Coleman v. Reynolds

Opinion by Mr. Justice Mitchell,

Plaintiff in March, 1891, sold to defendant Reynolds and one Lindley, conveyed to them by deed of that date and received from them a purchase-money mortgage which was duly recorded. The deed however from him to them was not recorded until 1893 as will be noted later on. Reynolds and Lindley having disagreed, the latter conveyed his ■ interest in the land to the former, and desired to be released from the obligation of his bond and mortgage to the plaintiff. Accordingly, after some discussion, the parties agreed that the mortgage and the unrecorded deed should be canceled, and a new deed from plaintiff to' Reynolds alone and a mortgage from Reynolds to plaintiff should be substituted in their place. This arrangement was carried out. The new deed from plaintiff to Reynolds and the mortgage from Reynolds to the plaintiff were executed on November 11, 1891, acknowledged a few days later, and recorded on November 28, the first mortgage by Reynolds and Lindley being satisfied of record by plaintiff on the latter day. In the *323 meantime however on November 25, a judgment was entered by the Scranton Savings Bank against Reynolds, on a judgment note given by him the day before for previous indebtedness. In April, 1893, Reynolds without the knowledge of plaintiff and for reasons not explained, but which the course of events indicates rather plainly, put on record the first deed from plaintiff to himself and Lindley. In April, 1894, the land was sold as the property of Reynolds under the Scranton Bank’s judgment, and the defendant, Wrigley, joined herein as terre-tenant, became the purchaser. The question in the case is whether he bought subject to the plaintiff’s mortgage of November 11, 1891, or whether that was not to be considered a purchase-money mortgage and therefore was discharged by the sale on a judgment entered before it was recorded.

As between the parties this was clearly a purchase-money mortgage. It was in fact to secure the unpaid purchase money on the very land mortgaged. It is not claimed that there was any other consideration for it, and it is beyond question that the arrangement was not made for plaintiff’s benefit in any way but that he acquiesced in it merely for the convenience of the others, and on the distinct understanding of all that his rights were not to be affected. Lindley wanted to be let out of his obligation in regard to the land, and Reynolds was desirous to get rid of him. Wilson distinctly says the second mortgage was “ to be done so as to let Lindley out of the deal .... to get rid of him in the transaction.” In stating the arrangement I have said advisedly that the first deed and mortgage were to be canceled and the new ones substituted in their place, for although some of the witnesses tried with varying success to evade the use of the words “ cancel ” and “ substitute ” yet the unquestionable effect of the testimony of each and all of them is that such was the intention, and the only purpose of all the parties in the matter. Being badly advised they did it in this way, but clumsy conveyancing will not impair rights between parties. The thing to be done was lawful and within the power of the parties ; the manner of doing it was not material between them, nor until other rights acquired in good faith intervened. On November 11, when the deeds were executed there were no such other rights. The court below held that as all of plaintiff’s title passed from him to Reynolds and Lindley by his first *324 deed his second deed to Reynolds alone conveyed nothing, but was a nullity, and when he satisfied the first mortgage he lost his purchase-money lien and could claim on the second only as an ordinary mortgage taking rank from the date of record. A verdict was therefore directed for the terre-tenants. But this was an insufficient ground on which to rule the case. It is true that title once passed by a delivered deed cannot be divested by mere destruction of the deed, Tate v. Clement, 176 Pa. 550 , but this refers to the. destruction of title, not to its strengthening which may always be done by additional conveyances, even if not legally necessary. And the conveyancing may be changed to suit the convenience or whim of the parties at any time until other rights intervene. A deed of release or quitclaim or confirmation is a valid instrument although it may in fact convey no interest in the land, and have no other legal effect than to quiet the fears of some of the parties. The deed from plaintiff to Reynolds in November 1891, even if regarded merely as a deed of confirmation or quitclaim, was a valid instrument, and must be looked at in connection with the circumstances and purpose of its execution. So regarded it is entirely clear that the deed and the mortgage were valid and effective instruments in substitution for the prior deed and mortgage, and as such binding on the parties, and that the mortgage was a valid purchase-money mortgage entitled to all its privileges and priority as such, between the parties, and against all others but those who may have been misled by plaintiff’s action into acquiring rights on the appearance of a different state of facts.

This brings us to the really important question in the case, were these terre-tenants so misled?

