Chap. XIV. Lund v. Lund, 1 N. H. Rep. 39. Where the substance of a contract is, to secure one against liability, it will be construed a mortgage, without regard to its form. Webb v. Patterson, 7 Humph. Tenn. Rep. 431. Where a conveyance of land is made upon condition that it shall be void upon the payment of a sum of money by the grantor, if the conveyance is in fact made to secure the payment of a debt, for which the grantee has a remedy against the person of the debtor, the conveyance is to be deemed a mortgage. But where the conveyance is not intended as a security, it must be deemed a conditional sale. Page v. Foster, 7 N. H. Rep. 392. Though a writing may purport on its face to be an absolute or a conditional sale, if it was obtained by any fraudulent device, or upon a usurious contract, or was really intended as security for a loan; and any such facts are charged by bill in equity and proved, and they may be proved by the defendant's express admission, and will be taken as admitted, if he evades the charge, or only gives a general response to a specific allegation, the writing will be treated as a mere mortgage or evidence of a pledge. Bright v. Wagle, 3 Dana, 254. Where a debtor conveyed his farm to his creditor for the amount of his debt, which was about the value of the farm, by an absolute deed, with covenants of warranty, and the creditor gave up and discharged the securities which he held for his debt, and, on the same day, gave to the grantor a writing to the effect that if such grantor could find a purchaser for the farm within one year, he should be entitled to all the surplus which he could obtain for the same beyond the amount of the debt for which it had been conveyed, and the interest thereon. Held, that the writing thus given was not such a defeasance of the conveyance as necessarily to constitute it a mortgage; even if it was given at the time of the execution of the deed, and in pursuance of a previous agreement to that effect. Holmes v. Grant, 8 Paige, 243. To enable the court to declare an absolute bill of sale to be but a security in the nature of a mortgage, the proof must be clear and convincing. Loose declarations of a trust, especially after great lapse of time, will not be allowed to overturn the written contract of the parties. Freeman adn't. v. Baldwin, 13 Ala. Rep. 246. A bill of sale made absolute on its face and signed by the vendor, attached was a condition signed by the vendee, which was in these words: "The condition of the above obligation is such that if the said H. shall well and truly pay to the said C., the above mentioned sum of money, without interest by the first of January, 1827, then, &c. Held by the court that it was not a mortgage on its face, but a sale with liberty to re-purchase. Hickman v. Cantrell, 9 Yerger, 172, See Waterman's Amer. Ch. Dig., tit. Vendor and Vendee, Chap. XV. *CHAPTER XV. AS TO THE EFFECT OF THE CONVEYANCE ON THE 1. Purchaser without notice, protected by legal estate against prior claimants. 2. With mere equitable title, postponed to prior equitable claimants. 3. How far protected against defective execution of powers—against prior claimants who have encouraged him to purchase—and by statute in various cases. 4. As to priority under the Registration Acts. 5. As to notice-what it is-how it may be provedand its effect of void or voidable estates, and fraudulent or voluntary conveyances-equitable relief against purchasers with notice. 6. As to contribution to paramount charges. 7. Rights of third parties after conveyance in various cases. equities legal estate (1.) WHERE two persons have, in conscience, an equal where claim to the same property, equity will not interfere are equal, against the one who acquires a legal right to hold it; prevails. even although his equitable title be of later date than of his opponent.(a)[1] (a) Oxwick v. Plumer, Bac. Abr. Mortgage, E. s. 3. [1] Hence, in the case here cited, where A. covenanted to surrender lands to uses, which were enjoyed accordingly, although no surrender was made; and A. thirteen years afterwards surrendered the same lands to B. for valuable consideration, without notice of the covenant, B. was holden to be entitled to the lands, and the covenantees were left to their remedy at law. Of two equitable incumbrancers he who hath the preferable right to call for the legal estate is entitled to the preference, though he hath not actually got it in, nor obtained an assignment, nor even possession of the deed conveying the outstanding legal title; and though his lien is subsequent in date to the other incumbrance. Williamson v. Gordon's ex'rs., 5 Munf. 257. Chap. XV. Purchaser without notice, pay ing purchase-money and acquir ing legal estate under the convey ance, [*390] or getting it in by deed The execution of a conveyance vesting the legal estate in a bona fide purchaser for valuable consideration, or in his trustee, will, therefore, render his title indefeasible as against all equitable claimants, even for valuable consideration, *of whose claim he had no notice prior to the execution of the conveyance, (b) and actual payment of the purchase-money :(c) and where the contract has been completed by a conveyance which proves defective, by reason of some prior conveyance, charge, or incumbrance, the purchaser may, at any subsequent period, get in any outsubsequent standing legal estate, (unless held expressly in trust for an adverse claimant, (d) and use it against all parties of feasible title. whose claims he had no notice at the time of the completion of his purchase :(e) where the conveyance is executed and the purchase-money is secured, he may come into equity to have it employed in discharge of newly discovered incumbrances, (f) if created by the vendor or covered by his covenants for title; (g) and where the conveyance has been executed, and part only of the money paid, before notice, he may, it is conceived, clearly avail himself of the legal estate as a security to the extent of the sum so paid. to convey. ance, acquires inde. Although vendor had no title in equity. And, for the above purposes, it is immaterial that the vendor has no equitable interest in the property :—a bare trustee, or a vendor whose apparent equitable title depends upon a forged instrument,(h) can make a good title to a purchaser paying his money without notice, and then, or subsequently, acquiring the legal estate.