Dufphey v. Frenaye

The bill was filed in the Circuit Court, by Frenaye against Duiphey, for the purpose of foreclosing a mortgage on the land in question, given to secure the payment of four promissory notes of six hundred and ninety-five dollars each, which fell due at annual periods, from the first of January, one thousand eight hundred and twenty-three, till the first of January, one thousand eight hundred and twenty-six.

Facts charged and admitted by the bill and answer, or sufficiently proved, are the following : That notes were given by M’Kinne, to complainant, in consideration of the land mortgaged — (being three quarter sections.) That the land had been owned and held by Frenaye, under the acts of Congress, (and contracts with the government, pursuant thereto,) in favor of the French emigrants ; but, for which paymentto the United States had not been completed, nor had all the other requisites been complied with. That M’Kinne, by virtue of this purchase and conveyance, being in quiet possession, in January, one thousand eight hundred and twenty-four, bargained, sold and conveyed the same to Dufphey, for twelve hundred dollars, of which sum, four hundred dollars were then paid; and two notes, for four hundred dollars each, payable at one and two years thereafter, were given for the balance. That, under this contract Dufphey received possession of the premises, and some additional privileges connected *232therewith, and, for a time, peaceably enjoyed the same — having no notice or intimation of the lien now attempted to be established. That, shortly af-terwards, he was informed by a friend, of the existence of the mortgage, and thereupon charged M’-Kinne with the fraud in concealing the knowledge of it, from him, who then assured the former, that the mortgage was of no validity, and he would sustain his contract of sale. That it was finally agreed between them, that M’Kinne should give up to Duf-phey, the two notes of four hundred dollars each, and that Dufphey should give him his other note, for the unconditional payment of eighty dollars, and should not pay him any more if the mortgage should prevail; but if it was defeated, and the conveyance to Dufphey sustained, he should still pay the eight hundred dollars.

It also appears, that three of the notes given by M’Kinne to Frenaye, which had become due, remained unpaid, and that on one, suit had been prosecuted to judgment, before the filing of this bill, and it was found, that M’Kinne had become insolvent, and left the State. That the mortgage provided, if M’Kin-ne should pay to Frenaye the sum due, on or before the first of January, one thousand eight hundred and twenty-six, according to the condition of the four promissory notes aforesaid, then the mortgage should he null and void; but, in case of the non-payment of said sum, or any part thereof, so to become due at the time limited for the payment the/eqf \ then Fre-naye was empowered to sell, &c. rendering the over-plus, (if any,) to M’Kinne. That the land had been *233considerably improved by Bufphey, and who, from the cultiva lion' of it, had derived extensive profits: That after pa> t only of the purchase money had become due to Frenaje, lie proposed selling the land under Ids mortgage, to which Bufphey objected, refusing to permit any entry to be made; in consequence of which, Frenaje, in August, one thousand eight hundred and twenty-five, (which was previous' to the maturity of the last instalment,) instituted this suit.

It further appears, that Bufphey, by his answer,among other things, objects, that the suit was prematurely brought — that, if the mortgage w7as valid, there, was no authority to proceed on it, until the' first of January, one thousand eight hundred and twenty-six, which was the maturity of the last note thereby secured, and the earliest date at which the' mortgage could be considered forfeited. It is shewn, however, that at a term of the Court, subsequent to' the last mentioned day of payment, Frenaje applied for, and obtained from the Court, leave to amend his bill, and on this general permission, filed a supplemental hill, charging, that then, if not before, the mortgage had become forfeited, as the last instalment was then due, and the demand unsatisfied.

Further, it is shewn, that the mortgage was acknowledged before one justice of the peace only, and on this proof, was admitted to record. That Duf-pliey, by his answer, solemnly and positively denies any information or notice of the existence of the' mortgage, or any hint or intimation of the kind, from any source, to excite the slightest suspicion of any *234such incumbrance; he objects to the sufficiency of the acknowledgment of the mortgage, insists it furnished no authority for the registration, that consequently the registration was a nullity, and not constructive notice of the lien. The answer also insists, that the price which Dufphey contracted to give, was a fair equivalent for the land, under the incum-brance in favor of the government.

Various other facts are presented by the record, and were urged in argument; but these are all which I consider important to the merits of the controversy.

The decree of the Circuit Court, in substance, is that, unless Frenaye’s debt, interest, and all costs were paid within six months, then the clerk, as master, should sell the land, for cash, in satisfaction of the same. That, if the rents and profits should be found, on an account, to be taken, equal to the four hundred dollars paid by Dufphey, and interest thereon, (after deducting therefrom the value of lasting improvements made by him,) and there be any excess, after the payment of Frenaye’s demand, such excess only, to be paid to Dufphey. But, if the rents, &c. be not found equal to the four hundred dollars and interest, as aforesaid, then the deficit to be first paid to Dufphey, out of the proceeds of sale, and the balance first to complainant’s debt, &c. as aforesaid.

This case having been argued at the last term, a decision was then pronounced by a majority of this Court, affirming the decree of the Circuit Court, with but a slight modification, respecting the costs, and a supposed ambiguity, as to the time from which *235the rents and profits should he computed. From that decision I dissented; and, on this re-hearing, am confirmed in my contrary opinion. My views of the case, I will state.

