dlornFll iCaiu ^rl|OBl ^library Cornell University Library KF 399.P78 1918 "'^ A treatise on equity |u"spf" 14 Atl.- 624. . § 539 EQUITY JTJBISPEUDElirCB. 1006 makes a bequest or devise in his will in favor of the other, ■which is in its amount and value a reasonably sufficient compensation, such testamentary provision is a satisfac- tion, and the creditor party cannot enforce his demand as a debt by an action against the estate. ^ It would seem that, under these circumstances, the creditor party would not even have an election, since he had agreed to look to the testamentary benefit alone for compensation. This result, however, must evidently depend upon the terms of the original agreement, in pursuance of which the ser- vices were rendered. Wherever, also, there being an exist- ing indebtedness, it is agreed between the parties, either expressly or impliedly, that it shall be paid by some benefit bestowed in the debtor's will, and a testamentary provision is subsequently made in favor of the creditor, which he accepts, his demand will thereby be satisfied; he cannot both take the bequest and enforce his debt as a subsisting claim against the estate. In this case, however, the cred- itor clearly has an election either to accept the bequest in satisfaction of his pre-existing demand, or to renounce thagift and enforce the demand. ^ ; § 539. Debt Owing to a Child or Wife.— Where a father, or person standing m loco parentis, owes an ordinary debt, arising in any manner, to his child, or to the one occupying the position of child, and while the debt is subsisting gives a legacy to such child, or to the one so treated as a child, the case is governed in every respect, both with regard to the general presumption of a satisfaction and the facts which rebut the presumption, by the same rules which apply to a debtor and creditor who are strangers to each § 538, 1 Eaton v. Benton, 2 Hill, 576, 578; Williams v. Crary, 4 Wend. 443, 450; Patterson v. Patterson, 13 Johns. 379; Jacobson v. Legrange, 3 Johns. 199; Morris v. Morris, 3 Houst. 568. § 538, 2 Williams v. Crary, 5 Cow. 368, 8 Cow. 246, 4 Wend. 443. See, also, Eaton v. Benton, 2 Hill, 576; Clark v. Bogardus, 12 Wend. 67; Van Riper v. Van Riper, 2 N. J. Eq. 1; Morris v. Morris, 3 Houst. 568. 1007 CONCEBNING SATISFACTION. § 540 other,! The same is true of a legacy given by a husband to his wife when he is indebted to her by any ordinary species of indebtedness.^ a It should be carefully ob- served that the foregoing proposition only applies when the liability resting upon the father is that of an ordinary indebtedness. If the liability arises from an antecedent executory settlement or a covenant to settle property as a portion upon the child, and the father gives a subsequent legacy, a presumption of satisfaction thence arises which is favored by courts of equity, and is not overcome by slight features of difference between the portion and the testamentary benefit.^ § 540. Debt to Child Satisfied by Advancement. — In im- mediate connection with the satisfaction of indebtedness to a child by a legacy, it is proper to present the contrast- ing doctrine concerning the satisfaction of debts to a child § 539, 1 As, for example, where a father and son had been in part- nership, and a debt was due from the former to the latter as the result of the firm transactions, a legacy by the father to the creditor son would be governed by exactly the same rules as if the parties were not related to each other. And where a father owed his daughter two hundred pounds, as executor of the wiU of a third person, and gave her five hun- dred pounds by his own will, to be paid to her when she arrived at the age of twenty-one, but not otherwise, it was held that she could claim both the debt and the legacy, since there was no satisfaction: Tolson v. C6llins, 4 Ves. 482; Stocken v. Stocken, 4 Sim. 152; Fairer v. Park, L. R. 3 Ch. Div. 309. See Bryant v. Hunter, 3 Wash. C. C. 48; Gilliam V. Chancellor, 43 Miss. 437, 5 Am. Rep. 498; Guignard v. Mayrant, 4 Desaus. Eq. 614; Kelly v. Kelly's Ex'rs, 6 Rand. 176, 18 Am. Dec. 710. § 539, 2 Fowler v. Fowler, 3 P. Wms. 353 ; Cole v. Willard, 25 Beav. 568; Gilliam v. Chancellor, 43 Miss. 437, 5 Am. Rep. 498; Bryant v. Hunter, 3 Wash. C. C. 48 ; Guignard v. Mayrant, 4 Desaus. Eq. 614. § 539, 3 See post, § § 565-568, where this particular doctrine is dis- cussed. § 539, (a) Thus in Gillings v. Bubsequently paid off the debt, it Fletcher, L. E. 38 Ch. Div. 373, was held that the , legacy was satis- where a testator bequeathed to his fied, although the purpose for which wife a legacy of £625, that being the it was given was not stated in the. exact amount he then owed her, and will. § 540 EQUITY JUKISPBUDBNCE. 1008 by a subsequent advancement during the parent's lifetime. It is settled by the uniform current of decisions in Eng- land, that where a father, or other person in loco parentis, being a debtor to his child by any kind of ordinary indebt- edness, makes an advancement to the child upon marriage, or upon any other occasion, that advancement is presumed to be a satisfaction, or a satisfaction pro tanto, of the debt.i In order that the provision may operate as a satis- faction, it is not necessary that it should be made on the marriage of a child, or should be expressly in the nature of a portion. The rule applies wherever the gift by the parent is in the nature of an advancement, or where he becomes personally liable for a child's debt, from which the latter is thereby discharged. It seems difficult to reconcile some of these decisions and the rule which they maintain with any sound principle. It is certainly diffi- cult to perceive why an advancement made by a father during his lifetime should be so, strongly presumed a satis- faction of a debt due to the child, while a legacy given by the same parent to the same child would not be presumed § 540, 1 In fact, the presumption of satisfaction is the same as that which arises where there is a prior covenant by a parent to give or settle a portion, and a subsequent legacy. The rule as stated in the text is applied even though the money be advanced on the pcca,sion of a daugh- ter's marriage, in consideration of a settlement made by the intended husband, and even though the intended husband is ignorant of the daughter's rights as a creditor against her father. The whole doctrine is ably discussed and the decisions fully reviewed in Plunkett v. Lewis, 3 Hare, 316, per Wigram, V. C. ; and see, also, Mackdowell v. Halfpenny, 2 Vern. 484; Wood v. Briant, 2 Atk. 521; Seed v. Bradford, 1 Ves. Sr. 501; Chave v. Farrant, 18 Ves. 8; Hardingham v. Thomas, 2 Drew, 353; Playes v. Garvey, 2 Jones & L. 268.* But the presumption of a satis- faction does not arise where there is no debt at the time of the advance, but it accrues afterwards : Plunkett v. Lewis, 3 Hare, 316, 330. § 540, (a) See, also, In re Lawes, Ct. 411. For an instance of rebuttal L. R. 20 Ch. Div. 81. The text is' of the piesumption, see Crichtou v. cited in Glover v. Patten, 165 IT. S. Criehton, [1896] 1 Ch. 870. 394, 406, 410, 41 L. Ed. 760, 17 Sup, 1009 CONCEBNING SATISFACTION. § 541 a satisfaction. The marked distinction between the two cases does not rest upon any solid and sufficient reasons." § 541. Legacy by a Creditor to his Debtor. — ^A testamen- tary gift from a creditor to a debtor stands upon an en- tirely different footing from one by a debtor to his creditor, which was examined in the preceding paragraph. A legacy from a creditor to his debtor, unaccompanied by lan- guage in the will or exterior to it expressly showing the special intent, whether equal to, greater or less than, the debt, raises no presumption whatever, either of law or of fact, that the testator intended thereby to excuse, release, or discharge the debt, so that the legatee would be entitled to claim and receive the whole amount bequeathed, but would be freed from all liability to pay the debt. In fact, such a legacy produces no effect upon the indebtedness. i ^ The only effect which such a legacy given simplidter can have is to create the right to an equitable set-off. The legatee might not be forced, by means of a legal action, to pay the debt to the executors, when he could in turn recover back from thena the same amount, or a part thereof, by virtue of his legacy. A court of equity, in order to prevent this circuity of action, may permit the executors to set off the debt against the demand made on them for the legacy; and if the estate is solvent, so that §541, iWilmot V. Woodhouse, 4 iBrown Ch. 227; Clark v. Bogardus, 2 Edw. Ch. 387, 12 Wend. 67; Stagg v. Beekman, 2 Edw. Ch. 89; Hayes V. Hayes, 2 Del. Ch. 191, 73 Am. Dec. 709; Brokaw v. Hudson, 27 N. J. Eq. 135; Blackler v. Boott, 114 Mass. 24; Huston v. Huston, 37 Iowa, 668; Zeigler v. Eckert, 6 Pa. St. 13, 18, 47 Am. Dec. 428. It may be remarked that in one or two of the recent American cases above cited ihe language used by the court seems to intimate that the same rule pre- vails as in the case of a legacy by a debtor-testator to his creditor; that the legacy is, in general, presumed to be a satisfaction; but that such presumption is overcome by very slight grounds of difference between the gift and the debt. Of course~this view, so far as it may have been held or intimated, is entirely erroneous. §541, (a) See, also, Sharp v. Wightman, 205 Pa. St. 285, 54 Atl. 888. 11—64 § 542 EQUITY JUKISPEUDENCE. 1010 the debtor will be entitled to receive payment of his legacy, the court may compel the executors to give him credit for the amount of the legacy, when they are seeking to enforce the claim of the estate upon him for the debt.^ ^ § 542. Declarations by a creditor-testator, made outside of his will, and not based upon any valuable consideration, whether oral or written, cannot, of course, operate as a dis- charge at law of a debt due to him, except when in writing and under seal, so as to be a technical release. Such declarations, when standing alone without any accompany- ing testamentary provision, also furnish no ground for the interference of a court of equity, in order to restrain an enforcement of the demand by the executors. ^ The only exception would arise where the declaration was made under such circumstances that the testator thereby im- posed a constructive trust upon the property given by his will, so that the beneficiary would not be equitably en- titled to the gift without at the same time carrying out the trust and discharging the debt.^ If, however, a cred- itor-testator bequeaths a legacy to his debtor, and accom- panies the testamentary gift by written declarations made at or after the execution of the will, and according to some authorities even by similar verbal declarations expressing an intention to forgive or discharge the debt,— these two facts in combination may amount to an equitable satis- faction, or in other words, may constitute sufficient grounds for the interposition of equity to restrain the § 541, 2 See cases cited in the last note. § 542, 1 Byrn v. Godfrey, 4 Ves. 6; Kidder v. Kidder, 33 Pa. St. 268. §542, 2Weskett v. Eaby, 2 Brown Pari. C. 386; Byrn v. Godfrey, 4 Ves. 6. §541, (b) The text is quoted and Estate of Foster, 38 N. Y. Misc. followed in Irvine v. Palmer, 91 347, 77 N. T. Supp. 922; Leask v. Tenn. 463, 30 Am. St. Kep. 893, 19 Hoagland, 64 N. Y. Misc. 156, 118 S. W. 326. See, also, Sleeper v. N. Y. Supp. 1035 (though debt is Kelley, 65 N H. 206, 18 Atl. 718; barred by statute of limitations). 1011 OONCEKNING SATISFACTION. § 543 executors from suing at law to enforce payment of the debt.3 § 543. Satisfaction of Debt, how Enforced. — ^It should be observed, in conclusion, that whenever a legacy is given by a debtor-testator in satisfaction of the debt ,whieh he owes, either by operation of the general presumption or by virtue of express language of the will, such satisfaction is purely a creation of equity, and cannot be set up as a defense at law, except so far as equitable defenses are allowed in legal actions by modern legislation. In the absence of such per- missive legislation, any affirmative relief to compel an elec- tion or satisfaction by the creditor-legatee must be obtained in equity. 1 ^ For the same reason, a clause in a will ex- pressly forgiving a debt due to the testator from a certain person, or directing that it shall not be enforced (which vir- tually amounts to a bequest of the debt), or a clause di- rectly bequeathing the debt to the debtor himself, does not constitute any legal defense to an action brought by the executors to recover the debt. One sufficient reason, among others, is, that the clause, in whatever form, being in reality a legacy of the debt itself, cannot be operative §542, 3 Eden v. Smith, 5 Ves. 341; Aston v. Pye, 5 Ves. 350, 354; Pole V. Lord Somers, 6 Ves. 309, 323; Zeigler v. Eckert, 6 Pa. St. 13, 18, 47 Am. Dec. 428. §543, 1 Clark v. Bogardus, 2 Edw. Ch. 387, 12 Wend. 67; Stagg v. Beekman, 2 Edw. Ch. 89; Crary v. Williams, 5 Cow. 368; Molony v. Scan- Ian, 53 111. 122. If the creditor brings an action at law against the executors to recover .the debt, it would be no legal defense for them to plead. that the testator had bequeathed a legacy in satisfaction of the debt. But if they should pay the debt, and the creditor should subsequently sue to recover his legacy, the question might then be raised, by way of defense in such second action, whether the legatee was not bound to elect, and had elected in favor of his debt, and so had renounced the bequest. Equity would have jurisdiction to decide all the questions in one suit brought for that purpose; and without doubt, in some of the states, the executors might set up the satisfaction as an equitable defense in the legal action brought against them to recover the debt. § 543, (a) See, also, Sharp v. Wightman, 205 Pa. St. 285, 54 Atl. 888. § 544 EQUITY JUEISPBUDENCB. 1012 unless there are assets sufficient to pay all the creditors of the estate in full; and this is a question which cannot be. determined in such a legal action. A bequest of a debt "'to the debtor, like all other legacies, is nugatory unless the estate is solvent, and there are assets sufficient remaining after paying all the liabilities of the estate. Such a tes- tamentary provision can only furnish ground for a court of equity to interfere and restrain the action at law brought to recover the debt, or constitute an equitable defense to the action, whenever equitable defenses are permitted by the statutory procedure.^ § 544. li. Satisfaction of Legacies by Subsequent Lega- cies. — The presumption of a satisfaction arising from the second legacy depends upon or is affected by the f pUowing external circumstances: Whether the legacies themselves are specific or pecuniary; whether they are both given simpliciter, or are accompanied by a statement of the tes- tator's reasons, motives, or other explanatory language.^ The doctrine on this subject seems to have been directly §543, 2H:obart v. Stone, 10 Pick. 215; Stagg v. Beekman, 2 Edw. Ch. 89; Clark v. Bogardus, 2 Edw. Ch. 387, 12 Wend. 67. § 544, 1 The entire doctrine on this subject was stated by Mr. justice Aston in the leading case of Hooley v. Hatton, 1 Brown Ch. 390, note, 2 Lead. Cas. Eq., 4th Am. ed., 721, 722, as follows: "There are four cases of double legacies : 1. Where the same specific thing is given twice, it can take place but once ; 2. Where the like quantity is given twice [by different instruments], the legatee is entitled to both; 3. As to a less sum in the latter deed, as one hundred pounds by will and fifty pounds by a codicil, the legatee shall take both; 4. As to a larger sum after a less, where they are in the same instrument, the two sums are not blended, but the legatee has two legacies. The law seems to be, and the authorities only go to prove the legacy not to be double, where it is given for the same cause in the same act, and totidem verbis, or only with small difference ; but where in different writings there is a bequest of equal, greater, or less sums, it is an augmentation." A more clear statement of the doctrine was given by Sir John Leach in Hurst v. Beach, 5 Madd. 351, 358: "Where a testator leaves two testamentary instruments, and in both has given a legacy simpliciter to the same per- son, the court — considering that he who has twice given must, prima 1013 CONCEEJSriNG SATISFACTIOIT. § 545 borrowed by the English chancellors from the Eoman law. Four principal rules have been well settled, corresponding to four different conditions of fact. It should be care- fully observed that whenever the second legacy is re- garded as substitutionary, and not as cumulative, the satis- faction of the prior legacy is absolute; the former legacy creating no right in the legatee, there is no claim for an election between the two on his part; the former gift is completely adeemed by the testator's own act. The fol- lowing are the four rules : — § 545. Rule First. Specific Legacies. — ^A second gift of the same specific thing, whether by the same instrument or by different instruments, and whether given simpliciter or accompanied by a statement of the motive, is always sub- stitutionary and in satisfaction of the prior gift. Such double legacies must, from the necessities of the case, con- stitute only one legacy, and can never be cumulative, since it is impossible that the same identical corpus or specific thing itself can be given twice.i This case is very plain. facie, be intended to mean two gifts — awards to the legatee both legacies, and it is indifferent whether the second legacy is. of the same amount, or less or greater than the first. But if in such two instruments the legacies are not given simpliciter, but the motive of the gift is expressed, and in both instruments the same motive is expressed, and the same sum is given, the court considers these two coincidences as raising a pre- sumption that the testator did not, by the second instrument, mean a second gift, but meant only a repetition of the former gift. The court raises this presumption only where the double coincidence occurs of the same motive and the same sum in both instruments; it will not raise it if in either instrument there be no motive or a different motive ex- pressed, although the sums be the same, nor will it -raise it if the same motive be expressed in both instruments, and the sums be different." See, also, as to the general doctrine, Johnstone v. Earl of Harrowby, 1 De Gex, F. & J. 183, and cases cited; Wilson v. O'Leary, L. R. 12 Eq. 527, L. R. 7 Ch. 448; De Witt v. Yates, 10 Johns. 156, 6 Am. Dec. 326; Jones v. Creveling's Ex'rs, 19 N. J. L. 127, 21 N. J. L. 57^-; Edwards V. Rainier 's Ex'rs, 17 Ohio St. 597. § 545, 1 Duke of St. Albans v. Beauclerk, 2 Atk. 638 ; Suisse v. Lowhher, 2 Hare, 424, 432, per Wigram, V. C. Legacies are given, within the § 546 EQUITY JUKISPKUDENCE. 1014 The only questions arise with respect to legacies of quantity; that is, of so much money, of so many shares of stock, and the like; and these legacies must necessarily be "general" or "pecuniary," and not "specific." The three remaining rules deal with such legacies of quantity. § 546. Rule Second. Legacies of Quantity by Different Instruments. — It is well settled that where a testator by dif- ferent instruments gives a legacy of quantity simpliciter, and also a second legacy of quantity to the same legatee, in the absence of language showing a different intent the second legacy is regarded and treated as cumulative, and not as substitutionary or in satisfaction of the prior one. The testator's intention is presumed to be that the bene- ficiary should receive both the gifts ; and it makes no dif- ference whether the second is exactly equal to or is greater or less than the first.i meaning of the rules stated in the text by the same instrument, when both gifts are contained in the body of the same will or in the same codicil; by different instruments, when one is contained in the body of one will and the second in that of anothef will, both being admitted to probate; or when one is contained in the body of a will and the other in a codicil thereto; or when one is contained in a codicil and the other in a second or different codicil. In other words, the will and each codicil are re- garded as different instruments for the operation of these rules. §546, 1 The two legacies equal: "Wallop v. Hewett, 2 Ch. Rep. 70; Newport v. Knyaston, Cas. t. Finch, 294; Baillie v. Butterfield, 1 Cox, 3?2; Forbes v. Lawrence, 1 Coll. 495; Radburn v. Jervis, 3 Beav. 450; Lee v. Pain, 4 Hare, 201, 216; Roch v. Callen, 6 Hare, 531; Russell V. Dickson, 4 H. L. Cas. 304. Second legacy greater than the first: Hooley v. Hatton, 1 Brown Ch. 390, note; Suisse v. Lowther, 2 Hare, 424; Hertford v. Lowther, 7 Beav. 107; Lyon v. Colville, 1 Coll. 449; Johnstone v. Lord Harrowby, 1 De Gex, F. & J. 183 ; 1 Johns. 425 ; Cress- well V. Cresswell, L. R. 6 Eq. 69, 76;. Wilson v. O'Leary, L. R. 12 Eq. 525, 7 Ch. 448. Second legacy less than the first: Pitt v. Pidgeon, 1 Ch. Cas. 301; Hurst v. Beade, 5 Madd. 358; Townshend v. Mostyn, 26 Beav. 72; Wilson v. O'Leary, L. R. 12 Eq. 525, 7 Ch. 448. The rule is fully accepted in De Witt v. Yates, 10 Johns. 156, 6 Am. Dec. 326; Jones V. Creveling's Ex'rs, 19 N. J. L. 127, 21 N. J. L. 573; Edwards v. Rainier 's Ex'rs, 17 Ohio St. 597; Cunningham v. Spickler, 4 Gill, 280; 1015 CONCEKNING SATISFACTION. § 547 § 547. There is -one important exception to this rule. If the first instrument gives a certain sum or quantity, and expresses the motive for the gift, and the second instru- ment gives exactly the same sum or quantity, and ex- presses the same motive, in this case the concurrence of two coincidences — the amount and the motive — is re- garded as raising a presumption that the testator in- tended a mere repetition of his former gift, and not a double benefit. The second legacy is therefore held to be substitutionary, or in satisfaction of the first one, and the legatee is not entitled to both.^ It should be observed, however, that this presumption of a substitution or satis- faction does not arise unless there is the double coinci- dence of the same motive and the same amount expressed in both instruments.^ Rice V. Boston etc. Aid Soc, 56 N. H. 191. While the presumption of a double benefit thus arises where two legacies of quantity merely are given by different instruments, such presumption is, of course, strength- ened, and the rule operates even more stringently, where there is any material variation between the two legacies, as in their modes and times of payment, in their bearing interest, in their ultimate disposition, in the trusts or other purposes on which they are given, in the capacities in which the legatee takes, as where one legacy is given to a married woman to her separate use, and the other is given to her not for her separate use, or in the kind and nature of the legacies themselves, as where one is a sum of money in bulk, and the other is an annuity. See Watson V. Reid, 5 Sim. 431; Strong v. Ingram, 6 Sim. 197; Attorney- General V. George, 8 Sim. 138 ; Robley v. Robley, 2 Beav. 95 ; Lee v. Pain, 4 Hare, 201, 223; Mackensie v. Mackensie, 2 Russ. 262; Bartlett v. Gil- lard, 2 Russ. 149; Wray v. Field, 2 Russ. 257, 6 Madd. 300; Guy v. Sharp, 1 Mylne & K. 589; Hodges v. Peacock, 3 Ves. 735; Sawrey v. Rumney, 5 De Gex & S. 698; Spire v. Smith, 1 Beav. 419; Masters v. Masters, 1 P. Wms. 421, 423. §547, 1 Hurst v. Beach, 5 Madd. 352, 358; Benyon v. Benyon, 17 Ves. 34. § 547, 2 It does not, therefore, arise, although the amounts given are exactly the same, where there is no motive at all expressed in either of the instruments, nor where the motive stated in one is different from or additional to that expressed in the other: Roch v. Callen, 6 Hare, 531; "Ridges v. Morrison, 1 Brown Ch. 388; Mackinnon v. Peach, 2 Keen, § 548 EQUITY JUEISPBUDENCB, 1016 § 548. Presumption Overcome by Language of Testator. The rule and its exception stated in the preceding para- graphs are both based upon a presumption of the testator's intent arising from the form and manner of his be- quests, — in the one instance two legacies given simpliciter by different instruments, in the other the same legacy twice given in different instruments accompanied by a statement of exactly the same motive. While these rules are thus based upon a presumption, there is another class of cases which are not governed by any presumption, but depend entirely upon a construction of the language used by the testator, in order to arrive at his real intent. It would perhaps be more accurate to say that any pre- sumption which might otherwise have arisen from the fact of two legacies to the same person given by different instruments has been overcome or destroyed by the special language which the testator has used in connection with the gifts, or even in other parts of the will. It is im- portant that this class of cases should not be confounded with those which fall under the general rule and exception stated in the two preceding paragraphs. Although two bequests may be made to the same person by different in- struments, and although these gifts may differ in their amounts, incidents, and forms, and although even different motives may be assigned for each separate bequest, still the special language used by the testator in making the second gift, or the language found in other parts of the will, may sufficiently show his intention to give the second legacy in substitution for or satisfaction of the prior one ; and thus any presumption otherwise arising from such double provision will be wholly overcome. It is impossi- ble to lay down any general rule governing such cases; each case must stand upon its own circumstances. The question is, then, simply one of interpretation, in order 555. Nor does the presumption arise, although exactly the same motive is stated in both instruments, if the amounts given are different : Hurst V. Beach, 5 Madd. 352; Lord v. Sutcliffe, 2 Sim. 273. 1017 CONCEBNING SATISFACTION. § 548 to ascertain the real intent of the testator ; but in arriving at this intent, the court will, if necessary, look at all parts of the will.i * The court may also be called upon to inter- pret the testamentary language, rather than to apply ,any rule of presumption, when the second instrument — e. g., the codicil — expressly refers to the former one. The terms of the second instrument, perhaps codicil, may be such, when all are taken together, as to show an intent that the second gift was to be in substitution or in satis- faction, and not cumulative.^ b The same result may fol- low when the language of the codicil shows that the testator §548, IKice v. Boston etc. Aid Society, 56 N. H. 191. Thus, for example, where a testator has in his will given legacies to several per- sons, A, B, C, and D, and in a codicil gives second legacies, either of equal or different amounts, to the same individuals, and in express words describes such second legacy to some of the beneficiaries — e. g., A and B — as "additional" or "in addition" to what was given in the will itself, but omits to make any such designation with respect to the second legacies given to the others, — e. g., C and D — this, it is held, "-is not an insignificant circumstance, but still not decisive," in aiding the court to discover the testator's intent. It is of some weight, but not conclu- sive, — a mere argument,- — ^tending to show that the second legacies given to C and D were to be in lieu of the former ones to the same persons, — in satisfaction, and not cumulative. The same is true of other words having the same general import. See Suisse v. Lord Lowther, 2 Hare, 424, 429-438, per Wigram, V. C. ; Allen v. Callow, 3 Ves. 289, per Lord Alvanley; Russell v. Dickson, 2 Dru. & War. 133, per Sugden, L. C; 4 H. L. Cas. 293; Lee v. Pain, 4 Hare, 201, 221, 233, per Wigram, V. C; Moggridge v. Thackwell, 1 Ves. 464; Barclay v. Wainwright, 3 Ves. 466; Mackensie v. Mackensie, 2 Russ. 273; Townshend v. Mostyn, 26 Beav. 72. With respect to the effect of similar language concerning legagies given to two different perso'ns, each of whom was a debtor to the testator, see Blackler v. Boott, 114 Mass. 24; and see Mason v. M. E. Church, 27 N. J. Eq. 47, as to the effect of analogous language. § 548, 2 Martin v. Drinkwater, 2 Beav. 215 ; Bristow v. Bristow, 5 Beav. 289; Currie v. Pye, 17 Ves. 462; Mayor of London v. Russell, Cas. t. Einch, 290. §548, (a) The text is quoted in Estate of Zeile, 74 Cal. 127, 137, 15 Estate of Zeile, 74 Cal. 127, 137, 15 Pac. 455, where the legacies were Pae. 455. held to be cumulative. §548, (b) The text is quoted in § 549 EQUITY JUBISPBUDENCE. 1018 is merely adopting that mode of revising, explaining, or qualifying Ms original will, rather than using it to make additional and distinct bequests. In such a case, there- fore, the intent will appear to give the second legacies as substitutionary, and not as cumulative.* The same intent may also appear when, from all its terms taken together, the codicil or other second testamentary instrument is plainly a mere copy of the former one, or even a mere copy so far as the bequests are dealt with.'* Finally, where bequests have been given to the same individuals by different testamentary instruments, the intent that the sec- ond gift should be substitutionary, and not cumulative, may be inferred from the fact that between the times when the two instruments were executed changes have taken place among the beneficiaries themselves, in their positions, in their families, in their relations to the testator, and the like.B § 549. Rule Third. Legacies of Quantity by the Same Instrument, of Equal Amount. — If by the same instrument, either by a will or a codicil, legacies of the same amount are given simplidter to the same individual, the second is held to be substitutional, or in lieu or satisfaction of the first, and the legatee is entitled to but one legacy. This presumption, is not overcome by small differences in the modes by which the gifts are bestowed, or in their ex- §548, 3 Fraser v. Byng, 1 Russ. & M. 90; Moggridge v. Thackwell, 1 Ves. 464, 3 Brown Ch. 517. § 548, 4 Coote v. Boyd, 2 Brown Ch. 521, Belt's ed., per Lord Thur- low ; Campbell v. Lord Radnor, 1 Brown Ch. 271 ; Barclay v. Wainwright, 3 Ves. 462 ; Gillespie v. Alexander, 2 Sim. & St. 145 ; Hemming v. Gurrey, 2 Sim. & St. 311, 1 Bligh, N. S., 479; Att'y-Gen. v. Harley, 4 Madd. 263; Hincheliffe v. Hinchcliffe, 2 Drew. & S. 96; Tuckey v. Henderson, 33 Beav. 174. § 548, 5 Here especially each case must be governed by its particular circumstances: Allen v. Callow, 3 Ves. 289, per Lord Alvanley; Osborn V. Duke of Leeds, 5 Ves. 369; and see Lee v. Pain, 4 Hare, 201, 242, 243, per Wigram, V. C. 1019 CONCEENING SATISFACTION. §§550,551 ternal forms.^ ^ The somewBat fanciful reason originally given for this rule was, that the second legacy must, under the circumstances, be regarded as the result of the tes- tator's inadvertence or forgetfulness. § 550. Rule Fourth. Legacies of Quaaitity by the Same Instrument, of Unequal Amounts. — If by the same instru- ment, either will or codicil, legacies of unequal amounts are given simpliciter to the same person, the second legacy is held to be additional or cumulative, and it is immaterial whether it be greater or less than the first, — ^in either case the legatee is entitled to both the gifts.^ § 551. In each of the two preceding rules the presump- tion arises when the legacies are given simpliciter; and the presumption will in either case be overcome by language of the- testator sufficiently showing a contrary intent. The intention, as indicated by the whole will, governs where two gifts are made by the same instrument, as well as where they are made by different instruments. If, there- fore, the testator gives exactly the same amount by a second clause, which he had already given by a prior clause of the same instrument, the intention may appear from all his language that the beneficiary is to hava both the sums ; or, on the other hand, if the testator gives, by a second clause, an amojint greater or less than that which he had § 549, 1 Greenwood v. Greenwood, 1 Brown Ch. 31, note ; Garth v. Mejrriek, 1 Brown Ch. 30; Holford v. Wood, 4 Ves. 76; Manning v. Thesiger, 3 Mylne & K. 29; Brine v. Ferrier, 7 Sim. 549; Early v. Ben- bow, 2 Coll. 342; Early v. Middleton, 14 Beav. 453; De Witt v. Yates, 10 Johns. 156, 6 Am. Dec. 326; Jones v. Creveling's Ex'rs, 19 F. J. L. 127, 21 N. J. L. 573; Edwards v. Rainier 's Ex'rs, 17 Ohio St. 597. § 550, 1 Curry v. Pile, 2 Brown Ch. 225; Windham v. Windham. Cas. t. Pinch, 267; Yockney v. Hansard, 3 Hare, 622; Baylee v. Quinn, 2 Dm. & War. 116; Adnam v. Cole, 6 Beav. 353; Hartley v. Ostler, 22 Beav. 449 ; Brennan v. Moran, 6 Ir. Ch. 126 ; De Witt v. Yates, 10 Johns. 156, 6 Am. Dec 326; Jones v. Creveling's Ex'rs, 19 N. J. L. 127, 21 N. J. L. 573. § 549, (a) See, also, Thompson v. Betts, 74 Conn. 576, 92 Am. St. Rep. 235, 51 Atl. 564. § 552 EQUITY JTJKISPKUDENCB. 1020 already given by a prior clause of the same instrument, Ms intention may appear from all his language that the second legacy is to be substitutionary, and that the bene- ficiary shall be entitled to it alone. In either of these cases the intent will control.^ It may be added that a tendency on the part of the courts is very strongly shown in the more modern decisions to escape all difficulties of construction and of applying the rules of presumption, by holding second legacies to be cumulative, rather than sub- stitutionary.2 § 552. Extrinsic Evidence. — ^With respect to the admis- sibility of parol evidence showing the testator's intention concerning the effect of double legacies given by him, the following conclusions are sustained by the decisions: Wherever, in pursuance of a rule above stated, a pre- sumption arises against double legacies, contrary to the literal terms of a will, — as, for example, where two legacies of equal amount are given by the same instrument, — parol evidence is admissible to show an intention, on the part of the testator, that the legatee was to have both, and thus to rebut the presumption; for such evidence really sup- ports, rather than contradicts, the literal terms of the will. But wherever, in pursuance of the rules above stated, no such presumption arises, — as, for example, where legacies are given simpliciter by different instru- ments, — parol evidence is not admissible to show an in- tention on the part of the testator that the legatee should have but one gift; for such evidence would directly con- tradict the literal terms of the will.i § 551, 1 Yockney v. Hansard, 3 Hare, 620 ; Lobley v. Stocks, 19 Beav. 392 ; Russell v. Dickson, 4 H. L. Cas. 293 ; and see many of the cases cited in the preceding notes. § 551, 2 See Eussell v. Dickson, 2 Dru. & War. 137, per Sugden, L. C. ; Lee V. Pain, 4 Hare, 201, 218, 236, per Wigram, V. C. § 552, 1 Hurst v. Beach, 5 Madd. 351, per Sir John Leach ; Lee v. Pain, 4 Hare, 201, 216, per Wigram, V. C; Hall v. Hill, 1 Dru. & War. 115, per Sugden, L. C; Guy v. Sharp, 1 Mylne & K. 589. 1021 CONCERNING SATISFACTION. §553 § 553. III. Satisfaction of Legacies by Portions and Advancements. — ^It is proper to state, by way of prelimi- nary explanation, that in the great majority of English cases involving this kind of satisfaction, and especially in thbse depending upon the equitable presumption of a satis- faction, a legacy has first been given to a child by way of a portion, and subsequently, but before the will becomes operative, the testator, by means of some formal instru- ment in the nature of a settlement, either pays or cove- nants to pay to the same child a sum of money also by way of a portion. The testator afterwards dying, and leaving the will unrevoked and unaltered, the question arises whether the child is entitled to the legacy, as well as to the sum paid or agreed to be paid by the settlement.* In § 553, (a) Satisfaction of Devises. In the recent case of Bumham v. Comfort, 108 N. Y. 535, 2 Am. St. Bep. 462, 15 N. E. 710, the court of appeals of New York, following the authority of Davys v. Boucher, 3 Younge & C. 397, decided that the rule of ademption of legacies by subsequent advajicements was not applicable to devises of real estate. The court, in its opinion, discussed the subject of ademption as if it operated as a revocation of the wiU, and reached the conclusion that the rule of ademption did not apply to devises of real estate, for the reason that to give it such operation would be to cause a revoeation of the devise in a. manner unauthorized by the statute of wills. While the point actually decided may be, and doubt- less is, sustained by authority, the reasoning of the court on which its decision is based would be equally applicable to prevent the ademption of pecuniary legacies wherever the statute of wills applies to personal property and provides that a revoca- tion of such wills can only be had in a certain prescribed manner. The fundamental error of this decision, as shown post, | 554, is In consider- ing an ademption as being a revoca- tion of the will. That the doctrine of ademption does not apply to devises of real estate is sustained by the decisions or dicta in the follow- ing cases: In Davys v. Boucher, 3 Younge & C. 397, it is said that no case can be found in which the doc-' trine is applied to devises, and that to so apply it would repeal the stat- ute of frauds as to the revocation of wills of real estate. This case finally turned, however, on parol evidence of the intention of tlie donor-testator, it being held that such evidence showed that the ad- vancements were intended by the testator as additional to the pro- visions of the will. In Clark v. Jetton, 5 Sneed, 229, the court says that the doctrine of ademption does not apply to real estate. In the course of the opinion it is said: "This distinction rests upon artifi- cial reasons, the justice and pro- priety of which are not clear, nor § 553 EQUITY JXTBISPEUDENOB. 1022 its primary and strictest sense, the term "portion" seems to have been used to designate the sum or amount of property given by a parent to a younger child, not the heir at law, as his intended share of the paternal estate not descending by inheritance to the heir. From this primary meaning the word seems to be extended so as to embrace the sum or amount given by a parent to any or to each of his children, as the recipient's intended share of the estate not descending to the heir. The two essential ele- ments of the' term in its legal signification seem to be, that it is intended to be the child's proportionate share of the paternal estate, and that it is a share bestowed as a gift, and not inherited as a matter of right under the law of descent. While a portion is thus a gift, and not an in- heritance, still the legal conception assumes that the re- cipient has a natural claim to it, and that a natural obliga- tion rests upon the parent to bestow it. It will be seen that the equitable presumptions are directly derived from this assumed natural duty of the parent, the relations between him and his child being regarded as entirely different from the reasons on which it is founded Fisher v. Keithley, 142 Mo. 244, 64 approved. But that branch of the Am. St. Eep. 560, 43 S. W. 650. See, doctrine, having no application to also, In re Brown's Estate, 139 Iowa, the case before us, need not be dis- 219, 117 N. W. 260; Hall v. Hall, 132 cussed." The case was one of Iowa, 664, 110 N. W. 148. ademption of a legacy. In Allen v. In Jacobs v. Button, 79 Conn. 360, Allen, 13 S. C. 512, 36 Am. Eep. 716, 65 Atl. 150, testator devised to W. this point was directly involved, and (his housekeeper) certain laud directly decided against the appli- which was subject to mortgage liens, cation of the doctrine of ademption, the terms of the will being such that notwithstanding the intention of the it was the duty of the executor to testator to produce a satisfaction of satisfy these liens out of the testa- the devise was clearly shown. The tor's personal estate. Subsequently court, while admitting that there he conveyed the land to W. without was no logical reason why the tes- reference to these liens. It was tator's intention should not control held that if the doctrine of ademp- in cases of a devise, refused to ex- tion applied, it was at most only a tend the doctrine to such cases, for partial ademption, and that the be- the reason that it had never yet quest implied from the will of an been so applied. To the same effect amount sufiScient to satisfy the liens are Weston v. Johnson, 48 Ind. 1; was not affected by the eonveyanca. .1023 CONCEBNINQ SATISFACTION", § 554 those subsisting between him and strangers.^ In this country formal settlements made by parents, upon or in favor of their children, are very infrequent. In the great majority of American cases, therefore, involving or de- pending upon this species of satisfaction, a legacy has first been given to a child, and subsequently, but before the will becomes operative, the testator either pays to the same child a sum by way of advancement, or agrees in some informal manner, either verbally or in writing, to pay such sum. The testator afterwards dying, the ques- tion arises, whether the child is entitled to the legacy. §554, Presumption of Satisfaction. — ^Whenever a par- ent, or person in loco parentis, gives a legacy to his child, or to the individual whom he treats as a child, without stating any particular object for which it is given, such legacy is regarded as a portion.^ And if the testator afterwards, during his own lifetime, makes a settlement upon the child by way of a portion, or pays to him a sum of money by way of a portion, or makes an advancement to him, or gives him a sum of money as an advancement, such payment, portion, or advancement amounts to a satisfac- tion — or, as is often said, an ademption — of the legacy, either pro tanto or in full, as the money thus paid or settled is less than, equal to, or greater than the' amount of tha legacy. 2 » This rule is based upon a presumption against § 553, 1 With respect to the meaning and nature of "portions," see Ex parte Pye, 18 Ves. 151, per Lord Eldon; Shudall v.Jekyll, 2 Atk. 518; Suisse v. Lowther, 2 Hare, 424, 433, per Wigram, V. C. § 554, 1 Shudall v. Jekyll, 2 Atk. 518; Ex parte Pye, 18 Ves. 140, 151. § 554, 2 Ex parte Pye, 18 Ves. 140 ; 2 Lead. Cas. Eq., 4th Am. ed., 741, and notes. In this leading case the rule was laid down by Lord Eldon in terms which have since been regarded as accurate, though not complete. He says: "Where a parent gives a legacy to a child, not stating the purpose with reference to which he gives it, the court under- stands him as giving a portion; and by a sort of artificial rule, — upon §554, (a) The text is cited in ter of Weiss, 39 Misc. 71, 78 N. T. Riehardson v. Eveland, 126 111. 37, 1 Supp. 877. See, also, Wallace v. Du L. K. A. 203, 18 N. E. 308, 311; Mat- Bois, 65 Md. 153, 4 Atl. 402; Van § 554 EQUITY JUEISPBUDENCB. 1024 double portions ; that is, a presumption adopted by courts of equity that a father, owing a common, natural duty to all his children, could not have intended to distribute his estate unequally among them, and to favor one at the expense of the others. This reasoning has sometimes been called artificial, and the rule itself harsh, but it is really founded upon equity and justice.^ It should be an artificial notion, and a sort of feeling upon what is called a leaning against double portions, — if the father afterwards advances a portion on the marriage of that child, though of less amount, it is a satisfaction of the whole or in part." § 554, 3 Like all other general rules, it may sometimes work injustice under special circumstances; but the reasoning on which it is based, and the equitable presumption out of which it results, are certainly in accordance with the general experience of mankind. The rationale of the presumption and of the rule derived from it was well explained and vindicated by Wigram, V. C, in Suisse v. Lowther, 2 Hare, 424, 433, 435: "The language of the court in these cases is, that it 'leans against double portions,' — a rule which, though' sometimes called technical. Lord Cottenham says was founded on good sense, and could not be disre- garded without disappointing the intentions of donors : Pym v. Lockyer, 5 Mylne & C. 34, 46. . ... The rule of presumption, as I before said, is against double portions, as between parent and child; and the reason is this: a parent makes a certain provision for his children by his will; if they attain twenty-one, or marry, or require to be settled in life, he afterwards makes an advancement to a particular child. Looking to the ordinary dealings of mankind, the court concludes that the parent does not, when he makes that advancement, intend the will to remain in full force, and that he has satisfied in his lifetime the obligation which he would otherwise have discharged at his death; and having come to that conclusion as the result of general experience, the court acts upon it and gives effect to the presumption that a double portion was not intended. If, on the other hand, there is no such relation, either natural or artificial, the gift proceeds from the mere bounty of the testator; and there is no reason within the knowledge of the court for cutting ofE anything which has in terms been given. The testator may give a certain sum by one instru- ment, and precisely the same sum by another; there is no reason why the Houten v. Post, 33 N. J. Eq. 344; (Biddulph v. Peel), [1911] 2 Ch. Hansborough v. Hooe, 12 Leigh 165 (rule applies to appointments un- (Vsk)) 322; StTotheT' s Adm'r v. der special power); Hayes v. Wel- Mitchell's Ex'r, 80 Va. 149: and the ling, 38 E. I. 553, 88 Atl. 843. recent cases: In re Peel's Settlement 1025 CONCERNING SATISFACTION. § 555 carefully observed that whenever the equitable presump- tion arises, and the rule based upon it applies, the satisfac- tion, either in whole or in part, of the prior legacy is accomplished absolutely by the act of the testator alone, without any regard to the act or assent of the legatee. It is not the case of a revocation, partial or complete, of the will; there is no analogy whatever between such a satisfac- tion and a revocation. The will, in fact, is legally sup- posed to remain in force unaltered in its disposition. But the testamentary gift being under the control of the tes- tator, he in reality acts as his own executor ; he anticipates his own death, and by his own hand pays the legacy, in whole or in part, a'fe the case may be, during his lifetime. The legatee, having thus received payment of the single gift designed for his benefit, cannot equitably demand to be paid a second time out of the estate in the hands of the executor. While the legacy is not revoked, it is removed or taken away by the act of the testator, and therefore this instance of satisfaction may with some propriety be called an "ademption." This satisfaction or ademption, if it takes place at all, must necessarily take place with- out any regard to the assent or other conduct of the legatee.* ^ § 555. Subsequent Payment Less than the Legacy.— Where the subsequent portion settled, advancement made, court should assign any limit to that bounty, which is -wholly arbitrary. The court, as between strangers, treats several gifts as prima, facie cumu- lative. The consequence is, as Lord Eldon observed, that a natural child, who is in law a stranger to the father, stands in a better situation than a legitimate child ; for advancement in the case of the natural child is not prima facie an ademption." § 554, 4 Lord Chichester v. Coventry, L. R. 2 H. L. 71, 82, 86, 90, 91 ; In re Tussaud's Estate, L. R. 9 Ch. Div. 363, 380 ; see ante, § 524, and note, where extracts from the opinions in these cases are given. §554, (b) See, also, to the same Am. Eep. 716; Gregory v. Lansing effect, Cowles v. Cowles, 56 Oonn. (In re Lansing's Estate), 115 Minn. 240, 13 Atl. 414; Low v. Low, 77 Me. 73, 131 N. W. 1010. 37; Allen v. Allen, 13 S. C. 512, 36 11—65 § 555 EQUITY JUKISPEUDENCE. 1026 or sum paid by the parent was less than the prior legacy, the earlier cases had pushed the equitable presumption to such a logical extreme that they held it to be a complete satisfaction, on the ground that the parent must be re- garded as the sole judge of the proportionate share of his estate naturally due to each child. i This purely logical consequence of the general presumption is so plainly op- posed to justice and to common experience that Lord Cottenham boldly repudiated it, rejected the authority of the judicial dicta by which it was supported, and laid down the rule that a subsequent advancement, payment, or set- tlement less in amount than the prior legacy is a satisfac- tion pro tanto only.2 The doctrine Ihus announced by Lord Cottenham is now established in England and in the United States, that if the subsequent advancement equals or exceeds the prior legacy, it is a satisfaction thereof in full; if less than the legacy, it is only a satisfaction pro tanto. ^ «■ § 555, 1 Ex parte Pye, 18 Ves. 140, per Lord Eldon. § 555, 2 Pym V. Lockyer, 5 Mylne & C. 29. The opinion of Lord Cot- tenham in this case is one of the ablest and most exhaustive discussions of the doctrine, upon reason and principle, as well as upon authority, to be found in the reports. § 555, 3 Kirk v. Eddowes, 3 Hare, 509 ; Montague v. Montague, 15 Beav. 565; Hopwood v. Hopwood, 7 H. L. Cas. 728; Nevin v. Drysdale, L. B. 4 Eq. 517; Langdon v. Astor's Ex'rs, 16 N. Y. 9; reversing 3 Duer, 477; Hine v. Hine, 39 Barb. 507; Richards v. Humphreys, 15 Pick. 133, 136; Paine v. Parsons, 14 Pick. 318; Sims v. Sims, 10 N. J. Eq. 158; Miner v. Atherton's Ex'rs, 35 Pa. St. 528; Garrett's Appeal, 15 Pa. St. 212; Gill's Estate, 1 Pars. Cas. 139; Roberts v. Weatherford, 10 Ala. 72; Timberlake v. Parish's Ex'rs, 5 Dana, 346 ; Clendenning v. Cljrmer, 17 Ind. 155, 159; Weston v. Johnson, 48 Ind. 1-; De Graaf v. Teeipenning, 52 How. Pr. 313; Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761; Howze v. Mallett, 4 Jones Eq. 194; Moore v. Hilton, 12 Leigh, l;,Hauberger v. Root, 5 Pa. St. 108; Clarke v. Jetton, 5 Sneed, 229; Dugan v. HoUins, 4 Md. Ch. 439; Swoope's Appeal, 27 Pa. St. 58. The legacy will be § 555, (a) See, also, Wallace v. Du see In re Pollock, L. R. 28 Ch. D. Bois, 65 Md. 153, 4 Atl. 402; Van 552; to the same effect, Matter of Houten v. Post, 33 N. J. Eq. 344. Weiss, 39 Misc. 71, 78 N. Y. Supp, That the ademption is only pro tanto, 877. 1027 CONCERNING SATISFACTI01i<^. § 556 § 556. Person in Loco Parentis. — As the presumption of a satisfaction applies not only to an actual parent, but ex- tends also to a person in loco parentis, it becomes important to fix tbe true, legal signification of this term. It is clearly not necessary that the beneficiary should have been, in pop- ular language, adopted by the donor, and actually received into his household ; the parental relation need not have been established in all respects and for all purposes. The essen- tial element of the legal conception in loco parentis depends rather upon the intention of the donor than upon his con- duct, and consists of a design on his part to make future provision for the beneficiary, shown so clearly by his con- duct that an obligation rests upon him, and a right arises on the part of the beneficiary, similar to the natural obligation and right existing between an actual father and child. The rule was first laid down in a clear and formal manner by Lord Cottenham, that a person mitst mean and intend to provide for the child, and thus to place himself in loco parentis towards it, and that such meaning and intent may be declared in an express manner, or may be shown by the donor 's conduct ; and where this is the case, it is immaterial that the child has a father living, with whom he resides, and by whom he is maintained according to his (the father's) naeans.i This most just and satisfactory rule, by which the satisfied althaugh the testator only covenants or agrees to pay the money as an advancement, or although the advancement is in the form of a loan, and some kind of security is taken from the legatee : Miner v. Atherton's Ex'rs, 35 Pa. St. 528; Garrett's Appeal, 15 Pa. St. 212; Hine v. Hine, 39 Barb. 507; Richards v. Humphreys, 15 Pick. 133. § 556, 1 Powys v. Mansfield, 3 Mylne & C. 359 , 6 Sim. 544. The opin- ion of Lord Cottenham is so clear and able that I shall give his own language without condensation. The child lived with her own father, as one of his family, and the question for decision was, whether her uncle stood in loco parentis towards her. In the court below the vice-chancellor held .that the uncle had not placed himself in looo parentis, and laid down as a general rule "that no person can be held to stand in loco parentis to a child whose father is living, and who resides with and is maintained by the father, according to his (the father's) means." Lord Cottenham,, on ajspeal, reversed this decision, saying: "The authorities leave in some § 556 EQUITY JUKISPKUDENCB. 1028 question whether a person has assumed the locus parentis towards one who is not his own legitimate child must be determined, has been clearly established by the English de- cisions, and has also been substantially adopted by the American cases which have dealt with the subject either by obscnrity the question as to what is meant by the expression, universally adopted, of one in loco parentis. Lord Eldon, however, in Ex parte Pye, 18 Ves. 140, has given to it a definition which I readily adopt, because it seems to me to embrace all that is necessary to work out and carry into effect the object and meaning of the rule. Lord Eldon says it is a person meaning to put himself in loco parentis, — in the situation of the person described as the lawful father of the child; but this definition must, I conceive, be considered as applicable to those parental offices and duties to which the subject in question has reference, namely, to the office and duty of the parent to make provision for the child. The offices and duties of a parent are infinitely various, some having no connection whatever with making a provision for a child; and it would be most illogical, from the mere exercise of any of such offices or duties by one not the father, to infer an intention in such person to assume also the duty of providing for the child. The relative situations of the friend and of the father may make this unnecessary and the other benefits most essential. Sir William Grant's definition is, 'A person assuming the parental character, or discharging parental duties' (Wetherby v. Dixon, 19 Ves. 407, 412), which may seem not to differ much from Lord Eldon's; but it wants that which, to my mind, constitutes the principal value of Lord Eldon's defi- nition, namely, the referring to the intention, rather than to the act, of the party. The vice-chancellor says it must be a person who has so acted towards the child as that he has thereby imposed upon himself a moral obligation to provide for it; and that the designation will not hold where the child has a father with whom it resides and by whom it is maintained. This seems to infer that the locus parentis assumed by the stranger must have reference to the pecuniary wants of the child, and that Lord Eldon's definition is to be so understood; and so far I agree with it; but I think the other circumstances required are not necessary to work out the prin- ciple of the rule or to effectuate its object. The rule, both as applied to a father and to one in loco parentis, is founded upon the presumed inten- tion. A father is supposed to intend to do what he is in duty bound to do,— to provide for his child according to his means. So one who has assumed that part of the office of a father is supposed to intend to do what he has assumed to himself the office of doing. If the assumption of the character be established, the same inference and presumption must follow. The having so acted towards a child as to raise a moral obligation 1029 CONCEENING SATISFACTION. § 556 direct adjudication or by judicial dictum. As the assump- tion of the character depends upon the donor's meaning and intent, it plainly follows that this intent may be shown by parol evidence, since it is often, even if not generally, in- ferable from his conduct. ^ In order that the equitable pre- sumption may arise, and the doctrine of satisfaction may to provide for it affords a strong inference in favor of the fact of the assumption of the character; and the child having a father with whom it resides, and by whom it is maintained, affords some inference against it, but neither are conclusive." The chancellor then held, upon the evi- dence, that the uncle, Sir John Barrington, did mean to put himself in loco parentis to his nieces, so far as related to their future provision.