[1] (b) Wigg v. Wigg, 1 Atk. 382, 384. (c) Tourville v. Naish, 3 P. Wms. 307; (where the money being secured by bond was held insufficient ;) Jones v. Stanley, 2 Eq. Ca. Abr. 685, pl. 9; Story v. Lord Windsor, 2 Atk. 630; see Davies v. Thomas, 2 Y. & C. Exch. 234. (d) Saunders v. Dehew, 2 Verm. 271. (e) Stanhope v. Earl Verney, 2 Ed. 81; and Mr. Butler's not to Co. Litt. 290, b. n.; Willoughby v. Willoughby, 1 Durn. & E. 763; and see Jones v. Smith, 1 Ha. 43; and 1 Ph. 244; as to the priority acquired by registration, vide infra. (f) 3 P. Wms. 307. (g) Supra, 381. (h) See Jones v. Powles, 3 M. & K. 581. [1] In Jones v. Powles, to which reference is here made, the seller's But notice having to call for legal estate, is notice of ties. all his equi[*391] But the legal estate will not protect a purchaser against Chap. XV. the claims of persons whose prior right to its protection of another *was known to him before the completion of the purchase, better right even although the extent of such claims were unknown; for instance, where A., knowing that B. had a charge on the property, accepted a mortgage of the estate, relying on the mortgagor's covenants, and then got in an old outstanding term for years, it was held that B., having, in respect of A.'s notice of the first incumbrance, a preferable right to require an assignment of the term, was entitled to priority not only in respect of such first incumbrance, but also in respect of a subsequent charge of which A. had no notice at the date of his advance.(i) legal estate, trustee who has notice And it seems that a purchaser who has completed with- Whether out notice of a prior incumbrance, may get in the legal got in from estate even from a trustee or satisfied mortgagee having of prior notice of such incumbrance, and will be entitled to available himself of its protection; (k)[1] yet it had been doubted (i) Willoughby v. Willoughby, 1 D. & E. 763. (k) See Lord Hardwicke's judgment in Willoughby v. Willoughby, 1 D. & E. 763; Peacock v. Burt, 13 L. J. 35; and see Sugd. 786, where the point is said to be clear. equitable title depended upon a forged will which was produced. It was suggested by the court, that the purchaser was not entitled to its protection, but this view was ultimately abandoned. The court observed, that its impression at the opening of the case was, that the protection of the legal estate extended only to cases where the title of the purchaser for valuable consideration, without notice, was impeached by reason of some secret act or matter done by the vendor, or those under whom he claimed; but upon full consideration of all the authorities, and the dicta of judges and text writers, and the principles upon which the rule is grounded, the court was of opinion that the protection of the legal estate was to be extended, not merely to cases in which the title of the purchaser, for valuable consideration, without notice, is impeachable, by reason of a secret act done, but also to cases in which it is impeached by reason of the falsehood of a fact of title asserted by the vendor, or those under whom he claims, where such asserted title is clothed with possession, and the falsehood of the fact asserted, could not have been detected by reasonable diligence. [1] "The importance of obtaining an assignment of all outstanding terms," says Sugden, (3 Sug. on Vend. 43,) “cannot be too strongly impressed on purchasers. If a purchaser has no notice, and happens to take a defective conveyance of the inheritance, defective either by reason of some prior charge or incumbrance, and if he also takes an assignment of Chap. XV. whether the trustee or mortgagee can safely make the Legal estate got in from incumbran cer, avail. able against conveyance() and if the trustee have executed a declaration of trust in favor of the incumbrancer, and the purchaser have notice of such declaration at the time of getting in the legal estate, he will lose the benefit of its protection.(m) But it is clear that a purchaser by paying off, and getunsatisfied ting in a legal estate from, an unsatisfied mortgagee, may hold it as against all mesne incumbrances of which he subsequent had no notice at the time of completion; and this may be done pendente lite, at any time before a decree to settle priorities.(n) incumbran cers. (1) See 1 D. & E. 771; and Ex parte Knott, 11 Ves. 613. (m) Saunders v. Dehew, 2 Vern. 271; Allen v. Knight, 5 Ha. 272, affirmed, 11 Jur. 527. (n) Belchier v. Renforth, 5 Bro. P. C. 292; and see 11 Ves. 619: the general doctrine is disapproved of by the present Registration Commissioners, and will probably eventually be destroyed by a general registra tion act. the term to a trustee for him or to himself, where he takes the conveyance of the inheritance to his trustee; in both these cases, he shall have the benefit of the term to protect him; that is, he may make use of the legal estate of the term to defend his possession, or, if he has lost the possession, to recover it at common law, notwithstanding that his adversary may, at law, have the strict title to the inheritance." See Williamson v. Gordon's ex'rs., 5 Munf. Rep. 257. Lord Hardwicke was of opinion that the protection arising from a term of years, assigned to a trustee for a purchaser, should extend generally to all estates, charges and incumbrances, created intermediate between the raising of the term and the purchase. See 1 Term Rep. 768. And this doctrine," says Sugden, (3 Sug. on Vend. 44,) "unqualified as it is, seems correct. For, as the term will prevail over a a strict title to the inheritance, it will, of course, be a protection against judgments, mortga ges, and all other incumbrances and estates less than a fee; and it may, in like manner, be used as a shield against an act or commission of bankruptcy." In the ease of Peacock v. Burt, here cited, there was a first mortgagee with the legal estate, a second equitable mortgagee who had given notice to the first, and then a transfer of the first mortgage to a third person, who advanced a further sum to the mortgagor upon the transfer, and had no notice of the second mortgage, and afterwards advanced further sums without notice; of course it was held that the mortgagee of the legal estate, without notice, could hold for all the money advanced against the equitable mortgagee, and a purchaser without notice being safe, although the seller to him had notice. |