Dufphey insists, that this decree of the Circuit Court is erroneous, in every material point.

Several of the principles embraced by the decree below, (though some of the same have been controverted in argument,) being fully satisfactory to all the members of this Court, may be adopted without comment—by which the field of investigation will be greatly circumscribed. These are, that the contracts of each of the parties, were in fact stipulated, and legally concluded with M’Kinne, to the effect and in the manner charged in the bill and answer, and as stated in the history of the case. That Fre-naye’s mortgage having been acknowledged before one justice of the peace only, who being incompetent to take and certify it, the registration was unau-thorised, and does not constitute constructive notice of the lien.a—Heister vs Fortner.b— Frost vs Beckman.c Nor does it appear, that any other notice of it was given to Dufphey, or that any circumstance came to his knowledge, sufficient to devolve upon him the necessity of making inquiry, until after he had concluded his contract, paid the four hunered dollars, and removed to, and acquired peaceable possession of the lands: consequently, to this stage of the negotiation, he is to be regarded as a bona fide purchaser, for a valuable consideration, without notice of the prior lien. But afterwards, it appears, he received the notice, and entered into a modification of the contract, as stated, and from the date of this notice, a c *236(so far as notice then was material,) is to be regards ed as a purchaser, with notice. That, by the terms of the mortgage, the day appointed for the forfeiture thereof, in the event of non-payment, was the first of January, one thousand eight hundred and twenty-six; and this suit, for foreclosure having been instituí ted, as early as the preceding August, the same was prematurely brought; but,' as the Chancellor below, in the exercise of his discretion, granted leave to the defendant to amend his bill, and the supplemental bill was filed, for the purpose of curing this defect, charging the true date of the forfeiture, which had then passed; and as no objection was made and sustained, to the nature of the amendment, but the subsequent proceedings have gone on the merits, the indulgence of Chancery will now so far consult the true merits, as to sustain the suit; but, will consider its premature commencement as a matter affecting the costs.

Also, it is conceded, that admitting the United States holds, or, at the time of these contracts, held, by law, a lien on the land, to secure the original purchase money, and the performance of the other conditions of the grant; yet, as the individual to whom it was allotted, or his assignee, mediate or immediate, had, by law, the right to comply with the terms of the grant, and, by so doing, could legally entitle himself to a patent, his interest or claim is to be regarded as an inchoate right to the fee, dependent on his performance of the conditions precedent, or, in other words, as a defeasible legal title — an estate, to which the doctrine of bona fide purchase, without notice of other incumbrance, is applicable, and peace*237able possession, under such, is a sufficient seizen for this purpose. See White vs SaintGuirons.a

Then, it remains to be considered, what are the equitable rights of each of these parties, under their conflicting claims: has Frenaye’s lien become es-r tinct, in whole or in part'?—What protection is due to Dufphey, and what is the proper disposition of the costs'?

An equitable mortgage, or that lien which is implied, under certain circumstances, on the estate sold, for the purchase money, will bind the vendee and his heirs and volunteers, and all other purchasers from the vendee, with notice of the existence of the vendor’s equity. Such lien is held, prima facie, to exist in all cases of the sale of real estate, where there are no circumstances, indicating the contrary intention: but, the taking a note, bill or bond, with distinct security, or taking distinct security exclusively by itself, is a waiver of the implied lien: and the rule is general, that an intervening mortgagee, or purchaser for a valuable consideration, without notice of such incumbrance, will be r>referred.b

The lien will be found but slightly, (if in any respect) different, in case of express mortgage, like the present.

The rule of the English Chancery is, that “where a man is a purchaser for a valuable consideration, without notice, he shall not be annoyed in Equity, not only where he has a prior legal estate, but where he has a better title, or right to call for the legal estate than the other.” But, by taking a conveyance, with notice of the trust, as immediate or first purchaser, or, as subsequent vendee, -where his vendor *238also had the requisite notice, he himself becomes the trustee.a,

Jt has also been ruled, that notice is not confined to the time of the contract: for, if a person, who has a lien in equity on the premises, give notice thereof before actual payment of the purchase money, it is sufficient. — See the above reference, (note c;) also Tourville vs Naish b —Story vs Lord Windsor c — Hardinham vs Nichols.d Or, if the notice be given before the execution of the conveyance, though the purchase money be actually paid, it is also said to be sufficient. Fonb. (same note,) and Wigg vs Wigg.e

The cases above referred to, are mainly relied on, to prove, that the English doctrine requires the subsequent purchaser not only to have contracted without notice of the incumbrance, but, that the conveyance should have been actually made, and all the purchase money paid, before the prior lien can be defeated. These cases, doubtless, give countenance to this mortgagee’s lien; but they are not conclusive, on the most material question, in the case under considera-, tion. The question alluded to is, whether the whole of the purchase money is necessary to be paid, in order to defeat the lien, either in whole or in part.— Neither of these, or any other authority referred to by the complainant’s counsel, is conclusive on this point. Nor can I admit, on principle, that an inflexible rule, maintaining either the affirmative or negative of the proposition, would be safe.

