, and consent to a sale of the premises. In her answer, and answer by way of cross-bill, Lydia A. Scott claims that she is entitled to priority of payment of her mortgage over the mortgage of the said Harriet Morgan. She insists that although the mortgage of the said Harriet Morgan was executed upon the 11th day of November, 1889, it was not recorded until long after the execution, delivery, and recording of the mortgage to her for $700. She alleges that she had no knowledge whatsoever of the existence of the mortgage to said Harriet at the time of making the loan, and accepting the mortgage to her as security therefor. The answer of Harriet alleges that the said Lydia took her said mortgage with full notice of the existence of her said mortgage, without stating when, or where, or under what circumstancessuch knowledge was communicated.
At the opening of this case the question arose as to which party had the burden of proof. It occurred to me then that the said Lydia having filed her cross-bill, setting up her innocence, and the statute declaring that every deed or mortgage shall be void and of no effect against a subsequent judgment creditor, or bona tide purchaser or mortgagee for a valuable consideration, not having notice thereof, unless such mortgage shall be acknowledged or proved according to law, and recorded or lodged for that purpose with the clerk of the court of common pleas, "that she was not only entitled to the affirmative, but that the general rule casts the burden of proof upon her." Alleging, as she did, that she gave a valuable consideration, and without notice, it seemed eminently proper that she should be required to establish these allegations. I understood all courts to require of the party who claims to occupy this position to require of him the utmost particularity by way both of pleadings and of proof. This seems to be clearly established as to the payment of the consideration, if not as to the notice. See notes to Basset v. Nosworthy, 2 White & T. Lead. Cas. (4th Amer. Ed.) 99, 104, 105. But the authorities in this state and in many others, if not all, where similar provisions have been enacted, hold the contrary. Hodge's Ex'rs v. Amerman, 40 N. J. Eq. 99, 2 Atl. Rep. 257. I suppose the reason for the change in the rule as to the burden of proof is found in the fact that the statute changes the common-law method or procedure, and enables him who places himself upon the statute to claim its protection until he is dislodged. Reference is made to what was required of the defendant Lydia at the opening of the cause in answering by way of cross-bill, for the purpose of showing that she was put to a disadvantage under the rule as I understood it; or, in other words, that the defendant Harriet had the benefit of the statement under oath of the said Lydia, and of her examination, before the said Harriet was obliged to speak under oath. This is worthy of consideration, since the defendant Harriet contents herself in her answer with the simple allegation that Lydia had notice, without stating when such notice was given, or under what circumstances. Lydia says that the application was made to her by Elmer E. Scott, the owner of the premises, two or three days before the 24th day of February, 1890," for a loan of $700, and that he offered to give a mortgage upon the lot in question as security; that she had the record examined, and considered the security offered was good for that amount. The mortgage of the said Harriet was not then recorded. Lydia made the loan and accepted the mortgage of Elmer E. Scott as security therefor on the 24th day of February. Lydia says that on the 16th day of June she first heard of the claim of Harriet to a lien upon these premises On that day she says she called to see the wife of Elmer, but not finding her at home, and supposing that she was at Mrs. Morgan's, called there, and while there Mrs. Morgan told her that she had a mortgage for $500 upon the lot of Elmer E. Scott, and that this was the first that she ever heard of the existence of such a mortgage. She says that then she made no mention of the fact that she had a mortgage, but that she was greatly worried about it, and immediately went to Elmer and chided him for having deceived her. Harriet says that, on the 16th day of February, Lydia and the wife of Elmer called at her house, and that while there the wife of Elmer began to complain about her husband, referring to his thriftless manner of doing business, and that Lydia made some observation respecting her husband during the conversation, when she remarked to the effect that Elmer had not dealt fairly with her, for he had given a check, when the property was purchased of her, for $100, payable in 30 days, which it seems she had considerable difficulty in getting paid, and that she had a claim on that house, and, if he did not pay it on the 1st of April, she would proceed against him. Her husband corroborates this statement, except he does not say, in the first instance, that his wife said she had a claim on the house. In her first examination she makes no reference to a mortgage; but when recalled, and asked if she had omitted anything in her first examination, and had her attention called to the mortgage, she then said that the mortgage was spoken of. After this the husband was called, and he says that the mortgage was spoken of. This statement is emphatically denied in every particular by Lydia. She says very positively that she was not there on that occasion. The wife of Elmer was not sworn.
