A. E. Cheney, for Appellant:
I. Smith and Hilton were not bona fide purchasers because they had notice of all facts relating to Price's claim. The
mortgage which Price gave to Ward had never been satisfied or discharged of record, and, when Smith and Hilton purchased from Ward, the undischarged and unsatisfied mortgage was constructive notice to them of Price's equity in the land. Whether the deed was a merger of the mortgage depends upon the intention of the parties. That intention is a question of fact, and no presumption of such intention arises from the mere execution of the deed. "Purchasers cannot rely upon the record as showing merger. * * * They must go beyond this and ascertain whether there has been a merger in fact; and they act at their own peril if they do not require their grantor to produce the mortgage and note supposed to be merged, and discharge the mortgage of record, or show that it constitutes a part of the title to the estate." (1 Jones on Mortgages, sec. 872; Aiken v. Milwaukee St. P. Ry. Co., 37 Wis. 478 , 479 .)
II. "Purchasers are bound to use a due degree of caution in making their purchases, or they will not be entitled to protection. Caveat emptor is one of the best settled maxims of the law, and applies exclusively to a purchaser. He must take care, and make due inquiries, or he may not be a bona fide purchaser. He is bound not only by actual, but also by constructive notice, which is the same in its effect as actual notice. He must look to the title papers under which he buys, and is charged with notice of all the facts appearing upon their face, or to the knowledge of which anything there appearing will conduct him. He has no right to shut his eyes or his ears to the inlet of information, and then say he is a bona fide
purchaser without notice." ( Simmons Creek Coal Co. v. Doran, 142 U. S. 437 ; Everdson v. Mayhew, 65 Cal. 163 ; Beatty v. Crewdson, 124 Cal. 577 .)
III. The burden is on the purchaser to show that he did not have notice of a third person's title. ( Beatty v. Crewdson, 124 Cal. 577 ; Wilhoit v. Lyons, 98 Cal. 409 .) "To entitle a party to protection as a bona fide purchaser without notice, he must aver and prove the possession of his grantor, the purchase of the premises, the payment of the purchase money in good faith, without notice, actual or constructive, prior to and down to the time of its payment, for, if he had notice, actual or constructive, at any moment of
time before the payment of the money, he is not a bona fide purchaser." ( Everdson v. Mayhew, 65 Cal. 167 ; Wilhoit v. Lyons, 98 Cal. 413 ; County Bank v. Fox, 119 Cal. 64 ; Boone v. Chiles, 10 Pet. 213.)
Torreyson Summerfield and F. H. Norcross, for Respondent:
I. A deed, though absolute in form, intended by the parties as security for money loaned, is, in fact, a mortgage, with all its attributes, and nothing more. ( Bingham v. Thompson, 4 Nev. 224 ; Saunders v. Stewart, 7 Nev. 200 ; Leahigh v. White, 8 Nev. 147 ; Cooks v. Culberson, 9 Nev. 199 ; Pierce v. Traver, 13 Nev. 526 ; Brinkham v. Jones, 44 Wis. 512 ; 2 Jones on Mortgages, 114, 1120-3.)
II. While the proof is conclusive that Smith and Hilton were purchasers from Ward without notice, actual or constructive, of the rights of Price as mortgagee in the premises, nevertheless, we contend that the plaintiff was not required to establish such fact as essential to his right of recovery. "The well-settled rule applies in this case, that a party is estopped from impeaching or contradicting his own deed, or denying that he granted the premises that his deed purports to convey." ( Van Kennen v. C. R. R. Co., 38 N. J. L. 167 , cited and approved in 15 Nev. 113 ; 11 Am. Eng. Enc. Law, 2d ed. 402.)
III. In principle we cannot see where the defendant in this case should be allowed to avoid the natural effect of his deed, any more than though the property was conveyed to avoid the payment of creditors. In both cases a wrong is committed, and an unlawful advantage sought. Certainly a wrong committed towards a poor debtor is no less to be frowned upon than one against a rich creditor. ( Allison v. Hogan, 12 Nev. 38 ; McCausland v. Ralston, 12 Nev. 195 ; Peterson v. Brown, 17 Nev. 175 .)
IV. Even if Smith and Hilton were purchasers mala fides from Ward, they would be but joint tort feasors with Ward, and the remedy of Price could be had solely against Ward. (Cooley on Torts, 133.)