In contracts, where the negotiation has, in all other respects, been closed, it can not be just, that the payment of an inconsiderable portion of the consideration, should give the same validity to the title. *239against a prior lien, that would arise from full payment, except a trivial balance. Other considerations connected with this, are necessary, in determining the equity of many, cases. These, I will endeavor to bring to view in the course of my remarks. If the terms of the contract require present payment, and the purchaser, after receiving 'the conveyance, fail to comply, before receiving notice, the vendor would be at liberty to rescind the contract, and of course an incumbrancer may set it aside, and assert his lien, though the unpaid balance be small.

In such case, the argument on which this doctrine rests, would well apply, that the contract and performance are but one transaction, and, until the payment be made it remains incomplete; but where according to the agreement, the conveyance has been duly executed, an essential part of the consideration paid, bond or note taken for the balance at a future day, and no lien retained for if, I would consider the contract as respects the title fully consummated, and that the payment or non-payment of the balance could not affect it. The exact proportion of the consideration necessary to be paid to exclude the prior lien, I conceive equally unsusceptible of any peremptory rale, but that it, together with all the circumstances of each case — as the price contracted to be given by the purchaser, compared with the true value of the land — the lapse of time between the purchase and the notice — the value of the improvements made by the purchaser — the cause of the incumbrancer’s failure to give notice — his exertions to have done so, and the motives by which he appears to have been actuated, should be left to the *240sound discretion of the Chancellor. If, however, the amount remaining unpaid be a main item in the value of the contract, the lien may continue in a qualified sense, without notice. In any case where the lien has been preserved in any degree, I doubt-not the competency of Chancery, to stop the payment of any balance of the consideration; and, if the lien be lost on the land, to attach if to such balance, and control the same accordingly.

The case of Jackson vs Rowe,a has been referred in support of this lien, and is supposed to sustain the position, that without notice, it continued to exist, until full performance of the contract on both sides. But on examination, it is found, that the only principle decided by the Chancellor, in that case, having any application to this, was, that a plea, of purchase for a valuable consideration, without notice,must aver that the vendor pretended' lo be seized, not merely before, but at the respective times of the execution of the conveyance, and of the payment of the money. The plea in that case, did aver a consummation of the contract, by full performance; on both sides, and that the defendant, at or before the same was done, had no notice of or reason to suspect the existence of the lien. To the sufficiency of the plea, in this respect, no question was made.

It is true, as argued, that by the practice in England, and several of the States of the Union, this de-fence can only be made by plea; but, by our statute, it is rendered equally available, as a part of the an-' swer. As respéets the sufficiency of the defence, *241whether presented by plea or answer, the American decisions seem to liave conformed strictly to the principles adopted in the English Chancery, so far as they are understood to have been fully established: The following cases will shew the light in which the subject is viewed in these States.

In the ease of Cole vs Scott,a a tract of land had been sold, possession delivered to the vendee, and part only of the purchase money paid, but no conveyance had been executed. After maturity of the balance of the consideration, and a deficiency of personal property, to pay it, the vendor filed Ms bill, to subject the laud to the payment; no bond had been taken for the same, nor was there any express agreement reserving a lien—the laud had not been sold by the vendee, but remained in the possession of a mere volunteer claimant under him. The Court sustained the lien ; but the President, at the same time remarked, that if the vendee had sold to a third person. without notice, it would have been lost.

In the case of Blair vs Owles,b the Same Court held, that notice of a lien or incumbrance on property, binds the purchaser, if received by him, at any lime before the execution of the conveyance; also, that d purchaser, with notice of an annual incumbrance, who had prevented the lawful claimant from enjoying the benefit, was personally liable, in equity, to the value thereof; raid, in such case, the purchaser, or the property may be made liable, in the first instance, at the election of the party arnrrieved.

In Bayley vs Greenleaf,c Chief Justice Marshall, in delivering the opinion of the Court uses the foliow-*242ing language — “ That a vendor who has taken no other security for the purchase money, retains a lien for it on the land, as against the vendee, or his heirs, seems to be well settled by the English decisions.— It is equally well settled, that this lien is defeated by an alienation to a purchaser, without notice”

The case of Warmly vs Warmly,a is entitled to its influence, as an authority in this case; but not to the extent, in favor of the lien, which has been contended for. That case was so widely different from this, that the facts need not be given: if is sufficient to notice such of the principles of that decision as are applicable to this case.

It was delivered by Judge Story, who says — “ It is a settled rule, in Equity, that a purchaser, to be entitled to protection, must not only be so at the time of the contract or conveyance, but at the time of the payment of the money. The answer of Castleman & M’Cormick, [who were co-defendants and purchasers of the trust property,] does not even allege any such want of notice.” On the contrary, it is in proof, that upwards of three thousand dollars of the purchase money was paid, not only after full notice of the anterior transactions, but after the commencement of the present suit. Here, it will be observed, that, though it is said, that the purchaser, to be protected, must have been without notice, both at the time of the conveyance, and payment of the money; it is also said, the answer of the defendants did not even allege any such want of notice — from which, I infer, the Court did not consider there was 'any denial of notice, at the time either mas done; and the rule is well settled, that no one can claim the benefit of *243this defence, unless he positively and absolutely aver, by plea or answer, (according to the practice of the Court,) that he was without the requisite notice.— Nor does the opinion define whether the whole or part of the consideration must be paid without the notice. It only says, in that case, that part of the purchase money was paid, after full notice, even after the commencement of flic suit; but this appears to have been mentioned, rather as a circumstance, from which, (with the other facts,) to infer the existence of the same knowledge of the nature of the transaction, during the whole of the negotiation and the pur chaser's voluntary participation iu the alleged fraud, than as an independent fact, sufficient to invalidate their title. The case does not maintain the principle, that where a bona fide contract has been entered into, for the sale of lands, the conveyance made, and an essential part of the purchase money paid, before notice of any incumbrance, that the circumstance of part of the consideration remaining unpáid, when the notice is received, will vitiate the title ; nor that it would affect it in the same manner, or to the same extent, as if the notice had existed previous to entering into the contract.

