Knapp v. Bailey

• Decision Date: 01 March 1887
• Citation: 79 Me. 195,9 A. 122
• Court: Maine Supreme Court
• Parties: KNAPP, Jr., v. BAILEY.

9 A. 122

79 Me. 195

KNAPP, Jr.,

v. BAILEY.¹

Supreme Judicial Court of Maine.

March 1, 1887.

On appeal from decision of single justice at nisi prius, Penobscot county.

Bill in equity brought to remove a cloud from the complainant's title, and to redeem the land from an equitable mortgage. The judge at nisi prius rendered a decision in favor of the complainant, and the respondent appealed to the law court.

A. W. Paine and C. P. Stetson, for complainant.

Davis & Bailey, for respondent.

PETERS, C. J. This bill seeks to remove a cloud overhanging the complainant's title to an undivided parcel of land,—in effect, to redeem the land from an equitable mortgage, the allegation being that the debt has been paid. We can have no reasonable doubt of the facts thus far alleged. The defendant's grantor was called as a witness by the complainant. The defendant contends that his testimony was inadmissible, and cites cases which sustain the ordinary principle that a grantor cannot dispute with his grantee the title which he has assumed to convey. The objection goes to the testimony, and not to the witness personally. The principle of estoppel, which is invoked, is aimed, not against the witness because he is a grantor, but against any oral testimony to contradict the terms of a deed. As said by Judge Curtis in answer to the same objection: "The facts to be proved were dehors the record, and one witness was as competent, in point of law, [to prove them,] as another." Where a grantor is allowed to prove a fact by another, he may do so by himself. Holbrook v. Bank, 2 Curt. 246.

It is true, as a general rule, that the effect of a deed cannot be controlled by oral evidence. But among the exceptions to the rule is that in equity, where the proof is clear and convincing, a deed absolute on its face may be construed to be an equitable mortgage. In Howell v. Jewett, 69 Me. 293, this exceptional doctrine was first allowed to have operation in this state. It was fully accepted in Stinchfield v. Milllken, 71 Me. 567, where the opinion says: "But the transaction was in equity a mortgage,—an equitable mortgage. The criterion is the intention of the parties. In equity this intention may be ascertained from all pertinent facts, either within or without the written parts of the transaction. Where the intention is clear that an absolute conveyance is taken as a security for a debt, it is in equity a mortgage. The real intention governs." In Lewis v. Small, 71 Me. 552, the same doctrine is admitted. It has since been affirmed in other cases, receiving an able discussion in the late case of Reed v. Reed, 75 Me. 264. The effect of many of the older cases in this state has been swept away by this new principle in our legal system,—a product of the growth of the law, very greatly promoted by legislative stimulation. The present case must be governed by the equitable rule declared in the later decisions.

Another question presented by the case is whether the statutory provision (Rev. St. c. 73, § 12) which declares that a title of a purchaser for a valuable consideration cannot be defeated by a trust, unless the purchaser had notice thereof, means actual or constructive notice. Section 8 of the same chapter requires "actual notice" of an unrecorded deed to defeat a subsequent purchaser's title from the same grantor. The two sections were incorporated in our statutory system at the same time,—in the Revision of 1841. One requires "notice," the other "actual notice." We think the difference in phraseology may be accounted for partly on the idea that section 8 would be applicable more to law cases, and section 12 more to questions in equity. We can have no doubt that there may be cases of constructive trusts where section 12 would apply. At the same time, where the facts present questions analogous to those ordinarily arising under the other section, we think actual notice would be required; that under either section, in cases generally, actual notice, as we understand the meaning of the term, would be the rule; and that actual notice applies in the present case.

There is a conflict in the cases and among writers as to what is actual notice. Much of the difference is said to be verbal only,—more apparent than real. Certain propositions, however, are quite well agreed upon by a majority of the authorities. Notice does not mean knowledge; actual knowledge is not required. Mr. Wade describes the modes of proving actual notice as of two kinds. One he denominates express notice, and the other implied. "Implied, which imputes knowledge to the party because he is shown to be anxious of having the means of knowledge, though he does not use them; in other words, where he chooses to remain voluntarily ignorant of the fact, or is grossly negligent in not following up the inquiry which the known facts suggest." Wade, Notice, (2d Ed.) § 5. Some writers use the word "implied" as meaning constructive, and would regard what is here described to be implied actual notice as constructive notice merely. As applicable to actual notice, such as is required by the sections of the statute under consideration, we think the classification of the author whom we quote is satisfactory. The author further explains the distinction by adding that "notice by implication differs from constructive notice, with which it is frequently confounded, and which it greatly resembles, with respect to the character of the inference upon which it rests; constructive notice being the creature of positive law, or resting upon strictly legal inference, while implied notice arises from inference of fact." It amounts substantially to this: that actual notice may be proved by direct evidence, or it may be inferred or implied (that is, proved) as a fact from indirect evidence,—by circumstantial evidence. A man may have notice or its legal equivalent. He may be so situated as to be estopped to deny that he had actual notice. We are speaking of the statutory notice required under the conveyances act. A higher grade of evidence may be necessary to prove actual notice appertaining to commercial paper. Kellogg v. Curtis, 69 Me. 212. The same facts may sometimes be such as to prove both constructive and actual notice; that is, a court might infer constructive notice, and a jury infer actual notice, from...