Lynch v. Murphy/Opinion of the Court

The question for our determination is whether or not appellant had a valid lien, legal or equitable, upon the real estate in question, at the time the bill of complaint was filed.

We will premise that the decree in the equity cause of Pippert v. English et al. was not void because English and his wife were not personally served with process. Constructive service by publication was authorized by section 787 of the Revised Statutes, relating to the District of Columbia. Hart v. Sansom, 110 U.S. 151, 3 Sup. Ct. 586, relied upon as supporting the proposition that the rights of Mr. and Mrs. English in the land could not be affected by such constructive notice, and that the decree rendered thereon was not entitled to recognition in a federal court, does not support the contention. The Hart Case was explained in Arndt v. Griggs, 134 U.S. 316, 10 Sup. Ct. 557, in which last case it was held that the duty of determining unsettled questions respecting the title to real estate was local in its nature, to be discharged in such mode as might be provided by the state in which the land was situated, where such mode did not conflict with some special inhibition of the constitution, and was not against natural justice; and we held (pages 327, 328, 134 U.S., and page 557, 10 Sup. Ct.) that nothing inconsistent with this doctrine was decided in Hart v. Sansom.

From the evidence contained in the record, we are satisfied that when Pippert instituted the action to annul his conveyance to Mrs. English and Andrew Schwartz, Sr., he did not have actual knowledge tht Mrs. English, or any one claiming to represent her, had incumbered, or attempted to incumber, the land. The question then presents itself: Was the record of the alleged deed of trust to Bean constructive notice to Pippert? We are relieved from extended discussion in answering this question by the admissions made in the answer of defendant Lynch and in the brief of her counsel.

In the bill of complaint it is charged that Alexander English was without any proper or competent authority in law to execute said deed of trust. This refers to the authority of English to execute the deed of trust as the attorney of his wife. This allegation is admitted by the answer, for while it is averred therein, 'upon information and belief, that said Alexander English did have proper and competent authority in law to execute the trust to said William W. Bean,' it proceeds to aver, in connection with this allegation, that 'the true facts in relation thereto' were, in substance, that the payment made by English when the property was purchased from Pippert was made with money belonging to English personally; that he had personally received the benefit of the consideration from Lynch, and that the said deed of trust, 'while not technically sufficient in law to constitute a valid deed of trust, * *  * was, on the part of said English, a pledge of property of which he was the real and equitable owner, for a just debt which he owed to said James Lynch; and that the said deed of trust constitutes an equitable mortgage upon the said premises, which this defendant has the right to have enforced.' In the brief of counsel for appellant the matter is thus stated: 'The only remaining objection to the Lynch trust is the defective character of the instrument. It is admitted in the answer that the instrument is inartificially drawn, and, as a mortgage, is technically defective.' And the argument then proceeds to maintain that the evidence clearly established a good equitable mortgage in favor of appellant.

In the face of these concessions it becomes unnecessary to determine what were the particular defects rendering the writing in question legally invalid.

Having concluded that the deed of trust was inoperative as a legal instrument, we recur to the question whether or not its spreading upon the land records of the District constituted constructive notice. As said by Pomeroy in section 652 of his work on Equity Jurisprudence:

'The record does not operate as a constructive notice, unless the instrument is duly executed, and properly acknowledged or proved, so as to entitle it to be recorded. The statutes generally require, as a condition to registration, that the instrument should be legally executed, and that it should be formally acknowledged or proved, and a certificate thereof annexed. If a writing should be placed upon the records with any of these preliminaries entirely omitted or defectively performed, such a record would be a mere voluntary act, and would have no effect upon the rights of subsequent purchasers or incumbrancers.'

Story (Eq. Jur., 13th Ed., § 404) states the doctrine thus:

'The doctrine as to the registration of deeds being constructive notice as to all subsequent purchasers is not to be understood of all deeds and conveyances which may be de facto registered, but of such only as are authorized and required by law to be registered, and are duly registered in compliance with law. If they are not authorized or required to be registered, or the registry itself is not in compliance with the law, the act of registration is treated as a mere nullity, and then the subsequent purchaser is affected only by such actual notice as would amount to a fraud.'

