McDonald v. Belding/Opinion of the Court

According to the evidence in the cause, McDonald paid in cash the full consideration recited in the deed from Flynn, without actual notice of any claim to the property by the plaintiffs, or either of them. Did he have such constructive notice of the plaintiffs' claim as deprived him of the right to be regarded as a bona fide purchaser for value? It is said that in Arkansas no one can be deemed an innocent purchaser if he holds under a quitclaim deed. In that state, 'a quitclaim deed is a substantive mode of conveyance, and is as effectual to convey all the right, title, interest, claim, and estate of the grantor as a deed with full covenants, although the grantee has no possession of or prior interest in the land,' and it is not necessary that a vendee hold 'under a deed with general covenants of warranty to entitle him to protection as an innocent purchaser;' although, where 'a person bargains for and takes a mere quitclaim deed, or deed without warranty, it is a circumstance, if unexplained, to show that he had notice of imperfections in the vendor's title, and only purchased such interest as the vendor might have in the property.' Bagley v. Flecher, 44 Ark. 153, 160; Miller v. Fraley, 23 Ark. 735, 740.

In Gaines v. Summers, 7 S. W. Rep. 301, 50 Ark. 322, 327, 328, the court, after referring to the fact that a deed recited a consideration of only five dollars for real estate which had cost $6,000, said: 'Add to this fact that the conveyance executed was a quitclaim deed, and the conclusion that Mrs. Saunders did not acquire a good and valid title, in the absence of an explanation, would be irresistible. It was, at least, sufficent to have put appellants on inquiry, which, if they had prosecuted with ordinary diligence, would, doubtless, have led to actual notice of the facts as shown by the evidence in this case. But they prosecuted no inquiry, and it follows that they are not bona fide purchasers without notice.' In the same case it was said that a person purchasing an interest in lands 'takes with constructive notice of whatever appears in the conveyances constituting his chain of title;' and that, if anything appeared in such conveyances, sufficient to put a prudent man upon inquiry, it was his duty to make the inquiry, and he would be charged by the law with the actual notice he would have received if he had made it. These cases fall far short of sustaining the broad contention of the plaintiffs in respect to quitclaim deeds. On the contrary, they show that, in Arkansas, one may become entitled to protection as a bona fide purchaser for value, although holding under a deed of that kind. Applying the principles of those cases to the present case, we are of opinion that McDonald is entitled to protection as an innocent purchaser. The deed that he accepted was not drawn as a quitclaim deed pursuant to any specific direction given by him. So far as the evidence discloses, the amount paid by him was the full value of the property. If he had, before purchasing, instituted an inquiry as to the title, so far as it was shown by the record of deeds, he would not have found any title of record in the plaintiffs. But he would have found that Flynn held under a patent from the United States based upon a claim established in favor of the patentee, under the acts of congress relating to the Hot Springs reservation. It is true that if he had caused the proceedings of the Hot Springs commission to be examined he would have seen that Belding contested, with Flynn, before that tribunal, the right to purchase the lot here in dispute. But he would also have learned that Flynn's right was recognized by the commission, and, from the records of the courts, state and federal, he would have learned that more than seven years had then elapsed without legal proceedings upon the part of the plaintiffs questioning the correctness or validity of the judgment by that tribunal in favor of Flynn. He might well have supposed that Belding had acquiesced in the judgment. Under all the circumstances, it cannot be held that McDonald, although taking a quitclaim deed, was chargeable, when he purchased, with notice of any existing claim to the property upon the part of the plaintiffs, or of either of them.

It is contended that the answer of McLonald does not support the defense of being an innocent purchaser, in that, while denying notice of the plaintiff's claim at the time of the payment of the purchase money, it did not deny that he had such notice at the time of the delivery of the deed to him. This position is supposed to be sustained by Byers v. Fowler, 12 Ark. 286, and Miller v. Fraley, 21 Ark. 22. In the first of those cases, the court, observing that the protection of a bona fide purchase is necessary only when the plaintiff has a prior equity which cannot be barred or avoided except by the union of the legal title with an equity arising from the payment of the money and receiving a conveyance without notice, and with a clear conscience, said: 'Notice must be denied previous to and down to the time of paying the money and the delivery of the deed.' In the other case, the language of the court was: 'The answer of Green wood & Co. should have positively denied notice of the fraud down to the time of paying the consideration and receiving the deed.' The general rule announced in those cases applies where the payment of the consideration and the acceptance of a deed by the purchaser occur at different times. In such cases, the denial of notice, in order to support a claim to protection as a bona fide purchaser, must relate both to the time when the deed is delivered, and to that when the consideration was paid. But, where it appears upon the face of the answer that the purchase for a certain price and the delivery of the deed were at the same time, and as parts of one transaction, the denial of notice until the defendant had made the purchase is equivalent to a denial of notice at the delivery of the deed. McDonald's answer denies every circumstance set forth in the bill from which notice could be inferred. He expressly alleges in his answer that he never heard of any claim of the plaintiffs until he had made the purchase and paid in cash the sum of $8,500 for the property. And in his deposition he distinctly states that he first knew of the plaintiffs' claim when he received notice of this suit. His evidence is not contradicted by anything in the record. This is a substantial compliance with the rule announced in the cases last cited.

It is proper to say that the present case is unlike Rector v. Gibbon, 111 U.S. 276, 4 Sup. Ct. Rep. 605. That case did not present any question in respect to the rights of a bona fide purchaser for value from the person to whom the Hot Springs commission accorded the right to purchase.

The decree is reversed, with directions to dismiss the bill.