^ § 556, 2 Ex parte Pye, 18 Ves. 140, 154; Booker v. Allen, 2 Euss. & M. 270; Pym v. Lockyer, 5 Mylne & C. 29; Watson v. Watson, 33 Beav. 574; Campbell v. Campbell, L. E. 1 Eq. 383. The headnote of this case seems to convey the impression that the court had applied the presumption against double portions, and the doctrine of satisfaction to a grandfather and his grandchildren merely from the fact that such blood relationship existed between the testator and the legatees. But the facts and the opin- ion clearly show that the decision was placed entirely upon the ground that an intent of the testator to assume the locus parentis was established by parol evidence, partly by his declarations. The court. Page Wood, V. C, expressly stated that the case was like Powys v. Mansfield, 3 Mylne & C. 359, 6 Sim. 544, and even stronger in its facts; Gill's Estate, 1 Pars. Cas. 139; and see Langdon v. Aster's Ex'rs, 16 N. Y. 9; reversing 3 Duer, 477; Clendenning v. Clymer, 17 Ind. 175, and other American cases cited in preceding note. In Gill's Estate, 1 Pars. Cas. 139, the general rule was stated in a very clear and fuU manner by King, P. J., but the court fell into a grave error in applying the rule to the facts, and in settling the accounts and determining the amounts to which the legatees were entitled. § 556, (a) In In re Pollock, L. B. ceased husband five hundred pounds, 28 Ch. Div. 552, the doctrine of with the words "aceording to the ademption of legacies, founded on wish of my late beloved husband," the presumption arising from the and she afterwards in her lifetime parental or g«asi-paxental relation, paid three hundred pounds to the was held to apply also to cases legatee, with a contemporaneous en- where a moral obligation, other than try in her diary that such payment parental, is recognized in the will, was a legacy from the legatee's un- though without reference to any ele, it was held that the legacy was special application of' the money. adeemed prn tanto to the extent of *rhus where by her will a testatrix three hundred pounds, bequeathed to a niece of her de- § 556 EQUITY JUEISPEUDENCE. 1030 apply, the assumption of the locus parentis must have been made, and the parental relation must have existed at the date of the will giving the legacy which is to be satisfied.^ Where the intention, however, to assume the parental char- acter, within the meaning of the rule, exists, any relative, or even a stranger both by blood and marriage, may place him- self in loco parentis.^ It is fully settled, in accordance with another doctrine of the common law, that the general presumption against double portions, and the doctrine of a satisfaction of a prior legacy by a subsequent portion or advancement, do not apply as between a father and Ms own illegitimate child unless the putative father has actually placed himself in ,loco parentis. The legal relation of parent and child, with its consequences, does not exist be- tween a father and his illegitimate child; they are in law strangers to each other.^ It is also clearly settled by the English decisions that where the intention to assume the locus parentis does not exist, no relative, however near, except the actiial parent, not even a grandparent, will be considered as in loco parentis, so as to create the equitable presumption of a satisfaction. ^ § 556, 3 Watson v. Watson, 33 Beav. 574. § 556, 4 Monck v. Monck, 1 Ball & B. 298; Rogers v. Soutten, 2 Keen, 598. In this latter ease, the locus parentis was established between a per- son and the illegitimate child of his son. § 556, 5 Ex parte Pye, 18 Ves. 140, 152; Wetherby v. Dixon, 19 Ves. 406. This conclusion may sometimes give an illegitimate child an advan- tage over the legitimate; and this possible result, more than anything else, seems to have caused Lord Eldon's evident opposition to the whole doctrine of presumed satisfaction. § 556, 6 Shudall v. Jekyll, 2 Atk. 516, 518; Powell v. Cleaver, 2 Brown Ch. 499, 517; Perry v. Whitehead, 6 Ves. 546; Eoome v. Roome, 3 Atk. 183; Grave v. Salisbury, 1 Brown Ch. 425; Ellis v. Ellis, 1 Schoales & L. 1; Twining v. Powell, 2 Coll. 262; Lyddon v. Ellison, 19 Beav. 565, 572; and see Campbell v. Campbell, L. R. 1 Eq. 383; note ante, under this paragraph.** There seems to be some discrepancy upon this point between §556, (1>) See, also, Allen v. Allen, [1897] 2 Ch. 574, it was held by 13 S. C. 512, 36 Am. Rep. 716. In Stirling, .L, that the mother of the the- recent case of In re Ashton, child was not in loco parentis within 1031 CONCERNING SATISFACTION. § 557 § 557. Circumstances Which do or do not Prevent the Presumption. — Notwithstanding the severe criticism upon the doctrine made by individual judges, the leaning of equity is so strong against ''double portions, and the pre- sumption of a satisfaction is so favored by the courts, that its operation will not be prevented, "although there may be slight circumstances of difference between the advance and the" portion" given by the prior will.^ The following general proposition is clearly settled by the decisions : It is not necessary, in order that the doctrine of a satisfac- tion should apply, that the two sums given by the will and the English and the American decisions. Judge Story, in stating the general doctrine, couples grandchildren and children in the same clause, and makes the presumption of satisfaction apply alike to both in exactly the same words. See Story's Eq. Jur., sees. 1111, 1112. It is true that in a subsequent paragraph he seems to restrict the presumption to parents and their actual legitimate children, and to those who have placed them- selves in loco parentis. The broad manner in which the doctrine is thus laid down by Judge Story, extending the presumption to grandchildren, is not sustained by a single English decision, nor, I believe, by a single dictum of any English judge; and it violates all the reasoning upon which the doctrine is founded, for a grandfather is not, as such, under any obliga- tion to provide for grandchildren. It will be found, however, that in some of the American cases the courts have announced the rule of pre- sumption in the same broad form as stated by Judge Story, so as to include grandchildren. In no case, however, is this point decided, nor do the facts require its decision. Notwithstanding these dicta, therefore, it may well be doubted whether any rule has been established by the American decisions different from that settled in England. See Langdon v. Aster's Ex'rs, 16 N. Y. 9, 3 Duer, 477; Clendenning v. Clymer, 17 Ind. 155; De Graaf v. Teerpenning, 52 How. Pr. 313. § 557, 1 Per Lord Eldon, in Ex parte Pye, 18 Ves. 140. the meaning of that phrase, so as to than father. This decision of Stirl- create an equitable presumption of ing, J., was reversed on appeal, satisfaction. The "parent" spoken [1898] 1 Ch. 142, it appearing from of by all the English cases is the the evidence that the child had ae- father. Since a mother, as such, has cepted the sums advanced as prepay- no duty of making provision for a ment of the legacy; but the question child, the burden of proving that she of law as to the meaning of in loco assumes such duty rests on those parentis was not discussed by the who assert it, as in the case of a court of appeal, grandfather or any relative other § 557 EQUITY JUEISPEUDENCE. 1032 by the subsequent advancement should be equal in amount; nor that they should be payable at the same time ; nor that the limitations of the bequest contained in the will should be precisely the same as those of the portion contained in the subsequent settlement or instrument of advancement. The latest English decisions have gone so far as to render it doubtful whether it is even necessary that the subject- matters of the two gifts should be ejusdem generis. The two gifts need not be equal in amount, since it has already been shown that where the subsequent advance is greater than the legacy, the satisfaction is in full ; where it is less, the satisfaction is pro tanto. The doctrine applies, al- though the times of payment of the two gifts are different, and although one carries interest and the other does not.^ Nor is the presumption of a satisfaction repelled by the fact that the limitations of the bequest contained in the will are quite different from those of the subsequent set- tlement or other instrument by which the advancement is made or secured.^ a § 557, 2 Hartopp v. Hartopp, 17 Ves. 184, 191. § 557, 3 Lord Durham v. Wharton, 3 Clark & F. 146; 10 Bligh, N. S., 526; 3 Mylne & K. 472; 5 Sim. 297; Trimmer v. Bayne, 7 Ves. 508; Sheffield v. Coventry, 2 Russ. & M. 317; Booker v. Allen, 2 Russ. & M. 270; Carter v. Bowles, 2 Russ. & M. 301; Powys v. Mansfield, 3 Mylne & C. 359, 374; Piatt v. Piatt, 3 Sim. 503; Days v. Boucher, 3 Younge & C. 411; Phillips v. Phillips, 34 Beav. 19; Monck v. Monck, 1 Ball & B. 298; Nevin v. Drysdale, L. R. 4 Eq. 517. Lord Durham v. Wharton, 3 Clark & r. 146, is the leading English case on this point. A father bequeathed by his will ten thousand pounds to trustees, one half payable three years and the other half six years after his death, with interest in the mean while, upon trust, for his daughter for life, and after her death, in trust, for all her children equally. Subsequently, upon the marriage of this daughter, the father covenanted to give her fifteen thousand pounds, to be paid over to the intended husband, he securing by his marriage settle- ment pin-money and a jointure for his wife, and portions for the younger children of the marriage. The house of lords held, reversing the decisions of Lord Chancellor Brougham and of the vice-chancellor, that the legacy of ten thousand pounds was satisfied by the subsequent advancement, §557, (a) See, also, In re Furness, [1901] 2 Ch. 346. 1033 CONCERNING SATISFACTION. § 558 § 558. If tlie legacy is of an uncertain amount, — ^as, for example, the bequest of a residue or part of a residue, — it is now settled by the more recent English decisions that a subsequent settlement or advancement of a definite sum will operate as a satisfaction in full or in part, if the circumstances are such as otherwise bring the case within the presumption. The earlier decisions had held that the presumption of a satisfaction would not arise where the prior legacy was of a residue, because, as it was said, the legal conception of a "portion" necessarily required a gift of a definite sum.^ Where a legacy, bequeathed in the • . although the limitations of the two were so very much different; and see Miner v. Atherton's Ex'rs, 35 Pa. St. 528; Paine v. Parsons, 14 Pick. 313.'' § 558, 1 These recent cases are : Montefiore v. Guedalla, 1 De Gex, F. & J. 93; Beckton v. Beckton, 27 Beav. 99; Schofield v. Heap, 27 Beav. 93; and see Meinertzhagen v. "Walters, L. R. 7 Ch. 670; Lady Thynne v. Earl of Glengall, 2 H. L. Gas. 131." Among the earlier cases holding that a prior bequest of residue is not thus satisfied are : Farnham v. Phillips, 2 Atk. 215 ; Freemantle v. Banks, 5 Ves. 79, 85; Smith v. Strong, 4 Brown Ch. 493; "Watson v. Earl of Lincoln, Amb. 327; Davys v. Boucher, 3 Younge & C. 397; Clendenning § 557, (b) Vickers v. Vickers, I/. E. illustrative of the principle that the 37 Ch. Div. 525. In this last case a presumption may be overcome by the testator bequeathed his residue, in- facts and circumstances attending eluding a business which he directed the subsequent gift, see Lacon v. to be sold for the benefit of his chil- Lacon, [1891] 2 Ch. 482. ~ dren equally. He had two sons and § 558, (a) See, also, In re Vickers, three daughters. Subsequently, he L. B. 37 Ch. D. 525; Hayes v. Well- assigned the business to his eldest ing, 38 E. I. 553, 96 Atl. 843. In re son, on trust, which provided for the Heather (Pumfrey v. Fryer), [1906] admission of the younger son as a 2 Ch. 230, Swinfen Eady, J., partner, on equal terms with the expressed the opinion that the doc- elder, on attaining full age, the re- trine of ademption would not be ap- payment, with interest, to the father plied against a child, or adopted of a sum temporarily employed by child, taking a share of the residue him in the business, and the payment as well as a legacy, where the result to the father of a weekly sum for would be to swell the share of the life. Notwithstanding the dissimi- residue bequeathed to a "stranger," larity of these provisions, it was held relying on Meinertzagen v. Walters, by North, J., that the shares of the L. E. 7 Ch. App. 670, 672, and sons in the residue were adeemed to Fowkes v. Pascoe, L. E. 10 Ch. App. the extent of the value of the prop- 343, 351, erty assigned in trust for them. As § 559 EQUITY JUBISPEUDENCB. 1034 first place to a child, is given over to a third person upon the happening of a contingency, — as, for example, . upon the death of the first legatee without issue, — if the legacy is satisfied as to the first donee by means of a subsequent portion or advancement, then the gift over is also adeemed and satisfied, and the person entitled under it is deprived of all benefit.2 ») See, also, Allen v. Allen, residue should be given full effect: 13 S. C. 512, 36 Am. Eep. 716, hold- Davis v. Whittaker, 38 Ark. 435. ing that while there is no presump- § 558, (c) See, also, Wallace v. tion in such a ease, proof of an in- Du Bois, 65 Md. 153, 4 Atl. 402. tention to adeem an interest in the 1035 CONCERNING SATISFACTION. § 559 appear in -the very terms of the written instrument by which the payment is secured or which accompanies it, or by the circumstances surrounding it, or by the verbal dec- larations made by the donor as a part of the transaction; and of course extrinsic parol evidence is admissible to show such intention.^ On the other hand, the payment by the § 559, 1 Booker v. Allen, 2 Euss. & M. 270; Carver v. Bowles, 2 Russ. & M. 301; Kirk v. Eddowes, 3 Hare, 509; McClure v. Evans, 29 Beav. 422, 425; Ravenscroft v. Jones, 32 Beav. 669, 4 De Gex, J. & S. 224; Ferris V. Goodbum, 27 L. J., N. S., 574; Nevin v. DrysdaJe, L. R. 4 Eq. 517; Linsay v. Piatt, 9 Fla. 150; Towles v. Roundtree, 10 Fla. 299; Bridges v. Hutchins, 11 Ired. 68; Barber v. Taylor, 9 Dana, 84; Wanmaker v. Van Buskirk, 1 N. J. Eq. 685, 23 Am. Dec. 748; Paine v, Parsons, 14 Pick. 103. As the point is one of importance, I add a brief abstract of these cases. In Booker v. Allen, 2 Russ. & M. 270, the testator gave to a cousin, to whom he stood in loco parentis, four thousand pounds, the income to be paid to her separate use for her life, and on her death the principal to be divided among her children. On her marriage with Booker, the testator executed a settlement by which he gave four thousand pounds to trustees, the income to be paid to the husband, Booker, for his life, then on his death, to the lady for her life, and then the principal to go for the benefit of their children. This settlement was accompanied by a verbal declaration of the testator that it was intended by him in lieu of the legacy. The master of rolls, Sir John Leach, held that the legacy was satisfied. The case of Carver v. Bowles, 2 Russ. & M. 301, is quite similar in its facts. -Kirk v. Eddowes, 3 Hare, 609, is a case of high authority, and is very frequently cited. A father had bequeathed three thousand pounds to his daughter for her separate use during life, with remainder to her children. After the execution of the will, and after her marriage, the testator gave to his daughter and her husband a promissory note of some third person, then due to the testator, for five hundred pounds. This gift was without ainy writing; but the evidence showed that the testator was requested by the daughter to confer some benefit upon her husband, and that he therefore gave them the note, declaring at the, same time that it was to apply on and be in part payment of the legacy. Wigram, V. C.,' held that the parol evidence of the iiitention was admis- sibly, and that the gift of the note was an advancement in part satisfaction of the legacy. It should be observed that under the law the husband would become solely entitled to the proceeds of the note, free from any interest or claim of his wife. In Ravenscroft v. Jones, 32 Beav. 669, 4 De Gex, J. & S. 224, a father had given his daughter a legacy of seven hundred pounds. The daughter afterwards became engaged to be married, and § 559 EQUITY JUKISPEUDENCE. 1036 testator to his son-in-law may undoubtedly be intended as a mere personal donation, and in that case it is not in the nature of an advancement nor a satisfaction. This is expressly conceded in several of the decisions last cited. her father gave her one hundred pounds with which to buy her outfit. After the marriage he gave the daughter's husband four hundred pounds in cash. On neither occasion did he make any reference to the legacy or the will. The master of rolls, Lord Eomilly, held that the one hundred pounds was clearly intended as a gift, and not as an advancement. He also held that the four hundred pounds was not an advancement, putting his decision partly, if not mainly, upon the ground that the money was paid to the husband alone. On appeal to the lords justices, both of them were very clearly of opinion that the one hundred pounds was intended as a mere gift, and not at all by way of satisfjang the legacy. With respect to the four hundred pounds. Knight Bruce, L. J., -expressly de- clined to rest his opinion upon the fact that the money was paid to the husband, and not to the daughter. He reached the conclusion, however, upon all the facts of the case, that the testator intended to bestow a simple donation, and that the payment was not, under all the circumstances, an advancement and partial satisfaction, even if made directly to the daughter herself. Turner, L. J., dissented from this view, and held that the pay- ment was an advancement. Ferris v. Goodburn, 27 L. J., N. S., 574, is directly in point, and goes even further than the statement of the rule which I have given in the text. A father had bequeathed a legacy to his daughter R. She was married during her father's lifetime, and he subsequently gave to her husband eight hundred pounds, in different sums, to be used by the husband in his business. This gift or payment was made at the husband's request, but there does not seem to have been any express declaration by the donor that it was to apply on the legacy, as in the case of Kark v. Eddowes, 3 Hare, 509, and others. Page Wood, V. C. (afterwards Lord Chancellor Hatherley), held that these payments were advances in pro tanto satisfaction of the legacy to the daughter. He said : "There was no reason for giving money to Ferris [the husband], except that he had married the testator's daughter, and connecting these gifts with the marriage, and the request made by the husband, it is impossible to say that the presumption of satisfaction is not raised, or that parol evidence is not admissible, and there being no evidence to rebut the pre- sumption, there must be a declaration that the legacy was adeemed to the extent of eight hundred pounds." It may certainly be concluded, from this decision by one of the ablest of modern equity judges, that where pay- ments are made by a father-in-law to his daughter's husband, which can only be reasonably explained as advancements made on account of the 1037 CONCEENING SATISFACTION. § 560 § 560. What Prevents the Presumption. — There are cir- cumstances attending the transaction, and differences be- tween the legacy and the advancement, which prevent the presumption of a satisfaction from arising. These circum- existing marriage relation, they will be taken as in satisfaction of a prior legacy to the daughter, even though there was no express declaration of such an intention by the donor as a part of the transaction. Nevin v. Drysdale, L. R. 4 Eq. 517, 519, is an equally strong case. A father be- queathed to his daughter five hundred pounds, in case she should marry. She afterwards married, in her father's lifetime, in September,, and in the following November the testator gave the husband four hundred pounds for furnishing a house. He afterwards promised a further sum of six hundred pounds, but died before carrying out this promise. Page Wood, V. C, held that the legacy to the daughter had been satisfied pro tanto by this gift to her husband. He said : "There can be no doubt that the legacy of five hundred pounds, being given by the testator to his daughter on her marriage, was in the nature of a portion; and the authorities, of which Lady Thynne v. Earl of Glengall, 2 H. L. Cas. 131, is a leading in- stance, being very strong against double portions, even where there are grea.t differences in the character of the gifts, there is, so far, a clear pre- sumption, that the gift of four liundred pounds was in satisfaction of the legacy, and intended as a part payment of the daughter's portion." The court then goes on to show that the subsequent promise of the father-in-law to give six hundred pounds in addition, which was unperformed by reason of his death, did not operate to repel and overcome the presumption of satisfaction arising from the payment of the four hundred pounds. The American cases cited above are equally decided in sustaining the principle of the rule. .In Linsay v. Piatt, 9 Fla. 150, a father made an agreement with his son-in-law that he would never enforce the payment of a debt due to him from his son-in-law; but that the same should be considered an advancement to the daughter on account of her distributive share of his estate. The father afterwards dying intestate, it was held that the agree- ment having been fulfilled by him, the virtual discharge of the debt con- stituted an advancement equal to the amount of it on the daughter's share of the deceased's father's estate. The court said: "There can be no doubt that the intestate intended this as an advancement. He made an express contract that it should be so considered. Nor is it material that the daughter did not, or might not, have known of the arrangement between her husband and her father, since it certainly appears that her father intended it as an advancement to her, and neither her knowledge or consent was necessary to make it a good advancement. The property in the life- time of her father belonged to him; and it was for him to determine § 560 EQUITY J UEISPEUDENCE. 1038 stances and differences I shall briefly mention. In the first place, where a father advances or pays money to his child before the execution of his will, there is no presumption that such advancement "or payment is to be in satisfaction of a legacy given to the same child in the subsequent will.^ whether he would ever give her anything or not, either by advancement or will. His action in the disposition of his property did not depend in any measure upon her knowledge or assent." This ruling was reaffirmed by the same court in Towles v. Roundtree, 10 Fla. 299. A father paid a debt oi his daughter's husband. The daughter died before her father. The father then dying intestate, it was held that the payment of her hus- band's debt was an advancement on the deceased's daughter's share of her father's estate, going to her own children. Bridges v. Hutchins, 11 Ired. 68, holds that a gift to a daughter's husband during their coverture is undoubtedly an advancement to the daughter herself. In Wanmaker V. Van Buskirk, 1 N. J. Eq. 685, 23 Am. Dec. 748, a father at the marriage of his daughter, gave her husband $150; and this was held to be strictly an advancement, to be accounted for as a part of the daughter's dis- tributive share of her father's estate on his death. In Barber v. Taylor, 9 Dana, 84, a father conveyed land to his son-in-law, reciting in the deed that "he conveyed the land as a part of his daughter's portion." Held, that the land so conveyed must be considered as an advancement to the daughter. In all these American cases, the question arose concerning an advancement made to a daughter upon her distributive portion of her father's estate when he dies intestate. So far as a payment to the daughter's husband constitutes an advancement, the principle is clearly the same, whether the daughter's portion is derived through operation of the statute of distributions or is given by her father's will. If payment to the husband is an advancement and satisfaction in the one case, it cer- tainly must be an advancement and satisfaction in the other." § 560, 1 Taylor v. Cartwright, L. R. 14 Eq. 167, 176, per Wickens, V. C. It appears from this case that a legacy bequeathed by a father to his child for life, with remainder to the issue of such child, would not be satisfied by an advance made to the child prior to the will, although the father §559, («•) See, also, the following there is, it seems, no satisfaction: cases of advances by intestate upon Estate of Lyon, 70 Iowa, 375, 30 the daughter's distributive share: N. W. 642. Dilley v. Love, 61 Md. 603; Bruce v. That a devise to a son is not satis- Slemp, 82 Va. 352; McDearman v. fied by a subsequent conveyance to Hodnett, 83 Va. 281. But if ' the the son's wife, see Hall v. Hall, 132 ' payment be made to the husband Iowa, 664, 110 N. W. 148. prior to the execution of the will 1039 CONCEENING SATISFACTIOK. § 560 In the second place, small sums paid, or small gifts occa- sionally made, to a child during the parent's lifetime will not be added up in order to raise an inference that a por- tion was intended as a satisfaction of a prior legacy.^ ^ verbally declared his intention that the advance then made should have such a future operation and effect. On the other hand, if a payment by a father to his child prior to the father's will is made in pursuance of a contract by the child that it is to be in satisfaction of a subsequent legacy, such contract, it seems, is controlling, and a legacy given by a subsequent will is regarded as satisfied in whole or in part, as the case may be. Upton V. Prince, Cas. t. Talb. 71, is directly in point. A father gave his son fifteen hundred pounds, and the son executed a receipt, as follows: "Received of my father, W. P., the sum of fifteen hundred pounds, which I do hereby acknowledge to be on account of and in part of what he has given or shall in or by his last will give unto me, his son." The payment thus made and received was held to be a satisfaction of a legacy of fifteen hundred pounds, contained in a subseijuent wUl of the father. The Amer- ican cases substantially agree with the English decisions with respect to both phases of this rule, and hold that a prior advancement cannot operate as satisfaction of a subsequent legacy, even where the testator expressed an intention that such an effect should follow, unless it appears that the testator's intention was known by the legatee and assented to by him, so as to create an implied agreement on the legatee's part : Langdon v. Astor's Ex'rs, 16 N. Y. 9, 3 Duer, 477; Yundt's Appeal, 13 Pa. St. 575, 53 Am. Dec. 496; Musselman's Estate, 5 Watts, 9; Kreider v. Boyer, 10 Watts, 54; Zeiter v. Zeiter, 4 Watts, 212, 28 Am. Dec. 698.* As to how far entries made by the testator in his books of account, or other memoranda made by him, or his oral declarations, are admissible as evidence to show Buch an intent on his part, see the same cases last above cited. § 560, 2 Suisse v. Lowther, 2 Hare, 424, 434; Schofield v. Heap, 27 Beav. 93; Watson v. Watson, 33 Beav. 574; Nevin v. Drysdale, L. R. 4 Eq. 517. §560, (a) Estate of Lyon, 70 ment, and the subsequent will was Iowa, 375, 5 L. K. A. 71, 30 N. W. intentionally antedated. 642; Estate of. Crawford, 113 N. Y. § 560, (b) And a sum expended 560, 21 N. E; 692; Strotlier's Adm'r by a father in paying a son's debts, V. Mitchell's Ex'r, 80 Va. 149. See, though large, is not necessarily an further, Hayes v. Welling, 38 E. I. advance by way of portion, but may 553, 96 Atl. 843; In re Vanderhurst's be regarded as a temporary assist- Estate, 171 Cal. 553, 154 Pae. 5. See ance: Taylor v. Taylor, L. E. 20 Eq. Louisville Trust Co. v. Southern 155, per Jessel, M. E.; so hold, in Baptist Theological Seminary, 148 view of the circumstances of the Ky. 711, 147 S. W. 431, where there gift, in In re Scott, [1903] 1 Ch. 1. was an express ademption by agree § 560 EQUITY JUKISPKUDENCE. 1040 In the third place, it has been regarded, as a general rule, that the legacy and the subsequent portion, advancement, or payment must be ejusdem generis, or else that no pre- sumption of a satisfaction can arise; and there are deci- sions which certainly support this rule in its general state- ment.s The latest English decisions, however, render it somewhat doubtful whether the rule can be accepted in all its generality.* ^ § 560, 3 In Holmes v. Holmes, 1 Brown Ch. 555, a legacy of five hun- dred pounds to a son was held not satisfied by a subsequent gift of the testator's stock in trade, worth fifteen hundred pounds; but this case has been doubted and criticised by Lord Cottenham in Pym v. Lockyer, 5 Mylne & C. 48 ;" and see Grave v. Lord Salisbury, 1 Brown Ch. 425 ; Davys V. Boucher, 3 Younge & C. 411. A legacy of a certain sum will not be satisfied by an annual allowance made to the legatee by the testator during his lifetime : Watson v. Watson, 33 Beav. 574 ; nor by a subsequent advance- ment depending upon a contingency: Spinks v. Robins, 2 Atk. 491, 493; Crompton v. Sale, 2 P. Wms. 553. While the rule that the subsequent advancement must be ejusdem generis with the legacy, in order to raise a presumption of satisfaction, has generally been enforced by the American courts, it is still well settled that the donor's intention will govern. If the intention that a subsequent gift shall be in satisfaction of a prior legacy is expressly declared by the testator, then it makes no difference how unlike the two may be: a conveyance of land, if the intention were so expressed, would satisfy a legacy of money; Gill's Estate, 1 Pars. Gas. 139; Hanberger v. Root, 5 Pa. St. 108; Swoope's Appeal, 27 Pa. St. 58; Jones V. Mason, 5 Rand. 577, 16 Am. Dec. 761 ; Moore v. Hilton, 12 Leigh, 1; Dugan v. Hollins, 4 Md. Ch. 439; Weston v. Johnson, 48 Ind. 1. In Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761, parol evidence of testator's declarations was held admissible, although no presumption of satisfaction arose because the two gifts were not ejusdem generis. § 560, 4 The necessity that the two amounts should be ejusdem generis is hardly reconcilable with these latest cases. In Dawson v. Dawson, L. R. §560, (c) Holmes V. Holmes is also generis are still the law; and that criticised in In re Lawes, L. B. 20 the observations of Jessel, M. K., in Ch. Div. 81; In le Vickers, L. E. 37 In re Lawes were not to be taken Ch. Div. 525. See In re Lacon, as implying a change in the rule. [1891] 2 Ch. 482, for a case where §560, (d) In the very recent case there was no ademption by a gift of In re Jacques, [1903] 1 Ch. 267, of shares in a partnership business. these doubts were resolved in favor But in In re Jacques, [1903] 1 Ch. of the rule; see the last preceding 267, it was decided that Holmes v. note. Holmes, and the rule of ejusdem ' 1041 CONCERKING SATISFACTION. § 561 § 561. Effect of a Codicil. — ^Wherever a legacy lias been satisfied by a portion, advancement, or payment, in pur- suance of tlie presumption against double portions, it will not be revived by a subsequent codicil which simply pur- ports to confirm the will and all the bequests in it. A codicil republishes a will, and reaffirms all the existing testamentary dispositions which purport to be operative, but does not re-establish particular bequests which have been already revoked or adeemed by the testator.^ » Nor can such a codicil be used as evidence tending to show that no satisfaction of the legacy was intended by the tes- tator.2 Since, however, the question whether a legacy has been satisfied by a portion or advancement depends finally upon the intention of the donor, even where the case is governed- solely by the equitable presumption, it follows 4 Eq. 504, a father had bequeathed to his son B. a share of a residue; on the subsequent marriage of B., the father by agreement made him an annual allowance of £350; the legacy to B. was held to be satisfied pro tanto by this yearly allowance. § 561, 1 Powys V. Mansfield, 3 Mylne & C. 359, 376, per Lord Cotten- ham; Paine v. Parsons, 14 Pick. 313; Langdon v. Astor's Ex'rs, 16 N. Y. 9; Howze v. Mallett, 4 Jones Eq. 194; Miner v. Atherton's Ex'rs, 35 Pa. St. 528, 537. § 561, 2 Powys V. Mansfield, 3 Mylne & C. 359, 376; Roome v. Roome, 3 Atk. 181 ; Montague v. Montague, 15 Beav. 565, 571 ; Langdon v. Astor's Ex'rs, 16 N. Y. 9, 37; Alsop's Appeal, 9 Pa. St. 374; but see the remarks of Knight Bruce, L. J., in Ravenscroft v. Jones, 4 De Gex, J. & G. 224, 228. In this case, however, the court held that a legacy given in the body of the will had not been satisfied by a subsequent payment. A codicil expressly confirmed the wUl, but made no reference to the legacy. The lord justice thought that the codicil, though not decisive of the question, was a fact for consideration.* § 561, (a) See, especially, in accord §561, (b) In re Scott, [1903] 1 with the text, the recent case of Ch. 1, also holds, in accordance with Hayes y. Welling, 38 B. I. 553, 96 the opinion of Knight Bruce, L. J., Atl. 843, where the subject is care- that the codicil is a fact for cpn- fully considered and the cases re- sideration; approved in In re Ayns- viewed at length. See, also. In re ley (Kyrle v. Turner), [1914] 2 Ch. Youngerman's Estate, 136 Iowa, 488, 422, [1915] 1 Ch. 172. 15 Ann. Cas. 245, 114 N. W. 7. 11—66 § 562 EQUITY JUBISPEXJDENCE. 1042 that a codicil subsequent to the advancement, specifically referring to the legacy and treating it as still subsisting, will necessarily show that there was no intention to adeem it, and will thus defeat the presumption of a satisfaction.^ § 562. Satisfaction of Legacies between Strangers.^' — If the testator is not the parent of the legatee, or does not stand to him in loco parentis, in general no presumption arises that a prior legacy is satisfied by a subsequent pay- ment, or gift, or provision by way of portion or advance- ment; the legatee is, in general, entitled to the legacy, in addition to the other benefit.^ ^ To this general proposi- tion there is, however, one important exception. If a legacy is given to a stranger for any particular purpose, and the testator subsequently makes a payment, advance- ment, or gift for the same purpose, such payment or ad- vancement is presumed to be, and will operate as, a satisfaction of the legacy.^ Parol evidence of the donor's §561, 3 Hopwood V. Hopwood, 22 Beav. 493; 3 Jur., N. S., 549; and see In re Aird's Estate, L. R. 12 Ch. Div. 291. § 562, 1 Ex parte Pye, 18 Ves. 140, per Lord Eldon. This conclusion is either expressly or impliedly sustained hy all the decisions heretofore cited which deal with the presumption as between parent-testator and child. § 562, 2 This is simply the case of a testator accomplishing during his lifetime the special purpose or object which he had contemplated, in the provisions, of his wiU, should be accomplished after his death : Monck V. Monck, 1 Ball & B. 303; Rosewell v. Bennett, 3 Atk. 77; Debeze v. Mann, 2 Brown Ch. 166, 519, 521; Trimmer v. Bayne, 7 Ves. 516; Weth- erby v. Dixon, 19 Ves. 411; Pankhurst v. Howell, L. R. 6 Ch. 136; Sims §562, (a) The text, |§ 562-564, is note, 114 N. W. 7; Grogan v. Ashe, cited in In re Youngerman's Estate, 156 N. C. 286, 72 S. E. 372; Ellarrl 136 Iowa, 488, 15 Ann. Cas. 245j 114 v. Ferris, 91 Ohio, 339, 110 N. E. 476. N. W. 7. In Kentucky, by Ky. Stats., § 4840, § 562, (b) See, also, Wilson v. the doctrine of satisfaction by ad- Smith, 117 Eed. 707; Kramer v. vaneementto a child is extended to art- Kramer, 201 Fed. 248, 119 C. C. A. vancements to any person : See .Louis- 482 (gift by husband to wife) ; John- ville Trust Co. v. Southern- Baptist son V. McDowell, 154 Iowa, 38, 38 Theological Seminary, 148 Ky. 711, L. R. A. (N. S.) 588, and note, 134 147 S. W. 431; Smith v. Cox's Com- N. W. 419; In re Toungerman, 136 mittee, 156 Ky. 118, 160 S. W. 786. Iowa, 488, 15 Ann. Cas. 245, and 1043 CONCERNING SATISFACTION. §562 intention in making the payment or gift is admissible for V. Sims, 10 N. J. Eq. 158; Hine v. Hine, 39 Barb. 507; Langdon v. Aster's Ex'rs, 16 N. Y. 9, 3 Duer, 477; William's Appeal, 73 Pa. St. 249; Roberts V. Weatherford, 10 Ala. 72; Jones v. Mason, 5 Band. 577; 16 Am. Dec. 761." In Monck v. Monek, 1 Ball & B. 303, Lord Chancellor Manners said, by way of illustrating this rule : "Suppose A bequeathed to Ms brother five thousand pounds to buy a house in Merrion Square, and that afterwards A bought one -which he gave to his brother; are there two houses to be bought?" In Pankhurst v. Howell, L. R. 6 Ch. 136, a tes- tator had given his wife a legacy of two hundred pounds, to be paid within ten days after his death; of this testamentary gift the wife was ignorant. During his last illness, a few days before his death, he gave his wife, at her request, two hundred pounds, so that she could have a sum of money under her control upon his death. The executors claimed that this gift was a satisfaction of the legacy; but Lord Romilly, M. R., and the court of appeal hold that there was no satisfaction intended. James, L. J., said (page 137) : "The rule on this subject is, that where the testator stands § 562, (c) See In re Polloek, L. K. 28 Ch. Div. 552, 556, by Lord Sel- borne, L. C. "To constitute a particu- lar purpose, within the meaning of that doctrine, it is not, in my opin- ion, necessary that some special use or application of the money, by or on behalf of the legatee (e. g., for bind- ing him an apprentice, purchasing for him a house, advancing him upon marriage, or the like), should be in the testator's view. It is not less a purpose, as distinguished from a mere motive of spontaneous bounty, if the bequest is expressed to be made in fulfillment of some moral obliga- tion recognized by the testator, and originating in a definite external cause, though not of a kind which (unless expressed) the law would have recognized, or would have pre- sumed to exist." For the facts of this case, see ante, note to § 556. But see In re Smythies, [1903] 1 Ch. 259: "A legacy to a trustee for the benefit of an infant, to whom the trustee is not in loco parentis, is not given for a particular purpose, within Pankhurst v. Howell, L. E. 6 Ch. 136, and In re Pollock, L. B. 28 Ch. D. 552, 556, so as to be adeemed by a subsequent gift of the same sum to the same trustee for the same purpose." A legacy to the trustees of the endowment fund of a, hospital is a legacy for a "par- ticular purpose," and is adeemed by a subsequent gift during the tes- tator's lifetime of the same amount for the same purpose: In re Corbett, [1903] 2 Ch. 326. In support of the text, see, also, Tanton v. Keller, 167 111. 129, 47 N. K 376; Taylor v. Tolen, 38 N. J. Eq. 91; Grogan v. Ashe, 156 N. C. 286, 72 S. E. 372; In re Johnson's Estate, 201 Pa. 513, 51 Atl. 342. In the following cases the motive and object of the gift and of the legacy were not the same, and hence there was no ademption: In re Aynesley (Kyrle v. Turner), [1915] 1 Ch. 172, affirming [1914] 2 Ch. 422; In re Youngerman, 136 Iowa, 488, 15 Ann. Cas. 245, 114 N. W. 7. § 563 EQUITY JUEISPEUDENCE. 1044 the purpose of repelling or strengthening the presump- tion.3 d § 563. Satisfaction, when not Presumed, but Expressed. Every case of satisfaction of a prior benefit or obligation by a subsequent gift depends ultimately upon the intention of the donor in conferring the latter "amount. If the natural or acquired relation of parent and child subsists between the giver and the beneficiary, the intention of the donor is implied from the very fact of the two benefits conferred while such relation exists, and need not be ex- pressed either in the writing by which the second gift is bestowed, nor in any collateral declaration, verbal or written. The rule concerning the equitable presumption of satisfaction, discussed in the foregoing paragraphs, is simply the statement of this result in a formal manner. In all other cases where the relation of parent and child does not exist, the intention of the donor to work a satis- ' faction of the prior benefit by a subsequent gift must be expressed, unless the case falls within the single special exception described in the last preceding paragraph. It is a proposition generally, even if not universally, true, that, whatever be the relation between the two parties,, whether that of strangers or otherwise, where a testator neither within the natural nor assumed relation of a parent to the legatee, the legacy will be considered as a bounty, and ^vill not be adeemed by a subsequent advancement, unless the legacy is given for a particular pur- pose, and the testator advances money for the same purpose, or unless the intention otherwise legally appear of making the advancement with a view to ademption. I think this refers to a legacy given for a particular specific purpose, — as, for instance, a legacy given to purchase an advowson for a son, which would be adeemed, or perhaps it would be more correct to say satisfied, by the father afterwards purchasing the advowson for him. Here the legacy does not appear to me to have been given for a particular purpose, within the meaning of the rule." § 562, 3 Debeze v. Mann, 2 Brown Ch. 166, 519, 521 ; Trimmer v. Bayne, 7 Ves. 516; Richards v. Humphreys, 15 Pick. 135. §562, (d) See, also. In re Pollock, L. E. 28 Ch. Div. 552; Grogan v. Ashe, 156 JST. C. 286, 72 S. B. 372. 1045 CONCERNING SATISFACTION. § 563 has conferred a legacjJ' upon an individual, he may after- wards during his own lifetime bestow a second gift of any nature upon the same beneficiary, with the intention that it shall be in satisfaction of the prior legacy; and if this intention is sufficiently expressed, and if the second gift is consummated so that the legatee accepts it or receives and enjoys its benefits, the prior legacy will thereby be satisfied. As this effect depends wholly upon the ex- pressed intention of the donor, the nature of the two gifts, their identities or differences, are entirely immaterial, — a legacy of money might thus be satisfied by the gift of a specific chattel or of a specific tract of land. As this doc- trine is important, and as its treatment by text-writers and even by some courts has been confused, I shall quote the language in which it has been stated by one of the ablest modern ■ equity judges. Lord Eomilly: "If the testator stands in loco parentis, the presumption of equity being against double portions, the presumption of satisfaction arises at once, and includes everything that the father gives which he intended to be in satisfaction of his previous promised benefit; and evidence is admissible for the pur- pose of rebutting or sustaining the presumption against double portions, which in that case is in favor of satisfac- tion. In the case of a stranger, the presumption against double portions does not arise at all. It is wholly a ques- tion of construction, and no evidence is admissible either to sustain or rebut any presumption, 'for the reason that none arises. In this latter case the question of satisfac- tion never arises except upon the express words of the donor, and whether the gifts said to be given in satisfac- tion are given by a father or a stranger is wholly imma- terial, and it is solely a question whether the original benefactor intended that his benefit should be diminished or adeemed by benefits derived from any other source, and if so, what other source. This may be shown point- edly in a case where the gifts supposed to be a satisfaction of the original gifts are gifts of land. In the case of a § 564 EQUITY JTJKISPBUDENCE. 1046 parent, or person in loco parentis, land would be no [pre- sumed] satisfaction of a gift of money. But if the original gift was to a stranger, the doctrine of satisfaction becomes applicable according to the words of the original donor. There the question is, whether the words he has used, fairly interpreted, meant the gift of land as satis- faction of the benefits he has bequeathed or previously conveyed. It is therefore of paramount importance to consider in all cases whether the doctrine of presumption against double portions, or the doctrine of construction of instruments, is that which applies. ' ' ^ § 564. Rationale of the Rule in Such Ca^es. — ^It may be stated, therefore, as a general proposition, that wherever a testator has bequeathed a legacy to a child or to a stran- ger, and afterwards during his lifetime either advances an amount of money or gives any other species of prop- erty, lands, chattels, or things in action to the same legatee, and the beneficiary in accepting the money or other prop- erty expressly assents, acknowledges, or agrees that the same shall be in partial or complete payment or discharge of the prior bequest, then the legacy will be satisfied in whole or in part, as the case may be. Also, when a tes- tator has in like manner bequeathed a pecuniary legacy, and afterwards pays to the legatee a sum of money wliich he expressly declares to be in discharge of the legacy, or gives to the legatee any other species of property which he expressly declares shall be in lieu of the legacy, and the legatee receives and enjoys the benefits of the payment or gift, the prior legacy is thereby satisfied.^ >* Where a § 563, 1 Cooper vi Cooper, L. R. 8 Ch. 813, 819, note, per Lord Romilly, M. R. § 564, 1 Hardingham v. Thomas, 2 Drew. 353 ; Richards v. Humphreys, 15 Pick. 133 ; Howze v. Mallett, 4 Jones Eq. 194. In these American cases the reasons for the rule are so clearly explained, and its operation so accurately described, that I shall quote some passages § 564, (a) See, also, Allen v. Allen, Eoquet v. Eldridge, 118 Ind. 147, 20 13 S. C. 512, 36 Am. Eep. 716; N. E. 733; Caxmiehael v. Lathrop, 1047 CONCBKNING SATISFACTION. § 564 pecuniary legacy has been given, and the testator after- wards during his lifetime advances a sum of money ex- pressly in payment of the prior gift, the legacy may properly be said to be "adeemed," but the result is the same whether the effect be termed "ademption" or "satis- faction," and in all the instances above described there from the opinions. In Howze v. Mallett, 4 Jones Eq. 194, a grandfather had bequeathed five hundred dollars to each of certain grandchildren. On the marriage of one of these granddaughters the testator paid over to her husband five hundred dollars, and took back a receipt by which the husband acknowledged the payment of that sum, "to be deducted from the bequest to his wife." The court held that the legacy to the wife was thereby satisfied. Ruffln, J., said: "The only question is, whether, after pajmient by the testator expressly in satisfaction of a pecuniary legacy, a second payment can be enforced from the executor. . . , The delivery by the testator to the legatee of a specific thing bequeathed has always been held to be a satisfaction or ademption of the legacy. Although the tenor of the will stands, yet the gift is ineffectual, because the legatee, having got the thing intended for him, cannot get it again. In that respect, it must be the same with the pecuniary legacy. Express anticipated payment by the testator must exclude a claim for a second payment of the same sum, since the testator intended but one gift, and that he completed in his life- time." In Richards v. Humphreys, 15 Pick. 133, a testator had bequeathed to his sister $500, and afterwards gave her $466 to enable her to purchase some land. She delivered to him in return a writing, by which she acknowl- edged the receipt of the money, and that it was paid to her "in part of her right of dower iip his last will." The evidence also showed that the 108 Mich. 473, 32 L. E. A. 232, 66 tion of the legacy, though the donee N. W. 350, and the recent cases: Es- signed a receipt of the money "on tate of Baker, 168 Cal. 766, 145 Pac. account of my future interest in her 1005; Johnson v. McDowell, 154 [donor's] estate." In re Shields Iowa, 38, 38 L. E. A. (N. S.) 588, ( Corbould-EUis v. Dales), [1912], and note, 134 N. W. 419; Nail v. 1 Ch. 591, Warrington, J., held that Wright's Ex'rs, 26 Ky. Law Rep. in an asserted case of express 253, 80 S. W. 1120; Smith v. Cox's ademption, not depending on any Committee, 156 Ky. 118,. 160 S. W. legal presumption, it must appear 786; Gallagher v. Martin, 102 Md. that the intention of the testator to 115, 62 Atl. 247; Norfleet v. Calli- adeem by the subsequent parol gift cott, 90 Miss. 221, 43 South. 616. In was communicated to the legatee Ellard v. Ferris, 91 Ohio, 339, 110 in the testator's lifetime, so as to N. E. 476, it was held, on the evi- bind his conscience; and claims that dence, that there was no iatention the English cases contain nothing at that the gift should be in satisfac- variance with this ruling. § 564 EQUITY JTJKISPBUDENCE. 1048 is a satisfaction of the legacy. It is certainly not essen- tial to a satisfaction, under any of the circumstances- above mentioned, that the beneficiary should assent thereto so as to become a party to an agreement that the legacy shall be satisfied. A legacy, as long as the will is ambulatory, is completely under the control of the tes- tator; a satisfaction takes place as the result of his inten- tion and act; the consent and agreement of the legatee, in one of the cases described, is really efficacious, as it shows unequivocally the intent with which the testator made his second gift. There is, unfortunately, some confusion upon this subject in the books, but the real testator expressed a willingness to pay off the whole legacy, and actually offered his sister the balance, but she declined to receive it. During all this time she had a husband, who died, however, before the testator. The legatee sued the executors for the entire legacy. The court held that the testator's declarations were admissible in evidence, and that the receipt, in connection with these declarations, clearly showed his intent in advancing the $466, and that the legacy was thereby pro tanto satisfied. The reasons for this decision were set forth in an elaborate opinion, from which I make the following extracts: "The ademption of a specific and of a gen- eral legacy depend upon very different principles. . . . But when a gen- eral legacy is given, of a sum of money out of the testator's general assets, without regard to any particular fund, intention is of the very essence of ademption. The testator, during his life, has the absolute power of disposition or revocation. If he pay a legacy in • express terms during his lifetime, although the term "payment," "satisfaction," "release," or "discharge" be used, it is manifest that it will operate by way of ademp- tion, and can operate in no other way, inasmuch as a legacy during the life of the testator creates no obligation upon the testator or interest in the legatee which can be the subject of payment, release, or satisfaction. If, therefore, a testator, after having made his will containing a general bequest to a child or stranger, makes an advance, or does other acts which can be shown by express proof or reasonable presumption to have been intended by the testator as a satisfaction, discharge, or substitute for the legacy given, it shall be deemed in law to be an ademption of the legacy." The court then states and explains the doctrine concerning the presump- tion of satisfaction arising between a parent and child, and proceeds: "From this view of the subject of the ademption of general legacies, it seems manifest that the ademption takes effect, not from the act of the legatee in releasing or receiving satisfaction of the legacy, but solely from 1049 CONCERNING SATISFACTION. § 564 distinction and the true rule are perfectly clear, and based upon universally accepted principles. It is not every ex- pressed intention of a testator that a prior legacy shall be annulled, no matter how plain and unequivocal, but wro- accompanied by any act of benefit to the legatee, that can be operative. No such mere expression of an intent to annul a prior legacy can be operative unless it amounts to an actual revocation; and a general or pecuniary legacy can only be revoked either by an act which amounts to a cancellation, or by a written instrument executed with all the formalities required for a will. Satisfaction or ademp- tion of a general legacy is not a revocation; it assumes the will and act of_ the testator in making such pajrment or satisfaction, or substituting a different act of bounty which is shown by competent proof to be intended as such payment, satisfaction, or substitute. The question therefore is, whether, from the facts shown in the present case, it suflBciently appears that the advance of money made by the testator in his lifetime to his sister was intended as a part payment and satisfaction of the legacy given to her by his will ; if it was so intended, the law deems it an ademption pro tanto." The court then examined the receipt, and held that its language acknowledging payment of the money "in part of her right of dower in his last will" must be interpreted as meaning to refer to the legacy given to her in his will, of which there could be no reason- able doubt; and also held that the testator's declarations were admissible in explanation of the ambiguity in the receipt, and in showing the testa- tor's intention, and said, in conclusion: "As to the objection that at the time of the payment the plaintiff was a feme covert, we are of opinion that it does not vary the result. The only ground is, that the plaintiff was at the time of the payment under the disability of coverture. But we have seen that ademption depends solely on the wUl of the testator, and not at all upon the ability of the party receiving to give a valid discharge. Had the money been paid to trustees or others for her benefit, without any act or consent of hers, if given expressly in lieu or in satisfaction of such legacy to her, it would have operated as an ademption. Had he purchased a house or other property in her name and for her benefit, with the like intent and purpose expressed, it would have had the same effect. The circumstance of her disability at the time of the payment, therefore, is not inconsistent with the testator's intention in making it to advance and satisfy the legacy to her, nor does it affect the efficacy of such payment as an ademption." § 565 EQUITY JUEISPKUDENCB. 1050 that the original intention to confer the gift upon the legatee ha& not been changed ; the testator simply antici- pates his own death by either paying to the legatee the very amount of the legacy or by bestowing upon him some other gift expressly in- lieu thereof. Satisfaction or ademption, in the sense in which it is here discussed, re- quires, therefore, that some benefit should be conferred upon the legatee, in anticipation by way of payment of the amount of the legacy, or of substitution of something in place of it; but its operation and effect depend upon the act and intention of the testator himself to make the pre- payment or substitution, and not upon any active assent on the part of the legatee, so that he would be bound by an implied agreement to receive the present benefit in- stead of the future donation. All the English and American cases of real authority are agreed upon this view of the nature of the satisfaction of a prior legacy, whether it arises from the equitable presumption between a parent testator and his child, or from the expressed intent of the testator where there is no such presumption.^ i> § 565, IV. Satisfaction of Portions by Subsequent Legacies or other Similar Provisions. — ^In pursuance of the same principle of opposition to double portions, the gen- eral rule is equally well settled, that where a portion is made payable under a settlement, or an instrument in the TTature of a settlement, by a parent, or a person m loco parentis, and he afterwards makes a provision by a legacy in favor of the one entitled to the portion, a presumption arises that such provision is intended to be in complete or partial satisfaction of the portion, according as the § 564, 2 The opinion in Richards v. Humphreys, 15 Pick. 133, quoted in the last note, states this view in the clearest and strongest manner, and the same doctrine is laid down in many other decisions cited in preceding notes. § 564, (b) This paragraph of the land, 126 ni. 37, 1 L. R. A. 203, 18 text is cited in Richardson v. Eve- N. E. 308. 1051 CONCEENING SATISFACTION. § 566 amount of the legacy exceeds, is equal to, or is less than that of the prior _portion. If the second provision is by a subsequent settlement instead of by will, it may also be a satisfaction; although the presumption does not seem to be as strong in that case as when the second gift is a legacy. 1 ^ As the rules concerning this species of satis- faction are substantially the same as those which govern the satisfaction of 'prior legacies by subsequent provi- sions, any detailed discussion of the subject is unnecessary, and I need only state the more important phases of the doctrine without further illustration.^ § 566. What Differences do not Defeat the Presumption. Since courts of equity lean strongly against double por- § 565, 1 Jesson v. Jesson, 2 Vera. 255 ; Palmer v. Newell, 20 Beav. 32, 40; 8 De Gex, M. & G. 74; Bruen v. Bruen, 2 Vem. 439; Hinehcliffe v. Hinehcliffe, 3 Ves. 516; Warren v. Warren, 1 Brown Ch. 305, note; Ackworth v. Aekworth, 1 Brown Ch. 308, note; Copley v. Copley, 1 P. Wms. 147; Moulson v. Moulson, 1 Brown Ch. 82; Byde v. Byde, 2 Eden, 19, 1 Cox, 44; Duke of Somerset v. Duchess of Somerset, 1 Brown Ch. 309, note; Finch v. Finch, 1 Ves. 534; Sparkes v. Cator, 3 Ves. 530; Pole V. Lord Somers, 6 Ves. 309; Bengough v. Walker, 15 Ves. 507; Campbell v. CampbeU, L. R. 1 Eq. 383; Lady Thynne v. Earl of Glengall, 2 H. L. Cas. 131, 1 Keen, 769; Chichester v. Coventry, L. R. 2 H. L. 71; Dawson v. Dawson, L. R. 4 Eq. 504; Paget v. GrenfeU, L. E. 6 Eq. 7; McCarogher v. Whieldon, L. R. 3 Eq. 236 ; In re Tussaud's Estate, L. R. 9 Ch. Div. 363; Fairer v. Park, L. R. 3 Ch. Div. 309; Mayd v. Field, L. R. 3 Ch. Div. 587; Bethel v. Abraham, L. R. 3 Ch. Div. 590, note; Russell V. St. Aubyn, L. R. 2 Ch. Div. 398 ; Cooper v. Cooper, L. R. 8 Ch. 813. § 665, 2 For example, the rules determining when a person is in loco parentis are exactly the same in this kind of satisfaction as in the one described under the preceding subdivision. As family settlements, and agreements in the nature of such settlements, by which parents bestow or covenant to bestow portions on their children, are quite rare in this coun- try, it naturally follows that comparatively a very few American decisions have dealt with this species of satisfaction. See Gilliam v. Chancellor, 43 Miss. 437, 5 Am. Rep. 498; Guignard v. Mayrant, 4 Desaus. Eq. 614; Winn's Adm'r v. Wier, 3 B. Mon. 648; Taylor v. Lanier, 3 Murph. 