Boling v. Howell

• Decision Date: 21 September 1883
• Docket Number: 10,649
• Citation: 93 Ind. 329
• Parties: Boling et al. v. Howell
• Court: Indiana Supreme Court

93 Ind. 329

Boling et al. v. Howell

No. 10,649

Supreme Court of Indiana

September 21, 1883

Rehearing Date: January 29, 1884

Reported at: 93 Ind. 329 at 335.

From the Washington Circuit Court.

Judgment is reversed.

D. M Alspaugh, J. C. Lawler and A. B. Collins, for appellants.

S. B. Voyles and H. Morris, for appellee.

OPINION

Elliott, J.

It is alleged in the complaint of the appellee, that on the 16th day of January, 1880, one Charles S. Boling executed to Jesse Boling two promissory notes for the purchase of real estate conveyed by Jesse to Charles; that in March, 1880, the former assigned the notes to appellee for the consideration of $ 480; that after the execution of these notes Charles Boling conveyed the land to Julia Boling, who, at the time, had knowledge that they were executed for the unpaid purchase-money of the land; that after the assignment and delivery of the notes to appellee, the appellant John W. Reyman instituted an action to set aside the conveyance of Jesse to Charles S., on the ground that it was made for the purpose of defrauding creditors, and recovered judgment declaring it fraudulent, but to that action appellee was not a party; that the land so conveyed by Jesse to Charles, and here in controversy, was ordered sold, and was sold and bought by Reyman, who purchased with full notice.

It is quite clear that the judgment in the action instituted by Reyman did not bind appellee, for it is well settled that a judgment only binds parties and privies. The case must, therefore, depend upon other considerations.

A vendor has a lien for unpaid purchase-money against the grantee and all who purchase from him with notice. Such a lien is, in legal contemplation, an equitable mortgage, and is assignable. Where notes are given for the purchase-money, and are transferred by assignment, they carry the lien to the assignee. Shanefelter v. Kenworthy, 42 Ind. 501; Nichols v. Glover, 41 Ind. 24. Jesse Boling had, therefore, a lien on the land sold to Charles, and by the assignment of the notes transferred it to the appellee.

We find nothing in the complaint impeaching appellee's right to enforce the lien assigned to him. It is assumed in the argument of appellee's counsel that the conveyance was a fraudulent one, and that, therefore, Charles Boling's title was defective, and that of his assignee no better. But the assumption is one not warranted by the facts pleaded. The presumption as to appellee is that of good faith, and this is in no wise overturned by the judgment suffered by his assignor in an action to which he was not a party. As the assumption on which the argument rests is an unwarranted one, we need not decide whether the conclusion would follow.

The fact, conceding it to be the fact, that the notes were assigned to appellee in payment of a precedent debt, does not show that there was no valid consideration for the assignment. A precedent debt is unquestionably a valuable consideration for a contract, but is not such a consideration as will make a grantee or assignee a bona fide purchaser against prior equities. Hewitt v. Powers, 84 Ind. 295; Louthain v. Miller, 85 Ind. 161; Fitzpatrick v. Papa, 89 Ind. 17. As against one who has no prior equity, a precedent debt will support a contract otherwise valid. In the present case it also appears that the appellee surrendered a debt not due, and extended the time of payment of a debt not due, and this brought the case fully within the rule laid down in Gilchrist v. Gough, 63 Ind. 576; Kester v. Hulman, 65 Ind. 100.

A debtor may prefer one creditor although at the time in failing circumstances. Lord v. Fisher, 19 Ind. 7; McGoldrick v. Slevin, 43 Ind. 522. The fact that the transaction set forth in the complaint may have operated to give one creditor preference does not of itself give it a fraudulent character. Gregory v. Harrington, 33 Vt. 241.

General creditors have equal equities, and in this case, even upon appellants' theory, appellee was their equal, at least until the commencement of the action to set aside the conveyance, and they can not, therefore, successfully aver that the precedent debt was not a valuable consideration sufficient to support the contract of assignment made before their action was instituted.

