Savings Bank v. Creswell

• Decision Date: 01 October 1879
• Citation: 25 L.Ed. 713,100 U.S. 630
• Parties: SAVINGS BANK v. CRESWELL
• Court: U.S. Supreme Court

100 U.S. 630

100 U.S. 630

25 L.Ed. 713

SAVINGS BANK v. CRESWELL.

October Term, 1879

APPEAL from the Supreme Court of the District of Columbia.

On June 20, 1870, the firm of S. P. Brown & Son made to Samuel P. Brown its promissory note for $10,000, payable to his order one year thereafter, which he duly indorsed to the Freedman's Saving and Trust Company. To secure its payment, he executed to Daniel L. Eaton, the actuary of the company, a deed of trust for certain lots of ground in Mount Pleasant, in the District of Columbia. Default having been made in the payment of the note, the trustee sold the property Oct. 12, 1872, and conveyed it to the company.

On March 3, 1870, John M. Jolly obtained in the court below a judgment against Samuel P. Brown. At various times in 1873 the company, for a valuable consideration, sold and conveyed a portion of said lots to different purchasers, giving to each its bond to save him harmless against said judgment. It still holds the remaining lots.

Some time about December, 1870, the National Savings Bank of the District of Columbia loaned to said Brown, or to said firm, moneys, to secure the payment of which he executed deeds of trust upon a number of other lots in Mount Pleasant. The moneys remaining unpaid, the bank, to protect its security against said judgment, purchased the same from Jolly, and, in July, 1874, issued an execution thereon, and caused it to be levied on the lots embraced by the trust-deed to Eaton.

This bill against the Savings Bank was filed by John A. J. Creswell, Robert Purvis, and Robert H. T. Leipold, the commissioners of the Freedman's Savings and Trust Company. It alleges that said promissory note remains unpaid, except so far as it has been reduced by the application of the proceeds of the lots so sold by the company, and that the latter is willing to pay its pro rata share to relieve from the lien of said judgment them and the remaining lots conveyed by Eaton, if it is in law or in equity bound so to contribute. It prays for an injunction restraining the Savings Bank and the marshal for said district, who was made a defendant, from selling said lots under said execution, and for general relief. By an amended bill, the purchasers from the company were made defendants. The National Savings Bank set up among other things in its answer that Brown, at the time of the rendition of said judgment, owned a considerable amount of property subject to the lien of said judgment other than that described in the complainants' bill, which property having been conveyed by him subsequently to his conveyances in trust to secure his debt to the defendant, the purchasers thereof are necessary parties in order to charge them with a pro rata share of said judgment.

The remaining facts are stated in the opinion of the court.

The special term decreed that the complaints were entitled to have all the real estate belonging to said Samuel P. Brown on the twentieth day of June, 1870, bound by the judgment at law in favor of John M. Jolly, sold in the inverse order of its alienation by said Brown, including that conveyed by him for the security of the National Savings Bank, before the lands conveyed for the security of the Freedman's Savings and Trust Company can be called upon to contribute to the payment of any part of said judgment. The defendants were also enjoined from in any wise interfering with any of said property for the purpose of collecting or satisfying the said judgment, or any part of it, until all the other real estate belonging to said Brown on said twentieth day of June, bound by said judgment, shall have been sold, and the proceeds applied to the payment thereof.

That decree having been affirmed by the Supreme Court of the District of Columbia at its general term, the National Savings Bank appealed to this court.

Mr. James M. Johnston for the appellant.

The rule that where several parcels of land, bound by a common charge, are conveyed by warranty deed to different purchasers and at different times, such parcels are charged with the paramount lien in the inverse order of their alientation, provided the junior purchasers have notice of the lien and of the prior conveyances of portions of the land bound by it, had never, previously to the decree in this case, been adopted by the Supreme Court of the District of Columbia.

On the contrary, this court, in Hughes v. Edwards (9 Wheat. 489), recognizes the opposing rule that, in marshalling real securities bound by a common charge, each piece of the incumbered property shall bear its share of the burden, in the proportion which the value of such parcel bears to the whole incumbrance, and irrespective of the order in which the several parcels may have been conveyed. That case constitutes a rule of property in the District of Columbia, and is conclusive in the case at bar.

The propriety of charging the paramount incumbrance on the parcels of land in the inverse order of their alienation was considered in Orvis v. Powell (98 U. S. 176), but there the court only followed the local rule in force in Illinois.