V. It not appearing from the deed that a lesser estate is intended, a fee simple estate is presumed to have been
intended to pass from Ward to Smith and Hilton. This being the legal presumption, and Ward being estopped from rebutting such presumption, it "cannot be the law that plaintiff in this action is required to establish by proof, independent of the deed, the very fact that is presumed from the deed. (Sec. 1105, Civ. Code Cal.; Maybury v. Ruiz, 58 Cal. 15 .)
VI. The matter of constructive notice is entirely a creation of the statute, and from the statute of California the conclusion is that Smith and Hilton had notice of a deed absolute in the name of M. E. Ward. (Civ. Code Cal., secs. 1213, 1113; Grellet v. Heilshorn, 4 Nev. 532 .)
VII. As between Ward and Price, the deed executed by Price to Ward was a mortgage, but being absolute in form, it vested the legal title to the property in Ward. ( Brophy M. Co. v. B. D. M. Co., 15 Nev. 107 .)
VIII. The mortgage from Price to Ward was executed and recorded nearly three years before the deed was executed and recorded, and Smith and Hilton could not be charged with notice of the mortgage. (20 Am. Eng. Enc. Law, 597, and authorities cited in notes.)
IX. The deed absolute from Price to Ward was a higher muniment of title than the mortgage, and even if it could be said that Smith and Hilton had constructive notice of the mortgage, they would also have the record notice that the mortgage was extinguished by the deed. "The taking and acquiring of a higher security merges and extinguishes the legal remedy in the lower one." (5 Lawson's Rights, R. P., sec. 2580; Wann v. McNulty,
43 Am. Dec. 58; Baler v. Baker,
75 Am. Dec. 243; Rump v. Gerkins, 59 Cal. 495 .)
X. "Equity will prevent or permit a merger, as will best subserve the purposes of justice and the actual and just intent of the parties." ( Jameson v. Hayward, 106 Cal. 688 ; McLain v. Sullivan, 85 Ind. 174 ; Fowler v. Fay, 62 Ill. 375 ; Andrue v. Vreeland, 29 N. J. Eq. 474 ; Watson v. Dundee, 12 Or. 474 .)
A. E. Cheney, for Appellant, in reply:
I. Respondent's contention that Ward is estopped from contradicting or impeaching his own deed has no application
in this action. They refer to 11 Am. Eng. Enc. Law, 2d ed. p. 402, passing over the pertinent statement of the law on page 400, namely: "Estoppels by deed do not bind strangers, nor can they take advantage of them." (11 Am. Eng. Enc. Law, 2d ed. 400.) "A stranger cannot be bound by, or take advantage of, an estoppel. An estoppel to be binding must be reciprocal; and parties and privies only are bound thereby." ( Robinson v. Bates, 3 Metc. 42; Kitzmiller v. Rensselaer, 10 Ohio St. 64 ; Franklin v. Dorland, 28 Cal. 175 ; Rodgers v. Donelan, 39 Pac. 494.)
II. Equally inapplicable is the contention of respondent that the mortgage from Price to Ward did not convey notice to Smith and Hilton because executed before Ward conveyed to them. If it had been executed after Ward had conveyed to Smith and Hilton, there would have been some reason in the contention. The rule is thus stated: "The purchaser is not charged with notice from the record of conveyances from his grantor prior to such grantor's acquisition of title." (Wade on Notice, 214.)
III. The court having sustained defendant's demurrer and required the plaintiff to allege and prove that Smith and Hilton were bona fide purchasers, and the plaintiff having acquiesced in that ruling, answered over and taken no cross appeal, he cannot on this appeal make any objection to the ruling of the court in that respect. "Where a demurrer to a pleading is sustained, but the same facts are put in issue by amended pleadings, any error in the ruling on the demurrer is waived." (6 Enc. Pl. Pr., 359, and notes 1, 2; 1 Enc. Pl. Pr. 624, and note 4; 2 Enc. Pl. Pr. 515.)
IV. The foundation of plaintiff's action is that Ward sold this land in violation of the agreement that he took the deed as further security for his debt. By what process of reasoning authorities concerning the liability of a joint tort feasor is applicable to this action, we are unable to ascertain. Respondent cites Cooley on Torts, page 133. The same authority, in continuing the discussion, upon page 134, says: "The rules regarding remedies which are applicable to breaches of contracts are obviously inapplicable here." (Cooley on Torts, p. 134.)