Pugh v. Highley
| Citation | 53 N.E. 171,152 Ind. 252 |
| Decision Date | 09 March 1899 |
| Docket Number | 18,518 |
| Parties | Pugh v. Highley et al |
| Court | Supreme Court of Indiana |
From the Grant Superior Court.
Reversed.
Moon & Wolf, for appellant.
R. T St. John and W. H. Charles, for appellees.
Suit to foreclose vendor's lien. Appellees conveyed lands to one Clayborn Highley and took his unsecured note therefor. Afterwards appellant recovered judgment against the grantee and caused execution to issue. The sheriff levied on the lands in question. At the sale, appellant was the purchaser. When the time for redemption expired, she received a sheriff's deed for the lands.
Complaint in two paragraphs. The first is silent concerning notice to appellant of appellees' equity. The second charges that appellant had notice before receiving the sheriff's deed. Appellant's several demurrers for want of facts were overruled. A demurrer was sustained to an answer of appellant's, in which she averred that she bid at the sale, paid the costs, and receipted the sheriff for the full amount of her judgment, without knowledge or notice of appellees' claim. Judgment for appellees after trial on issues completed by answers of general denial and payment and reply denying payment.
The question is: Does a judgment creditor, who in good faith buys at a proper execution sale on his own valid judgment, take the land subject to prior secret equities?
The lien of a judgment attaches only to the actual interest of the debtor in the land. While the judgment remains unexecuted, the lien may be subordinated to any prior equity, though secret; for the creditor pays or surrenders nothing to or for the debtor, and continues to hold against the debtor his full claim, which the court has merely changed from a cause of action into a judgment.
A security for an antecedent debt will be upheld between the parties; but the taker will not be protected against prior secret equities, because he parts with nothing.
But a purchaser who pays the owner the value of the land takes the title clear of equities of which he has no notice.
And a creditor who, without notice, cancels a preexisting debt in consideration of his debtor's conveying him land, is a good faith purchaser for value. To hold that the debtor may sell his land to a stranger and turn over the purchase price (money, notes, goods, land) to his creditor in satisfaction of the debt, whereby the creditor is free from claimants of secret equities; and to hold that the creditor, if the debtor conveys the land to him in payment of the debt, is liable to be affected by secret equities,--is to approve the roundabout and involved, and to condemn the straight and simple, method of accomplishing the same result,--using the land to pay the debt.
A good faith purchaser, other than the judgment creditor, at a proper execution sale on a valid judgment, who pays the sheriff the amount of his bid, acquires all the right, title and interest in the land sold (except redemption) that the judgment debtor could have conveyed to him by deed of bargain and sale. As to secret equities, he stands on the same footing with the good faith purchaser for value from the apparent owner of land. In both cases, the purchaser irrevocably parts with his money, relying and having the right to rely on getting not merely what the debtor actually owns, but what from the public records he apparently owns. In either case,--before the debtor himself conveys, or before the sheriff conveys for him,--the holder of the prior secret equity has had it in his power to prevent any one's being misled by the false situation. If either the subsequent purchaser or the holder of the secret equity must suffer or be postponed, it should be the latter, since his initiative made delusion by the debtor's apparent circumstances possible.
What, now, is the position of the judgment creditor who purchases at a proper execution sale on his own valid judgment? (The premises exclude the question of the effect upon the judgment creditor of irregularities in the proceedings.) The authorities holding that he is not a good faith purchaser for value seem to be based upon either or both of two propositions: that he has parted with nothing,--has not changed his position for the worse; and that he will not be permitted to urge a claim that rises higher than the source of his right (by that, meaning the lien of his judgment).
