Gray v. H. M. Loud & Sons Lumber Co.

• Decision Date: 08 October 1901
• Parties: GRAY v. H. M. LOUD & SONS LUMBER CO. et al.
• Court: Michigan Supreme Court

87 N.W. 376

128 Mich. 427

GRAY v. H. M. LOUD & SONS LUMBER CO. et al.

Supreme Court of Michigan

October 8, 1901

Appeal from circuit court, Wayne county, in chancery; William L Carpenter, Judge.

Action by Emma R. Gray against the H. M. Loud & Sons Lumber Company and another. From a judgment for plaintiff for a portion of the relief claimed, both parties appeal. Reversed on defendants' appeal.

William H. McBryan, for appellants.

Bacon &amp Yerkes, for appellee.

MOORE, J.

On the 22d day of October, 1887, complainant purchased from Hibbard Baker, by land contract, lot No. 162 of the Waterworks subdivision of private claim 257, in the township of Hamtramck, county of Wayne, for a consideration of $500. Fifty dollars of the purchase price was paid at the date of the contract, $50 and interest November 25, 1887 $300 and interest during the year 1888, $50 February 1, 1890, and the final payment of $50 and interest April 1, 1890. Complainant did not record her contract. The lot was a vacant unimproved one. Complainant received a warranty deed of the lot from Hibbard Baker and wife, in pursuance of said contract, on the 22d day of September, 1890, and four days later recorded it. On May 3, 1887, Hibbard Baker and Howard G. Meredith executed to the State Savings Bank a mortgage on 45 lots of the Waterworks subdivision for a consideration of $5,000, which mortgage contained the following clause: 'With the privilege of having any lot released at any time on payment of $300.00, with accrued interest, with three months' extra interest.' This mortgage includes lots 162, 251, 252, and 253. Releases were executed by the State Savings Bank at various times releasing all the lots from this mortgage, except the four lots mentioned. On the 20th day of February, 1889, Hibbard Baker and Howard G. Meredith executed to Caroline E. Richards a warranty deed for lots 251, 252, and 253. On the 18th of March, 1889, Caroline E. Richards deeded said lots to Gustave E. Mann, and on January 1, 1890, he deeded them to the H. M Loud & Sons Lumber Company, which deed was recorded on the 15th of March, 1892. On the 12th day of April, 1895, after all the lots subject to the mortgage had been discharged therefrom except lots 162, 251, 252, and 253, the State Savings Bank assigned the mortgage to the H. M. Loud & Sons Lumber Company for $472.42. Immediately on obtaining the assignment of this mortgage, the H. M. Loud & Sons Lumber Company commenced foreclosure proceedings against all of these lots, and on the 12th day of August, 1895 lot 162 was bid off to the H. M. Loud & Sons Lumber Company for $520.49, being the entire amount claimed to be due on said mortgage, together with the costs and expenses of foreclosure and sale. On the 13th of October, 1899, the H. M. Loud & Sons Lumber Company sold and deeded lot 162 to Anthony Muer for the sum of $750. The defendant the H. M. Loud & Sons Lumber Company had no knowledge of the existence of this mortgage to the State Savings Bank until some time after they purchased in 1892. The complainant had no knowledge of the existence of this mortgage until the 3d day of February, 1896, and she paid all the taxes on this property from the time she purchased it until November, 1895. November 24, 1899, complainant filed this bill, asking: (1) That the purchase of the mortgage by the Louds from the bank be decreed to be a full payment and satisfaction thereof as against Gray, (2) that the foreclosure and sale of lot 162 by the Louds may be declared null and void against Gray, and that the Louds may be decreed to release Gray all their title and interest in and to lot 162 under and by virtue of the mortgage and foreclosure thereof; (3) for general relief. The court made a decree that neither party was entitled to have the other's land sold prior to its own, but that the balance due on the mortgage, and expenses, amounting to $520.49, should be paid ratably by each of the four lots. The court also held that, as the defendant had sold lot 162 to a bona fide purchaser for $750, that amount was a fair valuation of the lot, and that the defendant should account to the complainant for that sum, less $130.12; and a decree was entered requiring the defendant to pay to the complainant the sum of $619.88, that being the difference between the amount for which the lot was sold and one-quarter of the mortgage and expenses. Both parties appealed from this decree, though complainant does not object to having it affirmed.