Since Harriet and her husband stand before me with equal credit to that of Lydia, I must assume that the parties did meet as they said on the 16th day of February in the house of Mrs. Morgan, and that the said conversation took place as has been adverted to. This leaves me to determine whether or not what took place was of such a nature as in law to warrant me in charging Lydia with notice of the existence of Harriet's mortgage. In other words, if so distinctly informed on that occasion, only six days before she was applied to for the loan, and only eight days before she actually made the loan and accepted the mortgage, why should she not be bound? Would it be just or equitable to charge a person with knowledge because he was present at a conversation between others when no business was being actually transacted, though referred to in the way of mere social gossip, but in which he then had no interest, present or prospective? There is nothing whatever to show that, on the 16th, Lydia had the slightest interest in what transpired between Mrs. Morgan and the wife of Elmer, or the slightest interest in Elmer's business transactions, or in the house and lot in question. The conversation was not respecting the house and lot distinctly, but, respecting the general conduct of Elmer. It was not introduced by Harriet for the purpose of making known her claims against Elmer uponthe house and lot, but it was introduced by Elmer's wife for the purpose of charging him with general delinquency in his business. It was carried on in the presence of Lydia, it is true; but nothing was said with the exception of a single remark by Harriet and Elmer's wife. It may be that a mortgage was mentioned during this conversation, but there is some reasonable ground for doubting it. The doubt arises from the fact that Harriet made no mention of it in her first examination. Lydia had been upon the stand, and had declared that she knew nothing of a mortgage at the time she made her loan. Harriet, in speaking of this very subject-matter, says that during this interview by her she spoke of a claim upon the house that she had against Elmer for $100, and of the difficulty she had in collecting it, and that she had a claim upon the house, which, if he did not pay on the 1st of April, she would sue him. But after Harriet had taken her seat by her counsel she was recalled, and she then said she had omitted to state that she had spoken of her claim by way of mortgage, and afterwards her husband corroborated her in this. Accepting the latter statement of Harriet as true, then, is the court bound to believe that Lydia was at all impressed with it as a distinct fact, and that she had it in her mind at the time she made the loan and accepted her mortgage? In other words, was this such notice, considering all the circumstances, as that the court is bound to charge Lydia with it? If so, then her accepting of the mortgage amounts to a fraud in the law, and the registry provided for by statute must give way to the mortgage which was executed prior to the one recorded. In order to overcome the rights of the individual grantee by the statute, the proof must be clear and entirely satisfactory. In considering this point, it must not be overlooked that neither Harriet nor her husband mentioned any particular house and lot on which she had a claim or mortgage. Lord Hardwicke says in Hine v. Dodd, 2 Atk. 275: "There may probably have been cases upon notice divested of fraud, but then the proof must be extremely clear." "But though, in the present case, there are strong circumstances of notice before the execution of the mortgage, yet upon suspicion only I will not overturn a positive law." In that case there was proof that the party who claimed the benefit of the registry over a prior mortgage had confessed that he was aware of the existence of the mortgage, but that, it not being recorded, he considered the registry acts binding, which confession was denied by him in his answer. Lord Hardwicke considered the testimony not sufficient to overcome the denial of the defendant and the registry act. In the case of Wyatt v. Barwell, 19 Ves. 438, Sir WILLIAM GRANT, master of the rolls, says: "It has been much doubted whether courts ought ever to have suffered the question of notice to be agitated as against a party who has duly registered his conveyance; but they have said: 'We cannot permit fraud to prevail; and it shall only be in 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 another that we will suffer the registered deed to be affected.' Even under this limitation, the security derived from the register is considerably lessened, as no one can with certainty tell what circumstances may, truly or falsely, be given in evidence, or what judgment a court will form as to the effect of the evidence in any particular case. However, it is sufficient for the present purpose to say that it is only by actual notice clearly provided that a registered conveyance can be postponed. Even a lis pendens is not deemed notice for that purpose." In the case of Jolland v. Stainbridge, 3 Ves. 484, the master of the rolls said: "I must admit now that registry is not conclusive evidence; but it is equally clear that it must be satisfactorily proved that the person who registers the subsequent deed must have known exactly the situation of the person having the prior deed, and, knowing that, registered in order to defraud them of that title he knew at the time was in them." In the case of Jackson v. Given, 8 Johns. 108, Kent, G J., refers approvingly to the views expressed by Lord Hardwicke in Hine v. Dodd, supra. In the case of Jackson v. Van Valkenburgh, 8 Cow. 264, the court refers to the cases in Hine v. Dodd and Jolland v. Stainbridge, supra, approvingly. Rogers v. Wiley, 14 Ill. 65; General Ins. Co. v. U.S. Ins. Co.; 10 Md. 517; Price v. McDonald, 1 Md. 403.