If it were necessary to decide the case upon the point whether Wrigley was a bona fide purchaser without notice of plaintiff’s mortgage, we should be obliged to say that there was sufficient evidence to send that question to the jury. Conceding that no specific item of evidence rises quite to the rank of the notice required by the cases cited by appellee, yet all the circumstances combine to show that he or his counsel did know all about it. He has not the clear standing of a purchaser at the sheriff’s sale relying on the record, for he had bought directly from Reynolds, paid the agreed price to Wilson, and gone into'possession before the sale. The sheriff’s sale was a mere form of convey; *325 ancing to get a title clear of incumbrances, chief of which was the bank’s judgment. Whether the property brought much or little, within the limits of his bargain, was of no moment to Wrigley, for he and the owner had already agreed upon a price to be paid without reference to the amount bid at the sale. The bank, with a judgment which on the face of the record, if plaintiff’s mortgage could be excluded as junior, was a first lien for $8,900, stood by at the sale and let the property be knocked down for $55.00. This bid was paid by Wilson out of the money which Wrigley had previously put in his hands as the purchase money under his bargain with Reynolds, and the rest of that money, as Wilson testifies, was distributed among certain of Reynolds’s creditors, the bank getting the lion’s share. It is difficult to regard this in any other light than as a preconcerted scheme between Reynolds and the other parties to it, in which the plaintiff’s mortgage was intentionally shut out.

But it is unnecessary to put the case on that ground, as the record notice is decisive. Assuming, as the most favorable aspect of the case for Wrigley, that he was an intending purchaser at the sheriff’s sale, in good faith searching the record to ascertain the state of Reynolds’s title, what would he have found? The argument of his counsel in this court is, that a person going to the record for a search in 1894 would start at that date and go back until he came to the title of J. C. Reynolds, the occupant of the property and the defendant in the writ on which the sale was to be made; that he would first strike the conveyances from Coleman to Reynolds and Lindley, and from Lindley to Reynolds, recorded on the same day, April 5,1893 ; and that having thus found a clear record title to which Reynolds’s possession was referable, he was not bound to look further. But this is an incomplete view. While he would have found that the deed was recorded in April, 1893, he would also have found that it was dated and executed in March, 1891, and he was thus at once put on inquiry not only as to any incumbrances or changes of title made by Reynolds since. 1891, but also as to any subsequent conveyances by Reynolds’s grantor, the plaintiff, made and put on record ahead of the deed to Reynolds and Lindley. This is not only the rule of strict law, but is the practice of safe conveyancers. “ Ordinary practice should always carry the search against the grantor down to the date of *326 the recording of Ms deed, if it has not been recorded within six months of its execution: ” Price on Limitations and Liens, 348. “ In searching for conveyances, search down to the day after the deed to any purchaser has been recorded.” Id. 351. Wrigley pursuing his inquiry according to this rule would have found the deed and mortgage of November 11,1891, between plaintiff and Reynolds. For reasons already noted he would not be entitled to treat this deed as a nullity. True it was from the same grantor for the same land, which was unusual, but it was to only one of the same grantees. There might have been an unrecorded reconveyance by the grantees in the first deed to the grantor, or there might have been, as was the fact, a substitution by agreement of parties. Had the deed of November, 1891, been to a third party it would unquestionably, being first recorded within time, have cut out the title of Reynolds and Lindley under the deed of March. How far Reynolds’s title under it supersedes his prior title under the unrecorded deed we need not consider.

The record put the searcher on inquiry as to the explanation of the second conveyance, and was notice.of everything which inquiry would have shown him. Then as to the mortgages he would have found a first one, of even date with the first deed, and duly recorded, but satisfied November 28, 1891, and recorded on tMs same day, a second one, on the same land, for the same amount, to the same mortgagee, by one of the same mortgagors, and executed and recorded contemporaneously with the deed of November 11,1891. Both these mortgages were prima facie for purchase money, for they were by the grantees to the grantor, on the day of the grant, and the exact state of facts existed which in Williamsport Nat. Bank’s Appeal, 91 Pa. 163, 168 , was declared to put the party on inquiry. It was there said, “ The record showed the deed from Hall and the mortgage to him on the same land; both bearing the same date and they were both recorded on the same day. These facts were sufficient to put a purchaser of the mortgage from Nichols on inquiry. Due inquiry would readily have resulted in full notice of the preferred lien of the Hall mortgage.” It is thus clear that an intending purchaser searching the record at the time of the sheriff’s sale was put upon direct inquiry as to plaintiff’s mortgage, and he or his counsel having neglected to make *327 it, he took the risk and must bear the consequences of the facts as they really were.

There is one other question in the case to -which we may refer briefly to avoid misconstruction from its omission. Plaintiff put his original mortgage on record in due time, and kept it there until the second was recorded. The second was a valid purchase-money mortgage between the parties, there were no intervening rights, and the plaintiff had therefore done all that was' necessary to preserve his priority up to that time against all the world. Ordinarily no mortgagee is bound to do more, or having once put his title clearly on the record, to concern himself about future dealings with the property by other parties. It is by no means clear that the subsequent act of Reynolds, in recording the first deed without his participation, could deprive the plaintiff of his priority even as against a purchaser without notice. But we do not find it necessary to go further into this question.

On the undisputed facts the verdict should have been directed for the plaintiff against the terre-tenants as well as the defendants.

Judgment reversed, and now judgment entered for plaintiff.