98, 9 Am. Dec. 599. S 565, (a) See, also, Montagu v. Earl of Sandwich, L. E. 32 Ch. Div. 525. § 566 EQUITY JUKISPKUDENCB. 1052 tions, as well when the first portion is given by a settlement or other agreement as when it is given by a will, it is well settled that slight differences — and as appears by some decisions even considerable differences — between the prior portion and the subsequent legacy will not be sufficient to rebut the presumption of the legacy being intended as a satisfaction of the portion. These differences may be either in the times of payment, or in the trusts and limita- tions contained in the settlement and in the subsequent will, or in the nature and amount of the two gifts. The question always is, as stated in a leading decision, whether the two provisions are substantially the same, and this question every judge must decide for himself from a com- parison of the two instruments, under the light of sur- rounding circumstances. Thus it has been recently held that the bequest of a residue, or a part of a residue, will be presumed to be a satisfaction, in whole or pro tanto, as the case may be, of a prior portion given to the same beneficiary. 1 § 566, 1 Lady Thynne v. Earl of Glengall, 2 H. L. Cas. 131, 1 Keen, 769; Hinchclifle v. Hinchcliffe, 3 Ves. 516; Sparkes v. Cator, 3 Ves. 530; Weall V. Rice, 2 Russ. & M. 251, 268; Copley v. Copley, 1 P. Wms. 147; RusseU V. St. Aubyn, L. R. 2 Ch. Div. 398 ; Campbell v. Campbell, L. R. 1 Eq. 383 ; and see the cases cited in the next following note.* § 566, (a) In In re Lawes, L. R. 20 ten thousand pounds secured by the Ch. 81, a father bound himself to bond. It was held by the court of pay his reputed son ten thousand appeal that the rule against double pounds on a certain day four years portions applied, and that the bene- later. .A few weeks before the day fit given to the son under the part- of payment he took his son into nership articles must be taken in partnership, and it was provided in satisfaction of the sum due under the articles that the capital should the bond. In Montagu v. Earl of consist of thirty-seven thousand five Sandwich, L. R. 32 Ch. Div. 525 a hundred pounds, to be brought in father, by a marriage settlement, by the father, of which nineteen covenanted to pay his second son an thousand pounds should be consid- annuity of one thousand pounds a, ered as belonging to the son. He year, and to charge the annuity on a also assigned to his son the lease of sufEcient part of his real estate. By the premises on which the business his subsequent will, he devised his was carried on. The father died real estate, "subject to the charges without having paid any part of the and encumbrances thereon," in strict 1053 CONCERNING SATISFACTION. § 567 § 567. What Differences Defeat the Presumption.— While the foregoing general rule is universally admitted, it is equally well settled that the presumption may be, overcome by intrinsic evidence, appearing in the provi- sions of the two instruments, of the donor's intention that the legacy shall be in addition to and not in satisfaction of the prior portion. The most recent English decisions of the highest authority have established the natural and exceedingly just doctrine that the presumption of a satis- faction is not so strong when the settlement or agree- ment to bestow a portion precedes the will, as it is when the will precedes the settlement or agreement. The con- clusion necessarily follows from this doctrine, that differ- ences or variations between the two provisions will avail to overcome and destroy the presumption of a satisfaction when a prior portion is given by settlement or agreement, and a subsequent legacy is conferred by a will, which would not be sufficient to produce the same result when a legacy is first given, and is followed by a settlement or advancement. The reasons for this distinction are ob- vious and convincing. A prior legacy is wholly under the control of the testator; it creates no obligation upon him, nor right or interest in the legatee; it can be adeemed by the sole act and intent of the testator without any con- sent of the legatee; and the presumption of an intent to adeem or satisfy it easily and naturally arises from his subsequent, bounty. A prior settlement or agreement to bestow a portion, on the other hand, does create an obli- gation upon the donor, and a right and interest in the donee; the donor cannot discharge or satisfy it by any settlement on his first son, and after that the presumption against double other legacies, gave his second son portions applied, and that the words legacies, the income of which would "subject to the charges and encum- be considerably more than one thou- brances thereon," used in the will, sand pounds a year. It was held on did not rebut it. See, also, in sup- appeal by Bowen, L. J., and Cotton, port of the text. In re Blundell, L. J. (Pry, L. J., dissenting), re- [1906] 2 Ch. 222. versing the decision of Pearsons, J., § 567 EQUITY JUEISPRUDEKOE. 1054 act or intent of his own, — the consent of the beneficiary is essential. The distinction between the two cases is clear, and inheres in their very nature. The conclusion reached by the recent English decisions is therefore natural and just; the presumption of an intended satis- faction is less strong and is more easily overcome when the settlement or agreement precedes the will than when the will precedes the settlement.^ The settlement or agree- § 567, 1 The subject is fully examined and the conclusions stated in the text are clearly established by the house of lords, in the case of Chichester V. Coventry, L. R. 2 H. L. 71. See quotations from thfe opinions ante, in note under § 524 ; also Dawson v. Dawson, L. R. 4 Eq. 504 ; Paget v. Grenfell, L. R. 6 Eq. 7; McCarogher v. Whieldon, L. R. 3 Eq. 236; Leth- bridge V. Thurlow, 15 Beav. 334; In re Tussaud's Estate, L. R. 9 Ch. Div. 363; Russell v. St. Aubyn, L. R. 2 Ch. Div. 398."' As examples of the differences between the two provisions which prevent the presumption from arising, a legacy given upbn a contingency is not a presumptive satisfaction of a prior certain portion: Bellasis v. Uthwatt, 1 Atk. 426, 428; Hanbury v. Hanbury, 2 Brown Ch. 352; and the legacy must be ejusdem generis with the prior portion, in order to create a presumption of satisfaction. A devise of land wiU not be a satisfaction of money given as a portion, nor a legacy of money a satisfaction for a settlement of land: Goodfellow v. Burchett, 2 Vern. 298; Chaplin v. Chaplin, 3 P. Wms. 245; Bellasis v. Uthwatt, 1 Atk. 426, 428; Savile v. Savile, 2 Atk. 458; Ray v. Stanhope, 2 Ch. Rep. 159; Grave v. Earl of Salisbury, 1 Brown Ch. 425. A direction by the testator in the will to pay all debts is a circumstance very materially affecting the presumption, even if not completely overcoming it : Lord Chichester v. Coventry, L. R. 2 H. L. 71 ; Paget V. Grenfell, L. R. 6 Eq. 7; Dawson v. Dawson, L. R. 4 Eq. 504. No presumption could possibly arise where the second gift is expressly stated in the will, either not to be in satisfaction of the portion, or to be in addition to it: Burges v. Mawbey, 10 Ves. 319, 327; Donee v. Lady Torrington, 2 Mylne & K. 600. On the other hand, if the will should expressly declare that the gift therein bestowed, whatever be its nature or amount, was intended to be in satisfaction or in lieu of a portion which the testator had before settled or agreed to pay to the same donee, such' § 567, (a) See, also, Montagu v. the provisions were so great as to Earl of Sandwich, L. E. 32 Ch. Div. defeat the presumption of satisfao- .525, 546-548, judgment of Fry, L. J. tion of a portion by a subsequent In Cartwriglit v. Cartwright, [1903] life insurance policy. 2 Ch. 306, the differences between 1055 CONCERNING SATISEACTION. § 568 ment to give a portion may sometimes contain a provision to this effect: that if the parent should afterwards, dur- ing his lifetime, make an advancement to the donee, such advancement should be a complete or partial satisfaction of the portion. If, instead of making a technical advance- ment, the parent should afterwards, by his will, leave a legacy of a specific sum or of a residue, the legacy given under such circumstances is held to be a compliance with the provision, and to operate as a satisfaction in full or in part of the portion.^ e § 568. Election by the Beneficiary. — Where the former provision is by will, the satisfaction takes place, as has been shown, without any assent of the legatee, from the act and intent of the testator alone, so that no election- on the part of the beneficiary is either necessary or i^os- sible. The legacy, being ambulatory, creates no obliga- tion upon the testator, nor any right or interest in the legatee. It is otherwise, however, when the prior provi- sion is by a settlement or other agreement for the payment of a portion. Such settlement or agreement, being a valid and effective contract, creates a distinct legal obli- expressed intention would necessarily control, independently of any pre- sumption, and the beneficiary would be put to an election between the two provisions.'' § 567, 2 Onslow v. Michell, 18 Ves. 490; Leake v. Leake, 10 Ves. 489; Noel V. Lord Walsingham, 2 Sim. & St. 99; Tazakerley v. Grillibrand, 6 Sim. 591; Papillon v. PapUlon, 11 Sim. 642. A share of a parent's property, when he dies intestate, is not such an advancement: Twisden V. Twisden, 9 Ves. 413. § 567, (1») The fact that two docu- tained in a separation deed, whereby ments are contemporaneous, so that the husband covenanted that his both are present in the mind of a executors should pay a certain sum donor when he executes each of to his wife, and a like provision in them, is a strong reason against his contemporaneous will, holding a gift in one of them to be § 567, (c) The text is quoted and a satisfaction of an obligation un- commented upon in Estate of Zeile, der the other to pay a like sum. So 74 Cal. 127, 133, 15 Pac. 455, a case held in Horlock v. Wiggins, L. B. 39 falling within the principle of §'548, Ch. Div. 142, of an obligation con- ante. § 568 EQUITY JXJRISPEXJDBNCE. 1056 gation resting upon the donor, and a distinct legal right and interest belonging to the donee. The two parties, if not strictly a debtor and a creditor, stand in a relation closely analogous to that of debtor and creditor. It is evident, therefore, that the obligation resting upon one party, and the right held by the other, cannot be discharged and annulled except by the co-operation of the one in whose favor the right exists. There can be in such a case no ef- fectual and operative satisfaction of the prior portion by the act and intent of the donor, however clearly expressed, unless the beneficiary also consents and voluntarily ac- cepts the subsequent provision as a substitute for or satis- faction of the prior obligation. It follows, therefore, that whenever a portion is secured by a settlement or by any other agreement, and a subsequent provision is made for the same beneficiary by a legacy or otherwise, which would either operate as a satisfaction in pursuance of the equitable presumption, or which is expressly declared by the "donor to be given in satisfaction, in each case the beneficiary has an election between the two provisions. He may, at his option, accept the subsequent legacy and surrender the prior portion, or he may reject the sub- stituted legacy and claim the prior portion. By electing to take either, he necessarily renounces his claim to the other. 1 § 568, 1 The rules which determine how an election is made, either expressly or impliedly, who may elect, the effect of an election, and the like, are the same in this particular instance as in the cases which were considered in the preceding section upon election: Copley v. Copley, 1 P. Wms. 147; Lady Thynne v.. Earl of Glengall, 2 H. L. Cas. 131; Tinch V. Finch, 1 Ves. 534; Hinchcliffe v. Hinchcliffe, 3 Ves. 516; Pole v. Lord Somers, 6 Ves. 309; and see the other cases cited under the preceding paragraphs which deal with the satisfaction of portions by subsequent legacies. The same doctrine of election, of course, applies to the case where the prior obligation satisfied by a subsequent legacy is an ordinary debt due from the testator; the creditor-legatee has an election whether to accept the testamentary gift or to enforce his prior demand. 1057 CONCEENING SATISFACTION. §§569,570 § 569. V. Admissibility- and Effect of Extrinsic Evi- dence. — There is certainly some conflict among the judicial decisions with respect to the question, H6w far may ex- trinsic and parol evidence of the donor's intention be admitted in these four cases of satisfaction? and the treat- ment of the subject by the text-writers has sometimes been confused, inaccurate, and unsatisfactory. If, how- ever, we form and constantly keep in mind a clear concep- tion of the exact circumstances under which such evidence is offered in each particular case, and the real purpose for which it is offered, and give their proper force and effect to certain elementary general rules concerning the use of parol evidence in connection with written instru- ments, the question will be freed from all its apparent difficulties, and will be found to be one of very easy solu- tion. § 570. General Principles Discussed and Explained. — A few preliminary observations will be useful to clear the ground from all irrelevant matter, to describe the real conditi'on of circumstances from which the questions arise, and to explain the exact nature of these questions them- selves which are to be examined. In the first place, it is evident that the same principles must apply to and gov- ern the admissibility of evidence in all of the four in- stances of satisfaction heretofore discussed, namely, the satisfaction of debts by subsequent legacies, of legacies by subsequent legacies, of legacies by subsequent advances or portions, and of portions by subsequent legacies. Each of these four instances, although they differ somewhat among themselves with respect to their external form, depends upon the same general principle of equity; in each in- stance the satisfaction, so far as it falls under the control of equitable rules, arises from the one equitable doctrine of a presumption that the donor did not intend to confer double benefits upon the single recipient of his bounty. How far extrinsic evidence is admissible affecting this 11—67 § 570 EQUITY JUEISPKUDENCE. 1058 intention, showing it either to exist or not to exist, must plainly be regulated by the same rules in all of these four instances. In the second place, it is equally clear that in all of these four instances of satisfaction which arise from equitable doctrines, the extrinsic evidence of the donor's intention must refer alone to the second gift, whatever be its form and nature.^ In every case the first benefit which is claimed to have been satisfied is either a pure gift, a legacy contained in a will, and of course still under the power of the donor; or it is a definite obliga- tion, — either a portion secured by a settlement or some other similar written agreement, or a debt which may either be evidenced by a written instrument or may have been contracted verbally. Whatever be its external form, its nature is fixed and settled, and is always determined by the terms of the will in which it is given, or of the obligation by which it is created. In some special cases a resort may be had to the express terms of the will or other instrument, which may refer to a subsequent bene- fit expected to be conferred by way of substitution; but extrinsic evidence can never be necessary in direct appli- cation to the first benefit for the purpose of showing wrhether or not it has been satisfied. The intent to satisfy must, from the very nature of the case, be an element connected with the subsequent benefit; and so far as ex- trinsic evidence is admissible to disclose that intention, it must relate exclusively to such subsequent benefit, § 570, 1 The correctness of this proposition is expressly admitted by Lord Chancellor Sugden in the celebrated case of Hall v. Hill, 1 Dru. & War. 94, 133. A father had created a certain obligation in favor of his son-in-law and daughter by a marriage contract; he afterwards gave the daughter a legacy, and it was claimed that the legacy was given in satis- faction of the prior contract obligation. Parol evidence of the testator's intent was offered. "With respect to this proposed evidence Lord Chan- cellor Sugden said (p. 133) : "If I admit parol evidence, it must be in connection with the will; it has nothing to do with the debt. The debt was contracted before the will was made ; and the declarations of the tes- tator, which have been offered in evidence, cannot apply to the debt, but must be used in reference to the will only." 1059 CONCERNING SATISFACTION. § 570 whether legacy, portion, advancement, gift, or payment. It should be remembered, however, that evidence of the surrounding circumstances, of the situation of the subject- matter, of the situation and relations of the parties, and the like, is always admissible to throw light upon and thus explain the nature of every writing or other transac- tion, however formal; and such evidence is therefore admissible in relation to the first benefit, the will, set- tlement, agreement, or debt, as well as for the purpose of describing the efifect and operation of the second donation. In the third place, it is clear that the subse- quent benefit, claimed to be in satisfaction of the prior one, may be conferred either by a written instrument or ver- bally without any accompanying writing. Where it is a legacy or a portion, it must necessarily assume a written form; where it is an advancement, gift, or pecuniary pay- ment merely, the donor's act and intention may be con- tained in a written instrument, or the entire transaction on the donor's part may be wholly verbal, — ^may wholly consist of his external acts and accompanying words. This difference between a written and a verbal form of bestowing the second benefit gives rise to a distinction concerning the admissibility of extrinsic evidence entirely unconnected with the essential nature of the transaction; that is, with the equitable presumption of a satisfaction, and depending solely upon the difference of external form. Whenever the subsequent benefit is conferred by means of a written instrument on the part of the donor, — a will, settlement, agreement, assignment, conveyance, or other writing, — it is, of course, subject to the universal rule, that, as between the parties thereto and their suc- cessors in interest, a written instrument cannot be al- tered, modified, added to, or subtracted from by extrinsic parol evidence directly showing the intention with which the writing was executed.^ The only extrinsic evidence § 570, (a) The text is eited to this jefEect in Estate of Lyon, 70 Iowa, 375, 378, 30 N. W. 642. § 570 EQUITY JUEISPEUDENCB. 1060 generally admissible is that which discloses the circum- stances surromiding the execution of the instrument, the nature and situation of the subject-matter, the relations of the parties, and the like, and which thus places the court in the very position which the parties occupied when the writing was executed. This rule obviously has no particular connection with the equitable presumption of satisfaction, but it applies to all written instruments of donation from which a satisfaction of a prior benefit may arise. Parol extrinsic evidence tending to show the donor's intention that a satisfaction should or should not be wrought by his second gift, so far as it would violate fliis general rule, cannot, of course, be admitted. On the other hand, wherever the second benefit is wholly verbal, where it consists of an advancement, or payment, or gift made by the donor's acts and words alone, without any accompanying writing on his part, the transaction is clearly not subject to any such restrictive rule concerning the admissibility of extrinsic evidence; there is nothing in the policy of the law which forbids a resort to such evi- dence for the purpose of describing all the acts and declarations of the donor, so far at least as they formed a part of the transaction in and by which the gift was bestowed. This distinction between the two cases of a written and a verbal gift, although self-evident, has some- times been overlooked in the discussions of the question as to the admissibility of extrinsic evidence; and it must be employed to explain and limit some of the general statements contained in judicial opinions. Having thus described the several conditions of circumstances from which the questions as to the admission of extrinsic evi- dence can arise, I shall proceed to state and discuss the questions themselves. What these questions are is now very clear. When may extrinsic parol evidence be ad- mitted, and when may it not, in relation to the second or subsequent benefit, to show the donor's intention, either that it should be, or should not be, in satisfaction of a 1061 CONCEENING SATISFACTION. § 571 prior gift bestowed or prior obligation conferred upon the same beneficiary? The two distinct cases, before men- tioned, in which these questions can arise will be examined separately, namely: 1. Where the second or subsequent benefit is conferred by means of a written instrument on the part of the donor; and 2. Where it is conferred ver- bally, without any writing by the donor.^ § 571. The Subsequent Benefit Giveu by a Writing. — ^It is plain that all possible cases of a written form of con- ferring the second benefit by the donor may be reduced to the following: 1. Where the written instrument states in express terms the donor's intention that the benefit therein contained is or is not bestowed by him in lieu of or in satisfaction for the prior gift or obligation; and 2. Where the writing is wholly silent with respect to any such intention, and is merely an instrument of donation, assignment, or transfer; in other words, where it is a will giving a legacy simpliciter, or a written agreement simply bestowing or covenanting to bestow a portion, or a writing simply showing an advancement or payment of money, or an instrument simply operating as an assignment, convey- ance, or transfer of chattels, lands, things in action, or other property, in either case without any additional lan- guage indicating an intention that the benefit thus given § 570, (b) In some of the United advancements, if expressed in tte States statutes have been passed on gift or grant to be so made, or if this subject, which require that tlie charged in writing by the decedent testator's intention should be evi- as an advancement, or acknowledged deneed by a writing, in order that in writing as such by the child or the advancement should have the other successor or heir." Similax effect of an ademption. In Califor- statutes have been enacted in Illi- nia, the Civil Code (sec. 1351) pro- nois: Eev. Stats. 1874, c. 39, sec. 7; vides that "advancements or gifts Hurd's Stats. 1887, p. 505, sees. 4-7; are not to be taken as ademptions Wilkinson v. Thomas, 128 111. 36'3, 21 of general legacies, unless such in- N. E. 596; Wallace v. Eeddiek, 119 tention is expressed by the testator 111. 151, 8 N. E. 801; and in Utah: in writing"; and in section 1397 it Comp. Laws 1907, §§ 2801, 2843; In is provided, in cases of intestacy: re Piokard's Estate, 42 Utah, 105, "All gifts and grants are made as 129 Pac. 353. § 572 EQUITY JURISPEUDENCE. 1062 should or should not be in lieu of, or in substitution for, or in satisfaction of the prior gift or obligation. Finally, this second form of the writing may occur between two different classes of persons having different legal rela- tions towards each other, namely, the donor may be the parent of, or stand in loco parentis to, the beneficiary, so that the equitable presumption of an intent to satisfy will arise from the naked fact of the second gift ; or the donor may stand in the legal relation of a stranger to the bene- ficiary, so that no equitable presumption of a satisfaction arises from the transaction. These three classes comprise all the instances of a second benefit conferred by a writing. § 572. The Writing Expressly States the Donor's Inten- tion. — The first of these three cases plainly requires no dis- cussion. It may occur eitTier where the donor stands in the parental relation towards his beneficiary, so that the equitable presumption of a satisfaction would otherwise have arisen, or where he stands in the relation of a stranger to his beneficiary, so that no such presumption would arise. Under either of these circumstances, if the donor inserts into the written instrument of donation an express declara- tion of his intention that the benefit thereby bestowed should be in substitution for or in satisfaction of the prior gift or obligation, or on the other hand, that it should be cumulative, and in addition to the prior benefit, such ex- press statement of the intention is conclusive, and must control. There is no place, under these circumstances, for any presumption; all necessity and even opportunity for the operation of presumptions is obviated. No ex- trinsic parol evidence of the donor's declarations, nor other parol evidence showing his intention, is admissible. The only effect of such evidence would be to alter, modify, vary, or add to the express terms of a written instrument, in direct violation of the general rule applicable to all similar cases. The written instrument, with its express statement of the donor's intention, must speak for itself, 1063 CONCBENING SATISFACTION. § 572 under the light, however, thrown upon it by the proof of the circumstances in which it was executed, which proof is, of course, always proper, i That no other kind of extrinsic evidence can be resorted to in such a case for the purpose of showing the donor's intention, and of § 572, 1 In Kirk v. Eddowes, 3 Hare, 509, 516, 517, Wigram, V. C, said, on this particular point : "Where similar questions have arisen upon gifts given hy two distinct instruments, the law as to the admissibility of parol evidence has, I believe, been long since settled. In such case, the rule of law applies, that written instruments cannot be added to or ex- plained by parol evidence. . . . Again, if the second instrument, in terms, adeems the gift by the first, it could not, I apprehend, be contended that it would not produce its intended effect; a party claiming under and having taken the benefit of it could not claim that benefit, and at the same time refuse to give full effect to it." This rule would plainly apply to every form of written donation made between parties standing towards each other in every legal relation. If the prior benefit was a pecuniary legacy, and the testator should in the same instrument give exactly the same sum of money, stated to be given for exactly the same motives, but expressly declared in its written terms to be additional to the former legacy ; or if the testator should in a subse- quent codicil bequeath to the same person a chattel or thing in action, or devise to him a piece of land, and should expressly declare that this second benefit was in lieu of or in substitution for the prior legacy, — in either case there could be no extrinsic evidence for the purpose of altering, adding to, 'or explaining this unequivocal expression of the testator's in- tention in writing. Also, if the prior liability was a certain, flLxed, legal obligation owing to a child, to any family relative, or to a stranger, in the form of an ordinary debt, a covenant, a settlement securing the pay- ment of a portion, and the like, and a subsequent bequest should be stated in express terms either to be in addition to such prior obligation, or to be in substitution for or satisfaction of the same, no extrinsic evidence of the testator's intention could be admitted ; in the one case the beneficiary could both claim the gift conferred by the will, and also enforce the obligation against the estate, while in the other case he would be compelled to elect between the two. Finally, if the prior benefit was a legacy be- stowed either upon a child or upon a stranger, and the testator should subsequently, during his lifetime, pay or advance a sum of money, or transfer any property to the legatee, which payment, advance, or transfer was accomplished by means q^ a writing expressly -declaring the intent of the testator, either to thereby satisfy and pay off the legacy, or to bestow an additional and separate gift, the written expression of intention in § 573 EQUITY JURISPRUDENCE. 1064 either producing or preventing a satisfaction, is a proposi- tion too clear for discussion. § 573. The Writing Silent as to the Donor's Intention, and No Presumption Arises from It. — In the second class of instances, as above mentioned, the written instrument of donation by which the second benefit is conferred is wholly silent with respect to any intention on the part of the donor of satisfying the prior gift or obligation; it is a mere instrument of donation, a legacy given sim- pliciter, a contract simply giving a portion, a simple ad- vancement or payment of money, or assignment of property evidenced by a writing from the donor. The relation between the donor and his beneficiary, however, is of such a kind that no equitable presumption of a satis- faction arises from this subsequent benefit. With respect to this class, there are English decisions, at one time regarded as authoritative, and as settling the rule, which laid down the broad doctrine that, although no presump- tion of a satisfaction arose, and no intention was ex- pressed in the written instrument, still the intention with which the second legacy, portion, advancement, or other gift was bestowed might always be proved by extrinsic parol evidence, even by the verbal declarations of the donor.i The authority of these decisions has, however, either case would be final and conclusive. These propositions may appear to be self-evident; but they are important, in order to present the real questions in their simplicity." § 573, 1 These eases in fact held that extrinsic evidence was alike admis- sible whether a presumption of satisfaction did or did not arise from the second gift, whenever the instrument of donation did not in express terms declare the donor's intention one way or the other : Weall v. Rice, 2 Rusa. & M. 251, 263; Booker v. Allen, 2 Russ. & M. 270; Lloyd v. Harvey, 2 § 572, (a) In Low v. Low, 77 Me. named in said will, or any sum of 38, a testator in Ms lifetime gave to money or property under any other a son a sum of money, and the son will of my said father." It was executed to Mm a writing releasing held that there was an ademption and discharging Mm and Ms repre- of all legacies in the will to the son. sentatives from paying "the legacy 1065 CONCEENING SATISFACTIOlir. § 573 been more than questioned, and the broad doctrine which they lay down has been very much limited by the more recent English cases. In the class of instances now under consideration, where the instrument bestowing the second donation is wholly silent with respect to any intention of satisfying the prior benefit, and where no equitable pre- sumption of a satisfaction arises on the face of the instru- ment from the nature of the gift, the doctrine, as settled Russ. & M. 310, 316; Lord Glengall v. Barnard, 1 Keen, 769. In the leading case of Weall v. Rice, 2 Russ. & M. 251, 263, Sir John Leach, M. R., said : "The rule of the court is, as in reason I think it ought to be, that if a father makes a provision for a ehUd by settlement on her mar- riage, and afterwards makes a provision for the same child by his will, it is prima facie to be presumed that he does not mean a double provision ; but this presumption may be repelled or fortified by intrinsic evidence derived from the nature of the two provisions, or by extrinsic evidence. Where the two provisions are of the same nature, or there are but slight differences, the two instruments afford intrinsic evidence against a double provision. Where the two provisions are of a different nature, the two instruments afford intrinsic evidence in favor of a double provision. But in either case extrinsic evic^ence is admissible of the real intention of the testator." In this statement of the rule, the court expressly repudiated any distinction between the case where the prima facie presumption against double portions and therefore of a satisfaction arises, and that where no such presumption exists; and declares that extrinsic evidence of the donor's intention is admissible in both. The actual decision upon the facts of this case may have been correct; the subsequent criticism has rather been directed to this broad statement of the rule. In Booker v. Allen, 2 Russ. & M. 270, a testator had given a l^gacy to a y(tung lady towards whom he stood in loco parentis; he subsequently made a settle- ment upon her; but the provisions of the will and of the settlement were so entirely different that the court held no presumption of a satisfaction could thereby arise. Nevertheless, Sir John Leach admitted parol evi- dence of the donor's declarations, for the purpose of showing his intention that the prior legacy should be satisfied by the subsequent settlement, and upon such evidence decreed in favor of a satisfaction. In Lloyd v. Harvey, 2 Russ. & M. 310, 316, a similar decision was made. The court held that no presumption of a satisfaction of a prior settlement arose from the terms of a subsequent will; but admitted parol evidence of the ^testator's declarations showing an intention that the legacy should operate as a satisfaction, and made a decree in accordance with such evidence. In Earl of Glengall v. Barnard, 1 Keen, 769, 794, Lord Langdale, M.- R., § 574 EQUITY JURISPKUDENCE. 1066 by the more recent English cases, excludes all extrinsic evidence of the donor's declarations, and all similar evi- dence directly showing his intention, on the ground that such evidence would alter or add to the terms of the writ- ing. This conclusion, and the judicial opinions by which it is sustained, are fully explained in the next succeeding paragraph.2 § 574. The Writing Silent as to Donor's Intention, but a Presumption of Satisfaction Arises from It. — In the third class of instances, as above described, the written instru- ment of donation, by which the second benefit is conferred, is whoUjT" silent with respect to any expressed intention on the part of the donor to satisfy the prior gift or obligation ; but still the relations between the donor and his benefi- ciary, and the two benefits themselves, are of such a nature that an equitable presumption of a satisfaction arises on the very face of the subsequent instrument. In this class of cases it is well settled that extrinsic evidence of the donor's intention, and even of his declarations, is admis- sible either to sustain and fortify, or on the other hand to rebut and destroy, the presumption which would arise and which would otherwise control ; and, according to the modern English decisions, this is the only class of eases where a second benefit is conferred by a written instru- ment, yhich admit of parol evidence directly tending to show the donor's intention. The following is a statement of the rule as laid down by Lord St. Leonards, when lord quoted and approved the general rule as laid down by Sir John Leach in Weall V. Rice, 2 Russ. & M. 251, 263. The authority of these decisions by Sir John Leach seems to have been recognized and approved by several American cases, which seem to lay down the broad rule admitting the evidence both when a presumption does and does not arise. See the American cases cited near the end of the first note under the next following paragraph. § 573, 2 See ^^irk v. Eddowes, 3 Hai-e, 509; Hall v. Hill, 1 Dru. & "War. 94; Hunt v. Beach, 5 Madd. 351, 360; Lee v. Pain, 4 Hare, 201; Palmer V. Newell, 20 Beav. 32. 1067 CONCERNING SATISFACTION. § 5'74 chancellor of Ireland: "If, by the construction of the in- struments the conclusion is arrived at by the court that the second gift was or was not a satisfaction of the first, then parol evidence could not be admitted to show the intention. But if by the construction no such conclusion was arrived at, and the gift was of such a nature that a presumption arose according to the rule of equity that the latter gift was intended to be in satisfaction of the former, then parol evidence would be admissible either to fortify or to rebut such presumption." The same rule, in slightly different language, was thus formulated by Vice-Chan- cellor Wigram: "Where the second instrument does in terms adeem the gift by the first, it will operate accord- ingly. Where the second gift does not expressly adeem the gift or satisfy the obligation by the first, but the case is of such a description that, from the relation between the author of the instrument and those claiming under it, the law raises a presumption of ademption or of satisfaction, then evidence is admissible to show that such presumption is not in accordance with the intention of the author of the gift. And where evidence is admissible for that purpose, counter-evidence is also admissible. The evidence is ad- missible to ascertain whether the presumption is well or ill founded. ' ' ^ The result of the modem authorities — cer- § 574, 1 The two leading authorities in support of this restricted doc^ trine, as stated in the text, are Hall v. Hill, 1 Dru. & War. 94, and Kirk V. Eddowes, 3 Hare, 509. In Hall v. Hill, 1 Dru. & War. 94, a father, on the marriage of his daughter, gave his bond to her husband for the payment of eight hundred pounds in installments, upon certain trusts; and afterwards gave his daughter a legacy out and out of eight hundred pounds, and died leaving his will containing the bequest. Lord Chancellor Sugden held, — ^1. That from the peculiar nature of the prior settlement on the husband and daughter, the subsequent legacy to the daughter did not of itself operate as a satisfaction ; that the case did not fall under the equitable presumption against double portions. Parol evidence was offered of the testator's declarations, which, if admissible, would have shown his intention that the prior settlement should be satisfied by the legacy; and the question chiefly discussed was in relation to the admission of this § 574 EQUITY JUEISPEUDENCE. 1068 tainly of the modern English authorities — ^is clearly as follows: In the single case of a subsequent benefit con- ferred by a written instrument which does not in terms express the author's intention that the benefit thus given shall or shall not be in ademption or satisfaction of the prior gift or obligation, but from which, by the operation evidence: Pages 111-133. Sir E. Sugden's opinion contains an exhaustive review of the cases. After referring to certain decisions upon the general subject of parol evidence in connection with writings, he takes up those which relate to the satisfaction of legacies by subsequent advanceme'nts, and of portions by subsequent legacies, and divides them into three classes. In the first class there was first a legacy and then an advancement, so that a presumption of satisfaction arose, and parol evidence was held admis- sible, either to repel or to confirm this presumption; since such evidence would not contradict nor alter the terms of either instrument. In this class he places the eases of Rosewell v. Bennett, 3 Atk. 77; Biggleston V. Grubb, 2 Atk. 48; Monck v. Lord Monck, 1 Ball & B. 298; Pole v. Lord Somers, 6 Ves. 309 ; Freemantle v. Bankes, ■ 5 Ves. 79. In the second class the circumstances were the same, and parol evidence was held admis- sible to show that the advancement was not intended to be a satisfaction, but that the legatee should have both amounts; for such evidence merely rebuts the prima facie presumption. To this class belong Shudall v. JekyU, 2 Atk. 516; Debeze v. Mann, 2 Brown Ch. 165; 1 Cox, 346; Trimmer v. Bayne, 7 Ves. 508. In the third class he placed certain cases where a prior portion or debt had been followed by a legacy, or where a prior legacy had been followed by a second legacy, but without creating any prima facie presumption of a satisfaction, namely: Fowler v. Fowler, 3 P. Wms. 353; Wallace v. Pomfret, 11 Ves. 542; Wilmot v. Woodhouse, 4 Brown Ch. 227; Coote v. Boyd, 2 Brown Ch. 521; Osborne v. Duke of Leeds, 5 Ves. 369; Hurst v. Beach, 5 Madd. 351; Guy v. Sharp, 1 Mylne & K. 589 ; and the three eases of Weall v. Rice, 2 Russ. & M. 251 ; Booker V. Allen, 2 Russ. & M. 270; and Lloyd v. Harvey, 2 Russ. & M. 310,— all decided by Sir John Leach. Lord Chancellor Sugden strongly disap- proved of the decisions by Sir John Leach in these three last-named cases, but approved and adopted the rule as laid down by the same judge in Hurst v. Beaeh, 5 Madd. 351. The decision in this case (Hurst v. Beach) had confined the admissibility of parol evidence showing the donor's inten- tion to those instances in which, according to equitable doctrines, a pre- sumption of satisfaction arises from the mere fact of the second provision being made ; such evidence is then admitted either to rebut the presumption or to strengthen or confirm it. This doctrine Lord Chancellor Sugden very strongly approved, and made it the basis of his decision. As the 1069 CONCERNING SATISFACTION. § 574 of equitable doctrines, there arises the prima facie pre- sumption that such an ademption or satisfaction was in- tended by the author, — in this single ease extrinsic parol evidence of the donor's actual intention may be resorted to, and may be used either to rebut and destroy the pre- sumption, or to .confirm, support, and establish it. The legacy of the testator's daughter, under the circumstances, raised no pre- sumption that he intended thereby to satisfy the prior portion settled upon her husband and herself, parol evidence of such an intention could not be received. He concluded as follows (p. 133) : "If I admit parol evidence it must be in connection with the will; it has nothing to do with the debt. The debt was contracted before the will was made; and the declarations of the testator which have been offered in evidence cannot apply to the debt, but must be used in reference to the will only. I am now asked to insert in the will a declaration by the testator, which I do not find in it, namely, that he means the legacy to be a satisfaction of the debt I am of opinion that I can do no such thing. If I were to admit the evidence, it would be, not with a view to extrinsic circumstances, but to the construction of the will itself." In Kirk v. Eddowes, 3 Hare, 509, Wigram, V. C, said (p. 516) : "Where the questions have arisen upon gifts given by two distinct instruments, the law as to the admis- sibility of parol evidence has, I believe, been long settled. In such cases the rule of law applies, that written instruments cannot be added to or explained by parol evidence; and therefore, unless the second instrument, in express terms or by presumption of law, adeems the gift made by the instrument of earlier date, no question can arise; both instruments wiU take effect. Again, if the second instrument in terms adeems the gift by the first, it could not be contended that it would not produce its intended effect. If, however, the second instrument do not in terms adeem the first, but the case is of that class in which, from the relations between the author of the instrument and the party claiming under it (as in the actual or assumed relation of parent and child), or on other grounds, the law raises a presumption that the second instrument was an ademption of the gift by the instrument of earlier date, then evidence may be gone into to show that such presumption is not in accordance with the intention of the author of the gift; and where evidence is admissible for that pur- pose, counter-evidence is also admissible. In such cases, the evidence is not admitted on either side for the purpose of proving, in the first in- stance, with what intent either writing was made; but for the purpose only of ascertaining whether the presumption which the law has raised be well or ill founded. For this it will be sufficient to refer to the case of Hurst V. Beach, 5 Madd. 351, and to the cases cited in the elaborate judg- § 574 EQUITY JURISPEUDENCE. 1070 meaning is, not that one of tlie parties may produce evi- dence tending to rebut the presumption, and when such testimony has been received, the opposing party may, by way of answer, introduce contrary evidence tending to sustain the presumption: all the decisions show the true meaning to be that the respective parties may, in the first ment of the lord chancellor of Ireland in the late case of Hall v. Hill, 1 Dru. & War 94, and to Hartopp v. Hartopp, 17 Ves. 192, Powys V. Mansfield, 8 Mylne & C. 359, and numerous other cases." The following American cases also involve the doctrine discussed in the text. In some of them the rule seems to be laid down in the same gen- eral terms, as though applicable alike where the subsequent benefit is con- ferred by a writing and where it is verbal; while in several of them the broad doctrine of Weall v. Eice, 2 Russ. & M. 251, seems to be followed, or at least no distinction is drawn between the arising or not arising of a presumption: Gilliam v. Chancellor, 43 Miss, 437, 5 Am. Rep. 498; Langdon v. Astor's Exrs, 16 N. Y. 9, reversing 3 Duer, 477; Hine v. Hine, 39 Barb. 507; Paine v. Parsons, 14 Pick. 313; Gill's Estate, "1 Pars. Cas. 139; Zeigler v. Eckert, 6 Pa. St. 13, 18, 47 Am. Dec. 428; Sims v. Sims, 10 N. J. Eq. 158, 162, 163; Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761; Clendenning v. Clymer, 17 Ind. 155; Timberlake v. Parrish's Ex'rs, 5 Dana, 346; Parks v. Parks, 19 Md. 323; Cecil v. Cecil, 20 Md. 153; Lawson's Appeal, 23 Pa. St. 85. In the recent case of Gilliam v. Chancellor, 43 Miss. 437, 5 Am. Rep. 498, a husband had settled five thousand dollars on his wife by a marriage contract, and left her a legacy of five thousand dollars. The court (pp. 453^56) discussed the question as to the admissibility of evidence with some fullness, citing the modern English cases, and stating the rule which they establish; but held that it was not necessary to decide the question, since the testator's intention was clear, from a construction of his will, that the legacy was to be in lieu of the sum settled by the marriage contract. Langdon v. Astor's Ex'rs, 16 N. Y. 9, is by far the most instructive case on the doctrine of satisfaction to be found in the American reports. The testator had given a large legacy; subsequently he gave, by a written assignment, accompanied by entries in his books of account, and by verbal declarations, certain stocks and other securities. The court laid down the rule in conformity with that contained in the text, holding that all declarations of the testator forming a part of the transaction may be proved; but expressed a strong doubt, and perhaps even a decided opinion, against the admission of sub- sequent declarations. In Clendenning v. Clsaner, 17 Ind. 155, the court, after admitting and applying the rule as to parol evidence for the purpose of rebutting or sustaining the presumption, held that the doctrine of 1071 OONCEKNING SATISFACTION'. § 574 instance, and to support their own contention, introduce original evidence which tends either to overthrow or to support the presumption- and this evidence may be of the donor's declarations. The evidence thus admitted in pur- suance of this rule does not in fact violate the general doctrine which forbids a resort to parol evidence for the purpose of adding to, taking from, or modifying the terms of a written instrument. Primarily, the second instru- ment of donation, if read literally, and enforced according to its very terms, would necessarily confer a distinct and separate benefit, independent of and in addition to the previous gift or obligation; but from certain considera- tions of policy, an equitable presumption has been created which modifies the terms of this instrument, which pre- vents them from operating according to their literal im- port. Now, the parol evidence which is permitted to rebut and remove this presumption simply restores the instru- ment to its literal meaning; instead of contradicting, or altering, or taking from the terms of that instrument, the evidence in fact only renders the very written terms effec- tive and obligatory according to their simple and literal signification. On the other hand, when the extrinsic evi- dence is admitted to strengthen and confirm the presump- tion, its operation is wholly in accordance with the legal meaning and effect of the written instrument. It is true, the evidence does not in this case apply to and enforce the literal terms of the writing ; those terms have already been presumed satisfaction does not extend to a legacy of residue, and there- fore extrinsic evidence is not admissible to show that an advancement by the testator was to apply on a legacy of residue. In Parks v. Parks, 19 Md. 323, Cecil v. Cecil, 20 Md. 153, and Lawson's Appeal, 23 Pa. St. 85, the question arose concerning advancements made, not by a testator to his legatee, but by an intestate to his children. In each case it was held that evidence of the donor's declarations made at the time of the transaction of the donee's subsequent admissions, and of other facts and circumstances showing the intent, was admissible for the purpose of showing whether the gift was an advancement on the child's share of the father's estate, or was an additional donation and gratuity. § 574 EQUITY JURISPEUDENCE. 1072 modified by tlie presumption, and a legal effect has been given to tbe instrument different from that which would have resulted from the mere language in the absence of the presumption. This legal import and effect of the instrument are strengthened, confirmed, and as it were ratified, by the extrinsic parol evidence. In neither aspect of the case does the extrinsic evidence of the donor's inten- tion alter, add to, or take from the written instrument, and its admission violates no general' rule concerning the use of such evidence. In every other case, however, where a second benefit is conferred by a written instrument which contains no express indication of the author's in- tention, and from which no presumption arises of an intention to adeem or satisfy the prior gift or obligation, the admission of extrinsic evidence directly showing the , author's intention would necessarily contradict, alter, take from, or add to the written terms, and would therefore violate the familiar general rule which forbids such evi- dence.2 §574, 2Monck v. Lord Monck, 1 Ball & B. 298; Hurst v. Beach, 5 Madd. 351, 360; Lee v. Pain, 4 Hare, 201; Palmer v. Newell, 20 Beav. 32; Powys v. Mansfield, 3 Mylne & C. 359; Hartopp v. Hartopp, 17 Ves. 192; Pole v. Lord Somers, 6 Ves. 321; Wallace v. Pomfret, 11 Ves. 542; Freemantle v. Bankes, 5 Ves. 79; Biggleston v. Grubb, 2 Atk. 48; Rose- well V. Bennett, 3 Atk. 77; Shudall v. Jekyll, 2 Atk. 516; Debeze v. Mann, 2 Brown Ch. 165 ; 1 Cox, 346 ; Trimmer" v. Bayne, 7 Ves. 508 ; and see, also, in this connection, Fowler v. Fowler, 3 P. Wms. 353; Wilmot v. Woodhouse, 4 Brown Ch. 227; Coote v. Boyd, 2 Brown Ch. 521; Osborne V. Duke of Leeds, 5 Ves. 369; Guy v. Sharp, 1 Mylne & K. 589. The case of Monck v. Lord Monck, 1 Ball & B. 298, is a very instructive one, although the second gift, concerning which the controversy arose, was conferred without any writing, so far as appears from the report. Lord Monck had given a legacy of five thousand pounds to his brother, W. D. S. Monck, to whom he confessedly stood in loco parentis, upon certain trusts for himself and children. Afterwards Lord Monck executed his bond for four thousand pounds, as a portion for the same brother, upon trusts slightly differing from those contained in the will. Some time previous to this last-named settlement, but after the execution of the will. Lord Monck gave one thousand pounds to the same brother, to enable him to purchase a house. This gift seems to have been wholly verbal. Upon 1073 CONCERNING SATISFACTION. § 575 § 575, Cases to Which the Foregoing Rules Apply. — The rules formulated in the foregoing paragraphs, being founded upon general doctrines concerning the effect of verbal evidence upon written instruments, and the admis- Lord Monek's death, his brother brought this suit to recover the whole legacy of five thousand pounds. The court held that the portion of four thousand pounds was clearly a satisfaction pro tanto of the legacy. With reference to the payment of the one thousand pounds, evidence of Lord Monek's verbal declarations, showing his intention, was offered by the executors, but was objected to by the plaintiff as inadmissible. Upon this question, Lord Manner said (p. 305) : "It appears from the testimony of a witness that the one thousand pounds had been paid at the desire of the plaintiff. The plaintiff objects to all this evidence as inadmissible, insist- ing that such evidence cannot be received to support but only to rebut a presumption." He then quotes Rosewell v. Bennett, 3 Atk. 77, and Pole v. Lord Somers, 6 Ves. 321, in which he states that such evidence had been admitted by Lord Hardwicke and Lord Eldon, in order to confirm as well as to rebut a presumption, and proceeds : "Well, then, one thousand pounds is advanced by Lord Monck, and this is proved by the testimony of Miss Isabella Quinn. She states that it was advanced be- tween the time of making the will and the plaintiff's marriage, and that Lord Monck often declared that his brother (the plaintiff) was very de- sirous of getting some of the money intended to be settled upon him; that Lord Monck had in consequence thereof advanced one thousand pounds, which he considered as part of the five thousand pounds he intended to leave or settle on the plaintiff, or as a part of what he had left by wUl; and deponent often heard Lord Monck say that he had given one thousand pounds to the plaintiff, and had settled four thousand pounds on his marriage; and that the five thousand pounds he intended to leave him was paid in that manner, and in lieu of the legacy; and she always heard Lord Monck say that he intended to provide for his brothers equally." This decision has been repeatedly cited and approved, and its correctness has never been doubted. It is instructive as showing the kind of extrinsic evidence which has been admitted, where any evidence of intent was admissible. See, also, the following American cases : Gilliam v. Chancellor, 43 Miss. 437, 453^56, 5 Am. Rep. 498; Langdon v. Astor's Ex'rs, 16 N. Y. 9; Hine v. Hine, 39 Barb. 507; Gill's Estate, 1 Pars. Gas. 139; Zeigler v. Eckert, 6 Pa. St. 13, 18, 47 Am. Dec. 428; Sims v. Sims, 10 N. J. Eq. 152, 153, 158; Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761; Clendenning v. Clymer, 17 Ind. 155; Timberlake v. Parrish's Ex'rs, 5 Dana, 346; Paine v. Parsons, 14 Pick. 313; Parks v. Parks, 19 Md. 323; Cecil V. Cecil, 20 Md. 153; Lawson's Appeal, 23 Pa. St. 85. 11—68 § 575 EQUITY JURISPRUDENCE. 1074 sibility of sucli evidence, clearly apply alike to all cases of double benefits to the same person, where the second benefit is conferred by means of a written instrument. They equally apply to and govern the cases of a prior legacy and a subsequent portion, advancement, payment, or gift in writing ; a prior portion, and a subsequent legacy or'por- tion; a prior lega,cy, and a subsequent legacy, in the same or in a different instrument; a prior indebtedness and a subsequent legacy. Although most of the decisions hereto- fore cited have arisen either from prior legacies and subse- quent portions, advancements, or gifts, or from prior por- tions and subsequent legacies, yet it will be found that the same rule has been recognized or actually enforced in both the other classes of double benefits. Thus in case of two legacies to the same person, if the equitable doctrine itself raises the presumption against double legacies. — that is, where two legacies of exactly the same amount are given simpliciter by the same instrument, — ^verbal evidence is ad- missible to rebut this presumption, and to show the tes- tator's intention that the legatee should receive both the gifts ; for such evidence does not contradict but rather sus- tains the literal meaning of the will. If the evidence is al- lowed to rebut and overcome the presumption, then it is also allowable, under the rule, to support and confirm it. On the other hand, if no presumption arises from the in- strument itself, — as, for example, where legacies of the same amount are given simpliciter by different instru- ments, — ^no parol evidence can be admitted; the decision must be made solely upon a construction of the writings. ^ The same rule must, on principle, and to preserve any con- sistency in dealing with the doctrine of satisfaction, con- trol the case of a prior debt and a subsequent legacy, where a debtor bequeaths a legacy to his creditor.