It follows that the recording of the instrument under consideration was a mere nullity in a jurisdiction such as the District of Columbia (Rev. St. D. C. § 440), where particular formalities are required to authorize the recording. To the cases referred to by the authors first cited may be added Dohm v. Haskin, 88 Mich. 144, 50 N. W. 108, and Musgrove v. Bouser, 5 Or. 313, 315, 316; the defect in the recorded instrument in both cases being the absence of a certificate as to the official character of the officer before whom a deed was acknowledged. See, also, 3 Washb. Real Prop. * 592; Wade, Notice, §§ 124-126.

The effect of the decree in Pippert's suit, annulling his conveyance to Schwartz and English, was that Pippert, as the consideration of such cancellation, surrendered the benefit of his vendor's lien, and the security of the deed of trust. When this result was accomplished the unpaid purchase money amounted to $10,390.42, and was in fact but $500 less than the entire consideration for the sale, and practically represented the full value of the property. By the reconveyance to him under the decree, Pippert stood in the position of a bona fide purchaser of the property for value, and, as we have found he did not have actual or constructive notice of the real or supposed equity of Mrs. Lynch, there would seem to be no ground upon which to base the claim that, at the time of the institution of this suit, mrs. Lynch had an equitable mortgage or lien upon the property. Let us assume, for the sake of the argument, that, as claimed by counsel for the appellant, Alexander English should be regarded in equity as having been the real owner of the property at the time of the transaction with Lynch, though the legal title was in his wife; that Lynch paid to English full consideration for the cash paid and notes delivered by English; and that Lynch accepted the notes on the faith of the security of the property in question. As against English, it is clear, under the authorities, that from the nature of the transaction, upon the hypothesis we have stated, a lien would have arisen in equity against English's interest in the land. Jones, Mortg. §§ 162, 163, 166, 168, 169; Story, Eq. Jur. §§ 1020, 1231; Peckham v. Haddock, 36 Ill. 38; McClurg v. Phillips, 49 Mo. 315; Gale v. Morris, 29 N. J. Eq. 222, 224. But a bona fide purchaser for value of property subject to an equitable mortgage, without notice of such mortgage, takes the property free of the equitable mortgage. Jones, Mortg. p. 139, § 162, citing Watkins v. Reynolds, 123 N. Y. 211, 25 N. E. 322. Watkins v. Reynolds was a case where a cestui que trust for life executed a mortgage in fee on the trust estate, and after her death the remainderman in fee executed, under seal, an unattested paper, covenanting, for sufficient consideration, that the mortgage should continue to be a lien on the land. Afterwards he sold and conveyed to another, who paid a sum in cash, and contracted to assume certain mortgages and pay certain debts of the vendor to third persons, equal in amount to the remainder of the purchase price. The cash payment and part of these debts were made before the purchaser had actual notice of the agreement to continue the mortgage lien. Upon this state of fact the court, speaking through Peckham, J., held that since the purchaser's agreements were made before notice, and remained in full force after notice, there was no equitable lien against the property, in favor of the mortgagee, for the purchase money unpaid at the time of such notice.

That notice to Pippert, actual or constructive, was an element essential to the survival of the lien, as against Pippert, is admitted in the answer of Mrs. Lynch, expressed by the averment that Pippert had notice of the existence of the supposed deed of trust. As that allegation was not established by the evidence, but the contrary was proven, it follows that the claim of a lien or a mortgage upon the property, in favor of Mrs. Lynch, has not been made out. And this conclusion inevitably results from the following additional considerations:

Pippert instituted and prosecuted his suit for cancellation of his conveyance against all persons known to him as claiming an interest in or incumbrance on the property. He did what the law required, in order to make his judgment binding upon all the world; and, when the court divested Mrs. English of all her interest in the property, appellant's alleged rights, acquired through her, not having been legally recorded before judgment, were divested by the decree as effectually as if appellant had been a party. There being no actual notice, and the recording of the defective deed not operating as constructive notice, the alleged equitable lien is wholly inoperative against those holding under the decree.

The decree of the general term of the supreme court of the District of Columbia must be affirmed.

Mr. Justice BREWER, not having heard the argument, took no part in the decision of this cause.