The case of Frost vs Buckman,a is confidently relied on by the counsel for Dufphcy, to sustain the principle, not only that a defective or unauthorised registration of a. mortgage does not create constructive notice thereof, but, also, that if such purchase be fairly made, and part only of the consideration paid, before notice of the prior lien, Chancery will protect such purchaser ; and will decree in favor of the lien, only that the unpaid balance of the purchase money *244shall be appropriated towards the satisfaction thereof. As respects the facts of the case, it is siuTidcnt to say, the bill was filed by Frost and others, as purchasers under Corl, who was the vendee of Beckman, and to whom, about the time of his purchase, he had given a mortgage on the land, to secure the purchase money. The mortgage purported to have been registered under the law of New York, which required that the register should contain, not the mortgage at large, but the essential parís of it; and, among other specified parts, “ the mortgage money, and the time or times when payable.” The sum for which the mortgage was given, was three thousand dollars, but by mistake, it was entered in the registry, three hundred dollars. The subsequent purchasers did not appear to have had actual notice of the mortgage, until some time after their respective purchases, and the payment of part of the purchase money ; and after they were informed of the mortgage, as registered, a considerable time more elapsed before they were apprised of the mistake in the sum. During this time valuable improvements had been made on the land, by the purchasers, and farther payments made, either in cash, or by renewing the bonds or notes to innocent assignees of those previously given. Afterwards, the purchasers considering themselves chargeable with constructive notice, to the amount of the three htndred dollars mentioned in the register, proposed to Beckman to pay him that sum in discharge of his lien, which the latter re- , fused, and insisted on payment of the whole three thousand dollars. On refusal of the purchasers, Beckman was proceeding to sell the land, in satisfac*245tion of his mortgage, when the former filed their bill, enjoining the sale, and praying relief from the larger amount of the alleged lien.

In pronouncing the decree, the Chancellor remarks, “ that the register is notice of the contents of it, and no more, and that the purchaser is not to be charged with notice of the contents of the mortgage, any farther than they may be contained in the registry.” Again, he says—“ The question does not necessarily arise, in this case, how far the unauthorised registry of a mortgage, as one made, for instance, without any -previous legal proof, or acknowledgment, would charge a purchaser with notice of the mortgage. The better opinion, in the books, seems to be, that it would not be notice; and that Equity will not interfere in favor of an incumbrancer, when he has not seen that his mortgage was duly registered.”

On the point more material to our purpose, he says: “ It is an established rule, in Equity, to give no assistance, against a purchaser for a valuable consideration, without notice; and cites Walwyn vs Lee.a He has equal claims upon the equity of the Court. But whenever actual notice of the true sum in the mortgage can be brought home to the purchaser, he is, from that time, so far as the former purchase is left incomplete, either as to the deed, on the one hand, or as to the payment on the other, hound by the prior equitable lien, and all subsequent payments by him, are made in his own wrong, so far as the rights of the mortgagee are concerned. As soon as notice is received, it arrests all further proceedings, towards the completion of the purchase and payment, and, if per-*246sisied in, they are held to be done in fraud of the equitable incumbrance.”

These arc the principles which that Court considered sustained, by the English cases, which are mainly relied on, in behalf of Frenaje.— Wigg vs Wigga-—Story vs Lord Windsorb—Hardinham vs Nicholasc—Tourville vs Naishd—previously noticed.

And the Chancellor further held, that whatever payments were made upon the purchase, before notice of the true mortgage, ought to be protected against any farther snm than that contained in the registry of the mortgage, and that any payments to an indorsee of Cori, the vendor to Frost, before notice, were the same as payments to him; or, that if any part of the debt thus created was changed in the hands of a bona fide assignee, by the purchasers giving new notes and taking up the old, before notice, he ought to be allowed for this also, as payment, because he has extinguished so much of the old debt, and become absolutely bound to the new creditor.

Here, the facts, that though an essential part of of the consideration was paid without notice, it was the minor portion—that the balance has been adjusted between the parties, by a conditional agreement; according to which, this decree may discharge Duf-phey from any further liability to M’Kinne, his vendor ; and that the estimate of the value of the land, in the two sales, ana in the opinion of the witnesses, has varied from one thousand and two hundred dollars, to two thousand eight hundred and eighty dollars, are circumstances which I think entitled to material influence in the decision of this case.

in reference to the latter fact, it may be said, if *247the land he worth only about the price agreed on by Dufphey, and he be refunded the amount paid with interest thereon, and be secured in the benefits of his bargain, so far as not to be treated as a tenant or trespasser, during the litigation of tSie conflicting rights, his actual loss can be little or nothing. If, on the contrary, the land be worth near the sum for which Frenaye sold it, Dufphey can be indemnified, except in the partial loss of an advantageous bargain, (to which I consider him subject,) and still leave a valuable lien in favor of Frenaye.