^ § 575, 1 Lee v. Pain, 4 Hare, 216; Hurst v. Beach, 5 Madd. 351. § 575, 2 It must be conceded, however, that there is some conflict and inconsistency among the decisions which apply the rule to this class of instances. Wherever the equitable doctrine raises a presumption of a 1075 CONCERNING SATISFACTION. § 576 §576. The Subsequent Benefit Given Verbally. — In three classes of cases, — namely, a prior portion and a subsequent legacy or portion, a prior legacy and a subse- quent legacy, a prior debt and a subsequent legacy, — the second benefit must necessarily be conferred by a writing, and there can be no room for any other rule than those already stated in the foregoing paragraphs. In the single case of a prior legacy and a subsequent advancement, pay- ment, or gift, it is alone possible that the second benefit may be bestowed otherwise than by a writing, — ^by mere acts and words of the donor. We are to consider the rule concerning the admission of extrinsic parol evidence ap- plicable to this case. In the first place, it is plain that the admission of such evidence cannot be fettered by the -gen- eral doctrine prohibiting parol evidence to contradict, alter, or add to a written instrument, so far as such evi- satisfaction from the mere bequest of a legacy by a debtor to his creditor, — namely, where a legacy equal to or greater than the debt is given sim- pliciter, — then on principle, and in accordance with the rule established for all other cases, parol evidence is admissible both to rebut and to support the presumption. See Plunkett v. Lewis, 3 Hare, 361. In Fowler V. Fowler, 3 P. Wms. 353, Lord Chancellor Talbot refused to admit evi- dence under such circumstances, and his decision seems to have been approved of by Lord Chancellor Sugden in Hall v. Hill, 1 Dru. & War. 94; but the decision and the apparent approval are in conflict with the conclusion reached and the general doctrine established by Chancellor Sugden in that celebrated case. On the other hand, in Wallace v. Pomfret, 11 Ves; 542, the testator had stated his intention in express words ; never- theless, Lord Eldon, in opposition to an argument of Sir Samuel Romilly, which advocated the doctrines as now settled, admitted parol evidence of the testator's intention in conflict with the express terms of the will. This decision is clearly opposed to principle, and was condemned by Chan- cellor Sugden in Hall v. Hill, 1 Dru. & War. 94. The rule has also been extended to a legacy by a creditor to his debtor. In Zeiglcr v. Eckert, 6 Pa. St. 13, 18, 47 Am. Dec. 428, it was held that a legacy by a creditor to his debtor is presumed not to be in discharge or release of the debt; but that this presumption may be overcome by parol evidence of the testator's declarations made both at and after the time of executing the -will, to the effect that the debt was thereby discharged; and that contrary evidence sustaining the presumption was also admissible. § 576 EQUITY JUEISPKTJDEHrCE. , 1076 dence is directed to the second benefit itself; because the benefit is conferred without any writing, and there is no foundation in fact for the operation of the doctrine. How far such general doctrine might apply to the prior benefit — the will — is another question, and 'will be separately Con- sidered. In the second place, it is equally plain that the admission of the evidence is wholly independent of any presmnption arising or not arising that the second benefit is intended to be in satisfaction of the prior legacy. In the rule established for the three classes of cases already discussed, the admission of parol evidence is made to de- pend upon the existence of the presumption solely because it is such presumption alone which prevents the evidence from altering or contradicting the written instrument by which the second benefit was conferred, and thus violat- ing the general doctrine. In the present case, there being no written instrument which can be altered or contra- dicted, the aid of the presumption is unnecessary, and the admission of evidence is wholly independent of its pres- ence or absence. In all cases, therefore, of a prior legacy and a subsequent verbal advancement, payment, or gift, as well in those where, from the relation between the two parties, a presumption of satisfaction arises as in those where no such presumption exists, there is nothing in prin- ciple which should prevent a resort to parol evidence for the purpose of disclosing the real intent of the donor, either that the second benefit was to be in lieu and satisfaction of the prior legacy, or was to be cumulative and in addition thereto. In fact, the transaction being entirely parol, the mere fact of the gift itself must he proved hy verbal evi- dence;^ and as the whole transaction must be shown, in ' order to disclose its true nature and effect, a resort to ver- bal evidence for that purpose becomes absolutely neces- sary. If the donor accompanied his parol advancement § 576, (a) In Van Houten v. Post, advance is not admissible, but 33 N. J. Eq. 344, it is held that evi- charges in books made by the tes- denee of parol declarations of the tator against the child are. testator of the fact of giving the 1077 CONCEENING SATISPACTION. § 576 or payment by an express stipulation or declaration that it was or was not to be in lieu and satisfaction of the prior legacy, such express stipulation or declaration would have the same effect as a similar one incorporated in the in- strument of donation when the second benefit is conferred by writing. It is thus demonstrated that, so far as it relates directly to the second benefit itself, verbal evidence of the donor's intention is on principle admissible; the question remains, whether it is admissible so far as it relates to and affects the prior will. The answer to this is equally clear. The evidence does not in any manner contradict, alter, or add to the terms of the* will. Even if it should be shown by extrinsic parol evidence that the subsequent advancement was made with an express verbal stipulation or declaration that it was given in lieu and satisfaction of the prior legacy, the will would remain un- touched and unaltered in all of its terms. The effect of such a verbal stipulation or declaration would not be to revoke the legacy. On the contrary, it expressly recog- nizes the bequest as operative; it simply shows that the testator has resolved to anticipate the payment of his intended gift, — to pay it himself to the legatee in his own lifetime, instead of postponing the payment until after his own death. These conclusions, so entirely in accordance with principle, are fully sustained by deci- sions of the highest authority, i From the foregoing dis- § 576, 1 The leading case is Kirk v. Eddowes, 3 Hare, 509. A testator had bequeathed three thousand pounds to his daughter upon certain trusts for the benefit of herself, and after her death for her husband and children. After the date of the will, he verbally gave to his daughter and her hus- band a note for five hundred pounds, then due and payable from a third person to the testator. In an administration suit, brought after the tes- tator's death, the question arose for decision, whether this gift of five hundred pounds was a partial satisfaction of the legacy. Parol evidence was offered that after the date of the will the testator was requested by his daughter to confer some benefit on her husband, and that therefore the testator gave them the promissory note, declaring that it was to be in part satisfaction of the legacy, and that the testator was advised by his attorney that it was not necessary to alter his will in order to give it that § 576 EQUITY JTJEISPETJDBNCE, 1078 cussion of the principle, and from the decisions cited in the note, the following conclusions are reached: Where the relations between the testator and the legatee and the nature of the two gifts are such that a presumption of satisfaction arises from the subsequent verbal advance- ment, payment, or donation, extrinsic parol evidence may effect. Wigram, V. C, decided as to the admission and effect of this evidence as follows (p. 517) : After stating the rales applicable when the second benefit is conferred by a writing, as heretofore quoted, he said: "The advance of five hundred pounds was after the date of the will. This transaction, however, is not evidenced by any writing, and the technical rule to which I have referred against admitting evidence to prove what was the intention of the parties to that transaction does not therefore apply. The question is, whether any other rule applies which shall ex- clude the evidence. . . . The defendant's evidence was not objected to, nor could it have been successfully objected to, so far as it went to show the gift of Warner's note, its amount, and other circumstances attending it, with the exception of the testator's declarations accompanying the gift; for the court which has to decide whether the transaction has affected a partial ademption of the legacy must know what the transaction was. But the declarations of the testator accompanying the transaction were objected to. Why should those accompanying declarations not be admissible ? They are of the essence of the transaction, and the truth of the transaction itself cannot be known to the court without them. The rule which would exclude the evidence if the intention of the parties had been expressed in writing does not apply. I assume that if the intention of the parties as proved by the evidence had been in writing, it could not be contended on the part of Mrs. Kirk, to whom a legacy was given for her separate use absolutely, that a payment to her husband of the amount of her legacy, at her instance and at her request, would not have precluded her from claiming it under her father's will ; or in other words, that the advance made under such circumstances would not have adeemed the legacy. If that be not so, the argument must be, that an advance made by a testator to one of his legatees, under an agreement in writing that the legatee shall accept the advance in full satisfaction of his legacy, would leave the legatee at liberty to claim the legacy notwithstanding the agreement; and if such an argument be not admissible, the declarations of the testator must be admissible in the case I am now considering, unless there be some rule of law which hinders a transaction, like that which the defendant relies upon, from being' valid unless it be evidenced by writing. This, however, cannot be successfully contended for. The evidence does not touch the wiU; it proves only that a given transaction took place after the will was made. 1079 CONCEENING SATISFACTIOK. § 576 be resorted to for the purpose of rebutting the presump- tion, and of showing the testator's intention that the beneficiary was to receive both gifts; and his verbal dec- larations accompanying the advancement or payment may be shown; and since such evidence is admissible to rebut the presumption, it may also be admitted to confirm it. £ind proves what that transaction was, and calls upon the court to decide whether the legacy given by the will is not thereby adeemed. Ademption of the legacy, and not revocation of the will, is the consequence for which the defendant contends, — a distinction which is marked by Lord Hardwicke in the case of Rosewell v. Bennett, 3 Atk. 77. The defendant does not say the wUl is revoked; he says the legatee has received his legacy by anticipation. In principle, therefore, I cannot see my way to reject the evidence in question. How, then, does the case stand upon authority?" He quotes, as sustaining his conclusions, and comments upon the cases cited below, at the conclusion of this note, and adds: "It was said that there was a distinction in this ease, inasmuch as the advance was made, not, as in the cases cited, to the legatee herself, but to the husband of the legatee. That circumstance might be material upon the question of implied ademption, but it cannot affect the question of admitting or re- jecting evidence to prove what the transaction was. In more than one of the cases cited the same circumstance occurred." See, also, Monck v. Lord Monck, 1 Ball & B. 298; Rosewell v. Bennett, 3 Atk. 77; Biggleston V. Grubb, 2 Atk. 48; Shudall v. Jekyll, 2 Atk. 516; Thellusson v. Wood- ford, 4 Madd. 420 ; Bell v. Coleman, 5 Madd. 22 ; Hoskins v. Hoskins, Prec. Ch. 263; Chapman v. Salt, 2 Vem. 646;-Powel v. Cleaver, 2 Brown Ch. 499; Grave v. Lord Salisbury, 1 Brown Ch. 425; 18 Ves. 152; Ex parte Dubost, 18 Ves. 140.'' In Monck v. Lord Monck, 1 Ball & B. 298, where a verbal gift of one thousand pounds was made to the legatee, evidence was admitted of the testator's subsequent declarations showing his intention, as well as of the immediate transaction itself. See the facts and opinion, quoted in a former note [ante, § 574] . The American cases fully sustain the conclusions of the text, and some of them even go further than the English judges have gone in their recent decisions. In one of these cases the question is so directly presented, and the discussion by the court is so full, clear, and able, that I shall add an extract from the opinion. In Richards v. Humphreys, 15 Pick. 133, a testator had bequeathed $500 to his sister, and, afterwards made her a verbal advancement of $466, and she gave back a written paper acknowledging that the money was paid §576, (»>) See, also. In re Pollock, re Shields (Corbould-Ellis v. Dale), L. E. 28 Ch. Div. 552. Compare In [1912] 1 Ch. 591, by Warrington, J. § 576 EQUITY JURISPRUDENCE. 1080 "WTiere no such presumption arises, — in other words, where the testator is not a parent of or in loco parentis to the legatee, or where the two gifts are not ejusdem generis, if the testator confers his subsequent verbal advance- ment, payment, or donation, with an express verbal stipu- lation, declaration, or condition that the same was to be and received by her, "in part of her right of dower in his last will." There was also evidence that he wished to pay off the entire legacy, and offered her the balance, which she declined to accept. Evidence of other verbal declarations by the testator was also given. The court, in a most able opinion, discussed the general doctrine of satisfaction, and the admissi- bility of extrinsic evidence. After stating the rules as to satisfaction, and their applicability to this case, (which portion of the opinion has been quoted in a prior note), the court proceeds: "In the present case we are of opinion that, conforming strictly to the rules of law in regard to the admissibility of evidence, it is quite apparent from the facts proved that the payment was intended by the testator as an advancement on account of this legacy, and an ademption pro tanto." It then examines and construes the peculiar language of the receipt given back by the legatee, and determines its real meaning, and adds : "But the ground upon which the court decides the cause is this : Whatever may be the difficulties in applying the rule which prohibits the admission of parol evidence to alter or control a written instrument, there is one modification which will sanction its admission in the present case. Whenever an act is done, the declarations of the party doing it, made at the time, are received to show the character of the act, and the purpose and design with which it is done. It is readily conceded that it would not be competent to give in evidence the declarations of the testator showing that he intended by any clause in his will something different from the dispositions expressed, or to limit or control the legal inferences or presumptions arising from those expressions. Nor would it be admissible to show such declarations alone (i. e., without any gift) to prove a direct intent of the testator to revoke or adeem a legacy. It would be, in either case, to make or revoke a will by parol; which is alike contrary to the general rule of law and to the statute of frauds. But when an act is done which, if done with one intent, will operate as an ademption, and if with a different intent, otherwise, under the rule already stated evidence of the declarations of the intent may be given to qualify the act, and the act operates by way _ of ademption. Here the declarations made at the time of the advance and payment of the money, not being contradictory to the receipt, but in conformity with it, prove conclusively that they were made in part satisfaction of the legacy. . . . But there is another fact which it seems competent to show 1081 CONCEENIKG SATISFACTION. § 576 in lieu and satisfaction of or in addition to tlie prior legacy, — the entire transaction, the declarations as well as the mere act of donation, may always be proved by extrinsic parol evidence. This would be so whether the subsequent benefit were of equal, greater, or less value than the legacy, and whether it were a payment of money, a conveyance of by parol evidence, and which leads to the same conclusion. It is stated that the testator expressed his desire to the plaintiff, at the same time, to pay off the whole legacy, and that he offered to pay her the balance of her legacy, which she declined receiving." The very broad statement of the general rule, in the sentence above indicated by italics, seems to approve and adopt the view taken by Sir John Leach in Weall v. Rice, 2 Russ. & M. 251, 263, and other similar decisions, rather than the more restricted doctrine of the recent English authorities, such as Hall v. Hill, 1 Dru. & War. 94. In other words, this rule is so broad that it would seem to allow parol evidence of the donor's actual intention in conferring a subsequent benefit by a written instrument, both where a presumption of satisfaction would arise, and where no such presumption would exist. See, also, Langdon v. Aster's Ex'rs, 16 N, Y. 9; Hine v. Hine, 39 Barb. 607, 512; Paine v. Parsons, 14 Pick. 313; Sims v. Sims, 10 N. J. Eq. 158, 162, 163; Gill's Estate, 1 Pars. Cas. 139; Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761; Clendenning v. Clymer, 17 Ind. 155." In Hine v. Hine, 39 Barb. 507, 512, a father had made a bequest to his son, and afterwards gave him fifteen hundred dollars, taking a receipt as follows : "Received of E. H. [the father] fifteen hundred dollars, to make payment on a farm which I have bought of A. B., which money I am to account for, without interest," signed 0. H. [the son] . No written assignment or transfer was made by the testator. Declarations of the father and admissions' of the son, showing that this advance was intended to be in satisfaction pro tanto of the legacy, were received in evidence. The general rule as to the admis- sibility of such parol evidence was laid down by Allen, J., citing WUliams V. Crary, 4 Wend. 443. In Paine v. Parsons, 14 Pick. 313, a father had bequeathed a legacy to his married daughter; he afterwards gave her articles and money, took a receipt from her husband for a part of the money as so much received of her portion, made charges against her of the sums in his account-books; evidence of all these facts was admitted, and the legacy held to have been satisfied. In Sims v. Sims, ,10 N. J. Eq. 158, 162, 163, after a legacy bequeathed to a son, the testator delivered him the amount thereof, as it appears, by a verbal gift. Testator's declara- -§576, (c) To the same effect, see v. Du Bois, 65 Md. 153, 4 Atl. 402; Richardson v. Eveland, 125 111. 37, 1 Van Houten v. Post, 33 N. J. Eq. ' L. K. A. 203, 18 N. E. 308; Wallace 344. § 576 EQUITY JUEISPRUDENCE. 1082 land, a transfer of chattels, or an assignment of tilings in action ; for in either case an express stipulation or declara- tion by the testator would render the benefit conferred and received a satisfaction of the prior legacy. There is still a third case. Between any of the parties, and under any of the relations and circumstances mentioned in the two fore- going cases, the testator's subsequent advancement, pay- ment, transfer, or gift might be wholly verbal, but the bene- ficiary might give back a written receipt, or other written instrument, expressly acknowledging, declaring, or stipu- lating that the benefit was given and received either in lieu and satisfaction of the prior legacy" or in addition thereto. In this case, also, proof of the testator's declarations, and other evidence of his intention, would be admissible, since the question whether a subsequent gift was or was not a satisfaction must depend mainly upon the testator's own intention in bestowing it. Several of the American cases in which parol evidence was admitted and relied upon by the court have presented exactly this last condition of cir- cumstances.2 tions and the legatee's admissions that the payment was in satisfaction of the legacy were admitted. The court held that such evidence was as proper to sustain the presumption as to rebut it. In Jones v. Mason, 5 Rand. 577, 16 Am. Dec. 761, a father had made bequests to his children; he afterwards bestowed property upon some of them, partly by putting them in possession of farms and partly by verbal gifts of slaves. The court held that the presumption of a satisfaction may be rebutted by evidence of testator's intent; and also, when there is no presumption because the legacy and the subsequent gift are not ejusdem generis, evi- dence of the testator's intent that the gift shall be in satisfaction is still admissible. § 576, 2 In the leading case of Kirk v. Eddowes, 3 Hare, 509, the rea- soning of the court is expressly directed only to those verbal declarations of the testator which immediately accompanied the gift, which necessarily disclosed the nature of the act, which formed a part of the single con- tinuous transaction, a part of the res gesta. I have therefore so formu- lated the rules in the text that they only extend to and embrace such declarations. The question will naturally be suggested, whether subse- guent declarations of the testator, showing his intent, are also admissible. The more recent English cases which have professedly examined the general 1083 CONCERNING PERFOEMANCE. §§577,578 § 577. Amount of Evidence. — With reference to the sufSciency of the extrinsic evidence in all. cases where it is admissible, whether the subsequent benefit be conferred by a writing or be verbal, each case must, of course, depend upon its own circumstances. There is no general rule applicable to all.^ SECTION IV. CONCERNING PERFORMANCE. ANALYSIS. § 678. Rationale. § 579. Definition. §§ 580-583. I. Covenant to purchase and settle or convey. § 580. General rule : Lechmere v. Earl of Carlisle. § 581. Forms of covenant to which the rule applies. § 582. Special rules. § 583. Such covenant creates no lien. §§ 584-586. II. Covenant to bequeath personal property. § 584. General rule: Blandy v. Widmore; Goldsmid v. Goldsmid. § 585. Limitations on the rule; covenant must not create a debt in life- time of deceased. § 586. A legacy not a performance; distinction between "performance" and "satisfaction of legacy." § 687. Presumption of performance by trustees. §§ 588-590. Meritorious or imperfect consideration; theory of. §§589,590. Defective execution of powers; relief of. § 590. Requisites for such relief; a partial execution necessary. § 578. Rationale. — The equity of Performance has a close resemblance to that of Satisfaction, and the two have subject with care — e. g.. Hall v. Hill, 1 Dru. & War. 94, Kirk v. Tllddowes, 3 Hare, 509, and the like — do not seem to have passed upon this par- ticular question. In some of the earlier cases, like Monek v. Lord Monck, 1 Ball & B. 298, such subsequent declarations seem to have been admitted without any attempt to distinguish between them and the declarations forming a part of the transaction itself. As illustrations of the text, see Richards v. Humphreys, 15 Pick. 133; Howze v. Mallett, 4 Jones Eq. 194 ; Paine v. Parsons, 14 Pick. 313 ; Hine v. Hine, 39 Barb. 507. In each of these cases the donee gave back a writing acknowledging that the verbal gift was in satisfaction, wholly or partly, of the prior legacy; and in each of them extrinsic evidence was admitted. § 577, 1 See Trimmer v. Bayne, 7 Ves. 508 ; Robinson v. Whiteley, 9 Ves. 577; Powys v. Mansfield, 3 Mylne & C. 359. § 578 EQUITY JUEISPBUDENCE. 1084 sometimes been confounded ; yet there is a clear and essen- tial distinction between them. Both, however, as well as the doctrine of Election, ultimately rest, as it seems to me, upon that broad principle of equity which refuses to admit double benefits to a single recipient, by raising a presump- tion that only one benefit was intended. Where A is under a prior obligation to bestow a particular kind of thing upon B, and he afterwards bestows upon B a different kind of thing, the question arises, whether the latter bene- fit was intended as a substitute for the prior obligation.^ The whole would turn upon the donor 's intention, although that intent might be presumed. If the second benefit was thus intended as a substitute, it would be a satisfaction, and not a performance; the prior obligation would be satis- fied, but not performed. Equity would not permit the recipient to claim both benefits ; but since he is not bound to accept the satisfaction of the obligation existing in his favor, he is entitled to elect between them. On the other hand, where A is under some positive obligation, as a cove- nant, to bestow a particular kind of thing upon B, in a certain specified manner, as by conveyance, or by will, and instead thereof he either voluntarily bestows the same kind of thing upon B in a different manner, or else per- mits the same kind of thing to devolve upon B by opera- tion of law, as by descent, or by succession, there is clearly no substitution, and therefore no satisfaction. Equity, however, sees in such a transaction no indication of an intent that the recipient is to enjoy double benefits ; it rather sees a contrary intention. If t"he benefit actually given to, or permitted to devolve upon, B was not intended to be a bounty, and was not a substitute for and satisfac- tion of the prior obligation, then it can only be regarded as a performance, and A must be presumed to have in- tended to perform the very duty which he owed to B. In such a case B obtains the very benefit which he had a right § 578, 1 See quotation from Goldsmid v. Goldsmid, 1 Swanst. 211, ante, in vol. 1, note 1, under § 521. 1085 CONCERNING PEEFOBMANCE. § 579 to demand, — the fulfillment of the very obligation existing in his favor, — and he has therefore no election. To sum up : In satisfaction a different kind of thing is given, with the intention that it shall be accepted as a substitute for and in lieu of the benefit due by the terms of the original obligation; and the donee has, in general, a right of elec- tion. In performance, the same kind of thing is either conferred in a different manner, or is left to devolve by operation of law, with the intention of thereby fulfilling the very terms of the original obligation ; and there is no right of election on the part of the recipient. While this particular doctrine concerning performance ultimately rests, in my opinion, upon the equitable principle of an- tagonism to double benefits, it is undoubtedly the imme- diate and direct result of the maxim. Equity imputes an intention to fulfill an obligation. To this maxim the doc- trine has generally been referred -by text-writers and judges.2 § 579. Definition. — ^From the foregoing analysis it ap- pears that the equity of Performance should be defined, or rather described, as follows : When a person has definitely bound himself to do a certain act, by which a particular kind of thing will be bestowed upon another in a specified manner, and instead thereof he either bestows the _ same kind of thing upon the obligee in a different manner, or else permits the same kind of thing to devolve upon the obligee in course and by operation of law, so that what is thus done or permitted may amount to a complete or partial ful- fillment of the existing obligation, then the party will be presumed to have done or permitted this with the intention of performing the very obligation itself in whole or in part, and the obligation will be thus wholly or partially per- formed, as the case may be.^ Equity imputes to the party § 578, 2 For an explanation of the maxim, and its effect upon this and other doctrines, see ante, vol. 1, § § 420-422. §579, iWilcocks v. Wileocks, 2 Vem. 558; Blandy v. Widmore, 1 P. Wms. 324; 2 Vem. 709; 2 Lead. Cas. Eq., 4th Am. ed., 833; Lechmere § 580 EQUITY JUEISPBUDEN-CE. 1086 an intention of fulfilling tlie obligation resting upon him, rather than the intention of violating that duty, or of con- ferring a mere bounty. Equity thus says, not only that a man should be, but that he is, just before he is generous. The cases involving this doctrine may be arranged, for pur- poses of convenience, into two classes : 1. Where a person covenants to purchase and settle, or to purchase and con- vey, lands, and he afterwards purchases such lands without expressing any purpose for which the purchase is made, and does not convey or settle them in pursuance of his cove- nant; 2. Where a person covenants to leave property by will, and he does not make the bequest, but on his death the covenantee receives the same kind of property by succes- sion. These two classes will be examined separately. § 580. I. Covenant to Purchase and Settle or Convey. Where a person covenants to purchase lands and settle, or to purchase lands and convey them, and he afterwards pur- chases lands answering to the description, — that is, of the same estate and tenure, — without expressing the object or purpose of making the purchase, and he does not convey or settle in accordance with the terms of his covenant, but dies, leaving the lands as part of his estate, and they devolve by descent upon the covenantee as heir at law, then the pur- chase- and suffering the lands to descend will be presumed to have been with the intention of performing the covenant in whole or in part ; the acquisition of the lands by inheri- tance will be a total or partial performance, as the case may be ; the covenantee-heir cannot specifically enforce the cove* nant, so far as it has thus been performed, against the covenantor's estate. i V. Earl of Carlisle, 3 P. Wms. 211, 227; Deacon v. Smith, 3 Atk. 333; Sowden v. Sowden, 1 Brown Cli. 582; 3 P. Wms. 228, note; Goldsmid v. Groldsmid, 1 Swanst. 211. The definition given by some writers is, as it seems to me, faulty, since the terms are so broad and general that they necessarily include satisfaction as well as performance. See, for example, Snell's Equity, 193. § 580, 1 Wilcocks v. Wilcocks, 2 Vern. 558 ; 2 Lead. Cas. Eq. 833 ; Lechmere v. Earl of Carlisle, 3 P. Wms. 211; Deacon v. Smith, 3 Atk. 323; 1087 CONCERNING PEKFOKMANCE. § 581 § 581. Forms of the Coveiuint. — The doctrine is not con- fined in its operation to any particular form of covenant. Tooke V. Hastings, 2 Vern. 97; Sowden v. Sowden, 1 Brown Ch. 582; Wilson V. Piggot, 2 Ves. 351, 356; Mathias v. Mathias, 3 Smale & G. 552; Mornington v. Keane, 2 De Gex & J. 292. The opinion in Lechmere v. Earl o~f Carlisle, 3 P. Wms. 211, has uniformly been regarded as a com- plete and accurate statement of the entire doctrine; subsequent decisions have simply repeated and applied Jts reasoning. I shall therefore quote from this case at some length ; there is, in fact, but little more to be added for a full exposition of the doctrine. Lord Lechmere, upon his marriage, covenanted to lay out, within a year after the marriage, thirty thousand pounds, in the purchase of freehold lands, in possession, with the consent of certain trustees named. The lands thus purchased he covenanted to settle in a certain manner, among other things, so as to secure an income of eight hundred pounds for his wife, and with remainder in all the lands to his eldest and other sons in tail, remainder to himself and his heiis. At the time of his marriage. Lord Lechmere owned some lands in fee. After his marriage he purchased some estates in fee of about &ve hundred pounds per annum, some life estates, some reversions in fee- expectant on prior life estates, and contracted for the purchase of some other estates in fee in possession. None of these purchases were made after consultation with or with consent of the trustees named. He -died intestate, without making any settlement. Mr. Lechmere, his heir at law, to whom all his estates in fee descended, filed a bill for a specific per- formance of the covenant, praying that the administrators be compelled to lay out thirty thousand pounds of the personal estate of the deceased in purchase of lands, as agreed by the covenant. The master of rolls decreed in favor of a specific performance, holding that none of the lands purchased by Lord Lechmere, and inherited by the plaintiff, were in part performance of the covenant. On appeal, this decree was reversed by Lord Chancellor Talbot, so far as related to the estates in fee purchased after the covenant and suffered to descend; such estates were to be con- sidered- as purchased in part performance of the covenant. On this sub- ject the chancellor said: "As to questions of satisfaction, where they are propejiy so, they have always been between debtor and creditor, or their representatives. [This statement is not exactly accurate as the doctrine of satisfaction is now understood. See preceding section, on satisfaction.] As to Mr. Lechmere, I do not consider him as a creditor, but as standing in the place of his ancestor, and thereby entitled to what would have vested in his ancestor. A constructive, satisfaction depends on the inten- tion of the party, to be collected from circumstances. [He further ex- plains "satisfaction."]. But I do not think the question of satisfaction properly falls within this case, for here it turns on what was the intention §■581 EQUITY JUEISPRUDENCE. 1088 It applies where a person, at the time owning no real estate, covenants to convey and settle, and he afterwards pur- of Lord Lechmere in the purchase made after the articles; for as to all the estates purchased precedent to the articles, there is no color to say they can be intended in performance of the articles; and as to the lease- holds for life, and the reversion in fee-expectant on the estates for life, it cannot be taken they were purchased in pursuance of the articles, because they could not answer the end of them. But as to the other purchases (in fee-simple in possession, etc.), though considered as a satisfaction to a creditor, yet they do not answer, because they are not of equal or greater value [i. e., they do not answer as a satisfaction] . Tet why may they not be intended as bought by him with a view to make good the articles? Lord Lechmere was bound to lay out the money with the liking of the trustees, but there was no obligation to lay it out all at once, nor was it hardly possible to meet with such a purchase as would exactly tally with it. But it is said the lands are not bought with the liking of the trustees. The intention of naming trustees was to prevent unreasonable purchases; and the want of this circumstance, if the purchases are agree- able in other respects, is no reason to hinder why they should not be bought in performance of the articles. It is objected that the articles say the lands shall be conveyed immediately. It is not necessary that every parcel should be conveyed as soon as bought, but after the whole was purchased, for it never could be intended that there should be several settlements under the same articles. Whoever is entitled to a performance of the covenant, the personal estate must be first applied so far as it will go; and if the covenant is perfonned in part, it must make good the deficiency. But where a man is under an obligation to lay out thirty thousand pounds in lands, and he lays out part as he can find purchases, which are attended with all material circumstances, it is more natural to suppose those purchases made with regard to the covenant than without it. When a man lies under an obligation to do a thing, it is more natural to ascribe it to the obligation he lies under than to a voluntary act inde- pendent o£ the obligation. Then as to all the cases of satisfaction, though these purchases are not strictly a satisfaction, yet they may be taken as a step towards performance; and that seems to me rather his intention than to enlarge his real estate. The case of Wilcocks v. Wilcoeks, 2 Vem. 558, 2 Lead. Cas. Eq. 833, though there are some circumstances that are not here, yet it has a good deal of weight with me. ... It is true, a set- tlement hath not been made, but they were bought with an intention to make a settlement, and you can make one. The same will hold as strong in the present case, that these lands were bought to answer the purposes of the articles, and fall within that compass; and it is not an objection 1089 CONOEENING PEErOEMANCB. § 581 chases land, but does not convey nor settle it ; ^ where the covenant is merely to settle lands ; ^ and where the covenant is to pay a sum of money to trustees to be laid out by them in lands, and the covenantor afterwards purchases an es- tate which he does not settle nor convey to the trustees.^ The doctrine has also been extended to the case where the obligation to purchase and settle lands arose from a stat- ute.* Wherever such covenants are performed in whole or in part by a descent of the lands to the covenantee, they are, for the same reason, performed by a devise of the - lands to him from the covenantor. ^ to say they are of unequal value, for a covenant may be performed in part, though it is not so in satisfaction; and in this particular I differ from the master of rolls. There must be an account of what lands in fee-simple in possession were purchased after the articles entered into, and so much as the purchase-money of such lands amounts to must he looked on in part satisfaction [performance] of the thirty thousand pounds to be laid out in land under the articles, and the residue of the thirty thousand pounds must be made good out of the personal estate." In the leading case of Wilcocks v. Wilcoc'ks, 2 Vern. 558, 2 Lead. Cas. Eq. 833, A covenanted on his marriage to purchase lands of two hundred pounds a year value, and settle them for the jointure of bis wife, and to his first and other sons in tail. He purchased lands of that value, but made no settlement, and on his death the lands descended to his eldest son. The eldest son filed a bill for a specific enforcement of the covenant, but it was held that the purchase and descent were a full performance, so that the bill stated no case for relief. § 581, 1 Deacon v. Smith, 3 Atk. 323 ; and see Wellesley v. Wellesley, 4 Mylne & C. 561; but see observations on this case in Momington v. Keane, 2 De Gex & J. 292. § 581, 2 Tooke v. Hastings, 2 Vern. 97; Powdrell v. Jones, 2 Smale & G. 335. § 581, 3 Sowden v. Sowden, 1 Brown Ch. 582; 3 P. Wms. 228, note. § 581, 4 Tubbs v. Broadwood, 2 Russ. & M. 487. The statute in this case was a private act authorizing a tenant for life to sell a settled estate, but requiring him to lay out the proceeds in the purchase of other lands, and to settle them upon the same uses. He bought lands, but died with- out making any settlement of them. § 581, 5 Wilson v. Piggott, 2 Ves. 351, 356; 1 "Watson's Compendium of Equity, 609. 11—69 §§582,583 EQUITY JUEISPKTJDENCB. 1090 § 582. Special Rules. — The following special rules have been settled in connection with all these forms of covenant, which either expressly or impliedly look to a future pur- chase and conveyance or settlement of lands by the cove- nantor. Where the covenant specifies the value of the lands to be purchased, a purchase of less value operates as a performance pro tanto^ In such a covenant, it can- not be presumed that lands which the covenantor owned at the time of making it, and which he suffers his heir to inherit, were intended to be acquired by the heir in per- formance of the obligation.2 Also, if the covenantor pur- chases property of a different nature — different estate or tenure — from that mentioned in the agreement, no pre- sumption of an intention to perform arises.^ A provision that the purchase is to be with the consent of trustees named is not material, provided that the purchase is other- wise a proper one, and conforms to the terms of the cove- nant.* § 583. No Lien Created. — ^A covenant to purchase and convey or settle, or to convey and settle, lands generally, without specifying any parcel or tract of land in particular, although it may give rise to the presumption that any par- ticular lands subsequently purchased were intended to be in performance of the obligation, does not create a lien upon such lands afterwards purchased, in favor of the covenan- tee, and consequently a mortgagoi* or purchaser of those lands, even with notice, is not affected by it ; the covenantee cannot enforce the covenant upon the lands in the hands of §582, 1 Lechmere v. Earl of Carlisle, 3 P. Wms. 211; Lechmere v. Lechraere, Cas. t. Talb. 80; Sowden v. Sowden, 1 Brown Ch. 582; 3 P. Wms. 228, note. §582, 2 Lechmere v. Earl of Carlisle, 3 P. Wms. 211; Lechmere v. Lechmere, Cas. t. Talb. 80; see Warde v. Warde, 16 Beav. 103. § 582, 3 Lechmere v. Earl of Carlisle, 3 P. Wms. 211 ; Lechmere v. Lechmere, Cas. t. Talb. 80; Deacon v. Smith, 3 Atk. 323 ; Pinnell v. Hallett, Amb. 106; Att'y-Gen. v. Whorwood, 1 Ves. Sr. 534, 540. § 582, 4 Lechmere v. Earl of Carlisle, 3 P. Wms. 211. 1091 CONCEENIlirG PEEFOEMANCB. § 584 such mortgagor or purchaser.^ In other words, while the purchase by the covenantor raises a presumption that he intended thereby to perform, this presumption may be overcome or destroyed by his conveyance of the land to a third person. § 584. II. Covenajit to Bequeath Property. — ^In this second class of cases to which the doctrine applies, if a per- son covenants to leave, or that his executors shall pay to a designated individual, a sum of money, or a part of his personal estate, and the covenantor afterwards dies intes- tate, and the individual becomes entitled to a distributive share of the personal property, equal to or greater than the amount agreed to be left or paid, then such share will be a full performance of the covenant, and the beneficiary can- not claim both; if the share is less than the amount agreed^ it will be pro tcmto a performance. In order, however, that the case may fall within the doctrine, and the distributive share be a total or partial performance, the covenant must be such that it is broken, if at all, at or after the cove- nantor's death. That the devolution of the share is a performance under these circumstances, and not a mere satisfaction, is expressly held in several of the decisions.^ The covenants which have ordinarily belonged to this class § 583, 1 Mornington v. Keane, 2 De Gex & J. 292 ; Deacon v. Smith, 3 Atk. 323. In the case of Mornington v. Keane, 2 De Gex & J. 292, the subject is examined with great care, the prior decisions are all com- pared, explained, and limited, especially that of Roundell v. Breary, 2 Vem. 482, and the rule as stated in the text is settled. See Pinch v. Anthony, 8 Allen, 636. § 584, 1 Blandy v. Widmore, 1 P. Wms. 324; 2 Vern. 209; 2 Lead. Gas. Eq., 4th Am. ed., 834, 842; Lee v. D'Aranda, 3 Atk. 419; Garthshore v. Chalie, 10 Ves. 1; Goldsmid v. Goldsmid, 1 Swanst. 211; Barrett v. Beck- ford, 1 Ves. Sr. 519; 1 P. Wms. 324, note 1; Thacker v. Key, L. R. 8 Eq. 408. In Goldsmid v. Goldsmid, 1 Swanst. 211, which was a case of in- testacy, because the will had failed to be operative, the master of roUsj Sir Thomas Plumer, after commenting upon the prior authorities cited above, and after distinguishing the case of a distributive share devolving upon the covenantee from that of a legacy bestowed upon him, said: § 585 EQUITY JUBISPEUDENCB. 1092 have been those made by husbands to leave money or prop- erty to their wives, but there are no grounds, upon prin- ciple, for confining the rule to this particular species of agreements. § 585. Limitations — ^When Covenant Creates a Debt in the Lifetime of Deceased. — The courts have been careful not to extend the rule controlling this class of cases to cir- cumstances in which the reasons for it do not apply. Where the covenant is such that it must be performed during the covenantor's lifetime, and the breach occurs before his death, a distributive share does not operate as a performance, either in whole or in part. The breach of such a covenant creates an ordinary debt due from the deceased, and it is well settled that a distributive share of the debtor's estate devolving upon the creditor cannot be treated as a payment of his demand. An illustration of such agreements is a covenant by a husband to pay a certain simi to his wife within two years from their mar- riage; he outlives the two years, and dies intestate, with- out having made the payment, and leaving a large dis- tributive share to devolve upon her. She is entitled both "Lord Eldon, in Garthshore v. Chalie, 10 Ves. 1, speaking of Blandy v. Widmore and other cases, says: 'These cases are distinct authorities that where a husband covenants to leave or to pay at his death a sum of money to a person who, independent of that agreement, by the relation between them and the provision of law attending upon it, will take a provision, the covenant is to be construed with reference to that.' Con- sidering the contract as made with that reference, it must be interpreted as intended to regulate what the widow is to receive; and consequently when the event of intestacy ensues, the single question is, Does she not obtain that for which she contracted? If the object of the covenant is, that the executors of the husband shall pay to the widow a given sum, and in her character of widow, created by the same marriage contract, she in fact obtains from the administrator that simi, the court is bound to con- sider that as payment under the covenant. These are not cases of an ordinary debt; during the life of the husband there is no breach of the covenant, no debt; the covenant is, to pay after his death, and the inquiry is, not whether the payment of the distributive share is a satisfaction, but a question perfectly distinct, whether it is a performance." 1093 CONCEENING PEBFOBMANCB, § 586 to her distributive share and to the sum due from the estate to her as a creditor, i Also, where the covenant is not to leave or pay a certain specified sum in gross, but is to give an annuity for life, or the annual interest on a named amount for life, the doctrine of performance has been held not to apply.^ § 586. A Legacy not a Performance. — The devolution of a distributive share in performance of a covenant to pay or leave money at the covenantor's death should be carefully distinguished, in its effects, from a legacy. If a husband has made such a covenant to leave or pay to his widow a certain sum of money, a bequest which he may give to her simpliciter , either of a definite amount or of the whole or a part of a residue, without any provision in the will ex- pressly showing an intention on his part that the gift was to be in payment, will not operate as a performance of the covenant ; a legacy is prima facie a bounty, and gives rise to a presumption that the testator intended to increase the provision made for his widow by the covenant, and not to pay and discharge it.^ This particular situation sug- gests the importance of distinguishing, in general, between the cases of performance, discussed in the foregoing para- graphs, and the cases of satisfaction of debts by legacies, considered in the preceding section. The essential differ- ences between satisfaction and performance have already been sufficiently pointed out. The instances of satisfaction of debts by legacies involve and depend upon certain pre- sumptions which do hot exist in cases of performance. "In cases of satisfaction [i. e., satisfaction of debts by § 585, 1 Oliver v. Brickland, cited in 1 Ves. Sr. 1, 12; 3 Atk. 420, 422; Lang V. Lang, 8 Sim. 451; and see Garthshore v. Chalie, 10 Ves. 1, 12, per Lord Eldon. § 585, 2 Couch V. Stratton, 4 Ves. 391 ; Salisbury v. Salisbury, 6 Hare, 526; Young v. Young, 5 I. R. Eq. 615. § 586, 1 See Haines v. Mice, 1 Brown Ch. 129; Devese v. Pontet, 1 Cox, 188. It should be remembered that there are no presumptions against double portions between a husband and his widow. See the preceding section on satisfaction. § 587 EQUITY JUEISPKUDENCE. 1094 legacies], the presuinption will not hold where the thing substituted is less beneficial (either in amount, or cer- tainty, or time of enjoyment, or otherwise) than the thing contracted for, since satisfaction implies the doing of some- thing, equivalent, and the presumption is so much weak- ened where the thing substituted is not equivalent to the thing contracted for, and a part satisfaction will not be in- tended; whereas, in cases where the thing done can be considered as a part performance of the thing contracted for, it shall be so taken. ' ' 2 §587. Presumption of PerformaJice by Trustees. — There is another and quite different case, which has some- times been regarded by writers and judges as an instance of performance, but which properly belongs to trusts aris- ing by operation of law. I shall therefore briefly mention it in this connection; its full discussion will be found in the subsequent chapter upon trusts. Whenever a trustee or other person standing in fiduciary relations, acting apparently within the scope of his powers, has trust funds in his hands, which he ought, in pursuance of his fiduciary duty, to employ in the purchase of property for the pur- poses of the trust, and he does purchase property with such funds, but takes the title thereto in his own name, without any declaration of trust, then a trust with respect to such property at once arises in favor of the original cestui que trust or other beneficiary. Equity imputes an intention to fulfill the obligation resting upon the trustee; and, independently of any element of fraud, it regards the trustee as intending to perform the obligation, — as intend- ing to act in accordance with his fiduciary duty, and not in violation thereof. It therefore treats the purchase as made for the benefit of the person beneficially interested. This doctrine is one of wide operation, of great efficiency, § 586, 2 Note of Mr. Cox to Blandy v. Widmore, 1 P. Wms. 324; and see remarks in Goldsmid v. Goldsmid, 1 Swanst. 211, 220, 221; also ante, section on satisfaction. 1095 CONCEENING PEBFOEMANCB. § 588 and is applied to every variety of persons occuping fidu- ciary relations.! § 588. Meritorious or Imperfect Consideration. — Closely akin to the equity of performance, and properly a special instance of it, is that of meritorious or imperfect consid- eration. Indeed, all cases of satisfaction and of perform- ance have been treated by some writers as applications of this equity.i All agreements, so far as the binding effi- cacy of their promises is concerned, must be referred to one or the other of three causes, — a valuable consideration, a mere voluntary bounty, or the performance of a moral duty. The first alone is binding at law, and enables the promisee to enforce the obligation against the promisor. The sec- ond, while the promise is executory, is a mere nullity, both at law and in equity. The third constitutes the meritorious or imperfect consideration of equity, and is recognized as § 587, 1 See ante, vol. 1, § 422. Trustees. — Trench v. Harrison, 17 Sim. Ill; Lench v. Lench, 10 Ves. 511; Mathias v. Mathias, 3 Smale & G. 552; Ouseley v. Anstruther, 10 Beav. 461; Deg v. Deg, 2 P. Wms. 412, 414; Perry v. Phelips, 4 Ves. 108; 17 Ves. 173; ScUaefer v. Corson, 52 Barb. 510; Ferris v. Van Vechten, 73 N. Y. 113; MeLarren v. Brewer, 51 Me. 402. Executors and Administrators. — ^White v. Drew, 42 Mo. 561; Stow v. Kimball, 28 HI. 93; Barker v. Barker, 14 Wis. 131. Directors of Corporations.- — Church v. Sterling, 16 Conn. 388. Guardians. — Johnson v. Dougherty, 18 N. J. Eq. 406; Bancroft v. Con- sen, 13 Allen, 50. Committees of Lunatics. — Reid v. Fitch, 11 Barb. 399. Agents. — Bridenbecker v. Lowell, 32 Barb. 10; Robb's Appeal, 41 Pa. St. 45. Partners. — Smith v. Bumham, 3 Sum. 435 ; Oliver v. Piatt, 3 How. 333, 401; Homer v. Homer, 107 Mass. 82; Settembre v. Putnam, 30 Cal. 490; Jenkins v. Frink, 30 Cal. 586, 89 Am. Dec. 134.» §588, 1 See Adams's Equity, pp. 97-106 (230-244). §587, (a) An agreement among Lavelle, 77 Cal. 10, 11 Am. St. Rep. mining partners, in pursuance of 229, 18 Pac. 803; Murley v. Ennis, 2 whieh one of them locates a claim in Colo. 300; Hirbour v. Eeeding, 3 his own name, is a familiar instance Mont. 15; Welland v. Huber, 8 Nev. in the Western states: Moritz v. 203. See, further, § 1049. § 588 EQUITY JURISPBUDENCE. 1096 effective by it within very narrow limits, althougli not at all by the law. While this species of consideration does not render an agreement enforceable against the promisor him- self, nor against any one in whose favor he has altered his original intention, yet if an intended gift based npon such meritorious consideration has been partially and imper- fectly executed or carried into effect by the donor, and if his original intention remains unaltered at his death, then equity will, within certain narrow limits, enforce the prom- ise thus imperfectly performed, as against a third person claiming merely by operation of law, who has no equally meritorious foundation for his claim.^ The equity thus de- scribed as based upon a meritorious consideration only ex- tends to cases involving the duties either of charity, of paying creditors, or of maintaining a wife and children. This last duty of maintaining children includes persons to whom the promisor stands in loco parentis.^ ^ The specific cases involving these three kinds of duties to which the doctrine has been applied by courts of equity are the sup- plying surrenders of copyholds against the heir,^ and the supporting and completing defective executions of powers, where the defect is formal, against the one who would be entitled iu remainder. Since the first of these cases does not exist under our law, it is only necessary to consider the second. § 588, 2 See ante, vol. 1, § 556, and cases cited in notes. § 588, 3 Rodgers v. Marshall, 17 Ves. 294. § 588, (a) The text is cited in Sip- 343, 4 S. E. 185, in support of the ley V. Wass, 49 N. J. Eq. 463, 24 proposition that equity will correct Atl. 233, to the point that a deed of mistakes in those deeds only which conveyance from husband directly to are supported by a valuable or meri- wife, having a nominal considera- torious consideration (see Pom. Equi- tion, passes an equitable estate in table Remedies, "Eef ormation") ; fee, the holder of which is entitled holding, also, that a voluntary con- to have the legal title from the heirs veyance by a grandfather to a of the husband. grandchild is not proof of his inten- §588, (b) The greater part of this tion to place himself in loco parentis paragraph is quoted in Powell v. to the grantee, and thus render the Morisey, 98 N. C. 426, 2 Am. St. Rep. consideration meritorious. 1097 CONCEBNIKG PEEFOKMANCB. § 589 § 589. Defective Execution of Powers. — ^Where the de- fect in the execution is merely formal, equity will support, correct, and complete the defective execution of powers, as against a remainderman who has no equally meritorious claim, on behalf of the classes of persons in whose favor -the "meritorious consideration" exists, — that is, on behalf of charitiies, purchasers, creditors, children, or wives. The rationale of this doctrine is the following: Although in the absence of a valuable consideration there is no complete obligation resting uppn the promisor, yet from the presence of the meritorious consideration there is, in contemplation of equity, as between the meritorious beneficiary and the remainderman possessing no equally meritorious claim, a quasi obligation, — a duty binding between the parties thus situated. An attempt having been made to execute the power, which is only formally defective, equity imputes to the donee in making the attempt an intent to fulfill this quasi obligation. An intent to perform having been thus shown and partly accomplished, a court of equity carries it into effect by decreeing a complete performance. The case is thus brought, in appearance at least, within the general principle concerning performance, and the equitable maxim which underlies that principle. The rationale thus de- scribed may be exceedingly artificial; it may be in reality unsound and inconsistent with other established principles ; but notwithstanding these objections, the doctrine itself is firmly settled upon the basis of authority. ^ * § 589, 1 Holmes v. Goghill, 7 Ves. 499, 12 Ves. 206; Eeid v. Shergold, 10 Ves. 370; ToUett v. ToUett, 2 P. Wms. 489; Bradish v. Gibbs, 3 Johns. Ch. 523; Sehenck v. Ellingwood, 3 Edw. Ch. 175; Dennison v. Goehring, 7 Pa. St. 175, 47 Am. Dec. 505; Porter v. Turner, 3 Serg. & E. 108; Innes V. Sayer, 3 Macn. & G. 606, 7 Hare, 377 (in favor of a charity) ; Long v. Hewitt, 44 Iowa, 363. §589, (a) Sections 589, 590 are ried woman, aided), and in Wat- cited in Ellison v. Branstrator, 153 kins v. Watkins, 82 N. J. Bq. Ind. 146, 54 N. E. 433 (defec- 483, 89 Atl. 253. See, also, Ameri- tive execution of a deed under a can Freehold L. Mtg. Co. v. Walker, power of attorney from a mar- 31 Fed. 103; Freeman v. Eacho, 79 § 590 EQUITY JUKISPEUDENCE. 