It is the claim of the complainant that, having purchased, and substantially paid for, her lot before the other lots were sold to defendant's grantors, although her conveyance was recorded subsequent to the record of the first conveyance of the other lots, she was entitled to have those lots sold first for the satisfaction of the mortgage; citing Cooper v. Bigly, 13 Mich. 464; James v. Hubbard, 1 Paige, 228; Ellison v. Pecare, 29 Barb. 333; Libby v. Tufts, 121 N.Y. 172, 24 N.E. 12. In Libby v. Tufts, though the second purchaser pur his conveyance on record first, the first purchaser had fully completed his contract, and entered into possession of the premises. A reference to the other cases will show they, too, are not controlling in this one. Complainant insists that, even though she may not insist upon the lots being sold in the inverse order of alienation, the decision of the circuit judge is undoubtedly in accordance with the law applicable to all cases where it would be inequitable to apply the general rule, and is as favorable to the defendants as the circumstances warrant; citing Cooper v. Bigly, 13 Mich, 464; Bernhardt v. Lymburner, 85 N.Y. 172; Woods v. Spalding, 45 Barb. 602; Hill v. McCarter, 27 N. J. Eq. 41. In Hill v. McCarter the first purchaser took his deed subject to the mortgage, and the court very properly held his land was not wholly relieved from the lien. An inspection of the other cases cited will show they are not decisive of this case in favor of complainant. If Miss Gray's contract had been put upon record, or if she had gone into possession of her lot, and her possession had been so obvious that it would have been notice to subsequent purchasers, her contention that the lots purchased by the defendants must first be sold would be sustained by the great weight of authority. As she did not put her contract upon record, and her lot was a vacant unoccupied lot, can the decree of the circuit judge be sustained? When Miss Gray obtained her land contract, and made payments thereon, she obtained an interest in the land described therein. Balen v. Mercier, 75, Mich. 47, 42 N.W. 666. Section 8988, Comp. Laws, reads: 'Every conveyance of real estate within this state, hereafter made, which shall not be recorded as provided in this chapter, shall be void as against any subsequent purchaser in good faith and for a valuable consideration, of the same real estate or any portion thereof, whose conveyance shall be first duly recorded.' Sections 9035-9038, Comp. Laws, provide for the recording of land contracts. The object of the recording laws is to protect subsequent bona fide purchasers (Godfrey v. Disbrow, Walk. Ch. 262), and to prevent fraud by securing certainty and publicity in such dealings (Atwood v. Bearss, 47 Mich. 72, 10 N.W. 112). In Burns v. Berry, 42 Mich., at page 179, 3 N.W. 924, in commenting on the policy of the recording acts, the court says: 'The protection which this statute gives to a bona fide purchaser does not proceed upon the theory, and is not made to depend upon the fact, that the grantor at the time of such conveyance had any interest in the premises whatever, or that any passed from him by his conveyance to such subsequent purchaser. It is not by force of the conveyances, but by the terms of the statute, that such subsequent purchaser acquires title to the premises. His grantor, having previously conveyed, has no title left to convey, and could therefore by his deed, unaided by the statute, pass none to any third person. Our registry laws, however, step in, and, for the purpose of protecting an innocent purchaser, give him what he supposed, and from an examination of the records had a right to suppose, he was acquiring by his purchase, and to this extent cut off the previous purchaser who negligently failed to record his conveyance.'

Cooper v. Bigly, 13 Mich. 463, throws much light upon the question involved in this case. Justice Campbell, speaking for the court, said: 'It has always been understood to be the settled law of this state that, where mortgaged premises are conveyed or incumbered in parcels, they are, upon a foreclosure, to be sold in the inverse order, of such conveyances or incumbrances, unless the mortgagee will be prejudiced by having the property sold in parcels,--a thing which can never happen where the property, when mortgaged to him, was treated as separate. This doctrine was recognized in Mason v. Payne Walk. Ch. 459, and Caruthers v. Hall, 10 Mich. 40, in both of which cases the principal exception to the rule was referred to and enforced. The same principle was recognized and explained in James v. Brown, 11 Mich. 25. It rests chiefly, perhaps, upon the grounds that, where one who is bound to pay a mortgage confers upon others rights in any portion of the property, retaining other portions himself, it is unjust that they should be deprived of their rights, so long as he has property covered by the mortgage out of which the debt can be made. In other words, his debts should be paid out of his own estate, instead of being charged on the estates of his grantees. Any other rule would be, in effect, to enable him to enjoy for his own benefit that which he has once vested in another, and in a measure to recall his own grant. The rule cannot, therefore, depend upon...