Refeld v. Woodfolk

THIS was an appeal from the Circuit Court of the United States for the district of Arkansas.

The case is fully stated in the opinion of the court.

It was submitted upon printed arguments by Mr. Pike for the appellants, and Mr. Meigs for the appellee.

The arguments upon both sides took a wide range, and included many points which would have been applicable, if a suit had been brought at law upon the covenant of warranty, such as that there could be no recovery, except for nominal damages, until the vendee was evicted. With respect to the interposition of a court of equity in a case situated like the present, Mr. Pike said:

The chief question in this case is a perfectly simple one. Woodfolk proposed to purchase certain land of Notrebe; he was informed that it was mortgaged to the Real Estate Bank, which was insolvent. The mortgage was of record; and the charter of the bank, showing the liability under the mortgage, was a public law of the land. It was totally uncertain what would be the ultimate liability under the mortgage. It was meant to cover the share of Notrebe and Cummins in any deficit of the assets of the bank. Whether there would be any deficit or not was not known. Notrebe told Woodfolk all he knew about it; that the bank attorney thought there would not. All the sources and means of information on that subject were as open to Woodfolk as Notrebe; and knowing, or having the means of knowing, all that anybody could know, he purchased the land at the low price of $10.50 per acre, and took a bond from Notrebe, to make him 'a good and sufficient conveyance in fee simple, with covenant of warranty.'

Can he, after occupying the land several years, and paying up the purchase money, when it is still as uncertain as ever, what, if any, will be the ultimate liability under the stock mortgage, claim at the hands of a court of equity that it shall compel Notrebe's heirs to indemnify him against such contingent liability? Or will it not be held that he made a chancing bargain, an aleatory contract, getting the land at the price he did on account of the contingent encumbrance upon it, and taking the risk of that encumbrance? That is the whole question.

(Mr. Pike then proceeded to argue that the words of the covenant did not bind Notrebe to make a conveyance with a covenant against encumbrances.)

The quia timet jurisdiction of the court of equity is one which the court has often exercised; but it will be extremely tender in so doing, because it materially varies the agreement of the parties at the time of the transaction.

Flight v. Cook, 2 Ves. Sen., 620.

And the doctrine seems to be well settled, that where a deed has been executed, and the only covenants in it are for quiet enjoyment or of warranty, and so long as there has been no eviction, actual or constructive, equity will, as a general rule, refuse to entertain a bill for relief, either by way of enjoining the purchase money, or a fortiori, by rescinding the contract; and, although it has been at times intimated that the presence of a covenant for seizin may in some cases fortify the position of the purchaser, it does not appear that the cases generally draw much distinction between the different covenants for title.

Rawle on Cov. for Title, 679, and the many cases cited.

If this contract is still executory, then in that case, as a general rule, the purchaser is entitled to a good title, free of encumbrances. He cannot be forced specifically to perform, unless such title can be made. If sued for the purchase money, he may enjoin its collection, or compel the removal of encumbrances. That is the general rule. But the question here is, what relief has he in equity, if, making the bargain, knowing of an encumbrance, he pays up the purchase money without requiring it to be removed, and when it is of the nature of the one here complained of?

It is not a question here, whether he could be compelled to perform his contract. He has performed it; he is in possession; has used the land and enjoyed its issues now for nearly ten years. He does not offer to give it up. He protests against doing so. If he had all the covenants he could possibly demand, there has been no breach of any of them that would entitle him to damages; and therefore he would be entitled to recover only nominal damages at law, and would have no relief in equity; that is too clear to be denied. Rawle, 680. How can be be entitled to any more relief, because he has not yet taken a deed? He has the same covenants he would have in a deed, and they are as effectual to protect him. The difference between a contract executory and one executed by deed is, that in case of the latter, if he had no covenants, he would have no remedy; and if he had them, he must look to them. In the former case, he might resist a demand of performance, and object to taking the property or to paying the price; but when he has paid, and is in possession, it makes no difference whether the contract is executed or executory. Having chosen to perform, all he is entitled to is his conveyance. If he could defend at law against payment of the purchase money, wholly or in part, he might have relief in equity; but he cannot be sued for what he has paid.

In Anon, 2 Freem., 106, a case was cited 'where a purchaser brought his bill to be relieved where encumbrances were concealed; but was dismissed; for he ought to have provided against it by covenants; but it was said by Rawlinson, that if the purchaser had in that case had his money in his hand, this court would have helped him, but not after he had paid his money.'

Again: We have sought in vain for a case where a bill, asking indemnity alone, has been sustained, or even heard of, filed by a purchaser when that indemnity was sought against an encumbrance by mortgage, well known to the purchaser at and before the time of purchase, and where he had fully paid the purchase money without requiring indemnity or complaining of the encumbrance.

It is a mere attempt 'to amend the plaintiff's security in equity; to give him a better remedy for his money in chancery than he had provided for himself by the condition of the bond which he took.' There was no fraud in Notrebe; he told Woodfolk all that he himself knew about the encumbrance. Woodfolk made the purchase and took the bond with his eyes open. That he has come to think the encumbrance more serious than he imagined, is no reason why a court of equity should mend or increase his security; that is not its province. The heir of Notrebe is in no default; being a minor, she could not convey. The bill is a plain attempt to get the court of chancery to mend Woodfolk's bargain, and we see no better ground to assign for the application, than 'that chancery ought to suffer no man to have an ill bargain.'