It has been thought by many very competent judges that the rule as above laid down has been very greatly departed from or modified; but this, I think, is so only with respect to the extent of the obligation required of him who asserts notice. While the ancient rule required full and satisfactory evidence that the facts necessary to constitute notice were brought to the knowledge of the party sought to be charged, the modern doctrine seems to be that wherever a party who is negotiating with respect to any title or interest in land has brought to his attention by a person interested therein, and who has a right to speak, or who may reasonably be presumed to Know whereof he speaks, any fact or circumstance which, though not notice in itself, is one of a train of facts or circumstances which, properly pursued, would lead to such facts or circumstances as amount to notice, he is chargeable with notice, even though he neglects to pursue such facts or circumstances. And if he be not negotiating for the title or any interest in lauds at the time his attention is directed to the fact or circumstance referred to, but afterwards engages in such negotiation, ami the court becomes satisfied from the evidence that such fact or circumstance was still present in his mind, he will be alike charged with notice; as to which the observation of Lord Eldon is beyond all criticism, when he said it would be very difficult to make him believe that an attorney who acquired knowledge of a fact respecting the title to lands in the morning could justly be supposed to have forgotten it in the afternoon. Mountford v. Scott, 1 Turn. & R. 274. See, also, Hargreaves v. Rothwell, 1Keen, 154; Wade, Notice, § 689; Distilled Spirits, 11 Wall. 356, 367; Atterbury v. Wallis, 8 De Gex, M. & G. 453, 463. But I think, in either case, the fact or circumstance which is alleged to be the foundation of the inquiry must still be clearly and satisfactorily established. Clearly, the statute, which is designed to secure and preserve the repose of society, and beyond question to prevent perjury, cannot be overcome by testimony which awakens nothing more than strong suspicion. In other words, the preponderance should be so satisfactory as to convince the court that a fraud would be perpetrated under cover of the statute. To this extent I think it may safely be said that the ancient doctrine has never been assailed, criticised, or qualified. One of the latest cases touching upon this branch of the subject is that of Distilled Spirits, supra. Mr. Justice Bradley, in speaking of the knowledge of an agent or attorney, and its binding effect upon the principal, says, in effect, that clear and satisfactory proof that such knowledge was in the mind of the agent or attorney at the time of the transaction in which his principal is sought to be charged is the only limitation upon the rule. Therefore I infer that the court is not to decide in favor of the party alleging notice by a simple numerical preponderance of testimony, but must be satisfied by clear and undoubted evidence that the party who holds under a registered deed or mortgage has notice, acquired at the time of the transaction, of a prior unregistered deed or mortgage, or of such facts or circumstances as would, if properly attended to, give him actual notice thereof; or, if acquired at any other time than during the transaction, that such knowledge was present in his mind at the time of the transaction. I think these principles should control the court in determining the case now under consideration. Taking this as a standard, is there enough in the case to justify me in coming to the conclusion that Lydia had any recollection of what transpired on the 16th of February when she was negotiating the loan on the 22d and 24th? As intimated above, the conversation referred to was mere social gossip between another and the mortgagee who claims priority over the recorded mortgage. It was not directed to Lydia, although she was present, and made some observations during its progress. It had none of the characteristics of a business transaction. Lydia was not then interested in making the loan, or in ascertaining anything about the relations of Elmer to Mrs. Morgan or to any one else. It would be dangerous in the extreme, many clays or weeks after, to charge a person with notice of transactions that are referred to in a loose and rambling conversation, which transaction, at the time, they had not the slightest interest in, and in no way expect to have. While it might be very unreasonable to hold in every case that a party ought not to be bound by the allegation of notice unless it appears that it came to him while employed in some business transaction in and about the matter or thing in controversy, yet in a case like the present I think the court is justified in laying great stress upon that fact.
But counsel for Mrs. Morgan insists that under the foregoing facts and circumstances, and the fact that Lydia is a sister-in-law to Elmer, and also the fact that Elmer's wife, who was one of the principals in the conversation referred to, was not called as a witness, it is fair to presume that. Lydia had the notice contemplated. Neither nor all of these can be considered without taking into account the character of Elmer as developed in this transaction. It would seem as though he was determined to wrong somebody. He executed the mortgage to Mrs. Morgan, and left it with her counsel, promising to send his wife immediately and have her execute it. This he did not do until months after, and after the mortgage of Lydia was recorded. For this there is no sufficient excuse. It can only be inferred that he wanted to gain an advantage over some one. If these circumstances show his true character, as I think they do, it is not surprising to me that counsel for Lydia refused to put his wife upon the stand, since his influence over her might be equal to the emergency. But, upon principle, the presumption arising from the absence of Elmer's wife from the witness stand can just as well be directed against Mrs. Morgan as against Lydia. I cannot see that Lydia is under any more obligations to call her than Mrs. Morgan. I have only dwelt upon these matters last referred to because counsel pressed them as essential; but it will be seen that Elmer's wife could do nothing more than corroborate Mrs. Morgan and her husband, and that I have given credence to what they have said respecting the gossip at Mrs. Morgan's house on the 16th of February. I will advise a decree for the complainant, with costs, and that the mortgage of Lydia is entitled to priority over that of Harriet, and that a reference be made to ascertain the amount due upon the said mortgages, respectively.