To this, when it is considered the failure to preserve the entire lien, is attributable to no intentional fraud, or violation of moral duty, it would appear Frenaye is equitably entitled. The eighty dollars contracted by Dufphey, after notice of the mortgage, was a risque voluntarily encountered, of which no notice can be taken.

The effect of the authorities which I have reviewed, and all others cited in argument, I conceive to be, that if neither a legal conveyance has been executed, or any part of the purchase money has been satisfied, before notice of the lien, Equity will arrest the transaction, and sustain the entire lien, with as little prejudice to the purchaser as the case will admit of, and his merits require. But, if the purchase has been fully consummated, in all other respects, except that a part only of the consideration remains to be paid, the Chancellor should exercise a sound equitable discretion, either to sustain the incumbran-cer’s lien on the property, in part, giving the purchaser a prior lien, for the amount paid without notice ; or to consider the lien on the premises extinct, *248and attach it to the unpaid balance of the conside-' ration.

Here, after Dufphey had made his partial payment, and received possession of this land, it was incumbent upon him, with reference either to his first or second contract with M’Kinne, to contest the validity of the lien of which he had received' no previous notice, and during this time it was to have been expected he would cultivate the land, and not as a tenant, but as the owner thereof. That the land may have been enhanced in value, by means of permanent improvements made by Dufphey, during his 'cultivation of part of the soil, and yet, that the profits, during the ten years, may have exceeded the value of the improvements, I would suppose by no means improbable. If so, the conclusion would be most erroneous, that a settlement of lands must be deteriorated in value, from the improvement and cultivation of it, in proportion to the value of the rents and profits.

The price contracted to be paid by Dufphey, though moderate, compared with the price to M-Kinne, is not, from the testimony, considered so inadequate as to prejudice the title of the former. Then, had he paid the whole of the consideration, under the same circumstances that he paid part, he would have been secure, not only in the temporary rents and profits, but in all the advantages of the permanent title. If the rule of Chancery subjects his purchase to defeat, on the ground, that part of price ivas not paid before notice of the prior lien, it does not follow that he should be subjected to the more rigid rule, of being chargeable *249for the rents and profits as a mere tenant, when be,in coalmen with most oilier persons, may have, deprecated that relation, as tire most unpleasant, and unprofitable. Suppose, instead of line four hundred dollars, lie bad paid one thousand one hundred dollars, of the one thousand two hundred dollars, consideration, and that the rents and profits could he estimated at the one thousand one hundred dollars, above the value of the lasting improvements, yet, that by means of his improvement, notwithstanding the cultivation, the value of the land had been increased — would it be just that his accounts should be thus balanced, and he turned ad fill, when the eaaly payment of only one hundred dollars more, would have rescued him from the bumble condition of a tenant, and constituted hha permanent lord of the premises, worth several thousand dollars'! íkich a principle would appear much better adapted to the rigor of the common law, than to the mild system of equity, whose province if is to balance justice, with a .steady hand.

Such, I conceive to be the principle of the decree rendered below, and which had the sanction of a a majority of this Court at the last term.

The circumstance, that the proportion paid in this case, was less than in the case supposed, does not remove the objection to the 'principie. I would even hold, that if Dufphey had made any permanent improvements on the land, previous to the time he. received notice of the lien, and which now enhances the value of the land, he should be refunded fox his expenses, so incurred, according to the present value *250of such improvements; but, as the "time he,so held, was very short, and it does not appear that such improvements were made, it is deemed unnecessary to make any provision on this point.

As respects improvements, made since the notice, as Dufphey knew at the time, that his title was subject to be contested, under the facts as here stated, and as he was, at the same time enjoying the profits of the premises — whatever improvements -he has erected, must abide the destiny of the land.

From these views it results that some other principle of decision must be adopted than that which governed the majority of this Court at the last term; and I think there is one better sustained by the authorities, and which has the higher sanction of natural equity and justice. It is, that Frenaye now has only a qualified hen on the land, but for which it must be sold unless his debt be otherwise paid within a reasonable time; yet that Dufphey has a prior claim to the amount of the four hundred dollars, with interest thereon, which must be first satisfied out of the same property. — That Freayne for his failure to preserve his earlier lien, by a legal registration, and for the premature commencement of his suit, be charged with all costs. I would therefore decree, that the Clerk of the Circuit Court, as master and commissioner in Chancery, be directed to compute the amount due to each of the parties— that he advertise the land for sale, giving forty days notice thereof in two newspapers, published nearest the place of sale, which shall be at the Court house of the county in which the land lies. That he sell the same at auction, and apply the proceeds *251as mentioned, first refunding Dufphey, and then paying Frenaye, so far as the proceeds may go; and - should there he any remaining balance, that the same he rendered back to Dufphey: and that Fren-aye pay all the costs of this Court and the Court below. Provided, that the sale take place in the month of May next, and if the amount of Frenaye’s mortgage money be paid by Dufphey on or before the day of sale, the same shall be dispensed with, and that Dufphey be by virtue of this decree and said payment quieted in his title to the premises in question.