A bill filed for compensation singly cannot be maintained.

Newham v. May, 13 Price, 749.

The jurisdiction of equity in cases of compensation is only incidental and ancillary to that of giving relief by enforcing the performance of contracts for the sale of real property. Id.

The court will give it when title to a part of the property fails, and it decrees that the purchaser shall accept, or he agrees to accept, that to which there is good title.

Besant v. Richards, 1 Taml., 509.

Pratt v. Law, 9 Cranch, 458, &c.

And there is certainly no ground on which to decree an indemnity against an encumbrance that was known to the purchaser when he made his contract, and to protect himself against which, he asked no provision to be put into the contract. The court will not insert that provision, when he himself did not think it worth his while to do so. He made his contract as he pleased, and must be content with it. If he had not known of the encumbrance, the case would be very different.

Mr. Meigs said that the present bill was filed to have a specific performance of Notrebe's covenant to make the complainant a good and sufficient conveyance in fee simple, if Notrebe's heirs can perform it, and if they cannot, that what title they have may be divested out of them, and vested in complainant, with indemnity against the mortgage.

Mr. Meigs then cited a number of cases in illustration of these principles, and then proceeded to consider the interference of a court of equity.

It is familiar law, that the general principles of the contract of sale, both in this country and in England, recognise and enforce, while it is still executory, as in this case, the right of the purchaser to a title clear of defects and encumbrances.

Rawle on Covenants, 566.

Burwell v. Jackson, supra.

But, practically, how is this to be done, in a case circumstanced as the one in hand? Before the payment of the purchase money, we have seen that it can be done by an abatement of the purchase money to an amount equal to the cost of removing the encumbrance. And the vendor must discharge an encumbrance, not disclosed to the vendee, whether he has or has not agreed to covenant against encumbrances, before he can compel the payment of the purchase money.

Sugden, chap. 12, sec. 2, par. 2.

Although the purchase money has been paid, and the conveyance is executed, yet if the defect do not appear on the face of the title deeds, and the vendor was aware of the defect, and concealed it from the purchaser, or suppressed the instrument by which the encumbrance was created, or on the face of which it appeared, he is, in every such case, guilty of a fraud; and the purchaser may either bring his action on the case, or file his bill in equity.

Sugden, chap. 12, sec. 2, par. 17.

In Sergeant Maynard's case, he was denied relief, because he had parted with his money, and taken a bond for repayment of it, on a certain condition.

2 Freeman's Rep., 2.

In our case, Woodfolk took a bond to make him a good and sufficient conveyance in fee, and then paid the purchase money. And afterwards he discovers that the land is encumbered for more than its entire value, the encumbrance having been represented to him as of no validity or force, and its true nature sedulously concealed, and the deed not even shown.

Now, in these circumstances, he is entitled, unquestionably, to a conveyance of the fee simple that shall be effectual. Will the court content itself by simply decreeing that a deed shall be made, formally conveying the fee, but leaving the land under the burden of the encumbrance; or divesting what title there is in Notrebe's heir, and vesting it in Woodfolk?If the court be of opinion that Woodfolk is entitled to 'an operative conveyance, one that carries with it a good and sufficient title to the land conveyed,' as Kent said in Clute v. Robinson, 2 Johns. R., 612, already cited, there seems to be no practical way of effecting this, but by compelling Notrebe's heir and representatives to extinguish the mortgage, or to buy so many State bonds as shall be equal to the stock bond.

It is plain that the heir of Netrebe cannot make a good and sufficient conveyance in fee simple, without, in some way releasing the estate from the mortgage; and it is equally plain that there is no way of releasing the estate from the mortgage but by paying a sum of the State bonds equal to the stock. And Woodfolk might insist upon this; but if he is willing to take such title as can be decreed out of the heir, with an indemnity against the mortgage, that is a relief which is within the power of a court of chancery. The subject will be found pretty fully discussed in Sugden on Vendors and Purchasers, chap. 10, sec. 2. And the weight of the cases there stated and commented on cannot certainly be regarded as weakened in the least by what is reported to have been said by Lord Eldon in Balmorno v. Lumley, 1 Ves. and Beam., 225, cited by Sugden in chap. 7, sec. 2, par. 36. The case, when examined, cannot possibly have the slightest weight, seeing that it is reported in so crude a manner as to leave us wholly in the dark as to its circumstances.

The indemnity which the heir of Notrebe seems bound to make will be, as already suggested, the substitution of another estate instead of the land sold to Woodfolk, to be held by a trustee, to save him harmless against the mortgage. When we ask this, we only ask that Notrebe's heir shall assume the burden of Notrebe's debt, and relieve the complainant against liability for it-a liability which, in his opinion, is not merely visionary, but is extremely likely to embarrass and harass him in 1861, only a year hence.

See Halsey v. Grant, 13 Vesey, 73.

Horniblow v. Shirley, 13 Ves., 81.

Cassamajor v. Strode, Wilson's Ch. R., 428.

Warren v. Bateman, 1 Flannegan and Kelly, 443.

Mr. Justice CAMPBELL delivered the opinion of the court.