Opinion
(June Term, 1857.)
Where a vendor, after a contract of sale, sold at an advanced price to another person who had no notice of the former sale, Held that the seller was bound to account to the former purchaser for the advanced price.
Constructive notice arising from the first purchaser's being in possession, must be taken to extend to all the circumstances attending the equity, and where these are such as do not affect the conscience of the second purchase, the Court will not vacate his purchase.
But where the second purchaser protects himself under the defense that the first purchaser gave way to him, on condition of receiving the increased price, which was obtained in the second sale, he is bound to see that such increased price is made good to the former purchaser.
A purchaser from one who had purchased without notice of a prior equity, although he had notice of it himself, at the time of his purchase, is nevertheless protected by the want of notice in his vendor.
A tenant for a term, who holds over, is not in adverse possession to his landlord, so as to prevent him from conveying the land, although the landlord has been compelled to bring an action for the possession, which is still pending.
The pendency of an action of ejectment brought by the seller against the purchaser who had been let into the possession, is no notice of such former purchase to a second purchaser.
CAUSE removed from the Court of Equity of Moore County.
Haughton, for the plaintiff.
Winston, sr., Kelly and Strange, for the defendants.
The bill was filed against the defendants, for a specific performance of a contract to convey a tract of land, which is alleged to be contained in the following written instrument, viz:
"January 25th, 1850. Received of Mrs. Lydia Margaret Taylor, an order on Col. S. J. Person, for two hundred dollars, with interest from the 25th of April, 1849, which, when paid to me, is to be in full satisfaction and payment for the land on which she now lives, and I am to give her a deed for the same.
Test, Wm. Wadsworth. ALEXANDER KELLY."
Previously to the execution of the above instrument, to wit, on 4th day of August, 1849, the plaintiff and her father, one Carroll Brady, entered into a sealed obligation "to pay to Alexander Kelly $12, as the rent of the land in question, until the 25th of the next December, and to surrender the possession of the land to him on that day, unless they should pay him $200, with interest from the 25th of April last past, and should get a title before that time." It was to carry into effect this latter stipulation that the order was given upon Col. Person, and the instrument first above recited was made by Kelly. The plaintiff's husband had been a soldier in the Mexican war, and was killed in that service, which entitled his widow to a pension. This pension was secured to her through the professional aid of Mr. Person, (His Honor S. J. Person), and he was, by her, constituted agent to receive it. He did not formally accept the order, but on the 28th of January, 1850, paid to Kelly $109, which was duly endorsed on said written instrument. Afterwards the plaintiff directed Mr. Person not to pay any more of the pension money to Mr. Kelly, but to pay the remainder to her.
Subsequently to this, to wit, about January, 1851, a conversation took place between the plaintiff and the defendant Kelly, about the rescission of the contract of purchase, which was renewed at various other times during that year, in which the defendant expressed his willingness to pay back to plaintiff the money he had received from her for the land, (deducting the rent), upon the plaintiff's surrendering to him the possession of the premises. She, on these occasions, professed her willingness to revoke the contract, admitting her inability to pay the remainder of the price, but objected to the payment of rent, and alleged that she could not give him the possession, because her father lived on the land, and refused to surrender it.
The defendant Kelly instituted an action of ejectment against Mrs. Taylor and her father, Carroll Brady, returnable to October Term, 1851, of Moore County Court, and obtained a judgment at October Term, 1852.
At that term, plaintiff tendered Kelly the unpaid balance of the purchase-money and the costs that had accrued in the action of ejectment, and required of him to execute a deed for the land, which had been prepared for that purpose, and was then produced for him to sign, but he refused to take the money, or execute the deed, and offered instead thereof, to settle the matter by paying back the money he had received from the plaintiff.
While the action of ejectment was pending, to wit, on 16th day of April, 1852, Kelly sold and conveyed the land in question, with warranty, to Thomas Dixon, David Dixon, Solomon Dixon, John Dixon, Caleb Dixon, and Joseph Dixon, for the purpose of erecting mills upon the same. They took possession of a mill-seat on the premises, and proceeded to erect buildings and machinery on the same; and after operating there for a year or so, they sold the land and works to the defendants, Woody and Thomas Dixon, for $4000. This was on 4th of Nov., 1853.