A majority of the Court, perhaps all, now concurring in the result — let a decree be entered accordingly.

In the decree pronounced in this case, the Court is unanimous, and on the points raised and discussed in the opinion filed, the luminous view of Judge Saffold, is cheerfully adopted, by the other members of the Court. There is one point, however, upon which the majority feel disposed to express their views; because the present decision of it is at variance with the doctrine contended for, both on the one hand and on the other, in the argument at the bar.

It was insisted, on the one hand-, that the notice of Frenaye’s mortgage, though unregistered, reaching Dufphey before he had paid all the consideration money of his purchase, as well as obtained the deed of conveyance, the land should be sold, irrespective of any negotiations between him and M’Kinne, and its proceeds ail applied to the satisfaction of Fre-*252iiaye’s mortgage, if so mucli should be realised from the sale, and nothing but the residuum, .if any, be paid to Bufphcy ; giving him the option, in the mean while, to pay the mortgage money. On the other hand, it was contended, that, as the notice was not given, till after a considerable portion of the purchase money had been paid, by Dufphey, and his legal title obtained, all the complainant could demand, was the balance of the purchase money, which was . due from Dufphey to M’Kinne. ,'

Wow, our decree conforms to neither of these opposite views — and, as both were contended for upon authority, which seemed, I acknowledge, to maintain the respective doctrines, I feci it due, to furnish distinctly, the reasons of the Court, on the point, as intended to be settled by the decree.

The doctrine contended for, by the counsel for Frenaye, is supposed to be deduced from the decided cases referred to — as laid down by Sugden, (p. 520,) thus: “ Notice before actual payment of all the money, although it be secured, and the conveyance actually executed, is equivalent to notice before the contract.”

If this sentence be understood to mean, notice before payment of all the money, though it be all se cured, and the conveyance be executed in fact, it presents a proposition entirely equitable to my apprehension ; because, not being compelled, in such a case, to pay a single sous to the vendor, no injury .can be done to the second purchaser. If, however, it mean, that though part of the money be paid, before notice, and the deed executed, notice will be equivalent, in such a case, to notice before any con*253tract, it is not conformable to my views of equity, unless the words, i-equivalent to ndice before the contract" be iutcrprclLed thus — that, as notice before any contract, stops or prevents the party from moving towards the purchase, so, notice, at the supposed-stage of the transaction, .stops or prevents him from moving any further towards the completion of the purchase, and, in that sense, is equivalent to notice before the contract — the question here arises between a mortgagee, who has failed to record his mortgage -in the time prescribed by the act, and a purchaser, who, without notice of the mortgage, had contracted for the mortgaged premises, paid part of the purchase money and secured his conveyance, before he had any notice of the incumbí anee.

The provision of our statute is, that such mortgage shall be void and of no effect, unless duly recorded, as against a subsequent bona fide purchaser, without notice. Now I concede that from analogy to the doctrine established in equity, concerning innocent purchasers without notice, the character of purchaser must be completed; that is, that all the money must be paid, and the title deed received, before notice, in order to avoid and render of no effect the prior mortgage. The total defeat of all his security can only be effected by the completion of the second purchase. But on the other hand, I feel sustained both by reason, and authority in this position, that his security in its extent, may be affected’ though not annihilated, by bona fide acts of a second purchaser, not amounting to a completion of the character of purchaser. When it is conceded that the rights of the prior mortgagee, may be totally defeated by the *254honest completion of the contract of purchase — that is, if Bufphey in this case had paid the remainder of the purchase money, his purchase would have been fully maintained, I cannot perceive upon what principle his conduct at any particular stage of its progress, and his rights thus far acquired, can be impugned. If he could by taking the conveyance, and paying all tire purchase money, have totally defeated the mortgage, and maintained his purchase, is it not demonstrably clear, that upon principle, his honest advance to pari payment, and receiving the conveyance, should operate proportionality upon the rights of the mortgagee. If it would be unjust to make Bufphey lose the whole, advanced in this purchase, would it not be equally unjust to make him lose any part, advanced in the same good faith'? It seems so to my apprehension. The situation of Bufphey, is surely entitled to as full a ¡.hare of the indulgent consideration of the Chancellor, as Frenaye — if not, his character as completo purchaser, would not be so peculiarly regarded, as it is admitted on all hands, it is in Equity.

It cannot be predicated with certainty, of any of those parties, that they acted fraudulently, but of M’Kinnc. But, it must be admitted, that the conduct of Frenaye is, at least, highly neglectful; and, if Bufphey were not indemnified by the decree of this Court, from all loss,.he might well impute to Fre-naye, if not a participation in the fraud of M’Kanne, at least the negligence of leaving in his hands a weapon, whereby he might inflict an injury on the community.

The act of registration gives a peculiar privilege *255to Frenaje, of perfect immunity, from tlie date of Ills mortgage, until the time allowed for recording it. For that indemnity, it ought to be exacted of every mortgagee, that he then, comply with its requisitions, and at least, if he omit to do so, the injury which is done by the omission, ought to be borne by Mm alone.