1098 § 590. Requisites — ^A Partial . Execution Necessary. — The powers whicii the doctrine may thus enforce are those given in wills, family settlements, and other similar instru- ments, and not bare authorities conferred by law. In the first place, there must be an execution of the power by the donee thereof formally defective, or a contract amount- ing to such a defective execution; otherwise the doctrine does not apply. If there has been no execution at all, the court cannot interfere ; for the donee, having an option by the very terms of the power, has shown an intention not to execute. If the defect is substantial, and not formal, the court cannot relieve, for its interposition would then frustrate the intention of the donor, that the power, if executed at all, should be executed in a prescribed manner, or by specified means.^ »■ In the second place, the original intention of the donee in making the defective execution must continue unaltered. The fact that the defective ap- § 590, 1 ToUett v. ToUett, 2 P. Wms. 489 ; Keid v. Shergold, 10 Ves. 370; Lippencott v. Stokes, 6 N. J. Eq. 122; Drusadow v. Wilde, 63 Pa. St. 170; Bingham's Appeal, 64 Pa. St. 345. As to statutory powers, see Smith V. Bowes, 38 Md. 463.* Va. 43 (defective execution of power Atl. 246, it was held, citing this by married woman). See, further, paragraph, that the rule that equity Charlton v. Charlton, [1906] 2 Ch. will not aid or enforce a power en- 523; Coates v. Lunt, 210 Mass. 314, tirely unexecuted hy the donee does 96 N. E. 685. The earlier eases are not apply to a property right held reviewed in the learned opinion of by a person of unsound mind. Pitney, V. C, in Cowdrey v. Cow- §590, (t>) Statutory powers: The drey, 71 N. J. Eq. 353, 64 Atl. 98. text is cited in Watkins v. Watkins, § 580, (a) This paragraph is cited 82 N. J. Eq. 483, 89 Atl. 253; see Cox in Satterfield v. Tate, 132 Ga. 256, v. Holeomb, 87 Ala. 589, 13 Am. St. 64 S. E. 60, to the point that equity Eep. 79, 6 South. 309 (defective con- will give no aid when the question is veyanee of homestead not aided) ; not one of defect in form, but the Williams v. Cudd, 26 S. C. 213 (de- exercise of the power was invalid fective execution of statutory power because the donee at the time was given to married woman, not aided, not authorized to execute it, the con- Compare Freeman v. Eacho, 79 Va. tingency not having arisen. See, 43) ; and Spaulding Mfg. Co. v. God- also, as to non-execution of power, bold, 92 Ark. 63, 135 Am. St. Eep. Sayer v. Humphrey, 216 III. 426, 75 168, 19 Ann. Cas. 947, 29 L. K. A. N. B. 170. In re Beeves (Del.), 92 (N. S.) 282, 121 S. W. 1063. 1099 CONCEENING PEBFORMANCB. § 590 pointment is left untouched is rather evidence that the donee's intention continued unchanged, than of a contrary intent. If, however, any subsequent act of his shows a change of his original intent, then the right to the inter- position of a cou^t of equity, for the purpose of completing the execution, is gone, since the court interferes only to carry out his intention, and never to relieve in opposition to that intention.2 Finally, the party against whom the completed execution is sought must not liave an equally meritorious claim. If, therefore, the heir at law or re- mainderman to whom the estate would pass in case the attempted appointment under the power should fail is a child or even a grandchild wholly unprovided for, the relief, it seems, will not be granted. It is not enough to defeat the equitable right to an enforcement that the heir is disin- herited by his own iminediate ancestor, for if he has been provided for by some one else, his claim is not equally meritorious, and it makes no difference from whom the provision came. The relative amount of the provisions, if any, made for different children in such cases is imma- terial, for the parent himself is the judge of the amount proper for each child.3 § 590, 2 Finch v. Finch, 15 Ves. 43, 51; Antrobns v. Smith, 12 Ves. 39. §590, 3Kodgers v. Marshall, 17 Ves. 294; Hills v. Downton, 5 Ves. 557; Morse v. Martin, 34 Beav. 500; Porter v. Turner, 3 Serg. & R. 108, EQUITY JUEISPKUDENCE. 1100 SECTION V. CONCERNING NOTICE. ANALYSIS. § 591. Questions stated : Le Neve v. Le Neve. § 592. Knowledge and notice distinguished, § 593. Kinds; actual and constructive. § 594. Definition. §i 595-603. Actual notice. § 596. When shown by indirect evidence. §597. What constitutes; rumors; putting on inquiry, etc. §§ 598-602. Special rules concerning actual notice. § 603. Effect of knowledge instead of notice. §§ 604^609. Constructive notice in general. § 605. Jones v. Smith, opinion of Wigram, V. C. §§ 606, 607. When the presumption is rebuttable; due inquiry. § 608. When it is conclusive. § 609. Species of constructive notice. §§610-613. 1. By extraneous facts; acts of fraud, negligence, or mistake; general rule as to putting on inquiry; visible objects, etc. §§ 614^625. 2. By possession or tenancy. §§ 614, 615. General rules, English and American. §§ 616-618. Extent and effect of the notice. §§ 619^622. Nature and time of the possession. §§ 623, 624. Whether the presumption is rebuttable or not. § 625. Possession by a tenant or lessee. §§^326-631. 3. By recitals or references in instruments of title. § 626. General rules. §§ 627-631. Nature and extent of the notice; limitations; instances, etfc §§ 632-640. 4. By lis pendens. § 632. Rationale: Bellamy v. Sabine. §§633,634. General rules; requisites. §§ 635, 636. To what kind of suits the rule applies. §§ 637, 638. What persons are affected. § § 639, 640. Statutory notice of lis pendens. §§ 641-643. 5. By judgments. §§ 644^665. 6. By recording or registration of instruments. §§645,646. (1) The statutory system; abstract of statutes. §§ 647-649. (2) General theory, scope, and object of the legislation. §§650-654. (3) Requisites of the record, in order that it may be a notice. § 655. (4) Of what the record is a notice. §§ 656-658,^ (5) To whom the record is a notice. § 657. Not to prior parties. § 658. To subsequent parties holding under the same source of title; effect of a break in the record. 1101 CONCERNING NOTICE. '';|^591 §i 659, 660. (6) Effect of other kinds of notice, in the absence of a reco §§661-665. (7) What kinds of notice will produce this effect. § 662. English rule. §§663,664. Conflicting American rules; actual or constructive notice. § 665. True rationale of notice in place of a record. §§ 666-676. 7. Notice between principal and agent. §§ 666-66&. Scope and applications. §§ 670-675. Eequisites of the notice. § 670. (1) Notice must be received by agent during his actual employ- ment. §§671,672. (2) And in the same transaction; when in a prior transaction. § 673. (3) Information must be material; presumption that it was com- municated to the principal. §§ 674, 675. Exceptions; agent's own fraud. § 676. True ratioTwle of this rule. § 591. Questions Stated. — ^It has been shown in the pre- ceding chapter that there are two fundamental principles or maxims affecting to a greater or less degree nearly the en- tire body of equity jurisprudence, — ^nearly the entire adr ministration of equitable rights and remedies, — ^namely, where there are equal equities, the one which is prior in time must prevail, and where there are equal equities, the law must prevail. These two principles necessarily find their most important application in cases, which are con- stantly arising, where several different, and perhaps suc- cessive, equitable, or legal and equitable, interests in or claims upon the same subject-matter exist at the same time, and there is a contest for the precedence among the- re- spective holders of these interests or claims. It has also been shown that the application of these maxims turns upon the question. When are the different equities simultaneously subsisting with respect to the same subject-matter " equal " ? or on the other hand, what renders them "unequal," so that one shall have an essential inherent superiority over another? In answering this question, the doctrine of Notice plays a most important part. When a per- son is acquiring rights with respect to any subject-matter, the fact whether he is so acting with or without notice of the interests or claims of others in or upon the same subject- matter is regarded throughout the whole range of equity § 591 EQUITY JXJKISPBUDENCE. 1102 jurisprudence as a most material circumstance in determin- ing the extent and even the existence of the rights which he actually acquires. In conformity with this view, the gen- eral rule has been most clearly established, that a purchaser with notice of the right of another is in equity liable to the same extent and in the same manner as the person from whom he made the purchase. The same rule may be thus expressed in somewhat different language: a person who acquires a legal title or an equitable title or interest in a given subject-matter, even for a valuable consideration, but with notice that the subject-matter is already affected by an equity or equitable claim in favor of another, takes it sub- ject to that equity or equitable claim.^ On the other hand, a person who has acquired a title, and paid a valuable con- sideration, without any notice of an equity actually ex- isting in favor of another, vnay by that means obtain a perfect title, and hold the property freed from the prior outstanding equity.^ This general doctrine was formu- lated by Lord Hardwicke in a celebrated case in the fol- lowing emphatic terms: "The ground of it is plainly this: that the taking of a legal estate, after notice of a prior right, makes a person a mala fide purchaser. This is a species of fraud and dolibs mcdus itself; for he knew the first purchaser had the clear right of the estate, and after knowing that, he takes away the right of another person by getting the legal estate. Now, if a person does not stop his hand, but gets the legal estate when he knew the right was in another, machinatur ad circumveniendum. It is a maxim, too, in our law that fraus et dolus nemini patrocinari debent."'^ Lord Hardwicke was here speak- ing of the effect of an actual notice; and undoubtedly it • § 591, 1 Le Neve v. Le Neve, Amb. 436; 2 Lead. Cas. Eq., 4th Am. ed., 109. § 591, (a) The text is quoted in effect In Seitet v. B'afh, 5 Wyo. 409, Howard v. McPhail, 37 R. I. 21, 40 Pae. 756; Reel v. Reel, 59 W. Va. Ann. Cas. 1917A, 186, 91 Atl. 12. 106, 52 S. E. 1023; Swick v. Reese, § 591, (b) The text is cited to this 62 W. Va. 557, 59 S. E. 510. 1103 CONCEENING NOTICE. § 592 is an act savoring of fraud for a person who has received actual, direct notice of another's right, to go on and know- ingly acquire the property in violation of that other's right. But on the other hand, to base the entire doctrine of notice upon fraud, to regard all its rules as inferences from the equitable principle against fraud, is, in my opinion, to ignore the plain meaning of words, and to introduce an unnecessary and misleading fiction into the subject. Most, of the confusion in the discussion by courts and writers has resulted, as it seems to me, from their acceptance of this dictum of Lord Hardwicke as universally true, and from their attempt to treat the effects of notice, under all circumstances, as mere instances and results of fraud. The great importance of the subject having thus been ex- hibited, its further examination will be conducted in the following order: 1. The nature of notice, what constitutes it, and its various kinds and classes; 2. The effects of notice, and especially the consequences of notice or the want of notice in determining priorities among equitable claims to or upon the same subject-matter. §592. Knowledge and Notice Distinguished. — ^Before entering upon this examination, a few preliminary observa- tions are necessary, to clear the ground and to explain the exact nature of the questions which are to be discussed, and of the conclusions to be reached by such discussion. In the' first place, it is of the utmost importance to distinguish between the objects and purposes for which the fact of notice having been given may be invoked. One object of notice may be simply to affect the priority of a right which the one receiving it has acquired, and to subordinate such right to an interest in the same subject-matter held by an- other. On the other hand, notice may be regarded as an ingredient or badge of fraud, as a feature which renders the transaction entered into by the person who receives it fraudulent. A distinction clearly exists between these two purposes ; and the rules which govern the nature and effect of notice in each must be different. That might easily be § 592 EQUITY JUEISPRUDENCB. 1104 sufficient to subordinate a person's right to another inter- est which would at the same time fall far short of stamping his conduct with actual fraud. In the second place, it should be most carefully borne in mind that the legal conception of "notice," as contained in the settled doctrines and rules of equity, is somewhat artificial and even technical. In this purely legal artificial sense, notice is by no means synony- mous with knowledge, although the effects produced by it are undoubtedly the same which would result from actual knowledge. In other words, while the doctrines of equity on the subject do not assume that notice is knowledge, nor even that it is necessarily followed by knowledge, they still often impute to it the very same consequences which would flow from actual knowledge acquired by the party. As the notice spoken of by the rules is not knowledge, there may be notice without knowledge, and knowledge without notice. If a person, A, were negotiating with B for the purchase of a piece of land, and should be informed either by B or by C that B had already given a deed or mortgage of the same land to C, such information would be notice, and even the highest kind of notice; but A would not thereby, in any true meaning of the word, have knowledge of the deed or mort- gage, of its various provisions and legal effect. On the other hand, if, before the negotiation, A had been casually shown the deed or mortgage itself by some third person in whose possession it happened to be, had been permitted by such person to take and read the instrument, had carefully examined it, and had thus become familiar with all of its provisions and its legal effect, he would not, within the set- tled meaning of the legal term, have received notice, but he would most certainly have obtained, and would be acting with, a complete knowledge of the instrument. Again, un- der certain circumstances, if A, while dealing with respect to a piece of property, deliberately and intentionally re- frains from making inquiries concerning outstanding en- cumbrances or claims for the very purpose of avoiding any information, he is charged with notice of the encumbrances 1105 CONCEKNING NOTICE. § 592 and claims wHcli are actually outstanding ; but he certainly does not acquire, and cannot possibly have, a knowledge of such prior charges or interests. The record of a deed or mortgage, when regularly and properly made, is construc- tive notice to subsequent purchasers and encumbrancers; but it does not necessarily convey any knowledge to such persons ; while A, in purchasing land from B, is absolutely and conclusively bound by the proper record of a prior in- strument affecting the same premises, he may be acting in perfect good faith and in most complete ignorance of the actual existence of any such instrument. If, however, be- fore making the purchase, A had fexamined the official records, and had there discovered and read a deed or mort- gage of the same land copied at length in the book of rec- ords, but under such circumstances that it was not legally entitled to be recorded, on account of a defective acknowl- edgment or other irregularity, he would not thereby have received any legal notice within the true meaning of the term, but he would as certainly have obtained a full knowl- edge of the instrument. These instances are sufficient to illustrate the distinction between notice, in its legal and somewhat artificial conception, and knowledge, and to show that one may exist without the other. Unless this distinc- tion is clearly apprehended and constantly borne in mind, much of the judicial discussion concerning the nature and effect of notice will seem to be confused and uncertain, and an irreconcilable conflict will appear among many of the decisions ; .the distinction renders the discussion clear and certain, and the decisions harmonious. Whenever the mere notice, in its strict signification, is relied upon, even though not accompanied or followed by any actual knowl- edge, then, from considerations of policy and expediency, the same effects are attributed to it which would have re- sulted from actual knowledge; and it will be found that what constitutes this notice is determined by definite, pre- cise, and even somewhat technical rules. Whenever, on the other hand, a party is shown to have obtained an actual 11—70 § 592 EQUITY JURISPEUDENCE. 1106 knowledge, even though there has been nothing which con- stitutes a notice in its true sense, then there is no longer any necessity of resorting to the artificial conception of notice; the consequences must naturally and necessarily flow from an actual knowledge of facts by a party, which from motives of expediency are attributed to a notice of the same facts given to him, in the absence of actual knowl- edge. In a word, among the complicated affairs and transactions of life, it is often necessary that mere "notice" should take the place of actual knowledge; but this does not and cannot mean that actual knowledge shall not produce the same effects upon the rights of par- ties which, from motives of policy, are given to its repre- sentative and substitute notice. This conclusion is, as it seems to me, self-evident, and it is most important; it reconciles at once all the confusion and conflict of opinion which, it must be confessed, appear in some of the deci- sions, and it has the support of the ablest judicial authority. It has been expressly sanctioned and adopted as the settled principle upon which courts of equity act, in a recent case by one of the ablest of modern English equity judges. Lord Cairns. He is speaking of a trustee dealing with the trust fund in his hands, and acting with knowledge, but without the true notice, actual or constructive, required by the set- tled rules, of an encumbrance on the property created by the cestui que trust. The general language which he uses with respect to these particular facts will apply to all cases of knowledge as distinct from notice. Lord Cairns says: "All I can do is to apply those principles which have been well established as part of those principles on which the court proceeds. ... I am bound to say that I do not think it would be consistent with the principles upon which this court has always proceeded, or with the authorities which have been referred to, if I were to hold that under no circumstances could a trustee, without express notice from the encumbrancer, be fixed with knowledge of an en- cumbrance upon the fund of which he is the trustee. It 1107 CONCEENING NOTICE. § 5Q3 must depend upon the facts of the case. But I am quite prepared to say that I think the court would expect to find that those who alleged that the trustee had knowledge of the encumbrance had made it out, not by any evidence of casual conversations, much less by any proof of what woidd only he constructive notice, but by proof that the mind of the trustee has in some way been brought to an intelligent apprehension of the nature of the encumbrance which has come upon the property,, so that a reasonable man, or an ordinary man of business, would act upon the information, and would regulate his conduct by it in the execution of the trust. If it can be shown that in any way the trustee has got hnowledge of that kind, — ^knowledge which would operate upon the mind of any rational man, or man of business, and make him act with reference to the knowledge he has so acquired, — there I think the end is attained, and that there has been fixed upon the conscience of the trustee, and through that upon the trust fund, a security against its being parted with in any way that would be inconsistent with the encumbrance which has been created. ' ' ^ This ex- tract states what is, in my opinion, the general doctrine, applied here to a trustee, but applicable to all persons whose rights or liabilities can be affected by notice of rights be- longing to others. It declares that although there may be no technical "notice," not even a constructive notice, still there may be an actual knowledge, acquired in modes which do not amount to notice ; and this knowledge may produce the same effects which the rules of equity attribute to "notice."* § 593. Kinds — Actual and Constructive. — Notice has been divided by judges and writers into the two main § 592, 1 Lloyd v. Banks, L. R. 3 Ch. 488, 490, per Lord Cairns. § 592, (a) This section is cited in Co. v. Moore, 170 Ind. 328, 82 N. E. Cleveland Woolen Mills v. Sibert, 81 52, 84 N. E. 540 (notice putting on Ala. 140, 1 South. 773; Kirkham v. inquiry is not always the equivalent Moore, 30 Ind. App. 549, 65 N. E. of full knowledge). 1042; Cleveland, C. C. & St. L. E. § 593 EQUITY JUKISPKUDENCE. 1108 classes, — "actual" and "constructive"; but there is a great diversity of opinion among text-writers in determin- ing what particular kinds shall come within each of these two classes. According to some, "constructive" notice in- cludes those' instances in which no information of the existence of any prior right or claim is directly or indi- rectly communicated to the party, but certain facts are shown to have existed, and from these the party is con- clusively presumed to have received the information, and is therefore conclusively charged with notice. In other words, the information amounting to a notice, although hot in fact given, is inferred as a conclusive presumption of the law, and this presumption cannot be rebutted by any evidence to the contrary. All other kinds, according to this theory, are "actual." This latter class, therefore, embraces many degrees, from the highest, where a posi- tive, personal information of a fact is directly communi- cated to the party, down through every grade, in which the notice is either implied by prima facie presumptions of law from certain facts shown to exist, or is inferred as an argumentative conclusion, with greater or less co- gency, from evidence which is perhaps entirely circum- stantial. The objections to this mode of classification are plain. It is, in fact, no classification; it groups under the head of "actual" notice different species which have no common features, no real resemblance, and the name "ac- tual" is an evident misnomer; while on the other hand the class of "constructive" is, from its definition, neces- sarily confined to a very few species, technical and artificial in their nature, the most important one being wholly the creature of statute. I prefer and shall adopt the classihca- tion approved and followed by many of the most' eminent judges, which has the merit of simplicity, naturalness, and certainty. According to this arrangement, "actual" notice embraces all those instances in which positive personal in- formation of a matter is directly commuicated to the party, and this communication of information, being a fact, is es- 1109 CONCERNING NOTICE. § 594 tablished by evidence directly tending with more or less cogency to its proof. "Constructive" notice includes all other instances in which the information thus directly com- municated cannot be shown, but the information is either conclusively presumed to have been given and received from, the existence of certain facts, or is implied by a prima facie presumption of the law in the absence of contrary proof.* § 594. Definition. — Judges and text-writers have seldom attempted to define notice in the abstract, but have gen- erally contented themselves with specifying instances, or describing its kinds and effects. Within the meaning of the rules, notice may, I think, be correctly defined as the information concerning a fact actually communicated to a party by an authorized person, or actually derived by him from a proper source, or else presumed by law to have been acquired by him, which information is regarded as equiva- lent in its legal effects to full knowledge of the fact, and to which the law attributes the same consequences as would be imputed to knowledge. It should be most carefully ob- served that the notice thus defined is not knowledge, nor does it assume that knowledge necessarily results.^ On the other hand, the information which constitutes the notice may be so full and minute as to produce complete knowl- § 593, (a) The text is quoted in' approved the definitions given in the Meador Bros. v. Hines (Tex. Civ. text. App.), 165 8. W. 915; Houston Oil §594, (a) This definition is Co. of Texas v. Griggs (Tex. Civ. quoted, with approval, in Cleveland App.), 181 S. W. 833. This section Woolen Mills v. Sibert, 81 Ala. 140, is cited in Cleveland Woolen Mills 1 South. 773, and in Houston Oil Co. V. Sibert, 81 Ala. 140, 1 South. 773; «* Texas v. Griggs (Tex. Civ. App.), Cleveland, C. C. & St. L. E. Co. v, ^^^ ^- ^- ^^S. This and the two Moore, 170 Ind. 328, 82 N. E. 52, 84 sections following are cited in Kirk- N E 540. In Drey v. Doyle, 99 Mo. ^^"^ ^- ^°°^^' ^O I^d. App. 549, 65 459, 12 8. W. 287, the court com- ^- ^- 1042 where a finding that a . , ., , . J J V purchaser had no "actual knowl- mented on the confusion produced by '^ , , . ^, ^ „ edge," was held not to be equivalent the erroneous use of the terms ac- j. \. ,. ..,.., ^ , , . , , to a finding that he had "no actual tual and "constructive notice, and . . ,. ' notice." § 594 EQUITY JUKISPKUDENCB. 1110 edge.i Although an actual knowledge is not necessarily assumed to result, yet in many instances, as will be seen, the party is not permitted to show this fact, but the same consequences follow with respect to his rights and interests as though he had obtained real knowledge. The correct- ness of the definition which I have formulated will appear from a comparison of all the cases hereafter cited in the discussions of this section. In dealing with the subject, great care should be taken to distinguish between notice and the evidence by which it is established. The personal communication of information which constitutes notice is a fact which may be proved by any kind of competent evi- dence submitted to, weighed, and passed upon by the tribunal which decides matters of fact. Whenever the notice is inferred by a conclusive or prima facie presump- tion from certain facts, the office of evidence is to prove the existence of those facts. Notice is either actual or constructive ; but the legal effect of each kind, when estab- lished, is exactly the same.^ i» § 594, 1 Of the few definitions given by text-writers, the following are examples: The English editors of the Leading Cases in Equity attempt no general definition. The American editor says: "In legal parlance, notice is information given by one duly authorized, or derived from some authentic source. • Notice may be either actual or constructive.'' While this definition has the merit of extreme brevity, and of correctly pre- serving the distinction between notice and knowledge, it lacks, as it seems to me, some of the essential elements of the entire legal conception : 2 Lead. Cas. Eq., 4th Am. ed., 144. Another American writer says : "Notice, then, in its technical sense, is the legal cognizance of a fact. It differs from knowledge, for knowledge may exist without notice, and there may be notice without any actual knowledge. . . . Notice, therefore, iu the sense here used, may be said to be the definite legal cognizance, either actual or presumptive, of a right or title" : Bispham's Equity, 325. While the dis- tinction between notice and knowledge is here distinctly emphasized, yet the definition itself, in calling notice the "legal cognizance" of a fact, gives the efeot of notice rather than describes the thing itself. Legal cognizance means simply legal knowledge, and is the effect which the law regards as produced by notice. § 594, 2 Prosser v. Rice, 28 Beav. 68, 74. § 594. (b) This sentence is quoted in Central Savings Bank v. Smith, 43 Colo. 90, 95 Pao. 307 (iw pendens). 1111 CONCERNING NOTICE. § 595 § 595. Actual Notice.^ — ^Actual notice is information concerning the fact, — as, for example, concerning the prior interest, claim, or right,— directly and personally com- municated to the party. ^ The distinction between actual and constructive notice does not primarily 'depend upon the amount of the information, but on the manner in which it is obtained, or assumed to have been obtained. In actual notice information is not inferred by any presumption of law; the personal communication of it is a fact, and, like any other fact, is to be proved by evidence. The informa- tion may be so full, minute, and circumstantial, that the party receiving it thereby acquires a complete knowledge of the prior fact affecting, the transaction in which he is then engaged, or it may fall far short of conveying such knowl- edge.2 Again, the evidence may be so direct, positive, and overwhelming as to establish the fact that the information was personally given and received in the most convincing and unequivocal manner, or it may be entirely indirect and circumstantial. Wherever, from competent evidence, either direct or circumstantial, the court or the jury is entitled to infer, as a conclusion of fact, and not by means of a/ny legal presumptions, that the information was personally com- municated to or received by the party, the notice is actual. In short, actual notice is a conclusion of fact, capable of being established by all grades of legitimate evidence.^ ^ § 595, 1 "Notice is actual when the purchaser is aware of the adverse claim or title, or has such information as would lead to knowledge" : Am. note in 2 Lead. Cas. Eq., 4th Am. ed., 144.- § 595, 2 Wi lliamson v. B rown, 15 N. Y. 354. Actual notice need not be full, circumstantial information of every material fact affecting the right of the person receiving it ; it is enough that it be information directly tending to show the existence of the fact, and sufficient to put the party on an inquiry: Barnes v. McClinton, 3 Penr. & W. 67, 23 Am. Dec. 62; Tillinghast v. Champlin, 4 R. I. 173, 215, 67 Am. Dec. 510. §595, 3 Tillinghast v. Champlin, 4 R. I. 173, 215, 67 Am. Dec. 510; Warren v. Swett, 31 N. H. 332, 341, 342; Hull v. Noble, 40 Me. 459, 480; §595, (a) This section is cited in St. L. E'y Co. v. Moore, 170 Ind. Goleman v. Dunton (Me.), 58 Atl. 328, 82 N. E. 52, 84 N. E. 540. 4S0; Oglebay V. Todd, 166 Ind. 250, §595, (b) This paragraph is 76 N. E. 238; Cleveland, C. 0. & quoted in full in Parker v. Maslin, § 596 EQUITY JUEISPEU0ENCB. 1112 §596. When Shown by Indirect Evidence.^ — ^It is ad- mitted by all text-writers and by many judges that much confusion and inaccuracy of language are exhibited in the decisions concerning actual and constructive notice ; notices are not infrequently called ' ' constructive, ' ' which are really "actual," and the rules governing the two are con- founded.1 That the party has knowledge or information of facts sufficient to put him upon an inquiry has often been treated as peculiarly the characteristic of constructive notice. In truth, however, this test is equally applicable to every instance of actual notice inferred by process of rational deduction from circumstantial evidence.^ The Buttrick v. Holden, 13 Met. 355, 357; Trefts v. King, 18 Pa. St. 157, 160; Rogers v. Jones, 8 N. H. 264; Griffith v. Griffith, 1 Hoff. Ch. 153; Nelson V. Sims, 23 Miss. 383, 388, 57 Am. Dec. 144; Curtis v. Blair, 26 Miss. 309, 328, 59 Am. Dec. 257; Bartlett v. Glascock, 4 Mo. 62, 66; Epley v. Witherow, 7 Watts, 163, 167; Jaques v. Weeks, 7 Watts, 261, 274; Blatch- ley V. Osborn, 33 Conn. 226, 233; Buck v. Paine, 50 Miss. 648, 655; Carter V. City of Portland, 4 Or. 339, 350, per McAxthur, J. (a very clear and accurate statement of the doctrine) ; Speck v. Riggin, 40 Mo. 405 ; Maupin V. Emmons, 47 Mo. 304, 306, 307; Maul v. Rider, 59 Pa. St. 167, 171, 172. § 596, 1 Wllliaiasottj?_.,Brown, 15 N. Y. 354, per S. L. Selden, J. § 596, 2 The confusion mentioned in the text is easily and completely dispelled and the necessary distinction between the two kinds of notice is clearly shown by a brief analysis of their essential operation. When A is dealing with B for the purchase of land which he knows, sees, or is told to be in the possession of a stranger, C, such possession does not show or tend to show that any information or knowledge of C's interest was directly and personally communicated to A; but the law presumes that information of C's real interest and claim was communicated. But the presumption in this case is rebuttable; it is said that A is put upon 85 Kan. 130, 116 Pac. 227. See, also, 848; all holding that actual notice is Knapp V. Bailey, 79 Me. 195, 1 Am. a conclusion of fact. St. Rep. 295, 9 Atl. 122; Batavia v. §596, (a) This section is cited in Wallace, 102 Fed. 240, 42 C. C. A. Coleman v. Dunton (Me.), 58 Atl. 310; Haskett v. Auhl, 3 Kan. App. 430; Cleveland, C. C. & St. L. E. Co. 744, 45 Pae. 608; Simon Gregory v. Moore, 170 Ind. 328, 82 N. K 52, I>ry Goods Co. v. Schooley, 66 Mo. 84 N. E. 540. Sections 596-600 are App. 406; Lewis v. Ihidley, 70 N. H. cited in Adams v. Gossom, 228 Mo. 594, 49 Atl. 572; Ball v. Panton, 64 566, 129 S. W. 16; Scoggin v. Mason, Or. 184, 129 Pae. 1032; Aultman & 46 Tex. Civ. App. 480, 103 S. W. 831. Co. V. Utsey, 34 S. C. 559, 13 S. E. 1113 CONCERNING NOTICE. § 596 distinction is plain and natural. In all cases of construc- tive notice, there is no evidence which directly tends to show that any information of the prior conflicting claim was personally brought home to the consciousness of the party affected; the particular facts of which he is shown to have knowledge do not directly tend to show such infor- mation; but from these facts the legal presumption arises, an inquiry ; if he fails to make any inquiry, or to prosecute it with reason- able diligence, then the presumption is absolute; if he does prosecute it ■with reasonable diligence, and does not discover the truth, then the pre- sumption is overcome. But it should be observed that the jury or court does not find the existence of a notice as a conclusion of fact deduced by rational argument from the fact of C's possession; the only province of the triers of fact in this case is to determine the nature, extent, and effect of A's inquiry as a means of rebutting the presumption. A second kind of constructive notice arises from recitals, statements, and references in title deeds. Here, also, it is very plain that there is nothing tending to show direct personal information, since the party is affected with the notice although he may not have read the deed, and even though he may not have seen it. A is the grantee in a deed of conveyance. From the mere fact that he must derive his title through that instrument and through the line of prior conveyances, he is charged with notice of all that they contain or refer to. This fact does not in the least tend to show that A received any direct personal information of a conflicting interest or claim ; the inference is a pure presumption of law, based upon considerations of general policy, and does not require any argumentative deduction from evidence. A third instance of constructive notice is that with which a principal is charged, when information or knowledge has been obtained by his agent. When this particular case is carefully considered, it will be perceived that it is governed by precisely the same principles as those which have already been examined. The mere fact that the agent has acquired information does not tend to show that the information has been directly and personally communicated to the principal; nor does the rule depend in the slightest degree upon such an assumption. That informa- tion constituting notice is imputed to the principal is entirely a presump- tion of law, supported by considerations of expediency, and made without any reference to the actual fact. The last instance of constructive notice which I shall mention is that resulting from registration pursuant to stat- ute. The mere fact that an instrument, of which the party is profoundly ignorant, has been recorded, certainly does not tend to show that he has received any direct personal information concerning it, and the interest or claim which it creates. The presumption arises from the positive man- § 596 EQUITY JUEISPBUDENCE. 1114 either conclusive or rebuttable, that the information was received. In all cases of actual notice inferred from cir- cumstantial evidence, the facts proved do directly tend to show that information of the prior conflicting claim was personally brought home to the consciousness of the party. The court or jury infers from the facts proved, by a process of rational deduction, but without the aid of any date of a statute; there is no oecasion for, nor even possibility of, any conclusion of fact drawn from evidence by a process of argument. The foregoing instances show the rationale of the operation of all con- structive notices. A similar analysis will disclose the true operation of actual notice. When A is dealing with B for the purchase of land, and the evidence shows that A is directly and personally informed, either by B or by C, that C already holds a conveyance, or mortgage, or entum- brance, or possesses an easement or other charge upon the same premises, the case is so simple, and the notice is so clearly actual, that no doubt can exist concerning it. Whenever the object is to prove that A has received the same kind of personal information concerning some prior interest or claim held by C, but the fact cannot be shown by any direct evidence, hut must he established by indirect and circumstantial evidence, — that is, must be inferred by the jury or court as a legitimate deduction from such evi- dence, — the notice is none the less actual; it is to be inferred as a con- clusion of fact, by a weighing of the evidence and process of argument, unaided by any legal presumptions. One illustration will suflSee. A pur- chased land from B. A third person, C, from whom B obtained the prop- erty, has a claim upon it; and the question is, whether A took with notice of C's claim. There is no direct evidence of any information given to A by either B or C. But it is proved that A is B's son, and has con- stantly lived in his house and been a member of his family; that for several years A has been acquainted with his father's business affairs, and has taken an active part in their management; that A was familiar with the transaction by which B obtained the premises from C, and aided his father in negotiating the contract with C, etc. If from these and similar facts a notice should be inferred, it would be an actual notice, and not con- structive. No legal presumptions would aid the court or jury; they would simply arrive at the conclusion, by a process of rational argument, that at some time information or knowledge of C's claim was directly and per- sonally communicated to or acquired by A, in exactly the same manner as a jury may infer that a certain man and woman were at some past time actually married, from the circumstantial evidence of their cohabita- tion and holding each other out to the world as husband and wife. The only question of law in such a case is, whether the evidence is sufficient to 1115 CONCBBNIHTG NOTICE. § 596 legal presumption, that such information was actually re- ceived.'' In weighing this evidence, the tribunal may properly ask whether the facts proved were sufficient to put the party upon an inquiry, so that, if he went on with the transaction without making any inquiry, his actual re- ceipt of information and consequent notice is a legitimate or necessary conclusion ; or whether, on the other hand, he prosecuted an inquiry to such an extent and in such a man- ner that his actual failure to acquire information is a just inference of fact.^ A careful examination of the cases con- warrant the finding of fact that information or knowledge of C's claim was actually acquired by A. It is true that many eases say, under such circumstances, that "the facts proved are sufiEicient to put the party, A, upon an inquiry, and if he neglected to make a due inquiry he must be charged with notice." Such a mode of statement is entirely proper; but it is incorrect, misleading, and a confounding of the two kinds of notice, to say under such , circumstances that if the party neglects to make a due inquiry he is presumed to have received the information which constitutes notice. In all cases of information constituting actual notice inferred from circumstantial evidence, this statement that "the facts proved are sufficient to put the party upon an inquiry," etc., is simply tantamount to saying that the facts and circumstances, when uncontradicted and un- explained, are sufficient evidence to warrant a finding that the information was directly and personally acquired by the party, but that the facts and circumstances may be sufficiently explained by the party's showing that he did make a reasonable inquiry, and did seek for information, but failed to obtain it. By such means the conclusion which would otherwise have been drawn from the unexplained circumstances is overcome and nega- tived. For illustrations of these positions, see cases cited in the next fol- lowing notei § 596, 3 In a large number of American cases the discussion concerning actual notice has arisen upon an interpretation of a statutory provision which expressly requires "actual notice" of a prior unrecorded deed or encumbrance, in order that it may have priority over a subsequent deed or mortgage which is first put on record. In a few of the states the courts have interpreted the intention of the legislature as demanding that the personal information of the unrecorded instrument should be proved by direct evidence, and as excluding all instances of actual notice established by circumstantial evidence. In most of the states, however, where this § 596, (b) The text is quoted in Houston Oil Co. of Texas v. Griggs (Tex. Civ. App.), 181 S. W. 833. § 596 EQTJiry jukispeudence. 1116 cerning notice inferred from circumstances will show that in a large proportion of them the notice was actual, and not constructive; and that one or the other of the following questions was in reality considered and determined by the court : 1. It being shown that the party had been informed of certain facts, and it further appearing that he had, not- statutory clause is found, the courts have defined the "actual notice" re- quired by the legislature as embracing all instances of that species in contradistinction from "constructive notice," — that is, all kinds of actual notice, whether proved by direct evidence or inferred as a legitimate con- clusion from circumstances." Whichever -view of the statute be taken, these decisions are all useful in describing the nature of actual notice, and especially in distinguishing actual notice proved by circumstantial evidence from constructive notice. See Brinkman v. Jones, 44 Wis. 498, 517, 519, 521, 523; Brown v. Volkening, 64 N. Y. 76, 82, 83; Lambert v. Newman, 56 Ala. 623, 625; Helms v. Chadbourne, 45 Wis. 60, 70, per Cole, J.; Chicago etc. R. R. Co. v. Kennedy, 70 lU. 350, 361, per Walker, J.; Shepardson v. Stevens, 71 111. 646; Erickson v. Rafferty, 79 111. 209, 212; Reynolds v. Ruckman, 35 Mich. 80 ; Loughridge v. Bowland, 52 Miss. 546, 553, 555 ; Tref ts v. King, 18 Pa. St. 157, 160 ; Rogers v. Jones, 8 N. H. 264; Griffith v. Griffith, 1 HofE. Ch. 153; Nelson v. Sims, 23 Miss. 383, 388, 57 Am. Dec. 144; Barnes v. McClinton, 3 Penr. & W. 67, 23 Am. Dec. 62; Bartlett v. Glascock, 4 Mo. 62, 66; Epley v. Witherow, 7 Watts, 163, 167; Jaques v. Weeks, 7 Watts, 261, 274; Buttrick v. Holden, 13 Met. 355, 357; Curtis v. Blair, 26 Miss. 309, 328, 59 Am. Dec. 257; Hull v. Noble, 40 Me. 459, 480; Warren v. Swett, 31 N. H. 332, 341; Tillinghast V. Champlin, 4 R. I. 173, 215, 67 Am. Dec. 510; Buck v. Paine, 50 Miss. 648, 655; Carter v. City of Portland, 4 Or. 339, 350; Pringle v. Dunn, 37 Wis. 449, 460, 461, 465, 19 Am. Eep. 772; Parker v. Kane, 4 Wis. 1, 65 Am. Dec. 283; Shotwell v. Harrison, 30 Mich. 179; Munroe v. Eastman, 31 Mich. 283; Eck v. Hatcher, 58 Mo. 235; Maupin v. Emmons, 47 Mo. 304, 306, 307; Parker v. Toy, 43 Miss. 260, 266, 55 Am. Rep. 484; Wailes v. Cooper, 24 Miss. 208, 228. In the recent and very instructive case of Brinkman v. Jones, 44 Wis. 498, the question was. whether a grantee had sufficient notice of a prior unrecorded deed to defeat his own recorded conveyance. The court were called upon to interpret the Wisconsin statute, which requires "actual notice" under such circumstances; and it discussed in a very full and accurate manner the true meaning and operation of actual notice. Taylor, J., said (p. 519) : "The actual notice required by the statute is not synony- §596, (c) Quoted in Knapp v. Bailey, 79 Me, 195, 1 Am. St. Rep. 295, 9 Atl. 122. 1117 CONCERNING NOTICE. § 596 withstanding such information, and without making any inquiry respecting its truth, gone on and completed the transaction, whether the court or jury were warranted in in- ferring as a legitimate conclusion from the evidence that he had also received that direct, personal information concern- ing the existence of a prior conflicting claim which the law mous with actual knowledge. We think the true rule is, that notice must be held to be actual when the subsequent purchaser has actual knowledge of such facts as would put a prudent man upon inquiry which, if prose- cuted with ordinary diligence, would lead to actual notice of the right or title in conflict with that which he is about to purchase. When the sub- sequent purchaser has knowledge of such facts, it becomes his duty to make inquiry, and he is guilty of bad faith if he neglects to do so, and consequently he will be charged with the actual notice he would have received if he had made the inquiry. We are aware that this construction of the statute is in conflict with the later decisions in Massachusetts and Indiana, and with the definition given to the term by Story in his Equity Jurisprudence, section 399 : Parker v. Osgood, 3 Allen, 487 ; Dooley v. Wolcott, 4 Allen, 406; Sibley v. Lefflngwell, 8 Allen, 584; White v. Foster, 102 Mass. 375; Lamb v. Pierce, 113 Mass. 72; Crasson v. Swoveland, 22 Ind. 428, 434. . . . These eases all proceed upon the theory that actual notica and actual knowledge mean the same thing." The court also cites decisions from many other states by which the same interpretation is given to similar statutes, and the same meaning attributed to "actual notice." It is admitted, however, that no mere "constructive notice" to the subse- quent purchaser would avail, under such a statute, to defeat his rights under an instrument first recorded. In the following eases substantially the same test is laid down, namely: "A knowledge of such facts and cir- cumstances as would put an ordinarily prudent man upon an inquiiy." It is true that in some of these opinions the language of the court appears to connect this test with constructive notice only; but a closer examination will show that, whatever be the language used, the judge really has in mind and is speaking of those instances of actual notice which are inferred from circumstantial evidence. See Lambert v. Newman, 56 Ala. 623; Helms V. Chadboume, 45 Wis. 60; Chicago etc. R. R. Co. v. Kennedy, 70 111. 350; Shepardson v. Stevens, 71 111. 646; Loughridge v. Bowland, 52 Miss. 546; Barnes v. McClinton, 3 Penr. & W. 67, 23 Am. Dec. 62; Warren V. Swett, 31 N. H. 332; Buttrick v. Holden, 13 Met. 355,— all of which are cited supra. In the recent case of Brown v. Volkening, 64 N. Y. 76, the kind and amount of notice required to defeat the precedence obtained by the first recording of a subsequent conveyance was discussed. The statute of New York does not in express terms require the notice to be actual. The notice relied upon was constructive, arising from the fact of § 597 EQUITY JUKISPEUDENCB. 1118 calls "actual nofice." 2. It being shown that the party had been informed of certain facts, and it further appearing that he had thereupon made inquiry respecting the truth of such information before he completed the transaction, whether the court or jury were warranted in inferring as a legitimate conclusion from the whole evidence, either that he had or had not received that direct personal informa- tion which constitutes actual notice.* § 597. What Constitutes It: Rumors; Putting on In- quiry, etc.^— A purchaser, or person obtaining any right in possession by a third person; and the precise point decided was confined to the kind, nature, purposes, and extent of the possession necessary under such circumstances to raise a legal presumption and to constitute a suffi- cient constructive notice. In the course of his opinion, however, Allen, J., speaks of actual notice in the following language, which fully corrob- orates the positions of the text (p. 82) : "Actual notice of a prior unre- corded conveyance, or of any title, legal or equitable, to the premises, or knowledge or notice of any facts which should put a prudent man upon inquiry, impeaches the good faith of the subsequent purchaser. There should he proof of actusJ notice of prior title or prior equities, or circum- stances tending to prove such prior rights, which affect the conscience of the subsequent purchaser. Actual notice of itself impeaches the subse- quent conveyance. Proof of circumstances short of actual notice, which should put a prudent man upon inquiry, authorizes the court or jury to infer and find actual notice." This passage of Mr. Justice Allen's opinion exactly adopts the reasoning and conclusions as given in the text. It de- clares that when a court or jury find notice as a conclusion of fact from circumstances tending to show it, which should put a prudent man upon inquiry, such notice is actual as truly as though it was proved by direct evidence. It is actual, and not constructive, because, although inferred from circumstances, it is inferred. by mere process of argument, and not by means of any legal presumptions. If the party thus put upon inquiry neglects to prosecute the inquiry, the conclusion of fact is then absolute, since the circumstances are left unexplained and the natural inference from them is left unanswered and unweakened. To the same effect as Brinkman v. Jones, 44 Wis. 498, is Maupin v. Emmons, 47 Mo. 304, 306, 307. § 596, 4 See the eases cited in the last preceding and in the next follow- ing notes. §597, (a) Sections 597, 598, aro 137 Wis. 66, 16 Ann. Cas. 821, 117 cited in Stuart v. Farmers' Bank, N. W. 820, dissenting opinion. TliLs 1119 CONCERNING NOTICE. § 597 specific property, is not affected by vague rumors, hearsay statements^ and th.e like, concerning prior and conflicting claims upon the same property ; and the reason is, that such kind of reports and statements do not furnish him with any positive information, any tangible clew, by the aid of which he may commence and successfully prosecute an inquiry, and thus discover the real truth; his conscience is there- fore not bound, ^^ On the other hand, the proposition is established by an absolute unanimity of authority, and is equally true both in its application to constructive notice, and to actual notice not proved by direct evidence but in- ferred from circumstances, that if the party obtains knowl- edge or information of facts tending to show the existence of a prior right in conflict with the interest which he is seeking to obtain, and which are sufficient to put a rea- sonably prudent man upon inquiry, then it may be a legiti- mate, and perhaps even necessary, inference that he ac- quired the further information which constitutes actual notice. This inference is not, in case of actual notice, a presumption, much less a conclusive presumption, of law; it may be defeated by proper evidence. If the party shows that he made the inquiry, and prosecuted it with reason- able diligence, but still failed to discover the conflicting claim, he thereby overcomes and destroys the inference. If, however, it appears that the party obtains knowledge § 597, 1 Woodworth v. Paige, 5 Ohio St. 70 ; Lamont v. Stimson, 5 Wis. 443; Shepard v. Shepard, 36 Miss. 173; Doyle v. Teas, 4 Scam. 202; Butler v^ Stevens, 26 Me. 484; Jaques v. "Weeks, 7 Watts, 261, 267; Wilson V. McCullough, 23 Pa. St. 440, 62 Am. Dec. 347; JoUand v. Stainbridge, 3 Ves. 478. paragraph is cited in Northrop v. Malone, 35 Fed. 445; Eaymond v. Columbian Lumber Co., 186 Fed. 770, Flavel, 27 Or. 219, 40 Pae. 158 (cit- 108 C. C. A. 640; John SUvey & Co. ing this section); Hopkins v. V. Cook, 191 Ala. 228, 68 South. 37; O'Brien, 57 Fla. 444, 49 South. 936 Mellon V. St. Louis Union Trust Co., (neighborhood reputation) : W. L. 225 Fed. 693, 140 G. C. A. 567; Moody & Co. v. Martin (Tex. Civ. Johansen v. Looney, 30 Idaho, 123, App.), 117 S. W. 1015; Williams v. 163 Pac. 303. Smith. 128 Ga. 306, 57 S. B. 801; and § 597, (b) See, also, Satterfield v. post, § 602. § 597 EQUITY JUBISPEUDENCE. 1120 or information of such facts, which are sufficient to put a prudent man upon inquiry, and which are of such a nature that the inquiry, if prosecuted with, reasonable diligence, would certainly lead to a discovery of the conflicting .claim,"' then the inference that he acquired the information con- stituting actual notice is necessary and absolute; for this is only another mode of stating that the party was put upon inquiry ; that he made the inquiry and arrived at the truth. Finally, if it appears that the party has knowledge or in- formation of such facts sufficient to put a prudent man upon inquiry, and that he whoUy neglects to make any inquiry, or having begun it fails to prosecute it in a reasonable man- ner, then, also, the inference of actual notice is necessary and absolute.* These three propositions substantially em- brace all instances of actual notice proved by circumstan- tial evidence, and they are illustrated by a vast number of decisions, each depending upon its own particular circum- stances.2 e §597, 2 Spofford v. Weston, 29 Me. 140; "Warren v. Swett, 31 N. H. 332, 341; Nute v. Nute, 41 N. H. 60; BlaisdeU v. Stevens, 16 Vt. 179, 186; Stafford v. Ballon, 17 Vt. 329; MeDaniels V. Flower Brpok etc. M. Co., 22 Vt. 274; Stevens v. Goodenough, 26 Vt. 676; BlatcUey v. Osborn, 33 § 597, (c) Quoted in dissenting from whom inquiry would have been opinion in Bell v. Solomons (Cal.), made did not know of her right, fail- 75 Pae. 649; in New York, N. H. & ure to make it is immaterial); John- H. B. Co. V. Eussell, 83 Conn. 581, son v. Eriandson, 14 N. D. 518, 105 78 Atl. 324; in Le Vine v. White- N. W. 722 (facts discovered must house, 37 Utah, 260, Ann. Cas. 1912C, furnish a «lue to facts to be dis- 407, 109 Pac. 2; paraphrased in covered). Wahl v. Stoy, 72 N. J. Eq. 607, §597, (d) The text is quoted in 66 Atl. 176. That the facts must New York, N. H. & H. R. Co. v. Eus- be of such a nature as to lead sell, 83 Conn. 581, 78 Atl. 324; in Le to the discovery of the conflicting Vine v. Whitehouse, 37 Utah, 260, claim, see College Park Electric Belt Ann. Cas. 1912C, 407, 109 Pac. 2; Line v. Ide, 15 Tex. Civ. App. 273, and paraphrased in Wahl v. Stoy, 40 S. W. 64; Fischer v. Lee, 98 Va. 72 N. J. Eq. 607, 66 Atl. 176. 159, 35 S. E. 441; and cases cited at § 597, (e) The text is cited in the end of this paragraph. See, also, Houston Oil Co. v. Wilhelm, 182 Fed. Herbert v. Wagg, 27 Okl. 674, 117 474, 104 C. C. A. 618; Johansen v. Pae. 209 (where inquiry would have Looney, 30 Idaho, 123, 163 Pac. 303. been ineffectual, because the party In addition to the recent cases cited 1121 CONCERNING NOTICE, §598 § 598. Special Rules. — ^The general rules formulated in the foregoing paragraphs apply to all species of actual notice. The inquiry next presents itself, whether any more particular rules have been established which determine the existence or non-existence of actual notice under special conditions of fact. Since actual notice is, by its very defini- Conn. 226, 233 ; Sigourney v. Munn, 7 Conn. 324 ; Peters v. Goodrich, 3 Conn, 146; Earitan Water etc. Co. v. Veghte, 21 N. J. Eq. 463, 478; Hoy V. Bramhall, 19 N. J. Eq. 563, 97 Am. Dec. 687; Williamson v. Brown, 15 N. Y. 354, 362; Swarthout v. Curtis, 5 N. Y. 301, 55 Am. Dec. 345; Pendleton v. Fay, 2 Paige, 202; Danforth v. Dart, 4 Duer, 101; Jackson V. Caldwell, 1 Cow. 622; Hawley v. Cramer, 4 Cow. 717; Parrish v. Brooks, 4 Brewst. 154; Kerns v. Swope, 2 Watts, 75; Jaques v. Weeks, 7 Watts, 261, 274; Epley v. Witherow, 7 Watts, 163, 167; Bellas v. McCarthy, 10 Watts, 13; Randall v. SUverthome, 4 Pa. St. 173; Trefts v. King, 18 Pa. St. 157, 160; Ringgold v. Bryan, 3 Md. Ch. 488; Stockett v. Taylor, 3 Md. Ch. 537; Bunting v. Ricks, 2 Dev. & B. Eq. 130, 32 Am. Dec. 699; ■ Gibbes v. Cobb, 7 Rich. Eq. 54; Maybin v. Kirby,'4 Rich. Eq. 105; Center V. Bank, 22 Ala. 743; McGehee v. Gindrat, 20 Ala. 95; Ringgold v. Wag- goner, 14 Ark. 69; Bartlett v. Glascock, 4 Mo. 62, 66; Doyle v. Teas, 4 Scam. 202; Hoxie v. Carr, 1 Sum. 193; Hinde v. Vattier, 1 McLean, 110, 7 Pet. 252; Lambert v. Newman, 56 Ala. 623, 625; Helms v. Chadboume, 45 Wis. 60, 70; Brinkman v. Jones, 44 Wis. 498, 519; Chicago etc. R. R. V. Kennedy, 70 111. 350, 361; Shepardson v. Stevens, 71 111. 646; Erickson V. Rafferty, 79 111. 209, 212; Reynolds v. Ruckman, 35 Mich. 80; Lough- ridge V. Bowland, 52 Miss. 546, 555; Brown v. Volkening, 64 N. Y. 76, 82; Chicago v. Witt, 75 111. 