The judgment creditor purchaser has parted with value and has changed his position for the worse. He has paid to the sheriff the amount of his bid in cash, actually or constructively; for, if he merely receipts for payment of his judgment in whole or in part, the transaction in contemplation of law is the same as if he had paid the sheriff in cash and the sheriff had paid him in cash. His payment is just as irrevocable as that of a stranger purchaser. His right to vacate the satisfaction of the judgment is no greater than that of a stranger purchaser. (And under section 765 R. S. 1881, section 777 Burns 1894, section 765 Horner 1897, there can be no right of that kind in the present case, for defects in the proceedings and want of title in the debtor are excluded from the question, by the facts.) If the judgment creditor purchaser does not pay at the time of the sale, he is liable to judgment for the amount of the bid, and damages, interest and costs, like any other purchaser. Section 760 R. S. 1881, section 772 Burns 1894, section 760 Horner 1897.
He has also changed his position for the worse, if he is not to be permitted to hold under the execution sale the same as a stranger purchaser. The debtor may have directed the sheriff to levy upon the very land that was subject to the secret equity. Manifestly the judgment creditor without notice is ethically as innocent in bidding as is the stranger. By the sale, the execution becomes functus officio and the judgment creditor has lost the lien of his execution upon the goods and chattels of his debtor. By the sale, the judgment is satisfied pro tanto and the judgment creditor has lost the lien of his judgment upon the other lands of his debtor.
But, it is said, he may not urge a claim of higher value than the source of his right, that is, his judgment lien. Why not?
If an innocent stranger pays for a deed, he acquires the apparent title of the grantor and the holder of the secret equity will not be heard to say aught against it. That is, the purchaser gets more than the debtor had. Stronger than the innocent stranger's, however, are the equities of the judgment creditor purchaser without notice. For the holder of the secret equity has less opportunity to protect himself against the stranger than he has against the judgment creditor; since he may have no means of ascertaining, even by the exercise of the highest vigilance, to whom his secret trustee is about to convey, but it is only his own inaction that can prevent his learning of the judgment before sale,--in time to subordinate the lien to his rights. Shall equity offer a premium for sloth? If not, then the judgment creditor purchaser should likewise take more than the debtor had.
If an owner of an antecedent debt cancels in good faith the obligation in consideration of a deed from his debtor, he takes the title free from secret equities. That is, the purchaser gets more than the debtor had. Shall the private, maybe secret, extinguishment of the debt be held of more exalted worth in equity than the law's public and open satisfaction thereof? If not, then the judgment creditor purchaser should likewise take more than the debtor had.
If a stranger without notice buys at execution sale, his purchase cuts off secret claims against the land. That is, the purchaser gets more than the debtor had. The law does not prohibit, but, on the contrary, encourages the judgment creditor to bid; for it is in the interest of the law's execution of the judgment and to the advantage of the debtor that he should compete with the other bidders. If a stranger purchases, the sheriff pays over the money to the judgment creditor who thereby receives satisfaction out of property on which his judgment may not have been actually a lien. Shall equity accredit the circuitous, and discredit the direct, means to the same end? If not, then the judgment creditor purchaser should likewise take more than the debtor had.
It is a misapprehension to say that the rights of a judgment creditor purchaser arise from the judgment lien and therefore continue subject to prior secret equities. His position as purchaser is in no sort of legal privity with his position as judgment creditor. When the sale is made, he ceases to be a judgment creditor. His rights thenceforward are those of a purchaser at execution sale. The contention that the rights of a purchaser at execution sale are one thing if he is a stranger and another if he is the judgment creditor is untenable in reason.
The decisions of this court, upon analysis, are found in conformity with these principles.
In Catherwood v. Watson, 65 Ind. 576, the facts were these: Daniel Watson bought land with his wife's money and took title in his own name. Subsequently Catherwood obtained judgment against one Mills on which Daniel became replevin bail. The land was sold on execution to satisfy the judgment and Catherwood purchased. Mrs. Watson sued to quiet title. Catherwood had no notice of her claim till after the execution sale. It was held that Catherwood was entitled to the land clear of Mrs. Watson's secret equity.
It appears in Rooker v. Rooker, 75 Ind. 571 that Samuel Rooker used money of his wife in buying land and took title in his own name. His wife had instructed him to buy the land for their daughter Mary. Samuel recognized the trust and made a will devising the land to...
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