Here no diligence could have protected Dufphey. His vendor was in possession of the land, and of the muniments of title. Caveat emptor does not apply to him. The deeds were in his vendor’s possession, and the only source of knowledge to him, of the latent equity of Freo aye, was from the registration, which the law enacts, but which Frenaje has omitted, or from personal communication.

I concede, that notice is the. only object of registration, and that notice actually given, is equivalent, at least with regisrration, which is only constructive. The failure to record in timo, is no penal forfeiture ; but the notice actually given, shall save all the rights, which have not been honestly acquired by another, during the dormancy of his claim. Whenever it comes to light, from that moment, I would say, it .shall be enforced as far as it can consistently with the principle, sic utere tuo, ut alienum non lcedas.

How, then, can the lien, in this case, be used, so as not to injure Dufphey. In no other way, (without giving the notice a retro-active operation,) but by considering it, though not defeated, yet impaired to the extent of the honest advance, made by Dufphey, upon the same subject matter.

The character of purchaser not having been acquired by Dufphey, in the meaning of the act, so as *256to render v:del the mortgage, I consider it still in life, and binding ; to "be enforced, however, subject to the honest advance made by Dufphey, upon the same subject.

I have had less difficulty, in reconciling the decree' pronounced in this case, wig'll the decisions referred to as sustaining the doctrine contended for, by the counsel for Drenaje,a than in reconciling it- with ise cases, which, on the oilier side have been ad- ¶ duced, to ¡maintain the position, that the purchase by Dufphey ought to be maintained; and that the only relief afforded to Frenayc should be a lien upon the' balance of the marchase money, due by Dufphey to MThiane, at the time of the notice. The establish-moot of this latter doctrine does, in effect, destroy the lien in tolo, as if regards the subsequent purchaser ; and.only lea too it to be enforced against his vendor, by subjecting his funds, in the hands of such subsequent purchaser, to-the payment of the residue.

The prominent case referred to, and relied upon, as sustaining this doctrine, is the case of Frost vs Beckman.b There, there was a mortgage for three thou- ' o o sand dollars; but, by mistake in the registry, entered' as for three hundred dollars. The mortgagor sold without communicating the fact of any mortgage whatever. The lien for the three hundred dollars was holdcn to be clear, and it was further held, that the actual mortgage should also bind the land ; so that it was only to be relieved from it, by the payment of whatever amount of the purchase money, was due at the time of the notice given to the subsequent purchaser, of the actual mortgage. The doctrine is laid down, that the notice arrests any further *257proceedings towards the completion of the purchase, after the notice, and that any payments, made after-wards would be in his own wrong.

The decree orders an account tó be taken, to ascertain what amount was due from the subsequent purchaser, at the time fixed upon as the date of the notice ; and declares that the land be only relieved from the mortgage, by the payment of that amount. The same result would always be arrived at, by pursuing the principiéis of that decree, and of the one-pronounced by this Court, whenever the land had been sold for its full value; for, in such case, by the principle of both decrees, the land is only subjected to the mortgage, to the extent of its value, after deducting bona fide payments, made by the subsequent purchaser.

If, in the case in Johnson's Reports, the sale from Cost to Frost and Goddard, was for the full value of the land, and the doctrine be settled, that they shall be indemnified to the amount paid before notice, the balance due would be all that the mortgag- or could have obtained — and it was clear equity, to require only that balance to be paid, to relieve the land from'the mortgage. . But the result would be widely different from the two decrees, if the decree in Frost vs Beekman is understood as applying universally, equally to cases where the subsequent sale was for its full value, as where it was for a very inconsiderable portion of its value.

The decree in Frost vs Beekman extended, so as to embrace a -case of the latter description, is irreconcilable with the principles which we feel bound *258to .adopt, and which wo sanction by the decree in this case. We mean to enforce the doctrine, that the lien in this case, as the whole of the purchase money was not paid by the subsequent purchaser as well as ills conveyance obtained prior to notice, still exists upon.the land; but that it must yield, pro tanto as to the bona fide payments of such subsequent purchaser.

Let us- consider the relative situation of the parties, and what adjustment of the difficulty, arising in such cases, would be most conformable to equity, and best calculated to promote fair dealing and good faith in the community. If that which we propose,, best subserves those ends, and is not forbidden by some fixed rule or precedent, which we are bound to-respect, then we should not hesitate to adopt it.

The holder of the prior claim, may be the original vendor of the land, who has not been paid a sous for his property, but has tafeen a mortgage for the purchase money ; he may be a mortgagee for a sum loaned; or he may be a vendee, with bond for title.

In this case, it is not certain, in what predicament Frenaye stands, though, as I consider the case, it makes no manner of difference, whether his mortgage was taken to secure the purchase money, or money due to him, upon another score. In every such case, confidence is repoosed in the mortgagor, ven-dee or vendor. He is, in fact, a trustee, though of a secret trust. In breach of good faith, finding that he can impose upon some .one, and lawlessly realise something by the sale of the premises, he proceeds to do so. Here, it must be obvious, that, generally this second sale will be made, under circumstances *259calculated to prevent its full value from being obtained. The vendor, knowing that publicity may defeat his fraudulent purpose, offers it to but few. Thus the market is limited. Fearing detection, despatch 'is required, and to insure a saie lie sells for much less than he knows the vendee, on inquiry, would be willing to give ; for inquiry might disclose the project, and thus defeat his illicit design.