The authorities are not harmonious. In the following cases, what is known as the pro rata rule has been adopted and acted upon. Barnes v. Rackster, 1 Y. & Col. N. R. 401; 1 Hilliard, Mort. 310 (citing Bacon's Abr., title Execution, B. 4; Carter v. Bernardiston, 2 Eq. Cas. Abr. 224; Sir W. Herbert's Case, 3 Cox, 14; Harris v. Ingleden, 3 P. W. 98, 99); Averall v. Wade, 2 Llo. & Goo. 252; Story, Equity, sects. 477, 484, 1233 b; Adams, Equity, 270 (citing 2 Porter, 262; 2 Rand. 384; 4 id. 272; 3 J. J. Marsh. 44; 4 Monr. 76; 2 Ed. C. R. 297); Green v. Ramage, 18 Ohio, 429; Burke v. Chrisman, 3 B. Mon. (Ky.) 50; Dickey v. Thompson, 8 id. 318; Beverly v. Brooke, 2 Leigh (Va.), 425; 2 Humph. (Tenn.) 34; Massie v. Wilson, 16 Iowa, 391; Barney v. Myers, 28 id. 472.

If the pro rata distribution of the common charge is the proper mode, the decree below, directing the property to be sold in the inverse order of its alienation by Brown, is certainly erroneous.

If this was the only error in the decree, it might be modified by directing the judgment to be paid pro rata from the several parcels of land mentioned in the bill. The appellant set up in its answer, however, that the owners of the other property, formerly owned by Brown, are necessary parties, inasmuch as their property must bear its share of the common burden. No amendment to that effect having been made, the bill should be now dismissed. Shields v. Barrow, 17 How. 130.

The bill is defective in that it fails to allege that the appellant, when the conveyance under which it claims was made by Brown, had actual knowledge or constructive notice of the prior conveyance to the company of some of the lots on which the judgment was a lien.

If a vendee should purchase one of several lots, known by him to be bound by a common charge, he, until otherwise informed from some source, has a right to presume that the remainder of the property is still vested in his vendor; and to infer that the lot so purchased is the last to be seized to satisfy the charge. Brown v. Simmons, 44 N. H. 475, 479; Chase v. Woodbury, 6 Cush. (Mass.) 143; 2 W. & T. Lead. Cas. in Eq., pt. 1, p. 298.

Hence, in order to call into existence the equity appealed to by the complainants, it must appear that the junior vendee had notice of the paramount lien and prior conveyance. Startey v. Stocks, 1 Dev. (N. C.) Eq. 314; Lock v. Fulford, 52 Ill. 166; Iglehart v. Crane, 42 id. 261, 266; Insurance Company v. Bell, 22 Barb. (N. Y.) 56, 57, 63; Green v. Ramage, 18 Ohio, 428; Reilly v. Mayer, 12 N. J. Eq. 56-60; Mechanics' Association v. Conover, 14 id. 225; Orvis v. Newell, 17 Conn. 100; Brown v. Simmons, supra; Chase v. Woodbury, supra.

Indeed, to hold that a purchaser of real estate is to be prejudiced by a mere equity, not known to him from the land records or from any other source, would be entirely opposed to the spirit of our registry laws.

The bill of complaint contains no allegation that the deed from Brown to secure the loan mode by the Freedman's Savings and Trust Company was ever recorded.

However the truth may be, evidence to establish the fact of record would not be admissible, since the proofs must be confined to the allegations. Simms v. Guthrie, 9 Cranch, 25; Boone v. Chiles, 10 Pet. 209.

It is true that the original deed is filed as an exhibit with the bill of complaint, but it is not, for that reason, a part of the latter, nor can its contents be treated as a portion of the averments of the complainants. Terry v. Jones, 44 Miss. 542; Strathan v. Insurance Company, 45 id. 600; Caton v. Willis, 5 Ired. (N. C.) Eq. 335.

Even if it were competent to refer to that deed for the purpose of supplying allegations which are wanting in the bill itself, there is nothing on its face to indicate that it was ever recorded, much less that it was of record when the appellant loaned its money on the faith of Brown's title to the land taken as security. The title of a bona fide purchaser for valuable considerations is not to be affected by loose, vague, and uncertain evidence of the existence of the prior title. If a former owner neglects to record his title, every presumption is to be made in favor of a subsequent purchaser. Boggs v. Varner, 6 Watts & S. (Pa.) 469.

But it is maintained that, even if that deed had been recorded, the appellant would not thereby be charged with constructive notice. The record does not show that Brown's title to the lots which the company subsequently owned was acquired by the deed or conveyance which passed the title to those he conveyed to secure the appellant. So far as the record shows, the parcels of ground came to Brown by different chains of title. But the appellant is not charged with constructive notice of any conveyance by Brown, unless it be in the chain of its title. Green v. Ramage, 18 Ohio, 429; Boggs v. Varner, 6 Watts & S. (Pa.) 469; Guion v....