While the Dixons were erecting their works, the plaintiff expressed her willingness that they should do so, and offered them a bond to make them a title, provided she succeeded in recovering from Kelly the increased amount which they had paid him. This they declined to receive, preferring to rely on Kelly's warranty.
The plaintiff alleges in her bill, and in an amended bill, that the defendants, the Dixons, had express notice of her claim at the time of their purchase, but that, at any rate, her residing on the land, and the pendency of the action of ejectment in the Court of law, amounted to constructive notice. And, in a second amended bill, she alleges that Thomas Dixon and Woody had express notice at the time of their purchase from the Dixons.
The prayer is for an injunction to stay the proceedings in the Court of law, also for a conveyance of the land upon the payment of the purchase-money, and for general relief.
The defendant Kelly, in his answer, insists that the unreasonable delay of the plaintiff in paying the purchase-money, and at last her inability to do so, are equivalent to an abandonment of her right to a specific performance of the contract, and that if she has any claim upon the agreement, it can be more properly asserted in a Court of law. He also contends in his answer, that the evidence shows the plaintiff had revoked and rescinded the contract. Finally, that believing the plaintiff had abandoned and revoked the agreement, he had, bona fide, conveyed the land in dispute to the defendants, the Dixons, and that it was, therefore, impossible for him to convey it to the plaintiff.
The Dixons answer that they had no notice of the plaintiff's equity at the time they purchased from Kelly; that they never heard of it until a few days afterwards, when, after they had got possession, and were proceeding to clear the foundation for their structures, the plaintiff exhibited to them Kelly's written promise to make title; that she did not even then require them to desist, but encouraged them to go on with their buildings, and declared that she did not want the land, but would look to Kelly for the enhanced price he had got, over what she was to give him.
Woody and Thomas Dixon admit that when they purchased from the Dixons, they were aware of the plaintiff's claim, but contend that as their vendors had no notice when they purchased, they, the Dixons, being protected in their purchase, they also are protected under that equity.
There were replications to the answers, commissions and proofs, and the cause being set down for hearing, was sent to this Court.
The defendant Kelly opposes the plaintiff's right to a decree, on three grounds. 1st. He contends that the failure of the plaintiff to pay the purchase-money, within reasonable time after it was due, her direction to Person not to make any further payment on the order, and her receiving the money from Person, and subsequent inability to pay the balance of the purchase-money, amounted to a repudiation of the contract on her part at least so as to take from her the right to come into a Court of Equity for a specific performance, and put her to an action at law for a breach of the contract. The defendant retained the order on Person, and could at any, time have sued the plaintiff for the balance, so as to force her into measures. This he neglected to do. Scarlett v. Hunter, 3 Jones' Eq. 84; Falls v. Carpenter, 1 Dev. and Bat. Eq. 237, are decisive against the defendant. "In Equity, time is not of the essence of a contract for the payment of money." 2nd. He alleges that the contract was rescinded by mutual consent. It is not necessary to decide whether a written contract to convey land can be rescinded by a parol agreement; for this allegation is not sustained by the evidence. The parties talked about rescinding the contract, and both were willing to do so, after the plaintiff had received and used her pension money, which was the only fund ever looked to for the payment of the purchase-money; but they could not agree upon the details. The defendant insisted upon being allowed occupation rent, by way of deduction from the amount that had been paid, and required as a condition precedent, that the possession of the land should be given up to him. The plaintiff seems to have objected to the allowance of rent, and, in particular, stated her inability to give up the possession, because her father was living on the land, and she could not get him to leave it. This, we have no doubt, was the principal difficulty, but it is sufficient that, for some cause or other, the parties never did come to a positive and absolute agreement to rescind. 3rd. He avers that, before the bill was filed, he had sold and conveyed the land, for a valuable consideration, to the other defendants, and so a specific performance by him is impracticable. Admitting this allegation, the plaintiff insists that, if she is not able to get the land from the other defendants, who are made parties by the amended bills, on the ground that they had notice of her equity, then, she is at liberty, under the general prayer for a relief, to fall back upon her secondary equity, and by ratifying the sale, charge the defendant Kelly with the price he received for the land, deducting the amount of the purchase-money, with its interest, that is still due on her contract.