211; Buck v. Paine, 50 Miss. 648, 655; McLeod V. First "Nat. Bank, 42 Miss. 99, 112; Parker v. Foy, 43 Miss. 260, 55 Am. Rep. 484; Carter v. City of Portland, 4 Or. 339, 350, per McArthur, J. (a very clear and accurate statement of the doctrine) ; Pringle v. Dunn, 37 Wis. 449, 465, 19 Am. Rep. 772; Shotwell v. Harrison, 30 Mich. 179; Munroe v. Eastman, 31 Mich. 283; Eek v. Hatcher, 58 Mo. 235; Maul v. Rider, 59 Pa. St. 167, 171, 172; Lawton v. Gordon, 37 Cal. 202, 205. in the notes to the foregoing and the of lease) ; Spenee v. Mobile & M. E. following sections, see these recent Co., 79 Ala. 576; Woodall v. Kelly, cases: Smith v. Ayer, 101 U. S. 320; 85 Ala,. 368, 7 Am. St. Rep. 57, 5 Havana Central B. Go. v. Central South. 164; Gamble v. Black Warrior Trust Co., 204 Fed. 546, 123 C. C. A. Cofil Co., 172 Ala. 669, 55 South. 190; 72; Mellon v. St. Louis Union Trust Luke v. Smith, 13 Ariz. 155, 108 Pac. Co., 225 Fed. 693, 140 C. C. A. 567 494 (notice to party to a suit, from (citing text; notice that party is the complaint therein, of the plain- lessee puts on inquiry as to terms tiff's right, though the complaint 11—71 §598 EQUITY JURISPBUDENOB. 1122 tion, a conclusion of fact inferred from evidence more or less convincing, it is plain that each case must, to a great extent, depend upon its own circumstances ; and the results collected and arranged from the decisions must therefore be regarded as illustrations of the general doctrines hereto- fore described, rather than as additional and more definite rules. It is possible, however, to reach some conclusions from a comparison and classification of judicial opinions, which will afford great practical aid in applying these gen- does not state the facts) ; Mont- gomery V. Keppel, 75 Cal. 128, 7 Am. St. Eep. 125, 19 Pac. 178; Leake V. Watson, 58 Conn. 332, 18 Am. St. Rep. 270, 20 Atl. 343; GaJe v. Hardy, 20 Pla. 171; TJrqiihart v. Leverett, 69 Ga. 92; Hunt v. Dunn, 74 Ga. 124; Stokes V. Eiley, 121 HI. 166, 11 N. E. 877; Wishard v. Hansen, 99 Iowa, 307, 61 Am. St. Rep. 238, 88 N. W. 691; Schnavely v. Bishop, 8 Kan. App. 301, 55 Pac. 667 (notice to pur- chager of mortgaged chattels); Knapp V. Bailey, 79 Me. 195, 1 Am. St. Eep. 295, 9 Atl. 122; Bradley v. Merrill, 88 Me. 319, 34 Atl. 160; Marbury v. Ehlers, 72 Md. 206, 20 Am. St. Rep. 467, 19 Atl. 648; Kent V. Melius, 69 Mich. 71, 37 N. W. 48; Hains v. Hains, 69 Mich. 581, 37 N. W. 563; Mercantile Nat. Bank v. Parsons, 54 Minn. 56, 40 Am. St. Eep. 299, 55 N. W. 825; Sensen- derfer v. Kempf, 83 Mo. 581, citing this section; Connecticut Mut. L. 'Ins. Co. V. Smith, 117 Mo. 261, 38 Am. St. Eep. 656, 22 S. W. 633, cit- ing §§596-600 of the text; Werner V. Litzinger, 45 Mo. App. 106 (notice need not be of the exact nature of the lien) ; Sicher v. Eambousek, 193 Mo. 113, 91 S. W. 68; Eichmond v. Ashoraft, 137 Mo. App. 191, 117 S. W. 689; Hurley v. O'Neill, 26 Mont. 269, 67 Pac. 626; Frerking v. Thomas, 64 Neb. 193, 89 N. W. 1005; McParland v. Peters, 87 Neb. 829, 128 N. W. 523; Lang Syne Gold Min- ing Co. V. Eoss, 20 Nev. 127, 19 Am. St. Eep. 337, 18 Pac. 358; Kline v. Grannis, 61 N. J. Eq. 397, 48 Atl. 566; Hodge v. United States Steel Corporation (N. J. Eq.), 54 Atl. 1; Ellis V. Horrman, 90 N. Y. 466; Wannemacher v. Merrill, 22 N. D. 46, 132 N. W. 412; Trumbo v. Ver- non, 22 N. D. 191, 133 N. W. 296; McDougal V. Lame, 39 Or. 212, 64 Pac. 864, and cases cited; Morgan's Appeal, 126 Pa. St. 500, 17 Atl. 666 (notice to assignee of mortgage); Middletou v. Johnston (Tex. Civ. App.), 110 S. W. 789; W. L. Moody & Co. V. Martin (Tex. Civ. App.), 117 S. W. 1015; La Brie v. Cart- wright, 55 Tex. Civ. App. 144, 118 S. W. 785; Toland v. Corey, 6 Utah, 392, 24 Pac. 190, citing this and the following sections; Neponset Land & L. Co. V. Dixon, 10 Utah, 334, 37 Pac. 573, citing this section; Town of Woodbury v. Bruce, 59 Vt. 624, 11 Atl. 52; Eoanoke Brick & L. Co. v. Simmons (Va.), 20 S. B. 955, citing §§ 595-597 of the text; Copperthite V. Loudoun Nat. Bank, 111 Va. 70, 68 S. B. 392; Cain v. Cox, 23 W. Va. 594; Barley v. Bateman, 40 W. Va. 540, 22 S. E. 72 (notice of un- docketed judgment) ; Pocahontas Tanning Co. v. St. Lawrence Boom & Mfg. Co., 63 W. Va. 685, 60 S. E. 1123 CONCERNING NOTICE. 598 eral rules to particular cases. The whole inquiry is re- duced to the examination of two entirely distinct questions, which should not be confounded, namely: What kind of information personally communicated to a party consti- tutes the actual notice proved by direct evidence? What facts are sufficient to put a party upon an inquiry, so that, if not overcome by contrary proofs, they would constitute the actual notice inferred from circumstantial evidence? 890; Diehl v. Middle States Loan Bldg. & Construction Co., 72 W. Va. 74, 77 S. E. 549. The doctrine as to actual notice inferred from circumstances is well illustrated by innumerable cases of conveyances or transfers in fraud of creditors, where the purchaser from the fraudulent debtor is charged, or sought to be charged, with notice of the fraudulent intent; see Shauer v. Alterton, 151 U. S. 607, 14 Sup. Ct. 442; Simms v. Morse, 2 Fed. 325 (purchaser not affected by mere sus- picion); Singer v. Jacobs, 11 Fed. 559; The Holladay Case, 27 Fed. 849; Walker v. Collins, 50 Fed. 737, 1 0. C. A. 642, 4 TJ. S. App. 406, and cases cited; Brittain v. Crowther, 54 Fed. 295, 4 0. C. A. 341, 12 U. S. App. 148; B'atavia v. Wallace, 102 Fed. 240, 42 C. C. A. 310, and eases cited; Montgomery v. Bayliss, 96 Ala. 342, 11 South. 198, and eases cited; Chip- man V. Glennon, 98 Ala. 263, 13 South. 822; Simmons v. Shelton, 112 Ala. 284, 57 Am. St. Rep. 39, 21 South. 309; Dyer v. Taylor, 50 Ark. 314, 7 S. W. 258; Adler-Goldman CommiEsion Co. v. Hathcock, 55 Ark. 579, 18 S. W. 1048; Ballou v. An- drews Bkg. Co., 128 Cal. 562, 61 Pac. 102; Knower v. Clothing Co., 57 Conn. 202, 221, 17 Atl. 580; Reagan V. First Nat. Bk., 157 Ind. 623, 61 N. E. 575, 62 N. K 701; Jones v. Hetherington, 45 Iowa, 681; Gamet V. Simmons, 103 Iowa, 163, 72 N. W. 444; Gollober v. Martin, 33 Kan. 252, 6 Pac. 267; Martin v. Marshall, 54 Kan. 147, 37 Pac. 977; Kicholson v. Freeman, 56 Kan. 463, 43 Pac. 772; Haskett v. Auhl, 3 Kan. App. 744, 45 Pac. 608 (circumstances out of the usual course of business, and such as to excite the suspicions of a reason- ably prudent man); Biddinger v. Wyland, 67 Md. 359, 10 Atl. 202; Smith V. Pattison, 84 Md. 341, 35 Atl. 963; Carroll v. Hayward, 124 Mass. 120; Hastings Malting Co. v. Heller, 47 Minn. 71, 49 N.'w. 400; Dow V. Sutphin, 47 Minn. 479, 50 N. W. 604; Tuteur v. Chase, 06 Miss. 476, 14 Am. St. Rep. 577, 4 L. K. A. 832, 6 South. 241 (mere suspicion not sufficient) ; State v. Purcell, 131 Mo. 312, 33 S. W. 13; Reid, Murdock & Co. V. Lloyd, 52 Mo. App. 278; Sam- mons V. O'Neill, 60 Mo. App. 530; Heam v. Due, 79 Mo. App. 322; Parker v. Conner, 93 N. T. 118, 124, 45 Am. Rep. 178; Fluegel v. Hen- schel, 7 N. D. 276, 66 Am. St. Rep. 642, 74 N. W. 996, and cases cited; Tantum v. Green, 21 N. J. Eq. 364; Coolidge V. Heneky, 11 Or. 327, 8 Pac. 281; Dodd v. Gaines, 82 Tex. 429, 18 S. W. 618; Anderson v. Mossy Creek Woolen Mills Co., 100 Va. 420, 41 S. E. 854; McMasters v. Edgar, 22 W. Va. 673; Keneweg Co. V. Schilansky, 47 W. Va. 287, 34 S. E. 773; Wilson v. Carrioo, 50 W. Va. 336, 40 S. E. 439; Rindskopf v. Myers, 87 Wis. 80, 57 N. W. 967. § 599 EQUITY JUKISPBUDENCE. 1124 § 599. Same — Kind and Amount of Information Neces- sary. — ^In the first of these two inquiries, it is assumed that some information is shown by direct evidence to have been personally communicated to the party, and the sole ques- tion is, What 'kind or amount of such information will constitute actual notice, and so bind his conscience? Whenever A is dealing concerning certain property with B, who acts as owner, grantor, vendor, or mortgagor, as the case may be, a definite statement made to A by a third person, C, that he has or claims some conflicting interest or right, legal or equitable, in the subject-matter, is a suffi- cient actual notice to affect A's conscience. The statement need not be so full and detailed that it communicates to A complete knowledge of the opposing interest or right ; it is enough that it is so definite as to assert the existence of an interest or right as a fact.^"- Under the same cir- cumstances, if A is informed by the grantor or vendor, B, that the subject-matter is encumbered, or is subject to an outstaliding -lien or equitable claim, or that he himself has not for any reason a title free and perfect, such informa- tion is actual notice; it need not state all the particulars, nor impart complete knowledge of the conflicting interest, encumbrance, or right; it is enough that A is reasonably informed, and has reasonable grounds to believe, that the conflicting right exists as a fact.^ i> Of course the state- §599, lEpley v. Witherow, 7 Watts, 163, 167; Jaques v. Weeks, 7 Watts, 261, 274; Barnes v. MeClinton, 3 Penr. & W. 67, 23 Am. Dec. 62; Bartlett v. Glascock, 4 Mo. 62, 66; Nelson v. Sims, 6 Miss. 383, 38S, 57 Am. Dec. 144; Blatchley v. Osborn, 33 Conn. 226, 233; Reynolds v. Ruck- man, 35 Mich. 80 (a ease in whieli it was held that no notice had been given) ; Ponder v. Scott, 44 Ala. 241, 244, 245 (case in which no notice was held to have been given). § 599, 2 Hudson v. Warner, 2 Har. & G. 415 ; Price v. McDonald, 1 Md. 403, 54 Am. Dec. 657; Russell v. Petree, 10 B. Mon. 184, 186; Reynolds § 599, (a) The text is cited and § 599, (b) Jackson v. WaJdstein followed in Bell v. Bell, 103 S. C. 95, (Tex. Civ. App.), 27 S. W. 26 (ven- 87 S. B. 540. See, also, Fry v. War- dor told vendee that he did not know field etc. Co., 105 Iowa, 559, 75 N. W. whether he owned the property or 485. not); Ohio Eiver Junction E. Co. v. 1125 CONCEENING NOTICE. § 599 ment by B may be so vague and uncertain, or it may be so accompanied by additional explanatory or contradictory- matter, that it does not affect the conscience of the pur- chaser, A, and does not amount to an actual notice.^ ^ "Wherever, under the circumstances above described, in- formation given by the grantor or vendor with whom the purchaser is dealing, or by the holder of the conflicting claim or right, would constitute an actual notice, the same information may be communicated by a relative or friend of either of these persons, and would then operate in like manner as actual notice, provided the party so repre- sented was prevented by absence, sickness, or other dis- ability from making the communication in his own person and on his own behalf.'* V. Ruckman, 35 Mich. 80 (example of no notice) ; Chicago v. Witt, 75 III. 211 (ditto, no notice) ; Ponder v. Scott, 44 Ala. 241, 244, 245 (notice merely of an intention to execute a deed is not notice of the contents of the deed afterwards executed). Definite information of a conflicting claim communicated by a third person, neither the claimant nor -the party with whom the purchaser is dealing, who speaks from his own positive knowl- edge, may amount to the knowledge which supersedes and takes the place of a mere notice. This question is fully examined in a subsequent para- graph. See Butcher v. Yocum, 61 Pa. St. 168, 171, 100 Am. Dec. 625 ; Lawton v. Gordon, 37 Cal. 202, 205, 206.« § 599, 3 Buttrick v. Holden, 13 Met. 355, 357; Curtis v. Blair, 9 Miss. 309, 328, 59 Am. Dec. 257; Chicago v. Witt, 75 HI. 211; Ponder v. Seott, 44 Ala. 241, 244, 245 ; and see post, § 601, where the question is more fully examined. §599, 4 Butcher v. Yocum, 61 Pa. St. 168, 171, 100 Am. Dec. 625; MuUiken v. Graham, 72 Pa. St. 484; Ripple v. Ripple, 1 Rawle, 386. In Butcher v. Yocum, 61 Pa. St. 168, 100 Am. Dec. 625, it was said not to be essential that notice of an equitable interest should come from the party interested or his agent; it may come aliunde, provided it be of a character likely to gain credit. A person about to purchase land from a widow in whom the legal title was vested was informed by the grand- Pennsylvania Co., 222 Pa. St. 573, 72 Ala. 368, 7 Am. St. Rep. 57, 5 Soiitli. Atl. 271 (purchaser accepts state- 164. ment of vendor as to binding effect § 599, (d) Satterfield v. Malone, 3.3 of outstanding agreement of sale Fed. 445, 1 L. R. A. 35; Shulthis v. with another). McDougal, 170. Fed. 529, 95 C. C. A. §599, (c) Woodall v. Kelly, 85 615. § 600 EQUITY JUEISPRUDENCE. 1126 § 600. Same — ^What Circumstances Sufficient.— The sec- ond question is, What facts are sufficient to put the party upon an inquiry, so that he may thereby be charged with the actual notice inferred from circumstantial evidence? Among the facts to which, as evidence, such force has been attributed are: Close relationship, personal intimacy, or business connections existing between the purchaser and the party with whom he is dealing, or between him and the holder of the adverse claim ; ^ great inadequacy of the price, which may arouse the purchaser's suspicion, and put him upon an inquiry as to the reasons for selling the property at less than its apparent value ; ^ b the sight or knowledge of father of her minor children that the equitable title had been in her de- ceased husband, and was then in his heirs. The grandfather was held a proper person to give notice, and the purchaser was bound by it as an actual notice. In Ripple v. Ripple, 1 Rawle, 386, a notice was given by an uncle of the person interested. But per contra, see Woods v. Parmere, 7 Watts, 382, 387, 32 Am. Dec. 772, per Gibson, C. J.; JoUand v. Stain- bridge, 3 Ves. 478, per Lord Loughborough.® § 600, 1 It is hardly to be supposed, however, that notice could be inferred from mere relationship or intimacy, without any other circum- stances:" Tillinghast v. Champlin, 4 R. I. 173, 204, 215, 67 Am. Dec. 510; Spurloek v. Sullivan, 36 Tex. 511; Trefts v. King, 18 Pa. St. 157, 160; Phillips V. Bank of Lewistown, 18 Pa. St. 394, 404; Hoxie v. Carr, 1 Sum. 173, 192; Elagg v. Mann, 2 Sum. 486; Dubois v. Barker, 4 Hun, 80, 86; 6 Thomp. & C. 349 (mere relationship of grantee to grantor, without any other evidence, not sufficient ground from which to infer notice of a con- flicting equitable claim) ; Reynolds v. Ruokman, 35 Mich. 80 (knowledge of a partnership existing between a grantor and another held not suffi- cient to charge grantee with notice). § 600, 2 Peabody v. Fenton, 3 Barb. Ch. 451; Hoppin v. Doty, 25 Wis. 573; Beadles v. Miller, 9 Bush, 405 (case in which inadequacy, of price § 599, (e) In John v. Battle, 58 veyances in fraud of creditors, with Tex. 591, public notice given at a respect to the grantee's notice of the bankrupt sale that the wife of the fraudulent intent: .Tohnson v. Jones, bankrupt "claimed an interest" in 16 Colo. 138, 26 Pao. 584; Fraser v. the estate, was held sufficient to Passage, 63 Mich. 551, 30 N. W. 334; charge purchasers at the sale. As to Pluegel v. Henschel, 7 N. D. 276, 66 who is an interested party within Am. St. Eep. 642, 74 N. W. 996. the rule, see, further, Yaukey v. § 600, (h) Inadeoiuacy of Price as Forney, 231 Pa. St. 371, 80 Atl. 879. Notice. — The text is quoted in Moore § 600, (a) So held, in cases of con- v. Sawyer, 167 Fed. 826 (purchaser 1127 CONCERNING NOTICE. §600 Visible material objects upon or connected with t^^e subject- matter, which may reasonably suggest the existence of some easement or other similar right.^ "^ The irregular, defec- was held not sufficient notice of grantor's fraudulent design, so as to invalidate a conveyance as against the grantor's creditors) ; Eck v. Hatcher, 58 Mo. 235 (case in which inadequacy of price and other circumstances were held a sufficient notice of grantor's fraud, etc.) ; Hoppin v. Doty, 25 Wis. 573, 591 (a grantee bought for one hundred dollars land which he knew to he worth two thousand dollars ; held a notice of the grantor's defects of title, fraudulent intent in conveying, etc.). § 600, 3 Thus structures upon land distinctly visible to the purchaser have been held sufficient to put him on an inquiry, and to constitute notice to him of an existing easement; Raritan Water Power Co. v. Veghte, 21 N. J. Eq. 463, 478; Hoy v. Bramhall, 19. N. J. Eq. 563; Randall v. Silver- thorn, 4 Pa. St. 173.* The fact that there were fourteen chimney-pots put on inquiry hty the inadequate con- sideration of a deed to his grantor) : Pelham v. Chattahooehie E. Co., 156 Ala. 500, 47 South. 172; New York, N. H. & H. E. Co. v. Eussell, 83 Conn. 581, 78 Atl. 324. See, also, Dunn V. Barnum, 51 Fed. 355, 10 U. S. App. 86, 2 C. C. A. 265; Barstow v. Beckett, 122 Fed. 140; Gaines v. Saunders, 50 Ark. 322, 7 S. W. 301; Mason v. Mullahey, 145 111. 383, 34 N. E. 36; Hume V. Franzen, 73 Iowa, 25, 34 N. W. 490; Allen v. Stingel, 95 Mich. 195, 54 N. W. 880; Baldwin v. An- derson, 103 Miss. 462, 60 South. 578 (purchase price only one-third real value) ; Connecticut Mut. Life Ins. Co. V. Smith, 117 Mo. 261, 38 Am. St. Bep. 656, 22 S. W. 623, citing this section; Brown v. Columbus (N. J. Eq.), 75 Atl. 917; Durant v. Crowell, 97 N". C. 367, 2 S. E. 541; Wood v. French, 39 Okl. 685, 136 Pac. 734; Jackson v. Waldstein (Tex. Civ. App.), 27 S. W. 26; Hume v. Ware, 87 Tex. 380, 28 S. W. 935. The fact that a conveyance by a husband to his wife was voluntary is sufficient to put a subsequent purchaser on inquiry as to whether the convey- ance was in fraud of the grantor's creditors; Milholland v. Tiffany, 64 Md. 455, 2 Atl. 831; and see New England Loan & T. Co. v. Avery (Tex. Civ. App.). 41 S. W. 673. In the following cases the inadequacy of price was held not sufficiently great to put the purchaser upon in^ quiry: Fish v. Benson, 71 Cal. 428, 12 ,Pac. 454; Thomas v. Van Meter, 164 111. 304, 45 N. B. 405; Anderson V. Blood, 152 N. Y. 285, 57 Am. St. Bep. 515, 46 N. E. 493 (purchaser not affected by mere suspicion); Wilmerdiiig v. Jarmulowsky, 85 Hun, 285, 32 N. Y. Supp. 983. As to inadequacy of the consideration destroying the bona fidos of the pur- chase, see post, § 747, and cases cited. § 600, (c) The text is quoted in Moore v. Sawyer, 167 Fed. 826; New York, N. H. & H. E. Co. v. Eussell, S3 €onn. 581, 78 Atl. 324 (power line across the land). § 600, (d) Notice from Structures, Maps, etc. — See, also, Atlantic City V. New Auditorium Pier Co., 63 N. J. Eq. 644, 53 Atl. 99; Bradley v. Walker, 138 N. Y. 291, 33' N. E. §600 EQUITY JUKISPKUDEITCE. 1128 tive, or improper recording of an instrument, although clearly not a constructive notice under the statute, may be sufficient to put a purchaser upon inquiry, and so constitute an actual notice ; and the inspection, perusal, or knowledge of a writing which purported to be a certified or official copy of the instrument thus defectively or improperly re- on the top of a house, but only twelve flues in the house, was held to be notice to the purchaser of an easement for the passage of smoke, held by an adjoining owner: Hervey v. Smith, 22 Beav. 299; and see Davies v. Sear, L. R. 7 Eq. 427; Blatchley v. Osborn, 33 Conn. 226, 233. In Paul V. Connersville etc. R. R., 51 Ind. 527, 530, it was held that a grantee of land with a graded railroad track openly across it, having embank- ments and excavations plainly to be seen by the purchaser, takes with actual notice of all the rights in the land possessed by the railroad com- pany; and a warranty deed from his grantor cannot affect those rights." 1079, citing this chapter (fact that houses are set back eight feet from the street is not notice of an equi- table easement) ; McDougal v. Lame, 39 Or. 212, 64 Pae. 864 (easement in ditch on land purchased); Joseph v. Wild, 146 Ind. 249, 45 N. E. 467 (easement in stairway over vacant lot from adjoining building.) See, further, Pollard v. Eebman, 162 Cal. 633, 124 Pae. 235 (gate in fence in- suflScient to put on inquiry as to right of way); Lorenzi v. Star Market Co., 19 Idaho, 674, 35 L. R. A. (N. S.) 1142, 115 Pae. 490 (party-wall, notice of agreement relating thereto) ; Brown v. Honeyfield, 139 Iowa, 414, 116 N. W. 731 (drain ditch) ; Long- shore V. Chicago & Great Western E. Co., 147 Iowa, 463, 124 N. W. 795 (right of way under railroad bridge) ; Seng V. Payne, 87 Neb. 812, 128 N. W. 625 (drain ditch); Eollo v. Nelson, 34 Utah, 116, 26 L. R. A. (N. S.) 315, 96 Pae. 263; Kalinowski V. Jacobowski, 52 Wash. 359, 100 Pae. 852 (right of way) ; Eoundtree V. HuteMnson, 57 Wash. 414, 27 L. R. A. (N. S.) S75, 107 Pae. 345 (public right of burial); Hawkea v. Hoffman, 56 Wash. 120, 24 L. R. A. (N. S.) 1038, 105 Pae. 156 (exist- ence of party-wall is not notice of an agreement to contribute to the cost of it), gee, also. Eshleman v. Parkesburg Iron Co., 235 Pa. St. 439, 84 Atl. 399 (purchaser of riparian land, with notice of existence of a dam farther upstream, bound by no- tice of terms of the easement for di- version of water). Similarly, where the shape and location of lots on a map suggested their intended use as a public park, the purchaser was put on inquiry: Commonwealth v. Cal- houn, 184 Pa. St. 629, 39 Atl. 563. See, also, Higbee Fishing Club' v. Atlantic City Electric Co., 78 N. J. Eq. 434, 79 Atl. 326 (survey shows existence of a right of way of neces- sity). § 600, (e) For further instances of notice of easements in favor of rail- roads from the existence of tracks or grades upon the land, see Indiana, B. & W. E. Co. v. McBroom, 114 Ind. 198, 15 N. E. 831; Kamer v. Bryant, 103 Ky. 723, 46 S. W. 14; Goodman V. Heilig, 157 N. C. 6, 36 L. R. A. (N. S.) 1004, 72 S. E, 866; Chicago 1129 CONCBKNING NOTICE. §600 corded sliould produce the same effect, although upon this particular point there seems to be some conflict of judicial opinion. It has even been held that, under special cir- cumstances, a jury or court might assume as an inference of fact, in the absence of any positive evidence, that a purchaser examined the public records, and thus obtained information amounting to an actual notice from a con- veyance imperfectly recorded, or improperly recorded, through some defect.** §600, 4 Kerns v. Swope, 2 Watts, 75; Hastings v. Cutler, 24 N. H. 481. In Kerns v. Swope, 2 Watts, 75, a deed of land lying in two coun- & E. I. R. Co. V. Wright, 153 111. 307, 38 N. E. 1062 (purchaser knew name of the railroad company, and by in- quiry of its officers eould have learned of an unrecorded deed of the right of way). Other circumstances putting on in- qmry. — One who has knowledge that the purchase-money of land was un- paid, wholly or in part, at the tiuje of the passing of title, is hound to inquire as to the existence and ex- tent of a vendor's lien on the land and the manner in which payment of it was secured: Briscoe v. Minah Consolidated Min. Co., 82 Fed. 952; Woodall V. Kelly, 85 Ala. 368, 7 Am. St. Eep. 57, 5 South. 164; Ellis v. Horrman, 90 N. Y. 466; see, also, post, § 1253, note. That the assignee of a, mortgage is bound to make in- quiries of the mortgagor, or else is chargeable with the equities in his favor, see Morgan's Appeal, 126 Pa. St. 500, 17 Atl. 666; and post, § 733.. An execution purchaser who knows that the judgment was procured by fraud is put on inquiry as to the rights of the defendant against whom the judgment was rendered: Lang Syne G-old Mining Co. v. Boss, 20 Nev. 127, 19 Am. St. Rep. 337, IS' Pac. 358. Knowledge that there was a water right connected with the land purchased puts the pur- chaser on inquiry as to its terms: Fresno C. & I. Co. v. Russell, 80 Cal. 114, 13 Am. St. Rep. 112, 22 Pac. 53. See, also, Marx v. Oliver, 246 111. 316, 92 N. E. 864 (vendee of incom- pleted house, knowing that the build- ing contract gave vendor right to make changes, takes with notice of changes- actually made by vendor be- fore the sale) ; Zweigart v. Reed, 221 Mo. 33, 119 S. W. 960 (knowledge that someone other than record holder of title had paid taxes, puts on inquiry as to claim of such party). It has been suggested that publica- tion of a fact in a newspaper habitu- ally read by a party or his agent tends in some degree to show actual notice of the fact; but this appears to be doubtful and unsupported by authority: American Fire Ins. Co. v. Landfare, 56 Neb. 482, 76 N. W. 1068. In general, knowledge of the existence of a debt does not put one dealing with the debtor on inquiry to ascertain whether it is secured: Johnson v. Valido Marble Co., 64 Vt. 337, 25 Atl. 441. That knowl- edge of the trust character of prop- erty is notice of the terms of the trust, see post, § 630. § 600, (f ) Notice from Actual In- spection of Record, — Woods v. Gar- § 601 EQUITY JUEISPEtTDENCE. 1130 § 601. Same — Eflfect of Explaining or Contradicting the Information Given. — In concluding this branch of the dis- cussion, the important question remains to be considered, How far may a party rely upon the whole of the informa- tion given or statement made to him in a case of actual notice? In other words, when information is given or a statement is made to a purchaser which, standing alone, would be actual notice, or at least would be sufficient to put him upon an inquiry, but this is accompanied by further explanatory or contradictory declarations which ties was recorded in only one of these counties, so that the record was not a constructive notice with respect to the portion of land situate in the other county. The court held, in an elaborate opinion by Chief Justice Gibson, that a jury might infer, as a conclusion of fact, that the purchaser examined the records, and so became acquainted with the prior convey- ance affecting the title to the whole land in both counties. The court further held that an inspection by the purchaser of a paper which pur- ported to be a certified or official copy of a deed improperly recorded on account of a defective acknowledgment, where the copy disclosed this defect, was not a fact from which actual notice could be inferred, because it was not sufficient to put the purchaser on an inquiry. This decision seems to be unsound ; at least, its correctness is very doubtful ; it seems to misinterpret the nature of facts sufficient to put a purchaser upon inquiry, and to confound them with absolute and complete knowledge. Hastings V. Cutler, 24 N. H. 481, holds, much more consistently, as it seems to me, that the inspection of a writing which purports to be a certified copy of a recorded deed, although it shows that the record was improperly made, because the deed was defectively acknowledged, is a fact sufficient to put the purchaser on an inquiry, so that if he neglected to make a proper inquiry, the inference of actual notice would be necessary. See Pringle v. Dunn, 37 Wis. 449, 461-464, 19 Am. Rep. 772, and Partridge V. Smith, 2 Biss. 183, 185, 186, as to the notice given by a defective record. nett, 72 Miss. 78, 16 South. 390 (one man, 147 Iowa, 574, 126 N. W. 781; who purchases after ieeing on rec- contra, Nordman v. B au, 86 Kan. 19, ords an unacknowledged deed is not Ann. Cas. 1913B, 1068, 38 L. E. A. a bona fide purchaser); Ladnier v. (N. S.) 400, and note, 119 Pac. 351 Stewart (Miss.), 38 South. 748 (ac- (record of instrument not entitled tual notice of defectively acknowl- to record, not notice to one who edged lease) ; Bledsoe v. Ross, 59 buys with actual knowledge thereof; Ind. App. 609, 109 N. E. 53 (citing a view which, of course, is contra to text; verdict against existence of the great weight of authority), jiotice not disturbed); James v. New- 1131 CONCEBNING NOTICE. §601 tend to nullify or destroy the effect of the former lan- guage, iow far may the purchaser accept and act upon the entire communication? or how far is he affected by that portion which tends to show the existence of a prior, out- standing, and conflicting claim? If the only information given to the purchaser concerning the existence of an out- standing claim, contract, or equity affecting the property is communicated by a third person,— a stranger having no interest in the matter, — and this person also states that such contract has been rescinded, or such claim or equity has been abandoned or discharged, and no longer exists, the purchaser, it seems, may rely on the whole communi- cation; it is not sufficient, in the absence of special rea- sons for believing the former part and rejecting the latter, to put him upon an inquiry, and does not therefore amount to an actual notice. This conclusion results from the ob- vious fact that such an informant has no personal interest to deceive the purchaser by misrepresenting or concealing the truth.i "When, however, the grantor, vendor, or mort- gagor admits that his title was defective or encumbered, or that there was some outstanding claim upon or equity in the property, or makes any other communication which, unex- plained, would constitute an actual notice, but adds a further declaration to the effect that such defect has been cured, or encumbrance removed, or claim or equity re- scinded and destroyed, the purchaser, according to the weight of authority, is not warranted in accepting and relying upon this explanation or contradiction; the in- §601, lln re Bright's Trusts, 21 Beav. 430; Buttrick v. Holden, 13 Met. 355, 357; Curtis v. Blair, 26 Miss. 309, 328, 59 Am. Dec. 257; Rogers V. Wiley, 14 111. 65, 56 Am. Dec. 491; WiUiams on v^ Brgwn, 15_N- Y- 354, 360 . In Pringle v. Dunn, 37 Wis. 449, 465,T67, 19 Am. Rep. 772, one purchaser "had heard that there was a defective railroad mortgage on the premises, but did not look for it, because his abstract did not show it." Another purchaser of a parcel of the land "knew by report" that there was such a mortgage, etc. Both were held charged with actual notice; but it does not appear in the report of the case from whom the purchasers obtained the information. § 601 EQUITY JURISPEUDENCE. 1132 formation obtained under such circumstances and from sucli a source is sufficient to put a prudent man «pon an inquiry. The reason of this is plain. The informant is under a strong personal interest to misrepresent or conceal the real facts. While the former branch of his com- munication is made against his interest, and is therefore more likely to be true, the latter part is ia conformity with his personal interest, and is essentially untrust- worthy.^a Finally, a purchaser is fully warranted in ac- cepting and acting upon the statements or conduct of the §601, 2 Hudson v. "Warner, 2 Har. & G. 415; Price v. McDonald, 1 Md. 403, 54 Am. Dec. 657; Russell v. Petree, 10 B. Mon. 184; Bunting v. Ricks, 2 Dev. & B. Eq. 130, 32 Am. Dec. 699; Littleton v. Giddings, 47 Tex. 109. This rule, however, is not pushed so far by the courts as to work real injustice to innocent purchasers who have been manifestly de- ceived and misled. See Jones_y^_Smitt, 1 Hare, 43; Rogers v. Jones, 8 N. H. 264; Curtis v. Blair, 26 Miss. 309, 328, 59 Am. Dec. 257. In Chicago v. "Witt, 75 111. 211, a grantee; some time before the conveyance was executed, was told by the grantor that he was not then able to make a good title, but that in a short time he would be able. It was held that no notice of an adverse unrecorded deed of the same land could be in- ferred : Ponder v. Scott, 44 Ala. 241, 244, 245.'» § 601, (a) The text is quoted in against Mm, he was informed that Le Vine v. Whitehouse, 37 "Utah, 260, he did, but that it was on other prop- Ann. Cas. 1912,0, 407, 109 Pa«. 2. erty only; relying on the closely See, also, Manasses v. Dent, 89 Ala. analogous case of Jones v. Smith, 1 565, 8 South. 108, citing this para- Hare, 43, and the distinction there graph of the text: Overall v. Tay- made: "Undoubtedly, when a party lor, 99 Ala. 12, 11 South. 738, citing has notice of a deed which, from this paragraph of the text. See, the nature of it, must affect the further, Engler v. Garrett, 100 Md. property, or is told at the time that 387, 59 Atl. 648; Ohio Eiver June- it does affect it, he is considered tion E. Co. V. Pennsylvania Co., 222 to have notice of the contents of Pa. St. 573, 72 Atl. 271. that deed, and of all other deeds §601, (b) In the very instructive to which it refers; but, where a case of Simpson v. Hinson, £'8 Ala. party has notice of a deed which does 527, 7 South. 264, a second mort- not necessarily — ^which may or may gagee was held not chargeable with not — affect the property, and is told notice of a prior unrecorded mort- that in fact it does not affect it, but gage on the same property, solely relates to some other property, and on evidence that on making inquiry the party acts fairly in the trans- of the mortgagor whether the first action, and believes the representa- mortgagee did not hold a mortgage tion to be true, there is no decision 1133 CONCEBNING NOTICE. § 601 person who holds or asserts a conflicting interest, claim, or right, if he, when interrogated upon the subject, either keeps silence, or denies the existence of any claim, or affirmatively declares it to be of a certain kind and amount ; such a person, even if not absolutely estopped from after- wards setting up any claim, or a claim different from his representations, would certainly be debarred from after- wards alleging that the purchaser was put upon an inquiry, and was charged with notice. ^ " If a purchaser, having |j been put upon an inquiry, prosecutes it with reasonable ; and due diligence, without discovering any adverse right, ;| the inference of an actual notice received by him is over- ' come and destroyed.*^ What is a due inquiry in these instances of actual notice inferred from circumstantial evidence must, to a great extent, depend upon the par- § 601, 3 McGehee v. Gindrat, 20 Ala. 95 ; Massie v. Greenhow's Ex'rs, 2 Pat. & H. 255 ; and see the following English authorities : Ibbotson v. Rhodes, 2 Vern. 554; Pearson v. Morgan, 2 Brown Ch. 388; Bridge v. Beadon, L. R. 3 Eq. 664; Lee v. Howlett, 2 Kay & J. 531; Burrowes V. Locke, 10 Ves. 470; Slim v. Croueher, 1 De Gex, F. & J. 518; Barry v. Croskey, 2 Johns. & H. 1, 21 ; 1 Dart on Vendors, c. 3, sec. 1, pp. 88, 89. § 601, 4 See cases cited ante, under § § 596, 597. that goes the length of saying that 44 Atl. 93'8; Dickey v. Henarie, 15 if he is misled he is fixed with no- Or. 351, 15 Pac. 464; Miller v. tice of the instrument." See, also, Merine, 43 Fed. S61. That the com- post, § 631, and notes. mittee of a lunatic has no power to § 601, (c) See, also, Winter-Loeb bind him by a declaration, in answer Grocery Co. v. Mutual Warehouse to a purchaser's inquiry, that he has Co., 4 Ala. App. 431, 58 South. 807; no interest in the land, see Jennings Barrett v. Baker, 136 Mo. 512, 37 v. Bloomfield, 199 Pa. St. 638, 49 Atl. S. W. 130 (purchaser justified in 135. relying on written statement of § 601, (d) See Mercantile Nat. owner of note that debt was paid Bank v. Parsons, 54 Minn. 56, 40 and trust-deed satisfied); Thompson Am. St. Eep. 299, 55 N. W. 825. V. Lapsley (Minn.), 96 N. W. 788 See, also, Bowles v. Belt (Tex. Civ. (former owner's false assertion of a App.), 159 S. W. 885; Loomis v. title in fee does not put purchaser Cobb (Tex. Civ. App.), 159 S. W. from his grantee on inquiry as to 305; Shulthis v. McDougal, 170 Fed. an unrecorded purchase-money mort- 529, 95 C. C. A. 615; and se'e ante, gage); Buthterford Land & Improve- §597, note ^c). ment Co. v. Sanntrock (N. J. Eq.), § 602 EQUITY JUEISPEUDENCE. 1134 ticular facts of each case. It is well settled, however, that mere examination of the record, and finding no adverse title or claim recorded, is not due inquiry by one who has been put upon inquiry by circumstances tending to show the existence of a conflicting title, claim, or right. ^ e § 602. Same — By Whom and when Information must be Given. a — Such being its general nature, it is impossible to define by a single formula what will amount to an actual notice sufficient to affect the conscience of the party receiv- ing it, and courts have not attempted to lay down any such criterion ; each case must, to a considerable extent, depend upon its own particular circumstances. The following an- cillary rules, however, bearing upon the question, have been well settled. "Where an actual notice is relied upon, in order to be binding it must come from some person inter- ested in the property to be affected by it ; and it is said that § 601, 5 In Shotwell v. Harrison, 30 Mich. 179, and Munroe v. Eastman, 31 Mich. 283, it was held that a purchaser who has such notice of a prior unrecorded deed cannot rely upon a mere search of the records without any other inquiry; the case of Barnard v. Campau, 29 Mich. 162, was distinguished. In Pringle v. Dunn, 37 Wis. 449, 465, 467, 19 Am. Rep. 772, a purchaser "who had heard that there was a defective railroad mort- gage on the premises, but did not look for it, 'because his abstract did not show it," and another, who "knew by report" that there was such a mort- gage, but made no further examination, were both held charged with actual notice: Brinkman v. Jones, 44 Wis. 498, 519. Littleton v. Giddings, 47 Tex. 109, holds that looking at the records and inquiring of the grantor is not enough, when an inquiry among the neighbors would have led to the truth; also, that a notice given to a person who was actually interested in the purchase, although not named as a grantee in the conveyance, is notice to the grantee himself. § 601, (e) See, also. Griffin v. Mis- most likely to lead to knowledge of Bouri, K. & E. Ey. Co., 82 Mo. App. the facts); Baltimore High Grade 93 (one having notice of unrecorded Brick Co. v. Amos, 95 Md. 571, 52 deed does not satisfy requirement of Atl. 582, 53 Atl. 148 (advice of eoun- good faith by examining the records, sel does not relieve from duty of but should inquire of grantor and making inquiry), reputed grantee) ; Stokes v. Biley, § 602, (a) This section is cited in 121 HI. 166, 11 N. E. 877 (inves- Raymond v. Flavel, 27 Or. 219, 40 tigation not conducted in the way Pac. 158. 1135 CONCEENING NOTICE. § 602 it must be given and received in the course of the very transaction itself concerning the property in which the parties are then engaged. As a necessary consequence, no mere vague reports from strangers, nor mere general statements by individuals not interested in the property, that some other person claims a prior right or title, will amount to an actual notice so as to bind the conscience of the party ; nor will he be bound by a notice given in some previous and distinct transaction, which he might have forgotten. 1 ^ It should be most carefully observed that the § 602, 1 See Sugden on Vendors and Purchasers, 755 ; Bamhart v. Greenshields, 9 Moore P. C. C. 18, 36; Natal Land etc. Co. v. Good, L. B. 2 P. C. 121, 129; Butcher v. Stapely, 1 Vem. 363; Jolland v. Stairibridge, 3 Ves. 478; Fry v. Porter, 1 Mod. 300; Wildgoose v. Wayland, Goulds, 147, pi. 67. That mere vague statements, rumors, and reports coming from third persons not interested in the transaction, or from any other unauthentic source, and even vague, uncertain, and wholly general state- ments, coming from a person interested in the subject-matter, such as the vendor or the claimant himself, will not amount to an actual notice, and will not bind the conscience of a purchaser, is decided or laid down by way of a dictum in a multitude of cases : Chicago v. Witt, 75 111. 211 (insufficient statement from a grantor to the purchaser) ; Loughridge v. Bowland, 52 Miss. 546, 555 (rumors, suspicions, etc.) ; Reynolds v. Ruck- man, 35 Mich. 80 (facts not amounting to notice) ; Lambert v. Newman, 56 Ala. 623, 625, 626 (vague evidence of conversations) ; Parker v. Foy, 43 Miss. 260, 266, 55 Am. Kep. 484; Wailes v. Cooper, 24 Miss. 208 §602, (b) Thus, it has been held on inquiry; such rumors and insinu- that an announcement at an execu- ations "do not furnish any positive tion sale that certain lots did not information, any tangible clew, by belong to the debtor is not suffi- the aid of which he may commence cient to put a purchaser on inquiry and successfully pursue an inquiry, as to a dedication to the public, and thus discover the real truth": when the announcement did not dis- Eaymond v. Flavel, 27 Or. 219, 40 close the name of the adverse claim- Pae. 158, citing this section of the ant, nor the nature of his claim: text. See, also. Hall v. Livingston, Commonwealth v. Calhoun, 184 Pa. 3 Del. Ch. 348, 402-406, and cases St. 629, 3© Atl. 563. Where an in- cited; In general, that the facts re- tending purchaser was told by a lied on to prove notice must be third person that if he bought the something more than would excite land he would "have trouble" with the suspicion of a cautious and wary certain persons, and that his vendor person, see Crossen v. Oliver, 37 Or. had "stolen" the land, he is not put 514, 61 Pac. 885; Green v. Morgan § 603 EQUITY JUEISPBTJDENCE. 1136 decisions here referred to, and the rules which they sus- tain, are dealing exclusively with the artificial conception of an actual notice, which is regarded as affecting the con- science of the party, and producing results upon his rights in the same manner and to the same extent as though it amounted to full knowledge, although it may perhaps fall far short of such a consummation. The question as to the consequences of such knowledge acquired in some other manner or from some other source is therefore left untouched. § 603. Effect of Knowledge.— What, then, is the effect of actual knowledge of the prior fact, interest, claim, or right, acquired previously, or in an entirely different transaction, or from a stranger or person having no interest in the property, or even in an accidental and fortuitous manner? The answer, on principle, is very clear and certain. It was (rumors) ; Buttriek v. Holden, 13 Met. 355, 357 ; Curtis v. Blair, 26 Miss. 309, 328, 59 Am. Dec. 257; Peebles v. Reading, 8 Serg. & R. 484; Miller V. Cresson, 5 Watts & S. 284; Epley v. Witlierow, 7 Watts, 163, 167; Jaques v. Weeks, 7 Watts, 261, 267, 274; Woods v. Farmere, 7 Watts, 382, 387, 32 Am. Dec. 772; Hood v. Falinestoek, 1 Pa. St. 470, 44 Am. Dec. 147; Churcher v. Guernsey, 39 Pa. St. 84; Wilson v. MeCuUough, 23 Pa. St. 440, 62 Am. Dec. 347; Van Duyne v. Vreeland, 12 N. J. Eq. 142, 155; Butler V. Stevens, 26 Me. 484; Lament v. Stimson, 5 Wis. 443; Rogers v. Haskings, 14 Ga. 166; Maul v. Rider, 59 Pa. St. 167, 171, 172 (general rumors) ; but as to notice not coming from the party interested, see Curtis V. Mundy, 3 Met. 405 ; Mulliken v. Graham, 72 Pa. St. 484, 490. That an actual notice given in a prior transaction is not notice in a subsequent and different one, see Lowther v. Carlton, 2 Atk. 242; Puller v. Benett, 2 Hare, 394, 404; Boggs v. Vamer, 6 Watts & S. 460; Meehan v. Williams, 48 Pa. St. 238; Bank of Louisville v. Curren, 36 Iowa, 555. (N. J. Eq.), ai Atl. 857; Newberry fides"). See, also, Daly v. Eizzutto, V. Bank of Princeton, 98 Va. 471, 36 59 Wash. 62, 29 L. R. A. (N. S.) 467, S. E. 515; Fischer v. Lee, 98 Va. 159, 109 Pac. 276; Hopkins v. O'Brien, 57 35 S. E. 441; Arbuekle v. Gates, 95 Pla. 444, 49 South. 936 (neighbor- Va. 802, 30 S. E. 496 (proof of ao- hood reputation as to ownership); tual notice "must be such as to affect W. L. Moody & Co. v. Martin (Tex. the conscience of the purchaser, and Civ. App.), 117 S. W. 1015; and see Must be so strong and clear as to ante, § 597, note (b). fix upon him the imputation of mala 1137 CONCEENING NOTICE. § 603 shown in a former paragraph that the conception of notice was introduced, and the rules concerning it were estab- lished, from considerations of policy and expediency based upon the common experience of mankind. Notice, even when actual, is not necessarily equivalent to knowledge ; "^ but the same effects must be attributed to it which would naturally flow from knowledge. It is treated as a repre- sentative of, or substitute for, actual knowledge, and is therefore in its essential nature inferior to knowledge. It necessarily follows that whenever a party has obtained a full knowledge, although not in accordance with the rules which define the nature of notice, and regulate the mode of its being given and received, there is no longer any need of invoking the legal conception of notice ; the rules con- cerning it no longer apply; the very fact for which it is intended as a substitute has been more perfectly accom- plished in another manner. To sum up in one statement, if the party has in any way obtained the full knowledge, those same results must necessarily, and even in a higher degree, be attributed to it — the very substance itself — which are, from motives of general policy, attributed to notice as its representative and substitute. The conclu- sion thus reached, upon principle, is supported by the weight of judicial authority, and it will reconcile much, if not all, of the apparent confusion and conflict of opinion upon this subject to be found in some of the decisions.^ § 603, 1 It cannot be claimed that the views contained in the text are expressly adopted by all the decided eases. There is unfortunately a great lack of precision and accuracy in the language of too many judicial opin- ions ; actual and constructive notice are sometimes not discriminated ; notice and the evidence by which it is shown are often confounded; knowledge and notice are used interchangeably, as though they were exactly equiva- lent. However great an appearance of conflict there may be, the reason- ing and conclusions of the text will, in my opinion, produce a consistent and harmonious system. See the eases cited in the next following note but one under this paragraph. § 603, (a) The text- is cited to this Co. v. Moore, 170 Ind. 328, 82 N. E. effect in Cleveland, C.C. & St. L. K. 52, 84 N. E. 540. 11—72 § 603 EQUITY JTJEISPBXJDENCE. 1138 Of course the knowledge here spoken of must be something more than the mental condition produced by rumors, casual conversations, and the like, — ^more than any con- structive notice, — more even than the mere actual notice defined and permitted by the rules. It must appear that the mind of the party charged with the knowledge has been brought thereby to an intelligent apprehension of the nature of the prior fact, interest, claim, or right, so that a reasonable man, or an. ordinary man of business, would act upon the information, and would regulate his conduct by it in the transaction or dealing in which he is engaged.^ In accordance with principle, and as a conclusion from the decided cases, the following proposition may be formu- lated: If it can be shown that the party has in any way, from any person or source, by any means or method, for any purpose, although not in pursuance of the rules which regulate the giving of notice, obtained or derived actual and full knowledge of the kind above described, concerning the prior fact, interest, claim, or right, — ^that is, a knowl- edge which would operate upon the mind of any rational man, or man of business, and make him act with reference to the knowledge he has so acquired in the transaction or dealing in which he is engaged — then the same results must follow from the knowledge so obtained which would follow from an actual notice communicated in the manner required by the rules governing notice; in other words, the conscience of the party having the knowledge is af- fected by it in the same manner and to the same extent as it would be affected by an actual notice.^* It some- § 603, 2 Lloyd v. Banks, L. R. 3 Ch. 488, 490, per Lord Cairns. § 603, 3 Lloyd v. Banks, L. R. 3 Ch. 488, 490, per Lord Cairns; Matter of Leiman, 32 Md. 225, 244; Price v. McDonald, 1 Md. 403, 54 Am. Dec. § 603, (b) The rule that actual no- Manasses v. Dent, 89 Ala. 565, 8 tice must be obtained in the course South. 108, citing this section. In- of the transaction or dealing re- formation amounting to knowledge spec'ting the property is inapplicable may come from any source: see to knowledge of facts as the equiva- Jaeger v. Hardy, 48 Ohio St. 335, lent or substitute for actual notice: 2.7 N. E. S'63. One who has knowl- 1139 CONCERNING NOTICE. § 603 times happens that by a positive rule of the law an actual and technical notice is necessary, in order to put a person in default, or to perfect some legal right, and then knowl- edge, however complete, will not supersede or take the place of the notice. Actual knowledge, however, will gen- erally have the same effect as notice in controversies concerning priority ; but it is especially important in deter- mining the existence of good faith ; it is often a most essen- tial element in making out a fraudulent intent, where a mere technical notice would not be sufficient. 657; Winchester v. Baltimore etc. R. R., 4 Md. 231; Johns v. Scott, 5 Md. 81 (actual knowledge of a prior unrecorded deed) ; Brown v. Wells, 44 Ga. 573, 575 (grantee's actual knowledge that his grantor was a mere squatter without color of title defeated his own title, although he had con- tinued in possession under it for seven years) ; Pringle v. Dunn, 37 Wis. 449, 465-467, 19 Am. Rep. 772 (the premises being encumbered by a prior unrecorded mortgage ; one subsequent purchaser of a portion of them "had heard that there was a defective railroad mortgage upon the premises, but did not look for it, because his abstract did not show it"; another purchaser of a different portion "knew by report" that there was such a mortgage; both were held charged as though they had received an actual notice) ; Jones v. Lapham, 15 Kan. 540, 545, 546 (purchaser of the legal estate with full knowledge of an outstanding equitable interest, claim or lien) ; Virgin v. Wingfleld, 54 Ga. 451, 454, and cases cited (full knowl- edge has the effect of notice, and is evidence of fraud on the part of the grantee or purchaser) ; Blatchley v. Osbom, 33 Conn. 226, 233 (actual knowledge of an existing easement) ; Butcher v. Tokum, 61 Pa. St. 168, 171, 100 Am. Dec. 625 (it is not essential that information should come from the party or his agent; it may come aliunde, provided it be of a character likely to obtain credit; knowledge was obtained from the grand- father of the equitable title belonging to infant heirs, by a purchaser of edge that another has a contract to were then pending, is charged with purchase the land must inquire of notice of the terms upon which the him as to the terms of the contract: purchase is to be made; and when Hains v. Hains, 69 Mich. 581, 37 such terms involve the execution by N. W. 563. And a prior mortgagee the purchaser of a. mortgage to the who, pending the negotiations for his vendor to secure the purchase, price, mortgage) acquires knowledge that the later mortgage, although subse- the property offered as security be- quently recorded, takes priority: longs to a third person, and was to Montgomery v. Keppel, 75 Cal. 128, be purchased by the mortgagor, and 7 Am. St. Bep. 125, 19 Pac. 178. that negotiations for its purchase § 604 EQUITY JURISPBUDENCB. 1140 § 6^04. Constructive Notice.^^ — Constructive- notice as- sumes that no information concerning the prior fact, claim, or right has been directly and personally communicated to * the party ; at least, such information is not shown by evi- dence, but is only inferred by operation of legal presump- tions. It embraces all those instances, widely differing in their external features, in which, either from certain ex- traneous facts, or from certain acts or omissions of the party himself, disclosed by the evidence, the information is conclusively presumed to have been given to or received by him, or is inferred by a prima facie presumption of the law in the absence of contrary proof.i There is a marked the legal title from the widow) ; Lawton v. Gordon, 37 Cal. 202, 205, 206 (a person about to purchase land was told by the recorder that the intended grantor had ' already given a deed of the property to another person, which had been filed for record, but afterwards taken away from the office before recording. Held, a suflBicient knowledge; such information need not come from a person interested in the property. The court expressly placed the decision upon the distinction, as laid down in the text, between actual knowledge obtained in any authentic manner, and the technical, actual notice). See, also, Dickerson v. Campbell, 32 Mo. 544 (where a clerk of a court obtained knowledge of prior equities through his famil- iarity with the records) ; Curtis v. Mundy, 3 Met. 405, 407, per Putnam, J.; Stevens v. Goodenough, 26 Vt. 676; Mulliken v. Graham, 72 Pa. St. 484, 490; Henry v. Raiman, 25 Pa. St. 354, 64 Am. Dec. 703; Phillipps v. Bank of Lewistown, 18 Pa. St. 394, 404; McKinney v. Brights, 16 Pa. St. 399, 55 Am. Dec. 512; Van Duyne v. Vreeland, 12 N. J. Eq. 142, 155; Rupert V. Mark, 15 111. 540; Cox v. Milner, 23 111. 476; Hankinson v. Bar- bour, 29 111. 80. § 604, 1 In the often-quoted case of Espin v. Pemberton, 3 De Gex & J. 547, 554, Lord Chancellor Chelmsford made some observations concerning constructive notice. The case was one of notice to a party's attorney. The lord chancellor, admitting that it was treated as a species of con- structive notice, thought that it had better be classed under the head of actual notice. "If a person employs a solicitor, who either knows or has imparted to him' in the course of his employment some fact which affects the transaction, the principal is bound by the fact, whether it is communi- cated to or concealed from him." He then adds: "Constructive notice properly so called is the knowledge [information?] wbieh the courts im- §604, (a) This paragraph is cited in Loomis v. Cobb (Tex. Civ. App.), 159 8. W. 306. 1141 CONCERNING NOTICE. § 604 inconsistency in the treatment of constructive notice by even the most eminent judges and text-writers. It has often been defined as knowledge or information inferred from certain circumstances, by a legal presumption of so high and conclusive a nature that the party is not allowed to overcome the inference by any contrary evidence show- ing that in fact he had no knowledge nor information.^ Notwithstanding this definition, writers and judges who adopt it have admitted into the class of constructive notice, and have treated as instances thereof, all those cases in pute to a person upon a presumption so strong of the existence of the knowledge that it cannot he allowed to he rebutted, either from his know- ing something which ought to have put him upon further inquiry, or from his willfully abstaining from inquiry to avoid notice. I should therefore prefer calling the knowledge which a person has, either by himself or through his agent, actual knowledge; or if it is necessary to make a dis- tinction between the knowledge which a person possesses himself and that which is known to his agent, the latter might be called imputed knowl- edge." The entire view of the chancellor in this extract is lacking in accuracy of thought, from his confusion of information with knowledge. Some necessary criticism upon his description of "constructive notice" will be found in the text and in the next following note. § 604, 2 Thus the English editor of the Leading Cases in Equity says: "Constructive notice is defined to be in its nature no more than evidence of notice the presumption of which is so violent that the court wiii not even allow of its being controverted"; citing Eyre, C. B., in Plumb v. Fluitt, 2 Anstr. 438; Kennedy v. Green, 3 Mylne & K. 699, 719; 2 Lead. Cas. Eq., 4th Am. ed., 121. Judge Story gives exactly the same definition : 1 Story's Eq. Jur., sec. 399. A recent editor of Judge Story's treatise adopts the same view, in nearly the same language : "Constructive notice is thus a conclusive presumption" : 1 Story's Eq. Jur., sec. 410a. In Hewitt V. Loosemore, 9 Hare, 449, 455, Turner, V. C, said : "Constructive notice is knowledge which the court imputes to a party upon a presump- tion, so strong that it cannot be allowed to be rebutted, that the knowledge must have been communicated." The American editor of the Leading Cases in Equity says: "Constructive notice is a legal inference from estab- lished facts, and, like other legal presumptions, does not admit of dispute" : 2 Lead. Cas. Eq., 4th Am. ed., 157. With respect to this last citation, it certainly cannot be said of all legal presumptions that they "do not admit of dispute." "Legal presumptions" are sometimes conclusive, and sometimes rebuttable § 605 EQUITY JUBISPEUDENCE. 1142 which it is settled that the presumption of information being received is merely prima facie, and that the infer- ence may be overcome by contrary evidence. The essen- tial element of constructive as distinguished from actual notice certainly is the legal presumption that information has been communicated to or acquired by the party; but it is equally certain that this legal presumption may be con- clusive and may be rebuttable.^ § 605. Opinion of Wigram, V. C, in Jones v. Smith. — It would be very diflBcult to formulate any statement which should embrace within its general terms all instances of constructive notice. The most important species, how- ever, have been sufficiently settled by the decisions, and will be described in the subsequent paragraphs. The most comprehensive and accurate generalization ever at- tempted by any judge or text-writer was made by Vice- Chancellor Wigram, in the following passage, which is well worthy of being quoted in full: "It is indeed scarcely possible to declare a priori what shall be deemed construc- tive notice, because, unquestionably, what would not affect one man may be abundantly sufficient to affect another. § 604, 3 This view renders the classification simple, comprehensive, and certain. "Actual" and ''constructive" notice, as defined in the text, are separated by a broad, clear, and natural line of distinction. Additional subdivisions into "constructive,'' "implied," "imputed" notice, and the like, are, as it seems to me, equally unnecessary and confusing. The explana- tion given by Lord Brougham ia Kennedy v. G-reen, 3 Mylne & K. 699, 719, is, in my opinion, very forcible and accurate, since while admitting a legal presumption as the basis, it does not assert that the presumption is always conclusive. He says: "The doctrine of constructive notice depends upon two considerations : first, that certain things existing in the relation or conduct of parties, or in the case between them, beget a pre- sumption so strong of actual knowledge, that the law holds the knowledge to exist, because it is highly improbable it should not ; and next, that policy, and the safety of the public, forbid a person to deny knowledge while he is so dealing as to keep himself ignorant, or so as that he may keep him- self ignorant, and yet all the while let his agent know, and himself, per- haps, profit by that knowledge." 