It is no doubt true, as a general rule, that an assignee takes only the title of his assignor, but the question of what he does take can not be raised by every one, and that is the difficulty here. As against the appellee the appellant Reyman shows no right to impeach the validity of the title of the assignor. If the complaint showed a judgment binding the appellee, or showed fraud as a fact, we should have a very different question, but it does neither; it simply shows a judgment not binding on appellee, and rendered in an action commenced subsequent to his acquisition of title. There is no averment that as to the plaintiff the conveyance was fraudulent, and what was done or suffered by the assignor subsequent to the assignment in no wise affects its validity or force.

It is settled law that one who buys in bad faith may sell to an innocent purchaser and convey a perfect title. Sharpe v. Davis, 76 Ind. 17. This, it may be, forms an exception to the general rule, but it is as firmly established as the rule itself. If, then, the appellee paid a valuable consideration for the land, he is entitled to protection, certainly against those not having superior equities, if not, indeed, as against all owners of unknown or secret equities. The complaint, as we have seen, shows no superior equity in the appellant; for it does no more than show Reyman to be a general creditor, as was his adversary, before he received the assignment of purchase-money notes which carried to him a specific lien on the lands. Until this assignment the parties were equals; thenceforward the holder of the specific lien occupied the "vantage ground."

We see no essential difference between the second and third paragraphs of the answer, and think that the only material fact added to those stated in the complaint is that the transaction between Jesse and Charles Boling was actually fraudulent as against creditors. This fact ought not, in our opinion, to strike down the rights of appellee. It is quite clear that he might have taken from the debtor the land in payment of his debt, although the latter was then insolvent, and the conveyance operated as a preference. Lowry v. Howard, 35 Ind. 170 (9 Am. R. 676). As he, the appellee, was himself free from fraud, and was equal in equity with his adversary, he ought not to lose his rights because of the intermediate conveyance of the land. The case of Gregory v. Harrington, supra, lays down a doctrine in harmony with that which we here declare, and we deem it a correct one.

Equities prevail in the order of priority, and before any specific lien on the land had been acquired by Reyman, the appellee had acquired one, and was thus advanced beyond his competing creditor in the race of diligence, and, as he was free from wrong, he should have judicial protection.

In the attack upon the consideration yielded by the appellee, counsel for appellant lop off the bough which supports their own theory, for Reyman was merely the holder of a pre-existing debt. If this fact gave his adversary no prevailing equity, it certainly supplied him with none. So far, then, as this fact goes, the scales are in equipoise, and they were turned by the procuration of a specific lien for which Howell surrendered his debt against Jesse Boling for one against Charles.

In the instructions given by the court, the jury were told that the appellee was entitled to recover on the note, and to enforce a lien against the land unless the defendant Reyman proved the fourth paragraph of his answer, and it is said that this answer alleges that the plaintiff, Howell, had full notice of the fraud. In so far as concerns the right of the plaintiff to a recovery against Charles Boling on the note, the instruction was correct, for there was no conflict of evidence upon the question of the execution of the notes. As to the right to enforce a vendor's lien a different question arises, for upon this point there was some conflict of evidence. The right to enforce this lien was put in issue by the general denial of Reyman, and we think the court had no right to take this question from the jury.

We deem the instruction faulty in another particular, and that is, in affirming, as it impliedly does, that appellee took the assignment without full knowledge of the frauds of the assignor. It is true, that one who buys is not affected by mere rumors. Foust v. Moorman, 2 Ind. 17; Flagg v. Mann, 2 Sumn. 486, 9 F. Cas. 202. But while this is true it is not true that to charge one with notice, full knowledge is essential. Wade Notice, sections 3, 6, 7. Where the circumstances are such as to put the party on inquiry, and the case is one in which reasonable inquiry would lead to knowledge, the party is chargeable with knowledge. Wade Notice, section 10; Martin v Cauble, 72 Ind. 67. It is perhaps true that the evidence of notice to Howells is weak, but there was evidence which entitled the appellant to the judgment of the jury. Whether the matters proved were sufficient to charge the appellee with knowledge ought to have been submitted to the jury under proper instructions, and they ought not to have been instructed that the defendant must prove full knowledge. It is not necessary that knowledge should be shown by direct evidence; it may be inferred from circumstances. Wherever circumstances are proved from which it may be justly and reasonably inferred that the party had knowledge, then the question is one of fact, and should, under proper statement of the rules of law, be...