It is held in Scarlett v. Hunter, and is, in fact, a familiar principle, that where there is a contract for the sale of land, the vendee is considered in Equity as the owner, and the vendor retains the title as a security for the purchase-money. So, the effect of the contract was, that the defendant held the land then in trust for the plaintiff. This brings the case within and then in trust for the plaintiff. This brings the case within another familiar principle: that where a trustee converts the fund, the cestui que use has a right to follow the fund and take it in its changed shape; as, where a guardian invests the ward's money in the purchase of land, the ward may elect to have the land; so here, we can see no reason why the cestui que use may not, if she chooses, have the price which was realized by a sale of the land. What right has the trustee to say that he should be allowed to retain the profit made by his sale? It was a breach of trust. Can he take advantage of his own wrong, and ask a Court of Equity to drive the injured cestui que use to her action at law, for damages on the contract?
In Cheshire v. Cheshire, 2 Ire. Eq. 569, one entitled to slaves, after a life estate, (the slaves having been run out of the State and sold by the particular tenant), was allowed to elect to take the fund in its changed form; that is, the money for which the slaves had been sold.
In Daniels v. Davidson, 16 Ves., jr., 249, where a seller, after a contract for sale, sold at an advanced price to another person, the bill filed by the first purchaser prayed that, if the second purchaser bought without notice, so that the land could not be reached, the seller might account to the plaintiff for the advanced price. It was not necessary to decide the point, but Lord ELDON seems to have had no doubt about this secondary equity of the plaintiff. Such was clearly the opinion of Sir EDWARD SUGDEN. See 1 Sugden on Vendors, c., 277. In fact, "the reason of the thing," is so clear, that no authority is necessary to establish it.
The other defendants oppose the plaintiff's right to a decree against them, on the ground that they purchased without notice. As there is no suggestion that the defendant Kelly is not able to pay the amount for which he is liable, it would be unnecessary to decide the matter as to these defendants, except for the fact, that the plaintiff insists upon her right to have the land, together with extensive improvements that have been put on it, provided she can fix them with notice. She charges that they had notice in three ways. 1st. By express notice of her contract. 2nd. Under the doctrine of lis pendens. 3rd. Constructive notice, by reason of the fact, that she was in possession as tenant of Kelly at the time they took the conveyance from him.
It may be well to simplify the case, by disposing of the defendants Woody and Thomas Dixon, who are brought in by the second amended bill. They admit that when they purchased of "the Dixons," they had notice of the plaintiff's alleged equity under Kelly's contract, but they insist that "the Dixons" had purchased from Kelly without notice; and claim the benefit of the want of notice to their vendors. It is settled, that a purchaser from one who purchased without notice, is entitled to the benefit of that fact, although such second purchaser had notice when he bought; in other words, he is in no worse situation than his vendor, and stands or falls with him; Harrison v. Forth; Prec. Ch. 51; Brandlyn v. Ord, 1 Atk. 571; 2 Atk. 242; Sugden on Vendors, 314.
1st. The defendants, "the Dixons," deny that they had notice before they took the conveyance from Kelly, and say the first intimation they had of the contract by Kelly to plaintiff, was some days after the conveyance was executed, when, having entered on the land in order to clear up a foundation for the erection of the mills, plaintiff showed them the contract. This allegation is responsive, and there is no proof to the contrary; indeed we are satisfied by the evidence that it is true.