1143 ■ CONCEENING NOTICE. § 605 But I believe I may, with, sufficient accuracy, and without danger, assert that the cases in which constructive notice has been established resolve themselves into two classes : 1. Cases in which the party charged has had actual notice that the property in dispute was in fact charged, encum- bered, or in some way affected, and the court has there- upon bound him with constructive notice of facts and instruments, to a knowledge of which he would have been led by an inquiry after [i. e., concerning] the charge, en- cumbrance, or other circumstance affecting the property of which he had actual notice; and 2. Cases in which the court has been satisfied from the evidence before it that the party charged had designedly abstained from inquiry for the very purpose of avoiding notice. How reluctantly the court has applied, and within what strict limits it has c6nfined, the latter class of cases, I shall presently con- sider. The proposition of law upon which the former class of cases proceeds is, not that the party charged had notice of a fact or instrumeri,t which in truth related to the subject in dispute without his knowing that such was the case, but that he had actual notice that it did so relate. The proposition of law upon which the second class of eases proceeds is, not that the party charged had incautiously neglected to make inquiries, but that he had designedly ab- stained from making such inquiries for the purpose of avoiding knowledge, — a purpose which, if proved, would clearly show that he had a suspicion of the truth, and a fraudulent determination not to learn it. If, in short, there is not actual notice that the property is in some way af- fected, and no fraudulent turning away from a knowledge of facts which the res gestce would suggest to a prudent mind, — if mere want of caution as distinguished from fraudulent and willful blindness is all that can be imputed to a purchaser, — then the doctrine of constructive notice will not apply; then the purchaser will in equity be con- sidered, as in fact he is, a bona fide purchaser without § 606 EQUITY JUEISPEUDENCE. 1144 notice. " ^ I would remark in passing tliat the construc- tive notice to subsequent purchasers and encumbrancers resulting from the registration of a pri6r deed, mortgage, or other instrument, under the recording statutes of this country, does not seem to fall within either of Vice- Chancellor Wigram's two classes, since it does not depend upon information or knowledge concerning any fact af- fecting the property sufficient to put the party upon an inquiry, which is the criterion of the first class, nor upon the party's willfully abstaining from seeking informa- tion, which is the test of the second class. In short, this species of constructive notice is wholly of statutory origin, and is not the result or application of any general doc- trine. § 606. When the Presumption is Rebuttable.a — Since constructive notice, as heretofore defined, includes all the instances in which information concerning a prior fact, claim, or right is inferred either by a conclusive or by a rebuttable presumption of 'law, it would be a most im- portant aid in the further discussion if we could discover a general criterion for distinguishing these two classes, and determining in what cases the presumption is conclusive, § 605, 1 J prips V. gniitVi^l Hare, 43, 55, 56. The vice-chancellor quoted as examples of his two classes the following cases: 1. Of the prst class: Ferrars v. Cherry, 2 Vem. 383 ; Jackson v. Rowe, 2 Sim. & St. 472 ; Ken- nedy V. Green, 3 Mylne & K. 699; Taylor v. Baker, 5 Price, 306; Coppin V. Femyhough, 2 Brown Ch. 291; Davies v. Thomas, 2 Younge & C. 234; Eyre v. Dolphin, 2 Ball & B. 290 ; Malpas v. Ackland, 3 Russ. 273 ; Bisco V. Earl of Banbury, 1 Cas. Ch. 257; Allen v. Anthony, 1 Mer. 282; Daniels V. Davison, 17 Ves. 433 ; Taylor v. Stibbert, 2 Ves. 437. 2. Of the second class : Illustrations of and limitations on the doctrine : Whitbread v. Jordan, 1 Younge & C. 303; Birch v. EUames, 2 Anstr. 427; Hiem v. Mill, 13 Ves. 114; Miles v. Langley, 1 Russ. & M. 39; Hanbury v. Litchfield, 2 Mylne & K. 629; Hine v. Dodd, 2 Atk. 275; Plumb v. Fluitt, 2 Anstr. 432; Evans v. Bicknell, 6 Ves. 174; Cothay v. Sydenham, 2.Brown Ch. 391. § 606, (a) This section is cited in Fed. 114; Gainer v. Jones, 176 Ala. National Cash Register Co. v. New 408, 58 South. 288 (notice by pos- Columbus Watch Co. (C. C. A.), 129 session). 1145 CONCEENING NOTICE. § 606 and in what it is only prima facie and rebuttable. It may not be possible to lay down a rule whicb is absolutely uni- versal in its operation, and which furnishes a certain test for every case ; but a rule may be formulated which is quite general in its application, and which gives a practical test sufficient for many instances differing widely in their external features.^ Wherever a party has information or § 606, 1 'WilUaB3aaaJE*JBrowii^l5.1i._X^354,. has been uniformly treated as an important and leading case. The controversy was concerning the priority between the plaintiff, who held under a subsequent conveyance of the land which was duly recorded, and the defendant, who held a prior unrecorded mortgage. The defendant claimed that plaintifE took his deed with notice of the prior mortgage. On this issue the referee found that the plaintiff, when he took his deed, did not have actual notice of the prior mortgage, but that he had sufficient information or belief of the existence of said mortgage to put him upon inquiry, and that he pursued such in- quiry to the extent of his information and belief, and failed to discover that any such mortgage actually existed. This finding the court inter- preted to mean that the plaintiff made all the inquiry which it became his duty to make upon the information he had received; upon this inter- pretation the court made: its decision, and laid down certain general rules. It was held that upon the finding of fact no constructive notice had been given; the prima facie presumption was overcome. It will be observed that the finding does not specify the particulars nor nature of the informa- tion, which was enough to put the plaintiff upon an inquiry, nor does it state the particulars of the inquiry which he made. The conclusions reached by the court, and rules laid down by them, are therefore general, and apply to all cases which could be properly described by this finding oi facts. S. L. Selden, J., holds, first, that constructive notice, as well as, actual notice, will defeat the priority obtained under the recording stat- ute by a previous record. Passing to the question now under considera- tion, he quotes the definition of actual and of constructive notice, given in Story's treatise (Story's Eq. Jur., sec. 309) ; he gives a recorded deed and notice to an agent as examples of constructive notice; because in each case the presumption is conclusive, and the party would not be allowed to show that he actually received no information. He adds some remarks concerning the various and inaccurate modes in which the terms "actual" and "constructive" have sometimes been used. The learned judge then proceeds (p. 360) : "The phraseology uniformly used, as descriptive of the kind of notice in question, 'sufficient to put the party upon inquiry,' would seem to imply that if the party is faithful in making inquiries, but fails to discover the conveyance, he will be protected. The import of § 606 EQUITY JUBISPBUDENCE. 1146 knowledge of certain extraneous facts, which do not of themselves constitute actual notice of an existing interest, claim, or right in or to the subject-matter, but which are sufficient to put him upon an inquiry concerning the ex- istence of a conflicting interest, claim, or right, then he is charged with constructive notice, because a presumption of law arises. This proposition is settled by an over- / whelming weight of authority, English and American. A large mmiber of particular instances or species of construc- tive notice are referable to and embraced within the gen- eral terms of this description. It should be carefully observed that the facts of which the party receives infor- mation or has knowledge do not directly tend to sholv the existence of any conflicting interest or claim, and are therefore not actual notice; but they are sufficient, what- ever be their nature and form, to put the party, as a rea- sonable man, upon further inquiry. As an illustration, if a party is negotiating for the purchase of certain land, and sees or learns that the land is not in the intended grantor's possession, but is possessed and occupied by a the terms is, that it becomes the duty of the party to inquire. If, then, he performs that duty, is he still to be bound, without any actual notice? The presumption of notice which arises from proof of that degree of knowledge which will put a party upon inquiry is, I apprehend, not a presumption of law, but of fact, and may therefore be controverted by evidence." I must remark at this point that the mistake in the last sen- tence is inexplicable. Judge Selden has, in other opinions, described in the most elesir and accurate manner, excelled in fact by no other judge,- the true nature of legal presumptions, the distinctions between those which are conclusive and those which are prima facie, and that argumentative conclusions of fact are not presumptions at all; that the term "pre- siunption of fact" is a misnomer; that a presumption "may be controverted by evidence," is not the test of a presumption being one of fact, and not of law. The inference which is drawn from "information or knowledge of facts sufficient to put the party upon an inquiry" is, under every cor- rect definition, a presumption of law, and not a mere argumentative deduc- tion which a jury may or may not make; the only question is, whether it is a conclusive or a rebuttable presumption. Judge Selden, in support of his position that the presumption under these circumstances may be re- butted by evidence, then cites and quotes from the opinions in Whitbread 1147 OONCEKNING NOTICE. § j606 third person, a stranger, this fact of possession is suffi- cient to put the expected grantee upon an inquiry concern- ing the nature of the occupant 's interest. The information or knowledge of such extraneous facts which are sufficient to put the party upon an inquiry constitutes a constructive notice of the conflicting claim or interest which does exist, because a presumption thence arises. Another instance is much more common in England than in this country. If a person loans money upon the security of a mortgage or other equitable lien given upon land belonging to the borrower, and learns that the title deeds are not in the possession of the borrower, but are in the possession of some third person, this is a constructive notice of any claim or interest in the land held by such third person, because the lender is put upon an inquiry, and a legal presumption arises from the facts. This presumption, in all cases of this class, is really a double one. The party is either presumed to have made the inquiry, and to have carried it out until he obtained full knowledge of the out- standing conflicting interest, claim, or right, or else to have V. Boulnois, 1 Younge & C. 303, per Alderson, B. ; Jones v. SmithijlHare, 43; Hanbury v. Litchfield, 2 Mylne & K. 629; Plagg v. Mann, 2 Sum. 486, 554, per Story, J. ; and Rogers v. Jones, 8 N. H. 264, per Parker, J. In conclusion, he states the general rule as follows (p. 362): "If these authorities are to be relied upon, and I see no reason to doubt their cor- rectness, the true doctrine on this subject is, that where a purchaser has knowledge of any fact svifflcient to put him on inquiry as to the existence of some right or title m conflict with that he is about to purchase, he is presumed either to have made the inquiry' and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered as a hona fide purchaser. This pre- sumption, however, [is a mere inference of fact,, and] may b.e repelled by proof that the purchaser failed to discover the prior right, notwithstanding the exercise of proper diligence on his part." The general conclusion thus formulated, both as to the extent of the presumption, — what is presumed, — ^and its prima facie or rebuttable nature, is beyond a doubt correct. The dictum by which it is asserted to be "a mere inference of fact" is as clearly erroneous. Another opinion was also delivered by Mr. Justice Paige, which arrived at the same result, by substantially the same reasoning: Reed v. Gannon, 50 N. Y. 345, 349, 350. § 606 EQUITY JUEISPKUDENCE. 1148 intentionally and deliberately refrained from making the inquiry or following it up in a reasonable and proper man- ner for the very purpose of avoiding the knowledge which he might have acquired. The presumption is clearly one of law, and not a mere inference of fact ; because upon the bare proof that the party had the information of facts sufficient to put him upon an inquiry, the inference is at once made, without any further evidence in its support, and in the absence of all contrary evidence it is absolute and conclusive.2 § 606, 2 Ratcliffe v. Barnard, L. R. 6 Ch. 652, 654; Maxfleld v. Burton, L. R. 17 Eq. 15, 18; Rolland v. Hart, L. R. 6 Ch. €78, 681, 682; Broadbent V. Barlow, 3 De Gex, F. & J. 570, 581; Hunt v. Elmes, 2 De Gex, F. & J. 578, 587, 588; Perry v. Holl, 2 De Gex, F. & J. 38; Espin v. Pemberton, 3 De Gex & J. 547, 554, 555; Roberts v. Croft, 2 De Gex & J. 1, 5, 6; Atterbury v. Wallis, 8 De Gex, M. & G. 454; Ware v. Lord Egmont, 4 De Gex, M. & G. 460, 473, 474; Penny v. Watts, 1 Macn. & G. 150, 167; Jackson v. Rowe, 2 Sim. & St. 472; Hewitt v. Loosemore, 9 Hare, 449, 456, 458. In seyeral of these later English cases a very strong disposition has been shown to limit and restrict the effect of the constructive notice which arises from the existence of facts and circumstances sufficient to put the party on an inquiry. This limitation is applied both where the party made some inquiry and relied upon what he had learned thereby, and where he made no inquiry at all. The criterion to which I refer was fully stated in Ware v. Lord Egmont, 4 De Gex, M. & G. 460, 473, by Lord Cranworth, as follows: "I must not part with this case without expressing my entire concurrence in what has on many occasions of late years fallen from judges of great eminence on the subject of constructive notice, namely, that it is highly inexpedient for courts of equity to extend the doctrine, — to attempt to apply it to cases to which it has not hitherto been held applicable. Where a person has not actual notice, he ought not to be treated as if he had notice, unless the circumstances are such as enable the court to say, not only that he might have acquired, but also that he ought to have acquired, the notice with which it is sought to affect him; that he would have acquired it but for his gross negligence in the conduct of the business in question. The question, when it is sought to affect a purchaser with constructive notice, is, not whether he had the means of obtaining, and might by prudent caution have obtained, the knowledge in question, but whether the not obtaining it was an act of gross or culpable negligence. It is obvious that no definite rule as to what will amount to gross or culpable negligence, so as to meet every case. 1149 CONCEKNING NOTICE. § 607 § 607. Same — Rebutted by Due Inquiry. — ^It may be stated as a general proposition that in all instances of con- structive notice belonging to this class, where it arises from information of some extraneous facts, not of themselves tending to show an actual notice of the conflicting right, but sufficient to put a prudent man upon an inquiry, the con- structive notice is not absolute ; the legal presumption aris- caa possibly be laid down." The iSrst and leading case in which this re- stricted view was laid down, and which other decisions have followed and approved, was Hewitt v. Loosemore, 9 Hare, 449, decided by Turner, V. C. ; and see Woodworth v. Paige, 5 Ohio St. 70, 76. On the other hand, in Broadbent v. Barlow, 3 De Gex, F. & J. 570, Lord Chancellor Campbell said: "By 'the means of knowledge' by which any one is to be affected, must be understood means of knowledge which are practically within reach, and of which a prudent man might have been expected to avaU himself." It is plain that the criterion, as established by these most recent English eases, is no longer the mere want of that reasonable care and diligence in making an inquiry which would be used by a prudent man ; the failure to prosecute or to make the inquiry must, under the circumstances, amount to gross or culpable negligence. It should be observed, however, that this rule is confined, and is intended to be confined, to that class of constructive notices ia which the legal presumption is rebuttable.* The American courts do not appear to have adopted this most recent Eng- lish rule; they seem to have adhered with great unanimity to the doctrine contained in the dictum above quoted from Lord Campbell." Wherever the facts and circumstances do not tend to show actual notice, — ia other words, where the facts and circumstances are not simply the circumstantial evidence of an actual notice, — the test of constructive notice generally applied by the American courts has been, whether such facts are sufficient § 606, (1>) The criterion of Ware v. In the opinion in this case it is ob- Lord Egmont was followed in the served: "Gross or culpable negli- reeent English cases of Oliver v. genee does not import any breach of Hinton, [1899] 2 Ch. 264, 68 Law J. a legal duty. It includes willful de- Ch. 583, 81 Law T. (N. S.) 212, 45 parture by a purchaser from the Wkly. Eep. 3; Bailey v. Barnes. 'usual course of business' in order to [1894] 1 Ch. 25, 7 Eeports, 9 (knowl- avoid acquiring a knowledge of his edge that the land had been sold vendor's title." for less than its value under a power § 606, (c) See, however, expres- of sale in a mortgage does not sions tending to support the English charge a purchaser from the vendee rule, in Grundies v. Beid, 107 111. at such sale with eonstruetive notice 304. of fraud in the conduct of the sale). § 607 EQUITY JUKISPEUDENCB. 1150 ing under the circumstances is only prima facie; it may be overcome by evidence, and the resulting notice may thereby be destroyed. Whenever, therefore, a party has merely received information, or has knowledge of such facts suffi- cient to put him on an inquiry, and this constitutes the sole foundation for inferring a constructive notice, he is allowed to rebut the prima fade presumption thence arising by evi- dence ; and if he shows by convincing evidence that he did to put a prudent man upon an inquiry, and whether an inquiry has been prosecuted with reasonable care and diligence: Rogers v. Jones, 8 N. H. 264; Griffith v. Griffith, 1 Hoff. Ch. 153; HuU v. Noble, 40 Me. 459, 480; Warren v. Swett, 31 N. H. 332, 341, 342; Briggs v. Taylor, 28 Vt. 180; Littleton v. Giddings, 47 Tex. 109; Allen v. Poole, 54 Miss. 323; Wood v. Krebbs, 30 Gratt. 708; Cordova v. Hood, 17 Wall. 1, per Strong, J.; Brush V. Ware, 15 Pet. 93, 112; Helms v. Chadbourne, 45 Wis. 60, 70, 71, 73; Chicago etc. R. R. Co. v. Kennedy, 70 111. 350, 361, 362; Blanchard v. Wave, 43 Iowa, 530 ; 37 Iowa, 305 ; Loughridge v. Bowland, 52 Miss. 546, 553-555; Deason v. Taylor, 53 Miss. 697, 701; Brown v. Volkening, 64 N. Y. 76, 82; Cambridge Valley Bank v. Delanc>, 48 N. Y. 326, 336, 339; Bennett v. Buchan, 61 N. Y. 222, 225; Kellogg v. Smith, 26 N. Y. 18; Baker v. Bliss, 39 N. Y. 70, 74, 78; Reed v. Gannon, 50 N. Y. 345; P*endle- ton V. Fay, 2 Paige, 202, 205; Edwards v. Thompson, 71 N. C. 177, 179; Major v. Bukley, 51 Mo. 227, 231; Rus^ll v. Sweezey, 22 Mich. 235, 239; O'Rourke v. O'Connor, 39 Cal. 442, 446; Button v. Warschauer, 21 Cal. 609, 82 Am. Dec. 765; Pell v. McElroy, 36 Cal. 268; Witter v. Dudley, 42 Ala. 616, 621, 625 ;* and many other cases cited in the preceding and the subsequent notes. It is sometimes difficult to distinguish a case of con- structive notice arising from extraneous facts sufficient to put the party upon an inquiry from a case of mere actuaj notice depending upon cir- cumstantial evidence; and the two have occasionally been confounded by the decisions themselves. The criterion as given in the text will, I think, render the distinction sufficiently plain and practical. § 606, (d) See, also, Bright v. Wheeler, 130 111. 128, 17 Am. St. Rep. Buckman, 39- Fed. 243, citing this 281, 22 N. E. 494; Janvrin v. Jan- section; Tillman v. Thomas, 87 Ala. vrin, 60 N. H. 169; Gale v. Morris, 321, 13 Am. St. Rep. 42, 6 South. 30 N. J. Eq. 289; Vredenburgh v. 151; Montgomery v. Keppel, 75 Cal. Burnet, 31 N. J. Eq. 232; Jaffray v. 128, 7 Am: St. Rep. 125, 19 Pac. 178; Tower, 63 N. J. Eq. 530, 53 Atl. 1S2, Washburn v. Huntington, 78 Cal. citing this and the preceding section 573, 21 Pac. 305; Fresno C. & I. Co. of the text; Lamar's Ex'r v. Hale, 79 v. Eowell, 80 Cal. 114, 13 Am. St. Va. 147. Eep. 112, 22 Pac. 53; Anthony v. 1151 CONCEBNING NOTICE. § 607 make the inquiry, and did prosecute it with all the care and diligence required of a reasonably prudent man, and that he failed to discover the existence of, or to obtain knowl- edge of, any conflicting claim, interest, or right, then the presumption of knowledge which had arisen against him will be completely overcome ; the information of facts and circumstances which he had received will not amount to a constructive notice. "What will amount to a due inquiry must largely depend upon the circumstances of each case.^ § 607, 1 The different species of constructive notice in wMch the legal presumption may thus be overcome seem to be the following: 1. That derived wholly from mere extraneous facts and circumstances which are said to put a party on an inquiry, which are matters in pais, and which generally consist of fraud, concealments, neglects, mistakes, and the like, by third persons; 2. That derived from the possession or tenancy of the property by some third person; and 3. To a partial extent, that derived from the pendency of an action affecting the property. In the following species the constructive notice seems to be absolute and the presumption conclusive : 1. That derived from a statutory recording or registration in the United States ;"• 2. That derived from the statutory lis pendens; 3. That derived from a definite recital or reference in an instrument forming an essential part of a party's chain of title; and 4. That affecting a prin- cipal, where an actual or a constructive notice has been duly given to his proper agent. That the presumption may be overcome in the classes of cases first above mentioned is either directly or inferentially held by the following decisions, among others : Williamson v. Bro wn, 15 N. Y. 354, 360; Flagg v. Mann, 2 Sum. 486, 554, per Story, J.; Rogers v. Jones, 8 N. H. 264, per Parker, J. ; Whitbread v. Boulnois, 1 Younge & C. 303, per Alderson, J. ; Jones_ v. Smith, 1 Hare, 43, per Wigram, V. C. ; Han- bury V. Litchfield, '2liyhir& K. 629; Hunt v. Elmes, 2 De Gex, F. & J. 578; Espin v. Pemberton, 3 De Gex & J. 547; Roberts v. Croft, 2 De Gex & J. 1 ; Ware v. Lord Egmont, 4 De Gex, M. & G. 460 ; Hewitt v. Loose- more, 9 Hare, 449; Griffith v. Griffith, 1 Hoff. Ch. 153." Whenever a party has, by means of information concerning extraneous matters, been put upon inquiry, how this inquiry should be made, and how far it should be prosecuted, in order that the legal presumption' may be overcome, and the constructive notice defeated, although the party may still have failed to ascertain the real truth, must largely depend upon the § 607, (a) The text is cited to this § 607, (b) See, also, Anthony v. effect in Johnson v. Hess, 126 Ind. Wheeler, 130 111. 128, 17 Am. St. Eep. 298, 9 L. E. A. 471, 25 N. E. 445. 2^1, 22 N. B. 494. § 607 EQUITY JUBISPETJDENCB. 1152 If, on the other hand, lie fail to make any inquiry, or to prosecute one with due diligence to the end, the presUtop- tion remains operative, and the conclusion of a notice is particular circumstances of each case; no universal rule is possible. Much help, however, may be derived from a comparison of the decisions, which I have arranged according to their genersd subject-matter. 1. Examination of the Records. — Examination of the records is always necessary, and there could hardly be a "due inquiry" without it. If the information given points to the existence of some interest or claim which, if it exists at all, must necessarily appear upon the record, then a search of the proper record, and a discovery that no such claim appeared therein, would generally be sufficient; the "due inquiry" would have been prose- cuted: Barnard v. Campau, 29 Mich. 162; Jackson v. Van Valkenburg, 8 Cow. 260; Bellas v. McCarthy, 10 Watts, 13, 28; Van Keuren v. Cent. R. R., 38 N. J. L. 165, 167 (when a grantor remains in possession after conveyance, a purchaser from his grantee held not bound to inquire further than the record of his conveyance; the record of his deed sufficient; but see, per contra, Illinois Cent. R. R. v. McCuUough, 59 lU. 166) ; Reynolds v. Ruckman, 35 Mich. 80. In general, an examination of the records by such a party is not suffi- cient. If the information which puts him on an inquiry points to the exist- ence of some matter in pais, some interest dehors the records, or which would not necessarily be shown by the records, then a search of the records alone is not "due inquiry," — if, for example, the supposed claim was an easement, or a grantor's lien for purchase price, and the like : Wilson v. Hunter, 30 Ind. 466, 472; Russell v. Sweezey, 22 Mich. 235, 239; Shotwell V. Harrison, 30 Mich. 179 ; Munroe v." Eastman, 31 Mich. 283 ; Deason v. Taylor, 53 Miss. 697, 701; Littleton v. Giddings, 47 Tex. 109; Baker v. Bliss, 39 N. Y. 70; RandaU v. SUverthom, 4 Pa. St. 173. 2. Inquiry from the Grantor or Vendor. — A purchaser who had been put on an inquiry should seek information from his grantor or vendor, and a failure to do so would generally show a lack of the due care and diligence in making the inquiry. There are cases which go to the length of holding that such a purchjiser, who neglects to question his grantor or vendor, will be charged with notice of all he could have learned : Sergeant v. IngersoU, 7 Pa. St. 340; 15 Pa. St. 343, 348, 349." Under some circumstances it is possible that the information sought and obtained from the grantor or vendor would satisfy the requirements of the rule, and constitute the due inquiry: See Espin v. Pemberton, 3 De Gex & J. 547, 556. § 607, (c) See, also, Hiekman v. ing opinion of Sherwood, J., citing Green, 123 Mo. 165, 29 L. R. A. »9, this note. 22 S. "W. 455, 27 S. W. 440, dissent- 1153 CONCERNING NOTICE. § 607 absolute.® The criterion thus laid down will serve to de- termine the prima facie nature of the presumption in a very large number of the instances which are properly referable to the class of "constructive notice." 3. Inquiry from Third Persons. — Under many circumstances, an exam- ination of the records and a questioning of the vendor would not be sufll- cient, unless the inquiry were further prosecuted among third persons from whom information could probably be obtained; a neglect to make such inquiry would not overcome the presumption. Thus an omission to seek information from a third person who was in possession, or from a third person who was said or claimed to hold some lien or encumbrance thereon, would- generally be a failure to prosecute the inquiry with due diligence. The cases on this particular subject are very numerous, depending upon a great diversity of facts: Littleton v. Giddings, 47 Tex. 109; Russell v. Sweezey, 22 Mich. 235, 239; Witter v. Dudley, 42 Ala. 616, 621, 625.* The following recent English cases are illustrations of a failure to make "due inquiry," whereby the party remained charged with constructive notice: Hopgood v. Ernest, 3 De Gex, J. & S. U6, 121; Broadbent v. Barlow, 3 De Gex, F. & J. 570, 581; Atterbury v. Wallis, 8 De Gex, M. & G. 454; Penny v. Watts, 1 Macn. S G. 150, 165; Hewitt v. Loose- more, 9 Hare, 449, 456, 458; Maxfield v. Burton, L. R. 17 Eq. 15, 18; Pitcher v. Rawlins, L. R. 11 Eq. 53 ; Briggs v. Jones, L. R. 10 Eq7 92. In the following recent English cases it was held that the inquiry was suffi- cient,, and the party was not affected with notice : Greenfield v. Edwards, 2 De Gex, J. & S. 582; Cory v. Eyre, 1 De Gex, J. & S. 149, 168, 169; Hunt V. Elmes, 2 De Gex, F. & J. 578, 588; Perry v. Holl, 2 De Gex, F. & J. 38, 53, 54; Espin v. Pemberton, 3 De Gex & J. 547, 556; Roberts V. Croft, 2 De Gex & J. 1, 5, 6; Ware v. Lord Egmont, 4 De Gex, M. & G. 460, 473, 474; Hewitt v. Loosemore, 9 Hare, 449, 456, 458; Credland v. Potter, L. R. 10 Ch. 8; Ratcliffe v. Barnard, L. R. 6 Ch. 652, 654; see, also, Epley v. Witherow, 7 Watts, 163, 167; McGehee v. Gindrat, 20 Ala. 95; Wilson v. McCullough, 23 Pa. St. 440,, 62 Am. Dec. 347. § 607, (d) See, also, Hickman v. S. W. 162; cited, Hickman v. Green, Green, 123 Mo. 165, 29 L. E. A. 39, 123 Mo. 165, 29 L. R. A. 39, 22 S. W. 22 S. W. 455, 27 S. W. 440, dissent- 455, 27 S. W. 440, dissenting opinion ing opinion of Sherwood, J., citing of Sherwood, J. The paragraph is this note. quoted at length in Loomis v. Cobb § 607, (e) This passage is quoted (Tex. Civ. App.), 159 S. W. 305. in Hill V. Moore, 85 Tex.-S35, 19 11—73 § 608 EQUITY JUBISPKUDENCE. 1154 § 608. When Conclusive. — ^It should be added, for the purpose of concluding this general description, that the doctrine determining what constitutes a constructive notice under such circumstances may be formulated, in somewhat different terms, as follows : Whenever a party has informa- tion or knowledge of certain extraneous facts, which of themselves do not amount to, nor tend to show, an actiud notice, but which are sufficient to put a reasonably prudent man upon an inquiry respecting a conflicting interest, claim, or right, and the circumstances are such that the in^- quiry, if made and followed up with reasonable care and diligence, would lead to a discovery of the truth,' to a knowledge of the interest, claim, or right which really exists, then the party is absolutely charged with a construc- tive notice of such interest, claim, or right. The pre- sumption of knowledge is then conclusive.^ There is plainly nothing contradictory between this statement and the criterion laid down in the preceding paragraph; both are phases of the same doctrine. Since the facts are as- sumed to be such that an inquiry properly conducted would result in arriving at the truth, it would be impossible for the party to show by any evidence that he had duly prose- cuted the inquiry, and had nevertheless failed to acquire the knowledge. If the facts of a particular case bring it within this description, the legal presumption becomes conclusive, and the constructive notice is absolute in its effects.^ § 608, 1 It is in pursuance of this general proposition that the con- structive notice from recitals contained in a deed forming a necessary link in a party's chain of title, and that chargeable upon a principal when given to an agent, and that derived from a lis pendens and from regis- tration, are absolute in their effects, ihe legal presumptions being eonclu- §608, (a) This passage is quoted 26 N. E. 982. The text is cited in in Lang Syne Gold Mining Co. v. Wittkowsky v. Gedney, 124 N. C. Ross, 20 Nev. 127, 19 Am. St. Rep. 437, 32 S. E. 731; Cooke v. Caswell, 837, 18 Pae. 358; Kernohan v. Dur- 81 Tex. 678, 17 S. W. 385, ham, 48 Ohio St. 1, 12 L. E. A. 41, 1155 CONCEBNING NOTICE. § § 609, 610 § 609. Species of Constructive Notice. — Having thus ex- plained the nature of constructive notice, and discussed the general doctrines concerning it, I shall now describe its various kinds or species, and state the particular rules ap- plicable to each. The following subdivision is accurate and sufficient ; it is based upon natural lines of separation, and embraces every definite species recognized by the courts. These various kinds of constructive notice are : 1. That by extraneous facts, or matters in pais, generally involving acts of fraud or negligence; 2. That by possession or' ten- ancy; 3. That by recital or reference in instruments of title ; 4. That by lis- pendens, including the statutory notice of a pending action; 5. That by judgments; 6. That by registration or recording of instruments; 7. That between a principal and his agent. These seven species will be examined in the order thus given. § 610. 1. By Extraneous Facts, Generally Acts of Fraud, Negligence, or Mistake. — The criterion in all in- stances of this species is, that the party had knowledge or information of certain matters in pais, which, although not directly tending to show the existence of a prior conflicting right, are sufficient to put him, as a prudent man, upon an inquiry; and he is charged with constructive notice of all that he might have learned by an inquiry prosecuted with' sive. In support of the general rule as given in the text, see the following cases, among others: Helms v. Chadboume, 45 Wis. 60, 70, 71; Chicago etc. R. R. Co. V. Kennedy, 70 111. 350, 361; Loughridge v. Bowland, 52 Miss. 54G, 553; Manl v. Rider, 59 Pa. St. 167, 171; Mullison's Estate, 68 Pa. St. 212; Kennedy v. Green, 3 Mylne & K. 699." § 608, (1») It appears that a person ceedings authorizing the sale, see In who is put on inquiry is conclusively re Axtell's Petition, 95 Mich. 244/ charged with notice of such a fact 54 N. W. 889, citing this note. In' as dedication to the public, notwith- Gulf, C. & S. F. E. Co. v. Gill, 5 Tex.' standing that his inquiries led him Civ. App. 496, 23 S. W. 142, citing to a wrong conclusion: Attorney- §§ 604 and 606 of the text, the General v. Abbott, 154 Mass. 323, author's classification of constructive 13 L. K. A. 251, 28 N. B. 346. That notice is approved, but notice from a purchaser at a guardian's sale is recitals is treated as of the second presumed to have notice of the pro- class. § 610 EQUITY JUEISPBUDENCE. 1156 reasonable diligence;. a legal presumption arises that he has obtained information of what he might thus have learned. In every such case the first question is, whether tlie facts of which the party has information are sufficient to put him upon an inquiry, so as to raise the prima facie presumption; the further question is then presented, whether he has made a due inquiry without discovering the truth, so as to overcome the presumption and ^efeat the notice, or whether he has so neglected this duty that the presumption remains unshaken and the notice effec- tive.* A third question might be suggested, whether he had made an inquiry and had ascertained the whole truth eancerning the prior conflicting right, so that the con- structive notice would in reality be turned into actual knowledge or actual notice. I would, remark that in many of the decisions involving this species of notice it will be seen upon a careful examination that the point actually determined by the court was, not whether the party had made a due and reasonable inquiry, but whether the facts were sufficient to put him upon any inquiry, so that his failure to inquire would be a fatal neglect. It is plain from the discussions of the preceding paragraphs that in all in- stances belonging to this species the legal presumption upon which constructive notice always rests is only prima fade, and may be overcome by evidence clearly showing that the inquiry was duly prosecuted without success. Be- fore describing the particular cases falling under this head, it is proper to mention the difficulty, which may sometimes exist, of distinguishing this kind of constructive notice from those instances of actual notice which are established merely by circumstantial evidence. In fact, there are de- cisions which make no attempt to distinguish them; the terms "constructive notice" and "actual notice" have been applied indiscriminately to the same condition of circum- stances. The distinction, however, exists, and is funda- §610, (a) The text is quoted in 673, 118 C. C. A. Ill; Miller v. Ash, Newberry v. Wilkinson, 199 Fed. 156 Cal. 544, 105 Pac. 600. 1157 CONCEBNING NOTICE. § 611 mental. Whatever may be the language of judicial dicta, it is settled beyond a doubt that in one case the actual notice is argumentatively inferred as a conclusion of fact, by the jury or other tribunal, from the circumstances which put the party upon an inquiry; and in the other case the constructive notice is inferred by the court as a presump- tion or conclusion of law from the same kind of circum- stances, in the absence of contrary evidence. ^ I shall now mention the most important instances which properly belong to this branch of constructive notice. § 611. Visible Objects and Structures. — ^If a purchaser sees or has knowledge of, or by the ordinary use of his senses might see or know of, visible material objects or structures upon or connected with the land or other subject- matter concerning which he is dealing, he may, and gen- erally will, be charged with a constructive notice of any easement or other similar right the existence of which would be reasonably suggested to him by the appearance of such material object. He is put upon an inquiry, and is presumed to have ascertained whatever he might have learned by prosecuting the inquiry in a due and reasonable manner. 1 ^ § 610, 1 These propositions are so fully examined in the preceding para^ graphs that no further citation of authorities in their support is necessary. Oases belonging to this first species of constructive notice are much more common in England than in the Unitpd States; indeed, a very large pro- portion of the English decisions concerning constructive notice must be referred to this head. The reason is obvious. In England, the absence of any general system of recording renders is possible for titles to be ailected in a vast number of modes by matters in pais, by matters resting in the knowledge of particular individuals, and -which can only be ascer- tained by a special inquiry. The universal system of recording in this country largely diminishes the possibility of titles being thus affected by extraneous matters. §611, IHervey v. Smith, 22 Beav. 299; Davies v. Sear, L. R. 7 Eq. 427, 432, 433; Morland v. Cook, L. R. 6 Eq. 252, 263, 265; Raritan Water § 611, (a) For recent cases illustrative of this section, see ante, § 600, note. § 612 EQUITY JTJEISPEUDENCE. 1158 § 612. Absence of Title Deeds. — The case belonging to this head which most frequently occurs in England is that arising from the absence of the title deeds, or their non- production by the owner of land with whom an intended purchaser or encumbrancer is dealing. From the peculiar system of conveyancing and land titles prevailing in Eng- land, the owner of a legal estate in fee or for life is entitled and is presumed to have the title deeds and other muni- P. Co. V. Veghte, 21 N. J. Eq. 463, 478; Hoy v. Bramhall, 19 N. J. Eq. 563, 97 Am. Dec. 687; Randall v. Silverthorn, 4 Pa. St. 173; Paul v. Con- nersville etc. R. R., 51 Ind. 527, 530. In Hervey v. Smith, 22 Beav. 299, there were fourteen chimney-pots visible on the roof of a house, but only twelve flues in the house; and the purchaser was held charged with con- structive notice of an easement for the passage of smoke in favor of an adjoining dwelling. This decision has been criticised. In Davies v. Sear, L. R. 7 Eq. 427, an open archway in a house visible to the purchaser was held constructive notice of a right of way through the premises enjoyed by a neighboring owner. In Morland v. Cook, L. R. 6 Eq. 252, lands on the coast were purchased which were below the level of the sea, and which, together with a larger extent of adjacent land, were protected by a sea-wall. The purchaser was held to be charged with constructive notice of a covenant providing for the maintenance of the sea-wall which constituted an equi- table charge upon the land so bought. In Raritan etc. Co. v. Veghte, 21 N. J. Eq. 463, a mill race and dam were held constructive notice of ease- ments for the use of water rights encumbering the property ; while in Paul V. Connersville etc. R. R., 51 Ind. 527, a graded railway track across a farm was held notice of aU the rights of the railroad. See, also, Allen v. Seekham, L. R. 11 Ch. Div. 790, 794; Suffield v. Brown, 9 Jur., N. S., 999; 33 L. J. Ch. 249, per Lord Romilly, M. R., and 10 Jur., N. S., Ill; 33 L. J. Ch. 256, per Lord Westbury; Pyer v. Carter, 1 Hurl. & N. 916; Ewart v. Cochrane, 4 Macq. 117; Dann v. Spurrier, 7 Ves. 231; Clements V. Welles, L. R. 1 Eq. 200; Wilson v. Hart, L. R. 1 Ch. 463. Exactly the same question in principle sometimes arises in suits for the specific per- formance of contracts, where the vendee, being familiar with the premises, or having seen them shortly before entering into the contract, is held charged with constructive notice of easements, and other similar rights affecting the land, which are reasonably suggested by the visible appear- ance of material structures or of modes in which the premises are used and occupied. See Shackleton v. Sutcliffe, 1 De Gex & S. 609; Grant v. Munt, Coop. 173; Pope v. Garland, 4 Younge & C. 394; Bowles v. Round, 5 Ves. 508 ; Dyer v. Hargrave, 10 Ves. 506. 1159 coNCEENiisrG NOTICE. § 612 ments of title constituting the written evidence of Ms estate in his own possession or under his personal and immediate control. The inability to produce the title deeds, and espe- cially their possession by a stranger, would indicate that some equitable or perhaps legal interest, mortgage, or lien had been created and was outstanding.^ The three follow- ing general rules may be considered as definitely settled by a strong preponderance of authority, and especially by the more recent and carefully considered decisions of the Eng- lish courts. It should be observed that they are given as general rules; their application must largely depend upon and vary with the changing circumstances of particular cases. If a purchaser or encumbrancer de'aling with the apparent owner of an estate learns or is informed that the title deeds are in the possession of a third person, this will, in general, be a constructive notice of any interest in or claim upon the estate held by such person; and will cer- tainly be a notice, if the party thus receiving the informa- tion intentionally omits to make any inquiry into the nature and objects of the stranger's possession.^ On the other § 612, 1 In fact, tie possession, by the apparent owner of the legal estate, of all the title deeds is quite analogous to, though not of course exactly identical with, a perfect record title in the United States. A pur- chaser dealing with the legal owner in England, and finding him in pos- session of all the title deeds, is in a position quite similar to that of a purchaser in this country who has made a search and finds the owner's title on the records clear and unencumbered. While in neither case is such purchaser absolutely secure against unknown outstanding claims, in both he stands in a like position of advantage and protection. § 612, 2 Dryden v. Frost, 3 Mylne & C. 670, 673, per Lord Cottenham; Hiern v. Mill, 13 Ves. 114; Birch v. Ellames, 2 Anstr. 427; Bradley v. Eiches, L. R. 9 Ch. Div. 189, 195, 196; Maxfield v. Burton, L. R. 17 Eq. 15, 18 (the purchaser was informed that the deeds were in the possession of a third person, and simply neglected to make any inquiry; it did not appear that his neglect was intentional or willful). Upon substantially the same grounds it was held, in Kellogg v. Smith, 26 N. Y. 18, 23, that the pur- chaser of a bond and mortgage who fails to require the production of the bond, it being in fact not produced, is charged with notice of any defects in his assignor's title. § 612 EQUITY JUKISPEUDENOB. 1160 hand, it is now thoroughly settled that the mere absence or non-production of the title deeds is not of itself a con- structive notice to a purchaser or encumbrancer, if he in good faith inquires for them, and a reasonable excuse for their non-appearance is given. His omission to make further inquiry is not the ^'culpable neglect" which the English courts now require, under such circumstances, in order ta charge the party with notice. Exactly the same rule has been applied by several of the cases to a some- what different state of facts. If deeds are produced and delivered to the purchaser or encumbrancer, which are represented to be all of the muniments of title, while in fact they are not all, but some of the deeds affecting the title are in possession of a third person, his omission to ex- amine the deeds thus delivered to him and to discover the defect is not the culpable neglect which renders him chargeable with notice.^ Finally, if a purchaser or en- cumbrancer fails to make any inquiries concerning the title deeds of the property for which he is dealing, this is, under the English system, a "culpable negligence," and he is thereby charged with constructive notice of all the facts which he might have learned by means of a due inquiry.* ^ § 612, 3 Dixon v. Muckleston, L. E. 8 Ch. 155, 158, IGl ; Rateliffe v. Barnard, L. U. 6 Cli. 652, 654; Hunt v. Elmes, 2 De Gex, F. & J. 578, 588; 28 Beav. G31; Perry v. Holl, 2 De Gex, P. & J. 38, 53, 54; Espin v. Pemberton, 3 De Gex & J. 547, 556; 4 Drew. 333; Roberts v. Croft, 2 De Gex & J. 1, 5, 6 ; 24 Beav. 223 ; Hewitt v. Loosemore, 9 Hare, 449, 456, 458; Colyer v. Finch, 5 H. L. Gas. 905; Finch v. Shaw, 19 Beav. 500; Dowle V. Saunders, 2 Hem. & M. 242; Hipkins v. Amery, 2 Giff. 292; Farrow v. Roes, 4 Beav. 18; Evans v. Bicknell, 6 Ves. 174; Phnnb v. Fluitt, 2 Anstr. 432; and see Ware v. Lord Egmont, 4 De Gex, M. & G. 460, 473, 474; Greenfield v. Edwards, 2 De Gex, J. & S. 582; Cory v. Eyre, 1 De Gex, J. & S. 149, 168, 169; Perry Herrick v. Attwood, 2 De Gex & J. 21, 37. § 612, 4 Such conduct is the willful shutting one's eyes to the truth, and omitting to inquire for the very purpose of avoiding information, § 612, (a) So, where a general in- tain what they consisted of or to quiry was made about the title deeds, have them produced, the purchaser but no endeavor was made to ascer- was culpably negligent: Oliver v. 1161 CONCERNING NOTICE. § 613 § 613. Other Matters in Pais. — As miglit be supposed from our wholly different system of conveyancing and titles, instances of constructive notice by the absence or non-production of title deeds seldom, if ever, arise in this country. The same general rule, however, is applied by our courts in all analogous cases. If a purchaser or en- cumbrancer, dealing concerning property of which the record title appears to be complete and perfect, has in- formation of extraneous facts or matters in pais, sufficient to put him on inquiry respecting some unrecorded convey- ance, mortgage, or encumbrance, or respecting some out- standing interest, claim, or right which is not the subject of record, and he omits to make a proper inquiry, he will be charged with constructive notice of all the facts which he might have learned by means of a due and reasonable inquiry. 1 ^ spoken of by Viee-Chaneellor Wigram in the passage quoted in a pre- ceding paragraph: Hewitt v. Loosemore, 9 Hare, 449, 458; Hopgood v. Ernest, 3 De Gex, J. & S. 116, 121; Atterbury v. Wallis, 8 De Gex, M. & G. 454, 466; Maxfield v. Burton, L. R. 17 Eq. 15, 18; Bradley v. Riches, L. R. 9 Ch. Div. 189, 195, 196; Finch v. Shaw, 19 Beav. 500, 511; Jones V. Williams, 24 Beav. 47; Peto v. Hammond, 30 Beav. 495; Allen v. Knight, 5 Hare, 272; Jonesv^_SmithjJJlMejJ:3 ; 1 Phill. Ch. 244; Worth- ington V. Morgan, 16 Sim. 547; Jackson v. Rowe, 2 Sim. & St. 472. § 613, 1 This inquiry, as has been shown, sometimes should be made of the grantor or vendor, and sometimes of third persons, according to the circumstances of each case: Epley v. Witherow, '7 Watts, 163, 167; Jaques v. Weeks, 7 Watts, 261, 274; Buttriek v. Holden, 13 Met. 355, 357; Sergeant v. IngersoU, 7 Pa. St. 340, 15 Pa. St. 343, 348, 349 ; Warren v, Swett, 31 N. H. 332, 341; Littleton v. Giddings, 47 Tex. 109; Helms v. Chadbourne, 45 Wis. 60, 70; Shepardson v. Stevens, 71 111. 646; Eriekson v. RafEerty, 79 111. 209, 212; Buck v. Payne, 50 Miss. 648, 655; Maul v. Rider, 59 Pa. St. 167, 171; Stearns v. Gage, 79 N. Y. 102, 107; Baker v. Bliss, 39 N. Y. 70. Hinton, [1899] 2 Ch. 264, 68 Law J. § 613 (a) The text is quoted in Ch. 583, 81 Law T. (N. S.) 212, 48 E. K. Bonds & Co. v. Ford, 175 Ky. Wkly. Eep. 3. See, also, in support 827, l^S S. W. 124. See, also, Kirseh of the text, Berwick & Co. v. Price' v. Tozier, 148 N. Y. 390, 42 Am. St. [1905] 1 Ch. 632; Davis v. Hutchings, Eep. 729, 38 N. E. 375; Petrain v. [1907] 1 Ch. 356. Kiernan, 23 Or. 455,' 33 Pac. 158, § 614 EQUITY JUKISPBUDENCE. 1162 § 614. 2. By Possession or Tenancy.^ — The general rule is well settled in England that a purchaser or encum- brancer of an estate who knows or is properly informed that it is in the possession of a person other than the vendor or mortgagor with whom he is dealing is thereby charged with a constructive notice of all the interests, rights, and equities which such possessor may have in the land, He is put upon an inquiry concerning the grounds and reasons of the stranger's occupation, and is presumed to have knowl- edge of all that he might have learned by means of an in- quiry duly and reasonably prosecuted. If he neglects to make any inquiry, or to make it with due diligence, the presumption and notice, of course, remain absolute.^ ^ § 614, 1 Taylor v. Stibbert, 2 Ves. 437, 440, per Lord Rosslyn ; Holmes V. Powell, 8 De Gex, M. & G. 572, 580, 581; Penny v. Watts, 1 Macn. & G. 150, 165. The general rule was so clearly and accurately stated by Kuight Bruce, L. J., in the recent case of Holmes v. Powell, 8 De Gex, M. & G. 572, that I shall quote a passage of his opinion (p. 580) : "I apprehend that by the law of England when a man is of right and de facto in posses- sion of a corporeal hereditament, he is entitled to impute knowledge of that possession to all who deal for any interest in the property, conflicting or inconsistent with the title or alleged title under which he is in pos- session, or which he has a right to connect with his possession of the prop- erty. It is equally a part of the law of the country, as I understand it, that a man who knows, or who cannot be heard to deny that he knows, another to be in possession of certain property cannot for any civil pur- pose, as against him at least, be heard to deny having thereby notice of the title or alleged title under which or in respect of which the former is and claims to be in that possession. Lord Eldon's language in Allen v. Anthony, 1 Mer. 282, 284, recognizes, as I understand it, both rules. But possession of a coi-poreal hereditament, to be effectual, need not be con- tinually visible or without cessation actively asserted. If a man has once received rightful and actual possession of land, he may go to any distance from it without authorizing any servant, or agent, or other person to enter quoting this passage of the text: cited in Caldwell v. Pierson, 37 S. D. Curry v. Williams (Tenn. Ch. App.), 546, 159 N. W. 124. 38 S. W. 278, citing this section. § ^^^' (^) ^his passage of the text is quoted in Curry v. Williams (Tenn. §614, (a) Sections 614-625 are ^^ ^^^^^ gg g ^_ ^^g^ ^^^ ^.^^^ cited in Roll v. Eea, 50 N. J. L. 264, i^ gehwoebel v. Storrie, 76 N. J. E'q. 12 Atl. 905. Sections 614, 615, are 460, 74 Atl. 969. 1163 CONCEENI-STG NOTICE. § 614 The same general rule, based upon the same motives and reasons, has been established in the United States by a very great number of decisions and judicial dicta.^ ^ In upon it or look after it ; he may leave it for years uncultivated- and unused ; he may set no mart of ownership upon it, — and his possession may never- theless still continue, at least until his conduct afford evidence of intentional abandonment, which such conduct as I have mentioned would not neces- sarily do. Suppose, for example, a purchase of a tract of woodland, and the purchaser, after possession given him, to leave it wholly neglected, uninhabited, untouched, unvisited, unseen, for years, the possession is not thus lost. ... It is unnecessary for me to repeat that I have uniformly been using the word 'possession' as meaning 'occupation,' and not as in- cluding that kind of possession of a corporeal hereditament which a man has by receiving compensation or remuneration for the occupation of it by another." The judge, in support of these conclusions, referred to the following decisions; Hardy v. Reeves, 5 Ves. 426 j Taylor v. Stibbert, 2 Ves. 437; Daniels v. Davison, 16 Ves. 249; 17 Ves. 433; Norway v. Eowe, ' 19 Ves. 144; Gordon v. Gordon, 3 Swanst. 400; Miles v. Langley, 1 Russ. & M. 39; White v. Wakefield, 7 Sim'. 401; Oxwith v. Plummer, 2 Vern. 636. § 614, 2 Rogers v. Jones, 8 N. H. 264; Hull v. Noble, 40 Me. 459, 480; Johnson v. Clarke, 18 Kan. 157, 164; School Dist. v. Taylor, 19 Kan. 237; Tankard v. Tankard, 79 N. C. 54, 56; Edward v. Thompson, 71 N: C. 177; Noyes v. Hall, 97 U. S. 34, 38; Cabeen v. Breckenridge, 48 111. 91; Trues- dale V. Ford, 37 111. 210; Dunlap v. Wilson, 32 111. 517; Strickland v. Kirk, 51 Miss. 795, 797; Loughridge v. Bowland, 52 Miss. 546, 553; Moss V. Atkinson, 44 Cal. 3, 17; Killey v. Wilson, 33 Cal. 690; Russell v. Sweezey, 22 Mich. 235, 239 ; Sears v. Munson, 23 Iowa, 380 ; Phillips v. Costley, 40 Ala. 486; McKinzie v. Perrill, 15 Ohio St. 162; Perkins v. Swank, 43 Miss. 349; Glidewellv. Spaugh, 26 Ind. 319; Warren v. Richmond, 53 111. 52; Reeves v. Ayers, 38 111. 418; Keys v. Test, 33 111. 316; Bank of Orleans V. riagg, 3 Barb. Ch. 316; Diehl v. Page, 3 N. J. Eq. 143; Baldwin v. Johnson, 1 N. J. Eq. 441; Woods v. Farmere, 7 Watts, 382, 32 Am. Dec. 772; Sailor v. Hertzog, 4 Whart. 259; Ringgold v. Bryan, 3 Md. Ch. 488; Baynard v. Norris, 5 Gill, 468, 46 Am. Dec. 647; Webber v. Taylor, 2 Jones Eq. 9. § C14, (c) This section of the text man v. Cooley, 28 S. D. 475, 134 is cited in Kirby v. Tallmadge, 160 N. W. 49. In addition to the cases U. S. 379, 16 Sup. Ct. 349; Carr v. cited under the following sections, Maltby, 165 N. Y. 557, 59 N. E. 2.91; illustrating various phases of the Chapman v. Chapman, 91 Va. 397, 50 doctrine, see, in general, the follow- Am. St. Rep. 846, 21 S. B. 813; HufE- ing: Landes v. Brandt, 10 How. 348, 614 EQUITY JUKISPRUDENCB. 1164 by far tlie larger portion of English cases, the possession has been that of a tenant or lessee, while in this country the instances of notice by mere tenancy are comparatively few. I shall therefore treat the effect of tenancy as a particular application of the more general doctrine con- cerning notice by possession. In discussing the entire subject, I shall endeavor, — 1. To define with accuracy and precision. the general rules which have been settled in the United States, with their limitations and exceptions ; 2. To determine the extent of the notice, of what rights belonging to the occupant his possession is notice, and the effects thereof on the rights of the one receiving the notice; 3. To ascertain what kind, amount, and length of posses- sion is necessary or sufficient in various classes of eases; 4. To inquire whether the presumption arising from the possession is conclusive or rebuttable; and 5. To consider 375; Lea v. Polk Co. Copper Co., ai How. 493, 498; Simmons Greek Coal Co. V. Derail, 142 U. S. 417, 12 Sup. Ct. 239; Van Gunden v. Virginia Coal & Iron Co., 52 Fed. S38, 850, 3 C. C. A. 294, 8 XJ. S. App. 229; Eeynolds V. Kirk, 105 Ala. 446, 17 South. 95; Kent V. Dean, 128 Ala. 600, 30 South. 543; Bryan v. Bamirez, 8 Cal. 461, 6S' Am. Dec. 340 (possession by holder of an equity that cannot be re- corded); Stonesifer v. Kilburn, 122 Cal. 659, 55 Pae. 587; Smith v. Brit- tenham, 109 111. 540; Chicago, B. & Q. E. Co. V. Boyd, 118 111. 73, 7 N. B. 487; Blair v. Whitaker (Ind. App.), 69 N. E. 182; Jones v. Wilkinson, 2 Kan. App. 361, 42 Pae. 735; Phoenix Mut. Life Ins. Co. v. Beaman, 5 Kan. App. 772, 48 Pae. 1007 (notice of possessor's equitable homestead rights); Du Val v. Wilmer, 88 Md. C6, 41 Atl. 122; Miner v. Wilson, 107 Mich. 57, 64 N. W. 874; Jones v. Breinzer, 70 Minn. 525, 73 N. W. 255; Thompson v. Borg (Minn.), 95 N. W. 896; Stovall v. Judah, 74 Miss. 747, 21 South. 614; Taylor v. Moseley, 57 Miss. 544; Pleasants v. Blodgett, 39 Neb. 741, 42 Am. St. Eep. 624, 58 N. W. 423; Stillings v. Stillings (N. H.), 42 Atl. 271; Salvage v. Hay- dock, 68 N. H. 484, 44 Atl. 696; Per- ron V. Errol, 59 N. H. 234; Essex Co. Bank v. Harrison, 51 N. J. Eq. 91, 40 Atl. 209, and cases cited; Manufacturing Co. v. Hendricks, 106 N. C. 485, 11 S. E. 568; Boss v. Hen- drix, 110 N. C. 403, 15 S. E. 4 (pos- session as notice of resulting trust); Mayo V. Leggett, 96 N. C. 242, 1" S. E. 622; Cooper v. Thomasqn, 30 Or. 161, 45 Pae. 296; Hawley v. Geer (Tex.), 17 S. W. 914 (possession puts on inquiry as to resulting trust); Snyder v. Botkin, 37 W. Va. 355, 16 S. E. 591 (possession under unre- corded mortgage notice to subsequent judgment creditor of mortgagor) ; Lowther Oil Co. v. Miller-Sibley Oil Co. (W. Va.), 44 S. E. 433; Lam- oreux V. Huntley, 68 Wis. 24, 31 N. W. 331. 