Under these circumstances, a contract is made with an honest and bona fide purchaser, who sees the vendor in possession of both the land and title papers. A profitable contract is offered to him, and as delay might interrupt it, he honestly co-operates in the fraudulent haste of his vendor, and closes the bargain.

Now, if all the money be paid, and the deed executed — by all the authorities, the sale is complete, and all prior claims are totally defeated. If, however, the transaction be not closed — if" the whole of the purchase money be not paid, on the one hand, and the deed executed, on the other; and before suclx consummation, he is notified of the prior claim, is it a matter of greater hardship to him, that he should be there arrested, indemnified for his misplaced confidence, but deprived of a great bargain, than that the prior claimant should be bereft of every thing 1 We say to the subsequent purchaser, in the language of Lord Hardwick,a “ You can not be hurt.” If the vendor is insolvent, it is the loss of the prior claimant, for you shall be indemnified to the extent of all your advances ; but, not being a complete purchaser., you can not claim- the profitable bargain which you proposed to yourself, as its enforcement *260would injure one equally honest with yourself, though not so alert in his dealings.

It will not fail to be seen, by close observation, that the equitable principle endeavored to be enforced by this opinion, must sometimes require a difference in the details of the decree, according to the peculiar features of the case. Suppose, for example, that in this case, in addition to the’ money actually paid by Dufphey, he had, with the same good faith, prior to notice, invested large capital in improvements, as in the erection of machinery, &c.; and that the sale of the premises, thus ameliorated, would bring the amount of the mortgage, though, without the improvements, they would he worth no more than the price agreed to be given by him. — - Here, compensation for the improvements, must, in some way be made. If a sale were ordered, in the event that the second purchaser did not pay off the mortgage, which he certainly would not do, in the case supposed, it would be impossible to determine how much of the sale money was to be considered as produced by the improvements, and how much by the land, exclusive of the improvements.

I merely make this suggestion, to shew, that, in in pursuing the equitable principles advanced in this opinion, a difference in the details of the decree must be made to suit the exigencies of the case in judgment.

In the case above cited, (from 1st Johns.,) it was admitted, that very valuable improvements were made by the second purchasers, before notice; and much embarrassment might be avoided in such a *261case, by adopting the sale to the subsequent purchaser, as the value of the land, exclusive of the improvements ; and decreeing the balance due at the time of notice, to be paid to the prior claimant.

In none of the cases, cited by the counsel for Fre-naye, does the question arise, as here, from the insolvency of MTCiime — 'who is to lose the amount of the amount of money actually paid by the second bona fide purchaser ¶ St is often decided, that, the contract not being completed, by the payment of all the consideration money and the execution of the deed — the pica of innocent purchaser, &c., can not be maintained, so as to defeat in toto, the prior claimant; hut the question, who must lose the honest payment, is not expressly raised, and decided, in those cases.

In a case, in 5th Litt. 62, the defendants relied upon the plea, and had paid only two thousand dollars of the purchase money, before notice: they, there, however, filed a cross bill, and prayed a decree against the fraudulent vendor, who had sold the same premises twice. The Court overruled the plea, on the principle that the purchase was not complete, only part of the money having been paid before notice. But the question, as to the payment already honestly made, being allowed to be satisfied out of the land, was not raised, in as much as the defendants sought, by a cross bill, its re-payment, from the fraudulent vendor, to which they were clearly entitled.

If, instead of that feature of the case, the insolvency of the vendor had been alleged and proven, and a repayment of the amount honestly advanced, *262had been insisted on, as a condition precedent to the surrender of the legal title, obtained from the vendor, the question would have arisen directly,, and I can not doubt but the decree would have been in conformity with the principles herein recognised— that the sum thus honestly advanced, should become a preferred lien upon the land. If the vendor is solvent, his liability may be enforced by either party, and it is not very material, in that case, who shall be thrown upon him.

. But, if insolvent, as here, the question is, who, of two innocent persons, shall lose. The doctrine, “qui prior est tempore,portior est jure,” only applies where, in other respects, the parties are equally faultless.— In such a case as this now under the consideration of the Court, I would say, he should lose, who, by a compliance with the law, requiring registration, might have protected himself; and not he, whom no diligence could have protected.

It is not necessary, in this case, nor do we mean, to say, what would be our determination, in a case, where the title or claim of the person assuming the attitude of first purchaser, was an equity merely, which our statutes of registration do not embrace— as, for example, the equitable lien of a vendor, without mortgage for the purchase money, he having-made title and given possession. We acknowledge, that the preponderance of our inclination,' is to extend the principle, in this decree, to that class of cases ; in as much as in all such, there is a looseness of dealing, very like the omission to record, in the present — which is calculated to enable a fraudulent *263vendor, to impose upon the community. But, as a modest caution is, in our opinion, the safest observance of a judicial tribunal, we forbear any anticipated judgments.

This opinion also contains the views of the Chief Justice, as expressed, in an opinion delivered by him, upon a former argument of the cause — which need not be published, as they are substantially the same.