2nd. The plaintiff alleges that, before the sale by Kelly to "the Dixons," Kelly had commenced an action of ejectment against her and her father, who was living with her on the land, and that this action was pending when they bought of Kelly, and insists upon the doctrine of "lis pendens." There is a total misconception as to the application of this doctrine. Where one purchases from a defendant the subject-matter of a suit which is pending, he takes, subject to the plaintiff's recovery, and is bound to know, or rather is presumed to know, of its pendency. This presumption is made to prevent evasion, and to ensure to plaintiffs the fruit of their recovery; for "unless regard should be paid to it, all decrees and the justice of the Court might be wholly evaded; since the defendant, pending the suit, might alien to one who, after the bill should be amended, might alien again, by which means suits and decrees in this Court would be rendered vain." Sorrell v. Carpenter, 2 P. Will. 482. It is no more than an adoption of the rule in a real action at common law, where, if the defendant aliens after the pendency of the writ, the judgment will over-reach such alienation; Murray v. Ballou, 1 John. Ch. Rep. 577. "The Dixons" bought of the plaintiff in that action. There is no ground for a legal presumption, that they knew of its pendency, and that the plaintiff, in this suit, was resisting a recovery at law, when she had no pretence of more than an equitable title.
3rd. The plaintiff had entered into possession as the tenant of Kelly for one year, and then held over, under the contract of sale. This prevented her possession from being adverse, otherwise the deed from Kelly to the Dixons would have been inoperative, and the legal title would have remained in him, and had a very important bearing on the rights of the parties. The fact that Kelly had instituted an action of ejectment against the plaintiff, who was holding over as his tenant at sufferance, did not make her possession adverse so as to render his deed inoperative; for she was estopped, having entered as his tenant, from denying his title until she had surrendered the possession up to him; accordingly, the fact of the plaintiff's being in possession is not relied on as having the effect of making the conveyance of Kelly inoperative; but, the bill charges that the legal title passed to the Dixons, and relies on her possession as amounting to constructive notice, so as to put them on enquiry, and fix them with notice of such facts as a full enquiry would have put them in possession of; that is to say : plaintiff held Kelly's contract, but was unable to pay for the land; she and Kelly were both willing to rescind the contract, but differed as to the allowance of rent; and the plaintiff was unable to give up the possession, as Kelly insisted she ought to do, because her father would not leave the place; the plaintiff was willing for Kelly to sell and pay himself in that way, but insisted that she ought to have the benefit of the resale; at one time she agreed that Kelly might sell to one Ritter, but a sale was not effected, in consequence of the obstinacy of her father. With a knowledge of these facts, the Dixons were not guilty of a fraud in buying from Kelly, so as to affect their consciences and give the plaintiff an equity to call on them for the land; on the contrary, the imputation of fraud rests on her; for when informed that they had bought of Kelly, she did not object to the sale, but was willing, and, in fact, urged them to go on with the contemplated improvements, assuring them that if she succeeded in establishing her right, she would let them keep the land, upon being paid the price they had paid Kelly. This was all she insisted on, and offered to give them a bond to make title on that condition, which they declined to accept, as they relied on Kelly's warranty, and did not believe her title could be established. After thus urging them to make expensive improvements, we say the imputation of fraud rests on her attempt, now, to take from them the land, together with the improvements. Her sense of equity was more accurate at the first, when she insisted, that she ought to have the benefit of the price obtained by Kelly. That, we think, is the relief to which she is entitled.
It has, in several cases, been intimated by this Court, that the English doctrine, that a purchaser is bound to see to the application of the purchase-money, has never obtained in this State. We wish not to be understood as favoring that doctrine, and yet, under the particular circumstances proven in this case, if the defendant Kelly is unable to pay the part of the price to which the plaintiff is entitled, we are of opinion that the other defendants are liable for it, secondarily. They protect themselves under the allegation that the plaintiff had authorised Kelly to sell, and then induced them to make expensive improvements. Of course then, they are bound by the condition under which she agreed that Kelly might sell, and under which she induced them to make the improvements, which was, that after Kelly was paid for the land, the benefit of the increased price should enure to her.
There will be a decree for plaintiff, and a reference to ascertain the amount of the price received by Kelly, and the balance of the purchase-money with its interest still due by plaintiff, so as to fix the sum to which the plaintiff is entitled.
PER CURIAM, Decree accordingly.