1165 CONCERNING NOTICE. § 615 the case of possession by a tenant or lessee, and tlie par- ticular rules connected therewith. § 615. General Rules.^ — Two leading and entirely dis- tinct rules have been settled in the United States as well as in England, and the failure to recognize this fact has, as it seems to me, sometimes produced confusion and un- certainty in dealing with the general subject. In the. first place, it is clearly established by many decisions of the highest authority that an actual, open, visible, and exclu- sive possession of a definite tract of land by one rightfully in possession or holding under a valid title is a construc- tive notice to subsequent purchasers and encumbrancers of whatever estate or interest in the land is held by the occupant, equivalent in its extent and effects to the notice given by the recording or registration of his title. The constructive notice thus described, like that arising from a record or registration, does not seem to require nor to depend upon any actual knowledge or information of the possession communicated to or had by the subsequent- purchaser, since he is held to be charged with notice, even though he is a resident of another state. ^ ^ This rule is, § 615, 1 This rule seems to have its special and most usual application be- tween prior grantees of land whose deeds have not been put on record, and subsequent grantees or encumbrancers whose deeds or mortgages have been, recorded. The rightful possession under such circumstances is held to pro- duce the same effect as that produced by a record: Noyes v. Hall, 97 II. S, 34, 38; Cabeen v. Breckenridge, 48 111. 91; Truesdale v. Ford, 37 III. 210; Brown v. Gaffney, 28 111. 157; Dunlap v. Wilson, 32 111. 517; § 615, (a) TLis paragraph is cited, 349 (the notice is independent of generally, in United States v. Krue- knowledge of the possession); Mer- ger, 228 Fed. 97, 142 C. C. A. 503; gan v. Morgan, 3 Stew. (Ala.) 383, Engler v. Garrett, 100 Md. 387, 59 21 Am. Dec. 638; Sawyer v. Baker, Atl. 648; Wood v. Price, 79 N. J. Eq. 72 Ala. 49; Eankin Mfg. Co. v. 620, Ann, Cas. 1913 A, 1210, 3S' L. R. Bishop, 137 Ala. 271, 34 South. 991; A. (N. S.) 772, 81 Atl. 983. Carter v. Challen, 83 Ala. 135, 3 §615, (b) This rule is supported South. 313; Gamble v. Black Warrior by the language or decision of the Coal Co., 172 Ala. 669, 55 South. 190; following additional eases: Kirby v. Leater v. Walker, 172 Ala. 104, 55 Tallmadge, 160 U. S. 379, 16 Sup. Ct. South. 619; Enslen v. Thornton, 182 1615 EQUITY JUKISPRUDENCE. 1166 plainly the same as the first one laid down by Lord Justice Knight Bruce, in the opinion quoted under the last preced- ing paragraph.2 The rationale seems to be, that as the occupant's title is a good one, and as his possession is Bradley v. Snyder, 14 111. 263, 58 Am. Dec. 564; Tankard v. Tankard, 79 N. C. 54, 56; Edwards v. Thompson, 71 N. C. 177, 179; Webber v. Taylor, 2 Jones Eq. 9; Taylor v. Kelly, 3 Jones Eq. 240 (in Edwards v. Thomp- son, 71 N. C. 177, it was said that the purchaser was thus charged with notice, although he lived in another state) ; School District v. Taylor, 19 Kan. 287; Emmons v. Murray, 16 N. H. 385; Farmers' L. & T. Co. v. Maltby, 8 Paige, 361; Doyle v. Stevens, 4 Mich. 87. § 615, 2 Holmes v. Powell, 8 De Gex, M. & G. 572, 580. Ala. 314, 62 South. 525; Alexander v. Fountain, 195 Ala. 3, 70 South. 669; Josey v. Davis's Adm'r, 55 Ark. 318, 18 S. W. 185; Hughes Bros. v. Redus, 90 Ark. 149, 118 S. W. 414; Beattie v. Crewdson, ]24 Cal. 577, 57 Pae. 463 (purchaser is bound to know who is in possession) ; Seheerer V. Cuddy, 85 Cal. 271, 24 Pae. 713 (immaterial whether knowledge of possession); Tate v. Pensacola, G. L. & D. Co., 37 Fla. 439, 53 Am. St. Eep. 251, 20 South. 542 (the notice is not dependent on knowledge of the pos- session); Georgia Code, 1895,13931; Neal V. Jones, 100 Ga. 765, 28 S. E. 427; Georgia State B. & L. Assn. v. Faison, 114 6a. 655, 40 S. E. 760; Baldwin v. Sherwood, 117 Ga. 827, 45 S. E. 216; Garbutt & Donovan v. Mayo, 12S Ga. 269, 13 L. E. A. (N. S.) 58, 57 S. B. 495; Tillotson v. Mitchell, 111 111. 518; Higgins v. White, 118 ni. 619, 8 N. E. 808; Morrison v. Morrison, 140 111. 560, 30 N. E. 768; Eock Island & P. E. Co. V. Dimiek, 144 111. 628, 19 L. R. A. 105, 32 N. E. 291; Carr v. Brennan, 166 111. lOS, 57 Am. St. Eop. 119, 47 N. E. 721; Joiner v. Duncan, 174 111. 252, 51 N. E. 323; Adam v. Joiner, 77 111. App. 179; Merchants & Farm- ers' State Bank v. Dawdy, 230 111. 199, 82 N. E. 606; Kirkham v. Mobre, 30 Ind. App. 549, 65 N. E. 1042; Eothschild v. Leonhard (Ind. App.), 71 N. E. 673; Bowman v. Anderson, 82 Iowa, 210, 31 Am. St. Eep. 473, 47 N. W. 1087 (the notice is' inde- pendent of knowledge of the posses- sion) ; Hannan v. Seidentopf, 113 Iowa, 658, 86 N. W. 44; Kansas City Inv. Co. v. Fulton, 4 Kan. App. 115, 46 Pae. 18S; Gray v. Zcl- mer, 66 Kan. 514, 72 Pae. 228; Bichel V. Oliver, 77 Kan. 696, 95 Pae. 396; International Harvester Co. V. Myers, 86 Kan. 497, 39 L. R. A. (N. S.) 528, 121 Pae. 500; Knox V. Thomson, 1 Litt. (Ky.) 350, 13 Am. Dec. 246; Brady v. Sloman, 156 Mich. 423, 120 N. W. 795; Delosh V. Delosh, 171 Mich. 175, 137 N". W. 81 (notice independent of knowledge of possession) ; Shaffer v. Detie, 191 Mo. 377, 90 S. W. 131; Squires v. Kimball, 208 Mo. 110, 106 S. W. 502; Adams v. Gossom, 228 Mo. 566, 129 S. W. 16; Mullins v. Butte "Hardware Co., 25 Mont. 525, S7 Am. St. Rep. 430, 65 Pae. 1004 (quoting this pas- sage of the text) ; Scharman v. Schar- man, 38 Neb. 39, 56 N. W. 704; Mon- roe V. Hanson, 47 Neb. 30, 66 N. W. 12; Best v. Zutavern, 53 Neb. 604, 74 N. W. 64; Fall v. Fall, 75 Neb. 1167 CONCEKNING NOTICE. §615 notorious and exclusive, a purchaser would certainly ar- rive at the truth upon making any due inquiry. The purchaser cannot say, and cannot be allowed to say, that he made a proper inquiry, and failed to ascertain the truth. The notice, therefore, upon the same motives of expediency, is made as absolute as in the case of a registration. The second of the two rules is undoubtedly the one which is sustained by the greatest number of decisions. It must not be supposed, however, that there is any conflict be- tween them, nor that the same court might not, under proper circumstances, adopt both. Whenever a party, dealing as a purchaser or encumbrancer with respect to a parcel of land, is informed or knows, or is in a condition which prevents him from denying that he knows, that the premises are in the possession of a third person, other than the one with whom he is dealing as owner, he is thereby put upon an inquiry, and is charged with constructive notice of all the facts concerning the occupant's right, title. 104, 106 N. W. 412, 113 N. W. 175; Munger v. T. J. Beard & Bto., 79 Neb. 764, 126 Am. St. Kep. 688, 113 N. W. 214; Pritchard v. Brown, 4 N. H. 397, 17 Am. Dec. 431 (possession by a ceftui que trust) ; Galley v. Ward, 60 N. H. 331 (the notice is independent of knowledge of possession) ; Hodge V. Amerman, 40 N. J. Eq. 99, 2 Atl. 257; Atlantic City E. Co. v. Johan- son, 72. N. J. Eq. 332, 65 Atl. 719; Brown v. Columbus (N. J. Eq.), 75 Atl. 917; Sanders v. Eiedinger, 51 N. Y. Supp. 937, 30 App. Div. 277, affirmed, 164 N. Y. 564, 58 N. E. 1092; Tankard v. Tankard, 84 N. C. 286; Eanney v. Hardy, 43 Ohio St. 157, 1 N. E. 523; Sweatman v. Ed- munds, 28 S. C. 62, 5 S. E. 165; Shearn v. Eobinson, 22 S. C. 32 (quoting this section of the text) ; Biemann v. White, 23 S. C. 400 (cit- ing this section of the text) ; Daniel V. Hester, 29 S. C. 147, 7 S. E. 65 (citing this section of the text) ; Huffman v. Gooley, 28 S. D. 475, 134 N. W. 49 (citing this paragraph of the text) ; Phillis v. Gross, 32 S. D. 438, 143 N. W. 373; Woodson v. Col- lins, 56 Tex. 168; Smith v. James, 22 Tex. Civ. App. 154, 54 S. W. 41; Eamirez v. Smith, 94 Tex. 1S4, 59 S. W. 258, 56 S. W. 254 (citing this section); Hayward Lumber Co. v. Bonner, 56 Tex. Civ. App. 208, 120 S. W. 577; Neponset L. & L. Co. v, Dixon, 10 Utah, 334, 37 Pae. 573 Stahn V. Hall, 10 Utah, 400, 37 Pac, 585; Chapman v. Chapman, 91 Va, 3'9.7, 50 Am. St. Eep. 846., 21 S. E. 813; Peery v. Elliott (Va.), 44 S. E, 919; Ellison v. Torpin, 44 W. Va, 414, 30 S. E'. 183 (opinion of Bran non. P., citing this sectioiv) ; Lowther Oil Co. V. Miller-Sibley Oil Co., 53 W. Va. 501, 97 Am. St. Kep. 1027, 44 S. E. 433; Smith v. Owens, 63 W. Va. 60, 59 S. E. 762; Mills v. Mc- Lanahan, 70 W. Va. 288, 73 S. E. 927. §615 EQUITY JUEISPEUDENCE. 1168 and interest wMch he migM have ascertained by means of a due inquiry.^ A legal presumption arises that he pos- sesses all the knowledge which he could have acquired by • such an inquiry.3 d Jt follows, as a necessary consequence § 615, 3 Rogers V. Jones, 8 N. H. 264; Hull v. Noble, 40 Me. 459, 4S0; Johnson v. Clark, 18 Kan. 157, 164; Mullins v. Wimberly, 50 Tex. 457, 464; Watkins v. Edwards, 23 Tex. 443; Strickland v. Kirk, 51 Miss. 795, 797; Loughridge v. Bowland, 52 Miss. 546, 553, 554; Brown v. Volken- ing, 64 N. Y. 76, 82, 83; Van Kueren v. Cent. R. R., 38 N. J. L. 165, 167; Moss V. Atldnson, 44 Cal. 3, 17; Killey v. Wilson, 33 Cal. 690; Rogers v. Hussey, 36 Iowa, 664; Illinois Cent. R. R. v. McCullough, 59 111. 166; Tunison v. Chamblin, 88 111. 378, 390; Warren v. Richmond, 53 111. 52; Russell V. Sweezey, 22 Mich. 235, 239; Perkins v. Swank, 43 Miss. 349, 361; O'Rourke v. O'Connor, 39 Cal. 442, 446; Pell v. McElroy, 36 Cal. 268; Button V. Warschauer, 21 Cal. 609, 82 Am. Dec. 765; Smith v. Gibson, 15 Minn. 89, 99; Bogue v. WUliams, 48 lU. 371; and see cases ante, under §614. § 615, (c) This passage of the text is quoted in Petrain v. Kiernan, 23 Or. 455, 32 Pae. 158. The text is cited to this effect in Alliance Trust Co. V. O'Brien, 32 Or. 333, 50 Pae. . 801, 51 Pae. 640; Schwoebel v. Stor- rie, 76 N. J. Eq. 466, 74 Atl. 969. §615, (d) The text is cited in Houston Oil Co. of Texas v. Wil- helm, 182 Fed. 474, 104 C. C. A. 61S'. In the following recent cases the possession is spoken of as putting the subsequent purchaser or encum- brancer on inquiry; Sloss-Sheffield Steel &.Iron Co. v. Taff, 178 Ala. 382, 59 South. 658; Sisk v. Almon, 34 Ark. 391; Hyde v. Mangan, 88 Cal. 319, 26 Pae. 180; Bank of Men- docino V. Baker, 82 Cal. 114, 6 L. E. A. 833, 22 Pae. 103; Dreyfus v. Hirt, 82 Cal. 621, 23 Pae. '193; Eun- yan v. SnydCr, 45 Colo. 156, 100 Pae. 420; Adams v. Betz, 167 Ind. 161, 78 N. E. 649; Crooks v. Jenkins (Iowa), 100 N. W. 82; John v. Penegar, 158 Iowa, 366, 139 N. W. 915; Penrose V. Cooper, 86 Kan. 597, 121 Pae. 1103; Border State Sav. Inst. v. Wilcox, 63 Md. 525; Weisberger v. Wisner, 55 Mich. 246, 21 N. W. 331; Allen v. Cadwell, 55 Mich. 8, 20 N. W. 692; Niles V. Cooper, 98 Minn. 39, 13 L. E. A. (N. S.) 49, 107 N. W. 744; Seymour v. McKinstry, 106 N. T. 230, 12 N. E. 348, 14 N. E. 94; Abbey V. Taber, 58 Hun, 602, 11 N. Y. Supp. 548; affirmed, 134 N. Y. 615, 32 N. E. 649 (where there is "notice" of the possession) ; Staton v. Davenport, 95 N. C. 11; Smith v. Phillips, 9 Okl. 297, 60 Pae. 117 (while possession not constructive notice, it may, with other circumstances, put upon in- quiry) ; Whitham v. Lehmer, 22 Okl. 627, 98 Pae. 351; Edwards v. Mont- gomery, 26 Okl. 862, 110 Pae. 779; Brown v. Trent, 36 Okl. 239, 128 Pae. 895; Young v. Chapman, 37 Okl. 19. 130 Pae. 289; Eayburn v. Davisson, 22 Or. 242, 29 Pae. 738 (where the possession is known) ; Alliance Trust Co. V. O'Brien, 32 Or. 333, 51 Pae. 640, 50 Pao. 801, (presumption fails where inquiry would not elicit the 1169 CONCERNING NOTICE. 615 of these rules, that when a grantee or a vendee whose deed or contract is not recorded is in actual possession of the land conveyed or agreed to be conveyed to him, his pos- session is constructive notice to a subsequent grantee of the same premises whose deed is put upon record, and his title takes precedence of such subsequent but recorded deed.'* e §615, 4 Strickland v. Kirk, 51 Miss. 795, 797; Moss v. Atfa'nson, 44 Cal. 3, 17 (the vendee may enforce his contract against such subsequent grantee); Killey v. Wilson, 33 Cal. 690; Tunison v. Chamblin, 88 111. 378, 390 (if the second grantee takes possession equity will cancel his deed as a cloud upon the first grantee's title, and -will restore possession to the first grantee) ; Russell v. Sweezey, 22 Mich. 235, 239; Warren v. Richmond, 53 111. 52; Doolittle v. Cook, 75 111. 354; Cabeen v. Breckenridge, 48 111. 91, 93; Perkins v. Swank, 43 Miss. 349, 361; Dixon v. Lacoste, 1 Smedes & M. 107; Bank of Orleans v. Flagg, 3 Barb. Ch. 316; Braman v. Wilkin- son, 3 Barb. 151 ( possession by a vendee). It will be seen that there is an exception to this particular rule in some states, where actual notice of a prior unrecorded instrument is necessary, and mere possession is held not to be such actual notice : See post) § 646, subdivision on recording. truth); Ambrose v. Huntington, 34 Or. 484, 56 Pac. 513 (subsequent pur- chaser knows of the possession) ; Scott V. Lewis, 40 Or. 37, 66 Pac. 299 (same) ; Hawley v. Hawley (Or.) 73 Pac. 3 (same) ; Jamison v. Dimock, 95 Pa. St. 52; Hottenstein v. Ltrch, in Pa. St! 454; Eowe v. Beam, 105. Pa. St. 543; Harker v. Cowie, 38 S. D. 385, 161 N. W. 620; Holmes v. Caden, 57 Vt. Ill; Quinn v. Vali- quctte, 80 Vt. 434, 14 L. E. A. (N. S.) 962, 68 Atl. 515; Eorer Iron Co. v. Trout, 83 Va. 397, 419, 5 Am. St. Rep. 285, 2 S. E. 713; Dennis v. Northern Pae. R. Co., 20 Wash. 320, 55 Pae. 210; Peterson v. Philadelphia Mort. & T. Co. (Wash.), 74 Pae. 585; Maughlin Mill Co. v. Hamilton, 61 Wash. 66, 111 Pae. 1067; Field v. Copping, 65 Wash. 359, 36 L. E. A. (N. S.) 488, 118 Pac. 329; Coe v. Manseau, 62 Wis. 81, 22 N. W. 155; TI— 74 Mateskey v. Feldman, 75 Wis. 103, 43 JSr. W. 733; Pippin v. Eichards, 146 Wis. 69, 130 N. W. 872. § 615, (e) See, sUso, Morgan v. Morgan (Ala.), 3 Stew. 383, 21 Am. Dec. 638; Lester v. Walker, 172 Ala. 104, 55 South. 619; Sisk v. Almon, 34 Ark. 391; Eubel v. Parker, 107 Ark. 314, 155 S. W. 114; Peasloy v. MePaddeu, 68 Cal. 611, 10 Pac. 179; Bank of Mendocino v. Baker, 82 Cal. 114, € L. K. A. 833, 22 Pae. 1037 (possession under unrecorded deed); McAdow V. Waehob (Fla.), 33 South. 702; Burr v. Toomer, 103 Ga. 159, 29 S. B. 692 (possession of vendee under contract); Finch v. Beal, 68 Ga. 594 (possession under bond for title); White v. White, 105 111. 313; Heppe v. Szczepanski (111.), 70 N. B. 737; Snell v. Hill, 263 111. 211, 105 N. F. 16; Garard v. Weaver, 42 Ind. App. 110, S4 N. E. 1092; Lasley §616 EQUITY JUBISPEUDENCE. 1170 § 616. Extent and Effect of the Notice. — There appears to be some disagreement among the American decisions concerning the question of what rights and interests held by the occupant his possession is a constructive notice. It V. stout, 90 Kan. 712, 136 Pac. 249; Corey v. Smalley, 106 Mieh. 257, 58 Am. St. Eep. 474, 64 N. W. 13 (pos- session of vendee uncler contract); Fraser v. Fleming, 190 Mieh. 238, 157 N. W. 269; Jones v. Breinzer (Minn.), 73 N. W. 255; Stovall v. Judah, 74 Miss. 747, 21 South. 614; Bolton V. Eoebuck, 77 Miss. 710, 27 South. 630 (possession under con- tract of purchase) ; Kirby v. Bank of Carrolton, 102 Miss. 190, 59 South. 10; Lipp V. Land Syndicate, 24 Neb. 692, 40 N. W. 129; Lipp v. Hunt, 25 Neb. 91, 41 N. W. 143; Harper v. Runner, 85 Neb. 343, 123 N. W. 313; Dundee Realty Co. v. Leavitt, 87 Neb. 711, 30 L. E. A. 389, 127 N. W. 1037; Salvage v. Haydock, 68 N. H. 484, 44 Atl. 696; Carthage Tissue Paper Mills v. Village of Carthage, 200 N. Y. 1, 93 N. E. 60; Galley v. Ward, 60 N. H. 331; Day v. E. E. Co.; 41 Ohio St. 392; Holland v. Coficld, 27 Okl. 469, 112 Pac. 1032; Adams v. White, 40 Okl. 535, 139 Pac. 514; Hawley v. Hawley, 43 Or. 352, 73 Pac. 3 (possession under con- tract of purchase); Daniel v. Hester, 29 S. C. 147, 7 S. E. 65 (the rule is not confined to equitable titles); Caldwell v. Pierson, 37 S. D. 546, 159 S. W. 124 (citing §§ 614, 615 of the text) ; Barnett v. Vincent, 69 Tex. 685, 5 Am. St. Eep. 98, 7 S. W. 525 (a case of possession by a vendee un- der a parol contract of sale) ; Kute- man v. Carroll (Tex. Civ. App.), 80 S. W. 842 (notice of right to spe- cific performance); Bendon v. Parfit, 74 Wash. 645, 134 Pac. 185; Frame V. Frame, 32 W. Va. 463, 5 L. R. A. 323, 9 S. B. 901; Snyder v. Botkin, 37 W. Va. 355, 16 S. E. 591 (pos- session under parol contract of pur- chase); Nuttall V. McVey, 63 W. Va. 380, 60 S. E. 251; Preston v. West, 69 W. Va. 24, 70 S. E. 853; Houzik v. Delaglise, 65 Wis. 494, 56 Am. Eep. 642, 27 N. W. 171 (posses- sion under parol contract) ; Mcintosh V. Bowers,. 143 Wis. 74, 126 N. W. 548. This rule is not changed by reason of the great inconvenience to which a purchaser would be put in making inquiries of all persons in a large tenement house: Phelan v. Brady, 119 N. Y. 587, 23 N. E. 1109. In Colburn v. Gilcrest, 60 Colo. 98, 151 Pac. 909, the purchaser under a deed containing a defective descrip- tion went into open and notorious possession. It was held that this amounted to notice of his rights to a creditor of the original grantor. In Virginia, by statute, possession under a contract of purchase is not notice to a subsequent purchaser: Norfolk & Portsmouth Traction Co. V. C. B. White & Bros., 113 Va. 102, Ann. Cas. 1913E, 655, 73 S. E. 467. Tinder a statute providing that where a grant purports to be abso- lute but is intended to be defeasible, such grant is not defeated or af- fected as against any person other than the grantee or his heirs or devisees or persons having actual notice unless a defeasance is re- corded, possession is not notice of the party's rights: Gray v. Harvey (Gray v. 0. N. Kerr Land Co.,) 17 N. D. 1, 113 N. W 1035. 1171 CONCEENING NOTICE. § 616 is firmly settled in England that the possession of a tenant or lessee is not only notice of all rights and interests con- nected with or growing out of the tenancy itself or the lease, but is also notice of all interests acquired by collateral and even subsequent agreements. If, for example, a tenant should enter under his lease alone, and should afterwards make an agreement for the purchase of the land, his posses- sion would be notice to a subsequent purchaser of his rights as vendee, as well as of those belonging to him as lessee.^ It would seem that the principle of these decisions extended to all persons in possession, whether as lessees, vendees, mortgagees, or otherwise. It has accordingly been adopted and followed by some of the American cases, which hold that a possession originally acquired by one right or in one manner is notice of all other rights subse- quently and differently obtained and held by the occupant, unless there is something in the circumstances of the case which has actually misled the purchaser who is to be affected by the notice. ^ a Exactly the opposite conclusion §616, 1 Daniels v. Davison, 16 Ves. 249, 17 Ves. 433; Taylor v. Stib- bert, 2 Ves. 437; Allen v. Anthony, 1 Mer. 282; Meux v. Maltby, 2 Swanst. 281; Crofton v. Ormsby, 2 Schoales & L. 583; Powell v. Dillon, 2 Ball & B. 416; Lewis v. Bond, 18 Beav. 85; Wilbraham v. Livesey, 18 Beav. 206; Moreland v. Richardson, 24 Beav. 33; Bailey v. Richardson, 9 Hare, 734; Bamhart v. Greenshields, 9 Moore P. C. C. 33, 34; and for limitations on the rule, see Hanbury v. Litchfield, 2 Myln^ & K. 629, 633, per Lord Cottenham; Jones v. Sm ith, I JIare, 43,_62. § 616, 2 In ray opinion, these decisions are much more in harmony with the general doctrine than those others which have speculated and drawn § 616, (a) The text is cited in 721 (possession under the unrecorded Wood V. Price, 79 N. J. Eq. 620', conveyance was a continuance of a Ann. Cas. 1913A, 12.10, 38 L. E. A. previous possession); Haworth v. (N. S.) 772, 81 Atl. 983 (possession Taylor, 108 111. 275 (tenant's posses- of tenant is notice both of his equi- sion is notice of landlord's rights at ties as tenant and of his collateral time of purchase, and not merely of agreements). See, also, Morrison v. rights at time of making lease); Herrick, 130 111. 631, 22 N. E. 537 Chesterman v. Gardner, 5 Johns. 29, (possession is notice of agreement to 9 Am. Dec. 265 (possession of ten- renew lease) ; Carr v. Brennan, 166 ant is notice of whole extent of his 111. 108, 57 Am. St. Kep. 119, 47 N. E. interest) ; Phelan v. Brady, 119 N. T. §616 EQUITY JURISPRUDENCE. 1172 has, however, been reached by cases which hold that a possession begun under one kind of right is not notice of any other or different interest subsequently obtained by the occupant, unless there was something special in the circumstances which might draw the purchaser's atten- tion to the change of title, and thus operate rather as an refined distinctions upon the amount of notice derived- from the occupant's original right to the possession. The reasons upon which the whole doc- trine rests seem to be conclusive. The possession of a third person is said to put a purchaser upon an inquiry; and he is charged with notice of all that he might have learned by a due and reasonable inquiry. Clearly a purchaser who is thus put upon inquiry is bound to inquire of the occu- pant with respect to every ground, source, and right of his possession; anything short of this would clearly fail to be the "due and reasonable inquiry": See Kbit v. Day, 14 Pa. St. 112, 53 Am. Dec. 52G; Woods v. Farmere, 7 Watts, 382, 32 Am. Dec. 772; Matthews v. Demerritt, 22 Me. 312; McKecknie v. Hoskins, 23 Me. 230; Rogers v. Joues, 8 N. H. 26i; Daubenspeck v. Piatt, 22 Cal. 330. 587, 8 L. K. A. 211, 23 N. E. 1109; Anderson v. Brinser, 129 Pa. St. 376, 6 L. R. A. 205, 11 Atl. 809, 18 Atl. 520 (subsequent purchaser charge- able with notice of contract to pur- chase by lessee in possession, whether he had knowledge of the lease or not; overruling Leach v. Ansbacher, 55 Pa. St. 85); Smith v. James, 22 Tex. Civ. App. 154, 54 S. W. 41 (unrecorded-deed to grantor's tenant in possession); Allen v. Gates, 73 Vt. 222, 50 Atl. 1092. The author's note 2 is quoted in Bright v. Buck- man, 39 Fed. 243. Possession of Tenant in Common. — It has accordingly been held that the possession of the entire premises by one of two or more co-tenants is sufficient to put a purchaser from a co-tenant out of possession upon in- quiry as to the interests claimed by the possessor, by purchase of his co- tenant's shares, etc.: Peck v. Wil- liams, 113 Ind. 256, 15 N. E. 270; Kirkham v. Moore, 30 Ind. App. 549, 65 N. E. 1042; Farmers' Nat. Bank V. Sperling, 113 111. 373 (as against a judgment creditor); Collum v. Sanger Bros. (Tex.), 82 S. W. 459. See, also, Schmidt v. Steinbaoh, 193 Mich. 640, 160 N. W. 448. In Weis- berger v. Wisner, 55 Mich. 246, 21 N. W. 331, the court in discussing this rule said: "It is true, as com- plainant says, that the possession was not apparently inconsistent with the record title; but this may be said in any case. It is possible that any possession may be that of a licensee or otherwise subordinate to the rec- ord title; and if that were sufficient reason for holding that the posses- sion is no notice of actual rights, the principle on which decisions have been made, giving protection to oc- cupants, would have very limited application." Other cases hold that such sole occufancy is not notice, since it could be referred to the oc- cupant's former title as tenant in common: Schumacher v. Truman, 134 1173 CONCEBNING NOTICE. §616 actual than a constructive notice.^ ^ The decisions may be regarded as agreeing upon the conclusion, which also seems to be in perfect harmony with sound principle, that where a title under which the occupant holds has been put on record, and his possession is consistent with what thus appears of record, it shall not be a constructive notice § 616, 3 McMechan v. Griffing, 3 Pick. 154, 15 Am. Dec. 189; Kendall V. Lawrence, 22 Pick. 542; Bush v. Golden, 17 Conn. 594, 602; Williams V. Sprigg, 6 Ohio St. 585; Matthews v. Demerritt, 22 Me. 312, 313; Daw- son V. Danbury Bank, 15 Mich. 489. Cal. 430, 66 Pae. 591; Hurley v. CyNeill, 26 Mont. 269, 67 Pac. 626; Mullins V. Butte Hardware Co., 25. Mont. 525, 87 Am. St. Rep. 430, 65 Pac. 1004; Wilcox v. Leominster Nat. Bank, 43 Minn. 541, 19 Am. St. Eep. 259, 45 N. W. 1136; Dutton v. McEeynolds, 31 Minn. 66; Martin v. Thomas (W. Va.), 49 S. E. 118, cit- ing this paragraph of the text. Thus, in Plumer v. Eobertson, 6 Serg. & B. 179, it was held that oc- cupancy by one of three former ten- ants in common alone is not notice of a transfer to him of the interests of the other two, as his sole occu- pancy could be referred to his former title. In Pellow v. Arctic Iron Min- ing Co., 164 Mich. 87, Ann. Cas. 1912B, 827, 47 L. R. A. (N. S.) 573, 128 N. W. 918, one co-tenant had conveyed his interest in a portion of the laud by metes and bounds without the consent of the others, and the purchaser had gone into open possession. It was held that this possession was notice to the other co-tenants. - §616, (b) See, also, Hodges v. Winston, 94 Ala. 576, 10 South. 535 (a vendor's possession of part of the tract conveyed, which part he has acquired by repurchase, is referred to the repurchase, and imparts no notice of a vendor's lien on the re- mainder of the tract); Aden v. City of Vallejo, 139 Cal. 165, 72 Pac. 905 (possession under a franchise from a city not notice of an unre- corded deed); Garrard v. Hull, 92 Ga. 7S7, 20 S. E. 357 (possession referable to a tenancy) ; Stockton T. National Bank of Jacksonville, 45 Fla. 590, 34 South. 897; Eeinberg v. Steams, 56 Ma. 279, 131 Am. St. Eep. 119, 47 South. 797; Bed Eiver Val. L. & I. Co. V. Smith, 7 N. D. 236, 74 N. W. 194 (possession under lease of which the purchaser knows is attributable thereto); Brown v. Eoland, 11 Tex. Civ. App. 648, 33 S. W. 273 (possession by tenant not constructive notice of independent right claimed by him); Smith v. Miller, 63 Tex. 72. "The fact that a third person was in possession of the land at the time of defendant's purchase is not sufficient to charge the latter with notice of a prior un- recorded deed to plaintiff, and that such person had attorned to him, when defendant knew such person went into possession as tenant of the grantor": Bynum v. Gold, 106 Ala. 427, 17 South. 667. See, also, Pen- rose V. Cooper, 88 Kan. 210, 128 Pac. 362. See, also, the group of eases last cited in note (a) to this section. Extent of Notice — In General. — In Sloss-Sheffield Steel & Iron Co. 616 EQUITY JURISPBUDENCE. 1174 of any additional or different title or interest to a pur- chaser who has relied upon the record, and has had no actual notice beyond what is thereby disclosed.* « §616, 4piumer v. Robertson, 6 Serg. & R. 184, per Tilghman, C. J.; Woods V. rarmere, 7 Watts, 382, 388, 32 Am. Dec. 772; Great Falls Co. V. Worster, 15 N. H. 412; Smith v. Yule, 31 Cal. 180; and see White v. Wakefield, 7 Sim. 401; Rice v. Rice, 2 Drew. 1; Muir v. Jolly, 26 Beav. 143;- Staples v. Fenton, 5 Hun, 172; and see Bell v. Twilight, 18 N. H. 159, 45 Am. Dec. 367. Where A gives a mortgage by absolute deed with defeasance to B, and the deed is recorded, but the defeasance is not, and A remains in possession, his possession, if known by them, has been held a sufficient notice to grantees from B ; Daubenspeek v. Piatt, 22 Cal. 330 ; but per contra, Crassen v. Swoveland, 22 Ind. 427; Newhall v. Pierce, 5 Pick. 450; and see Corpman v. Baccastow, 84 Pa. St. 363. V. Taff, 178 Ala. 382, 59 South. 658, it is held that possession is notice to a subsequent purchaser only of the right or title in or by which the possession is held. See, also, Hodges V. Winston, 94 Ala. 576, 10 South. 535. "Possession speaks for itself to the extent of placing upon the purchaser or person about to 'deal with the property the duty to inquire of the one in possession — not to inquire of the one holding the record title": Penrose v. Cooper, 88 Kan. 210, 128 Pac. 362. A novel situation is presented in Eversole v. Virginia Iron, Coal & Coke Co., 122 Ky. 649, 92 S. W. 593. The purchaser knew that his vendor was in possession, but the vendor's title was not of record. The ven- dor conveyed the mineral rights by a deed which was duly recorded, but being out of the chain of title was claimed not to be constructive notice. The court held that the possession of the vendor put the subsequent purchaser on inquiry as to any con- veyances he may have made. § 616, (c) Possession Consistent With Recorded Title. — Quoted, Kirby V. Tallmadge, 160 tJ. S. 379, 16 Sup. Ct. 349; Sanguinetti v. Rossen, 12 Cal. App. 623, 107 Pac. 560; Mull'ins V. Butte Hardware Co., 25 Mont. 525, S'7 Am. St. Kep. 430, 65 Pac. 10O4; Lee v. GUes, 161 N. C. 541, 77 S. E. 852; Ellison v. Torpin, 44 W. Va. 414, 30 S. E. 183. See, also, Aden v. City of Vallejo, 139 Cal. 165, 72 Pac. 905; McNeil v. Polk, 57 Cal. 323; Tyler v. Johnson, 61 Pla. 730, 55 South. 870; May v. Sturdivant, 75 Iowa, 118, 9 Am. St. Rep. 463, 39 N. W. 221; Commonwealth v. Lakeman, 4 Cush. 597; Wilcox v. Leominster Nat. Bank, 43 Minn. 541, 19 Am. St. Rep. 259, 45 N. W. 1136; Button V. MeBeynolds, 31 Minn. 66; Smith V. Fuller, 152 N. C. 7, 67 S. E. 48; Bed Eiver Val. L. & L Co. V. Smith, 7 N. D. 236, 74 N. W. 194; Lance v. Gorman, 136 Pa. St. 200, 20 Am. St. Rep. 914, 20 Atl. 792; Harding v. Seeley, 148 Pa. St. 20, 23 Atl. 1118; Stewart v. Crosby (Tex. Civ. App.), 26 S. W. 138; Wat- kins v. Sproull, 8 Tex. Civ. App. 42-7, 28 S. W. 356; Hamilton v. Ii-gram, 13 Tex. Civ. App. 604, 35 S. W. 748 (lease is on record) ; conira, see Toland v. Corey, 6 Utah, 392, 24 Pae. 1175 CONCEBNING NOTICE. §617 § 617. Grantor Remaining in Possession. — The last- mentioned rule has frequently been invoked where a grantor, having executed a deed absolute on its face, which is put upon record, remains in possession of the land by- virtue of some arrangement or relation between himself and his grantee dehors the deed and the record, which 190. Thus, where the record shows title in tenants in common, the sole possession of one of themj being attributable to his recorded title, is not notice of any additional title or interest in him: Schumacher v. Tru- man, 134 Cal. 430, 66 Pao. 591; Tyler V. Johnson, 61 Fla. 730, 55 South. S70; Hurley v. O'Neill, 26 Mont. 269, 67 Pac. 626; Stortlez v. Chapiine (Ark.), 70 S. W. 465; Martin v. Thomas (W. Va.), 49 S. E. 118; contra, see Collum v. Sanger Bros. (Tex.), 82 S. W. 459. But this rule does not apply to defeat the effect, as notice, of the possession of a tenant in common under an equitable title, where the record shows title in his co-tenant only, and not in the occupant: Ramirez v. Smith (Tex.), 59 S. W. 268, reversing (Tex. Civ. App.), 56 S. W. 254 (the very recent case of Collum v. Sanger Bros. (Tex.), 82 8. W. 459, reversing 78 S. W. 401, contains language which seems to reject entirely the rule stated in the text) ; nor does it ap- ply where the purchaser had actual knowledge of facts and circum- stances which rendered the co- tenant's possession adverse: Lara- way v. Larue, 63 Iowa, 407, 19 N. W. 242. The possession and use of land by a firm has been held not notice that the property is partnership as- sets, where the record shows that it is held by the partners as tenants in common: Hammond v. Paxton, 58 Mich. 393., 25 N. W. 321. If the .land is occupied jointly by two per- sons, apd there is a record title in one of them, such joint occupation is not notice of an unrecorded title in the other: Kirby v. Tallmadge, 160 U. S. 379, 16 Sup. Ct. 349. Where possession by a tenant is con- sistent with a recorded lease, it is not notice of an unrecorded deed to him: Kelly v. Blakeney (Tex. Civ. App.), 172 S. W. 770. But in Deng- ler V. Fowler, 94 Neb. 621, 143 N. W. 944, it was held that a recorded lease to the party in possession does not relieve a purchaser from the duty of inquiry, and that the pur- chaser is charged with notice of the facts he would thereby gain. Where the record title is in a husband and wife, possession by the wife is con- sistent therewith, and is not notice of an unrecorded deed to her: Ildvedsen v. First State Bank of Bowbella, 24 N. D. 227, 139 N. W. 105. It has been suggested that the rule of the text should be confined . to cases where one is in possession under two rights derived from the same person, and should not apply where the sole occupant has pur- chased from two tenants in common, and has recorded the deed of one and left the other unrecorded: Elli- son V. Torpin, 44 W. Va. 414, 30 S. E. 183, opinion of Brannon, P. The reason of the rule of the text is clearly stated by Gibson, 0. J., in the often cited case of Woods v. Far- mere, 7 Watts, 382, 32 Am. Dec. 732: "In Pennsylvania every written title § 617 EQUITY JTJRISPKUDENCE. 1176 entitles him to the possession, such as a collateral agree- ment which really turns the deed into a mortgage, a lien for the unpaid purchase price, an unrecorded mortgage, and the like. In England, if a grantor has signed the usual receipt for the whole purchase-money indorsed upon his conveyance, his continued possession is not a con- structive notice of any lien he may have for the unpaid price. The receipt in such a case is analogous to the record of the deed in the United States, and a subsequent purchaser from the grantee has a right to rely upon it.^ There has been a direct conflict of opinion among the American courts in applying the rule to the condition of facts above described. In one group of decisions the pos- session of the grantor is held not to be a constructive notice of any right or interest he may have antagonistic to his deed which has been put upon record; a subse- quent purchaser, it is said, has a right to rely upon the information derived, or which would be derived, from the record, and to assume that the grantor's continued pos- session is merely by sufferance.^ a Another group reaches § 617, 1 White v. "Wakefield, 7 Sim. 401; Eice v. Eice, 2 Drew. 1; Muir V. Jolly, 26 Beav. 143. § 617, 2 Van Keuren v. Cent. E. R., 38 N. J. L. 165, 167. This case, while admitting that, in general, possession is constructive notice, holds may be registered, and, wjiere an lie to a particular conveyance by the occupant announces but one of his register he abandons every other in- titles, he does an act which for its dex." tendency to mislead ought to post- Of course where the possession is pone the other. By exhibiting a con- inconsistent with the record, the rule veyance to which, by his own show- does not apply. Thus, in Dreyfus v. ing, his possession may be referred, Hirt, 82 Cal. 621, 23 Pac. 193, posses- he does what he can to turn a pur- sion of one parcel was taken under chaser from the direct path of in- a recorded lease, and subsequently qulry. The party for whose protec- open and notorious possession was tion registration is intended would taken of an adjoining parcel. It was be more misled by the use of it than held that a purchaser was put on in- if the occupant had pointed to his quiry. possession alone, as that would have § 617, (a) The text is cited to this led him to a particular examination effect in Sanguinetti v. Eossen, 13 of it; and when the occupant, there- Cal. App. 623, 107 Pac. 560; Rowsey fore, points the attention of the pub- v. Jamison, 46 Okl. 780, 149 Pac. 1177 CONCERNIJvTG NOTICE. §617 a conclusion directly the contrary to this, and holds that a in the most emphatic manner that this does not apply to a grantor remain- ing in possession after his conveyance. A purchaser from his grantee is not thereby bound to inquire whether he retained any interest; his deed absolute in form is conclusive, and the purchaser can safely rely on it : Bloomer v. Henderson, 8 Mich. 395, 404, 405, 77 Am. Dec. 453; Scott v. Gallagher, 14 Serg. & R. 333, 334, 16 Am. Dec. 508; NewhaU v. Pierce, 880. See, also, Bragg v. Lamport, 96 Fed. 630, 38 C. C. A. 467; Malette V. Wright (Ga.), 48 S. E. 229; Dodge V. Davis, -85 Iowa, 77, 52 N. W. 2; May V. Sturdivant, 75 Iowa, 118, 9 Am. St. Kep. 463, 39 N. W. 221; Trulin v. Plested (Iowa), 159 N. W. 633; McNeil v. Jordan, 28 Kan. 7, 16; Iloekmau v. Thuma (Kan.), 75 Pae. 486; Baldwin v. Anderson, 103 Miss. 462, 60 South. 578; Exon v. Dancke, 24 Or. 110, 32 Pao. 1045 (knowledge of grantor's possession does not put on inquiry; statute re- quires "actual" natice) ; La Forest V. Downer, 63 Or. 176, 126 Pac. 996; Eowe V. Beam, 105 Pa. St. 543; Curry v. Williams (Tenn. Ch. App.), 88 S. W. 278, citing the text; Smith V. Miller, 63 Tex. 72; Love v. Breed- love, 75 Tex. 652, 13 S. W. 222; Eylar v. Eylar, 60 Tex. 315; Hick- man V. Hoffman (Tex. Civ. App.), 33 S. W. 257; Bryant v. Grand Lodge Sons of Herman (Tex. Civ. App.), 152 S. W. 714 (grantor by deed in- tended as mortgage remains in pos- session); Murry v. Carlton, 65 Wash. 364, 44 L. K. A. (N. S.) 314, 118 Pao. 332 (grantor by deed with un- recorded agreement to support gran- tor). In Bufnpas v. Zachary (Tex. Civ. App.), 34 S. W. 672, following Mullins V. Wimberly, 50 Tex. 457, the distinction is made, that the con- tinued possession of the grantor, while not notice of secret trusts and other matters which should have been made to appear of record, is notice of matters wherein there is no omission of duty on the part of the grantor, as where by mistake the wrong parcel Was conveyed. In Book Island & P. E. Co. v. Dimick, 144 111. 628, 19 L. R. A. 105, 32 N. B. 2'91, it is said that the rule does not apply to the reservation of an ease- ment or right of way or passage in the land conveyed, when the gran- tor retains title to adjacent lands, and the easement or right of way is appurtenant to, and essential to the full enjoyment of, the adjacent premises, the title to which remains in the grantor. In Eandall v. Ling- wall, 43 Or. 383, 73 Pac. 1, it was held that the rule does not apply where the grantor, after retaining possession for some time, delivers possession to his tenant, whose occu- pation is notice of his landlord's title. In Mateskey v. Feldman, 75 Wis. 103, 43 N. W. 733, the rule was applied to a case where a convey- ance of land was induced by fraud, and the grantor, without knowledge of the fraud, continued in possession under an agreement with the gran- tee, and it was held that such pos- session was not constructive notice of his equities arising out of the fraud to one claiming under a mort- gage from the grantee. See, also, Carr v. Maltby, 165 N. Y. 557, 59 N. E. 291, post, § 618, last note. In Bankin v. Coar, 46 N. J. Eq. 566, 11 L. R. A. 661, 22 Atl. 177 (a ease where a mother, after conveying a §617 EQUITY JUEISPEUDENCB. 1178 purchaser is put upon an inquiry and is affected by a con- 5 Pick. 450 ; and see, also, for dicta or reasoning pointing to the same con- clusion, New York Life Ins. Co. v. Cutler, 3 Sand. Ch. 176, 179; Woods V. Farmere, 7 Watts, 382, 32 Am. Dec. 772; and the opinions in Jaques V. Weeks, 7 Watts, 261, 272, 287. As to possession of a mortgagor after foreclosure sale, see Dawson v. Danbury Bank, 15 Mich. 489; Cook v. Travis, 20 N. Y. 400; Reed v. Gannon, 50 N. Y. 345, 350." house to her son, continued in the occupancy of a part of it, the son appearing by the records as the sole owner), it was held that the mother's occupancy was not sufScient to give notice to a, mortgagee of the son of any equities she may have had. This section of the text was cited. In Kentucky the distinction is made thiit the rule applies only where there has been no fraud, deceit or misrepresentation practiced on the vendor: Kentland Coal & Coke Co. V. Elswick, 167 Ky. 593, 181 S. W. 181, and cases cited. The argument in support of the rule of the text is thus summed up in Turman v. Bell, 54 Ark. 273, 26 Am. St. Eep. 35, 15 S. W. 886: "On the other side, it is said that the execution of a warranty deed, with- out reservation, is a most solemn declaration by the grantor that he has parted with all his rights in the property, and directly negatives the reservation of any right; that those who see the deed are warranted upon relying upon such declaration as much as if it had been made to them orallj' upon an inquiry; and that if they acquire interests in- faith of such reliance, the grantor in posses- sion will be estopped to assert any right secretly reserved from the grant; that as the grantor has de- clared that he parted with his entire estate, strangers about to deal with the property would reasonably refer his continuous possession to the suf- ferance of the grantee, and would not reasonably think to refer it to a reserved right"; citing cases. Sim- ilar reasoning was used in Hafter v. Strange, 65 Miss. 323, 7 Am. St. Eep. 659, 3 South. 190. In Bankin V. Coar, 46 N. J. Eq. 566, 11 L. E. A. 661, 22 Atl. 177, the doctrine was put on the ground that the vendor was estopped from impeaching his own deed by proof of an undisclosed arrangement? impairing its force. In Sprague v. White, 73 Iowa, 670, 35 N. W. 751, it was held that by the deed the grantor voluntarily relin- quished all interest in the property, and the record thereof was notice to the world of such relinquishment. In Eylar v. Eylar, 60 Tex. 315, it was held that possession merely puts on inquiry, and that inquiry is prose- cuted sufficiently when the purchaser examines the records and finds a deed from the party in possession. On the other hand, it is held that if no inquiry is made and no examina- tion of the records is attempted, the possession is sufficient to charge with notice of all the grantor's rights: Jinks V. Moppin (Tex. Civ. App.), 80 S. W. 390; Eamirez v. Smith, 94 Tex. 191, 59 S. W. 25S. § 617, (l>) That possession after an adverse decree is presumed to be in subordination to the party in whose favor the decree was rendered, see Harms v. Coryell, 177 111. 496, 53 N. E. 87. 1179 CONCERNING NOTICE. §617 structive notice in the same manner as in any other case of possession by a third person.^ « § 617, 3 Illinois Cent. E. E. v. McCullough, 59 HI. 166. This case lays down the rule generally that when a grantor continues in possession, this is constructive notice to a subsequent purchaser from his grantee of all his rights and equities in the land. It was applied to a grantor whose deed, having been delivered as an escrow until the price had been paid by the grantee, was put upon record in violation of this arrangement: Met- ropolitan Bank v. Godfrey, 23 111. 579, 607, and cases cited; Pell v. Mc- Elroy, 36 Cal. 268, 278; Wright v. Bates, 13 Vt. 341, 350; Grimstone v. Carter, 3 Paige, 421, 439, 24 Am. Dec. 230; Hopkins v. Garrard, 7 B. Mon. 312; Webster v. Maddox, 6 Me. 256; McKecknie v. Hoskins, 23 Me. 230; Jaques v. Weeks, 7 Watts, 261. § 617, (c) A. Shift & Son v. An- dress, 147 Ala. 690, 4(} South. 824; Gerwin v. Shields, 187 Ala. 153, 65 South. 769 (grantor of deed intended as mortgage remains in possession) ; Ford V. Marcall, 107 111. 136; Rook Island & P. E. Co. v. Dimick, 144 111. 628, 19 L. B. A. 105, 32 N. E. 291; Springfield Homestead Assn. v. Roll, 137 111. 205, 31 Am. St. Eep. 358, 2.7 N. E. 184; Ronan v. Bluhm, 173 111. 277, 50 N. E. 694; Stevenson v. Campbell, 1S6 111. 527, 57 N. E. 414; Gallagher v. Northrup, 215 111. 563, 74 N. E. 711 (possession by ten- ants of grantor); Weeks v. Hath- away, 45 Ind. App. 196, 90 N. B. 647; Rea v. Croessman, 95 111. App. 70; Coppage v. Murphy, 24 Ky. Law Eep. 257, 68 S. W. 416 (though deed recited that consideration was paid) ; Kentland Coal & Coke Co. v. Elswick, 167 Ky. 593, 181 S. W. 181, 183 (where there has been fraud, deceit or misrepresentation practiced on the vendor) ; Groff v. State Bank, 50 Minn. 234, 36 Am. St. Kep. 640, 52 N. W. 651; Ludowese v. Amidon, 124 Minn. 288, 144 N. W. 965 (posses- sion by tenant); Kahre v. Rundle, 38 Neb. 315, 56 N. W. 888 (where the conveyance was procured by fraud, and the subsequent purchaser knew of grantor's possession); Smith v. Myers, 56 Neb. 503, 76 N. W. 1084; O'Toole v. Omlie, & N. D. 444, 79 N. W. 849 (deed intended as mort- gage); Manigault v. Lofton, 78 S. C. 499, 59 S. E. 534; Dennis v. North- ern Pao. E. Co., 20 Wash. 320, 55 Pac. 210. In Austin v. Pulschen, 112 Cal. 528, 44 Pac. 788, citing this paragraph of the text, the question was not decided, but it was inti- mated that the courts of that state would probably feel themselves bound to hold that the grantor's continued possession puts on inquiry. It was held, however, that it does not have that effect upon one taking a mortgage from the grantee, where the act of taking the mortgage was, practically, simultaneous with the execution and delivery of the deed. Some cases assert a variation of the rule to the effect that possession of the grantor, if continued for a con- siderable length of time, imparts notice: Turman v. Bell, 54 Ark. 273, 26 Am. St. Rep. 35, 15 S. W. 886. See, also, in support of this varia- tion of the rule, American Building & Loan Ass'n v. Warren, 101 Ark. 163, 141 S. W. 765 (subsequent pur- §618 EQITirY JUEISPRTJDENCB. 1180 § 618. Tenant's Possession, how Far Notice of Lessor's Title. — ^Wtether possession by a tenant is constructive notice of Ms landlord's title, is also a question upon which the decisions are in direct conflict. In England it seems to be settled that the possession by a tenant, or notice of a tenancy, will not affect a purchaser with constructive notice of the landlord's title.^* The same view has been § 618, 1 The rule is so stated by the English editor of Leading Cases in Equity: 2 Lead Cas. Eq., 4th Am. ed., 133; Jones v . Smith, 1 Hare, 43, 63, per Wigram, V. C; Barnhart v. Greenshields, 9 Moore T^.C. C. 36. And it is held that where the tenant in possession holds under a derivative lease, his possession is not a notice to a purchaser of the covenants con- tained in the original lease : Hanbury v. Litchfield,- 2 Mylne & K. 629, 633. chaser put on inquiry as to length of grantor's possession) ; Morgan v. McCuin, 96 Ark. 512, 132 S. W. 459. In Telsehow v. Quiggle, 74 Or. 105, 145 Pac. 11, it is held that where a deed is executed in blank and afterward fraudulently obtained, a subsequent grantee cannot claim to be a bona fide purchaser as against the original grantor in possession. The argument in favor of the rule is thus stated in GroflE v. State Bank, supra: "But it seems to us that, in- asmuch as the law allows possession to have the effect of notice, there is no good reason for making a dis- tinction between possession by a stranger to the record title and pos- session by a grantor after delivery of his deed. In either case the pos- session is a fact inconsistent with the record ^title, and, if possession by the stranger is sufficient to make it obligatory upon a purchaser to ascertain his right, possession by the grantor is a circumstance entitled to equal consideration. An absolute deed divests the grantor of the right of possession as well as of the legal title, and when he is found in pos- session after delivery of his deed it is a fact inconsistent with the legal effect of the deed, and is suggestive that he still retains some interest in the premises. Under such circum- stances, a purchaser has no right 'to give controlling prominence to the legal effect of the deed,' in disre- gard of the other 'notorious anta- gonistic fact,' that the grantor re- mains in possession just as if he had not conveyed. To say that the gran- tor is estopped by his deed is beg- ging the question; for, if his posses- sion is notice to third parties of his rights, there is no principle of estoppel that would prevent him from asserting against purchasers or creditors any claim'to the premises which he might assert against his grantee." §618, (a) Hunt v. Luck, [1901] 1 Ch. 45, 70 L. J. (Ch.) 30, S3 L. T. (N. S.) 479, 49 Wkly. Eep. 155; affirmed on appeal, [1902] 1 Ch. 428, overruling dictum to the contrary of Jessel, M. E., in Mumford v. Stoh- wasser, L. R. 1& Eq. 556, 562. Actual knowledge by a purchaser that rents are paid to some person whose re- ceipt of them is inconsistent with the vendor's title is constructive do- 1181 CONCERNING NOTICE. §618 adopted by several American decisions. 2 In the greater number of American cases, however, it is held that a pur- chaser is bound to make inquiry from the tenant in pos- session with respect to all the rights and interests which he claims to have, and under which he occupies, and is -presumed to know all the facts which he might have learned by such an inquiry- he must pursue his inquiry to the final source of the tenant's right, and is thus affected with a constructive notice of the landlord's title and estate.^ ^ § 618, 2 riagg V. Mann, 2 Sum. 486, 557; Beattie v. Butler, 21 Mo. 313, 64 Am. Dec. 234; and see Veazie v. Parker, 23 Mo. 170; Jaques v. Weeks, 7 "Watts, 261, 272, per Sergeant, J. § 618, 3 Edwards v. Thompson, 71 N. C. 177, 179 (possession by a tenant is the same, with respect to notice, as possession by his landlord) O'Kourke v. O'Connor, 39 Cal. 442, 446; Cunningham v. Pattee, 99 Mass, 248, 252; Kerr v. Day, 14 Pa. St. 112, 53 Am. Dec. 526; and see post, § 625 tiee of that person's title; but mere knowledge that the rents are paid to an estate agent affects the pur- chaser with no notice at all: Hunt v. Luck, supra. § 618, (b) The text is cited to this effect in Wood v. Price, 79 N. J. Eq. 620, Ann. Oas. 1913A, 1210, 38 L. B. A. (N. S.) 772, 81 Atl. 983. See, also, McCullars v. Eeaves, 162 Ala. 158, 50 South. 313; Crawford v. Chi- cago etc. E. E. Co., 112 HI. 3U; Haworth v. Taylor, 108 111. 275; Mal- lette V. Kaehler, 141 111. 70, 30 N. E. 549; A. E. Beck I/umber Co. v. Eupp, 188 HI. 562, 80 Am. St. Eep. 190, 59 N. E'. 429; Eea v. Grossman, 96 111. App. 70; Gallagher v. Northrup, 215 111. 563, 74 N. E. 711; Bowman V. Anderson, 82 Iowa, 210, 31 Am. St. Eep. 473, 47 N. W. 1087; Hannan V. Seidentopf, 113 Iowa, 65S', 86 N. W. 44; O'Neill v. Wilcox, 115 Iowa, 15, 87 N. W. 742; Townseud V. Blanchard, 117 Iowa, 36, 90 N. W. 519; Brady v. Sloman, 156 Mich. 423, 120 N. W. 795; Wilkins v. Bevier, 43 Minn. 213, 19 Am. St. Rep. 238, 45 N. W. 157 (dictum, eit ing this section of the text) ; Wolf V. Zabel, 44 Minn. 90, 46 N. W. 81 Northwestern Laud Co. v. Dewey 58 Minn. 369, 59 N. W. 1085; Ludo wese V. Amidon, 124 Minn. 288, 144 N. W. 965 (possession of tenant of former owner); Bratton v. Eogers, 62 Miss. 281; Corinth Bank & Trust Co. V. Wallace, 111 Miss. 62, 71 South. 266 (possession of the lessee, however, is not notice of the fact that the landlord has assigned the lease); Eandall v. Lingwall, 43 Or. 383, 73 Pae. 1 (reviewing many cases) ; H'ottenstein v. Lerch, 104 Pa. St. 454; Lance v. Gorman, 136 Pa. St. 200, 20 Am. St. Eep. 914, 20 Atl. 792; Duff V. McDonough, 155 Pa. St. 10, 9,5 Atl. 608; Woodson v. Collins, 56 Tex. 168; Clendenning v. Bell, 70 Tex. 632, S' S. W. 324; League v. Snyder, 5 Tex. Civ. App. 13, 23 S. W. 825 (lessee's possession is notice, though the term of the written lease has expired); Le Doux v. Johnson (Tex. Civ. App.), 23 S. W. 902; Dun- can v. Matula (Tex. Civ. App.), 26 §619 EQUITY JURISPKUDENCE. 1182 § 619. Nature and Time of the Possession. — Under this head, the kind, extent, and time of the possession necessary or sufficient to constitute a constructive notice will be ex- ^ amined. The .determination of this question must largely depend upon the circumstances or conditions of fact under which it arises, and upon the immediate purpose or object for which the protection by a notice is invoked. Thus the question may arise between the rightful holder of a prior unrecorded title, and a subsequent purchaser whose con- veyance is recorded ; and it may therefore come within the first rule as stated in a former paragraph,^ where the pos- § 619, 1 Ante, § 615. S. W. 638; Allison v. Pitkin, 11 Tex. Civ. App. 655, 33 S. W'. 293; Matt- field V. Huntington, 17 Tex. Civ. App. 716, 43 S. W. 53 (possession by lessee of part is notice of lessor's right to the whole) ; Huntington v. Mattfield (Tex. Civ. App.), 55 S. W. 361; Collum v. Sanger Bros. (Tex.), 82 S. W. 459; Diffie v. Thompson (Tex. Civ. App.), 90 S. W. 193; Garth v. Stuart, 59 Tex. Civ. App. 391, 125 S. W. 611; Tolar v. South Texas De- velopment Co. (Tex. Civ. App.), 153 S. W. 911; Ellison v. Torpin, 44 W. Va. 414, 30 S. E. 183, opinion of Brannon, P., citing this section of the text; Coe v. Manseau, 62 Wis. 81, 22 N. W. 155 (possession by ten- ant of land subject to mortgage is notice to the owner of the mortgage of the rights of the landlord). In Thomas v. Burnett, 128 111. 37, 4 L. K. A. 222, 21 N. E. 352, it was held that where a grantee in an un- recorded deed to laud which is fenced and cultivated rents to a ten- ant, the possession is suflScient to put an attaching creditor on inquiry, although the levy was made shortly after the tenant had surrendered possession and before grantee had an opportunity to rent to a new tenant. Where the Grantor's Tenant Be- comes Tenant of the Grantee, whose conveyance is unrecorded, there is a lack of harmony among the cases upon the question whether his pos- session is notice of the new land- lord's title. On the affirmative it is argued that the subsequent pur- chaser "should not be excused from inquiry unless there is something more to mislead him than hia own assumption that parties occupy un- der the same right as formerly": Mainwaring v. Templeman, 51 Tex. 205, 213; Duncan v. Matula (Tex. Civ. App.), 26 S. W. 638; Duff v. McDonough, 155 Pa. St. 10, 25 Atl. 608. Other cases hold that "it is necessary that there should be a vis- ible change, which should indicate to others that there had been a sale, to have the effect of giving notice to a subsequent purchaser or attach- ing creditor": Veasie v. Parker, 23 Me. 170; Troy v. Walter, 87 Ala. 233, 6 South. 54; Bynum v. Gold, 106 Ala. 427, 17 South. 667; Griffin v. Hall, 111 Ala. 601, 20 South. 485; 115 Ala. 647, 22 South. 156; Powers 1183 CONCEKNING NOTICE. 620 session of a person rightfully entitled is equivalent, in its effects as notice, to a registration ; or it may arise in other circumstances, which are not directly affected by the re- cording acts, and which are governed by the second general rule concerning the effect of possession as notice. A fail- ure to recognize the difference existing between these two kinds of cases will undoubtedly account for whatever of confusion and conflict of opinion may be found in the decisions upon this subject. § 620. Actual, Open, Exclusive Occupancy. — It is there- fore abundantly settled by the decisions, that where the first general rule as stated in a foregoing paragraph is V. state, 129 Ala. 126, 29 South. 784; McCullars v. Eeaves, 162 Ala. 15S, 50 South. 313; Brown v. " Inter- national Harvester Co., 179 Ala. 563, 60 _ South. 841; Wahrenberger v. Waid, 8 Colo. App. 200, 45 Pac. 518; Stockton V. National Bank (Fla.), 34 South. 897; Stevens v. Magee, 81 Miss. 644, 33 South. 73; Wilkins v. Bevier, 43 Minn. 213, 19 Am. St. Eep. 238, 45 N. W. 157. Of Whose Eights the Fossession is Notice, in General. — It is not notice of a stranger's title — that is, of the unrecorded title of one claiming ad- versely to the possessor: Calanchini V. Branstetter, 96 Cal. 612, 31 Pac. 575; Eobertson v. Wheeler, 162 111. 566, 44 N. E. 870; Boll v. Eea, 50 N. J. L. 264, 12 Atl. 905; compare Henderson v. Wanamaker, 79 Fed. 736 (possession of another than vendor is notice of defects in ven- dor's title, including the defense that title was in another than the pos- sessor). That a subsequent pur- chaser is bound to search the records for mortgages made by the party in possession, see Balen v. Mercier, 75 Mich. 42, 42 N. W. 666. Fossession Is not Notice of Bights of Which the Possessor was Ignorant, and of which, therefore, he could impart no information on inquiry being m-ade of him; Bowles v. Bolt (Tex. Civ. App.), 159 S. W. 8S5. Thus, where a grantor in possession at the time of a conveyance by his grantee was ignorant of 'the fraud practiced in obtaining the deed from him, his possession does not charge such subsequent grantee with notice of his equity to have the deed can- celed: Cornell v. Maltby, 165 N. Y. 557, 59 N. E. 291; and a vendee's possession is no notice of the right of a secret assignee of the purchase- money notes from the vendor, of which the vendee knew nothing: First Nat. Bank v. Chafee, 98 Wis. 42, 73 N. W. 318. But "the court will not speculate in cases of this character upon what might happen or be discovered if inquiry were made, but will presume, in the absence of evidence conclusively showing the contrary, that upon inquiry the true situation and claims of the pos- sessor would be made known": Teal V. Scandinavian-American Bank, 114 Minn. 435, 131 N. W. 4S6. § 620 EQUITY JUEISPKUDENCE. 1184 invoked, and the party rightfully in possession nnder an unrecorded conveyance relies upon the fact of such pos- session as a constructive notice, equivalent in its effects to a registration,' to a subsequent grantee or encumbrancer Whose deed or mortgage has been recorded, his possession must be an actual, open, distinct, notorious, and exclusive occupancy of the land in question. No mere occupation of the premises in common or in connection with a third per- son, and no mere exercise of acts of ownership equivocal in their nature over the land, will then suffice.^ ^ § 620, 1 It cannot be pretended that all of the decisions expressly and distinctly refer the necessity of such open, notorious, and exclusive occu- pancy to the cases in which the first general rule as formulated above is relied upon. In some of the decisions cited below, the requirement of such a kind of occupancy seems to be stated in the most general manner, without any limitation or restriction, as though it applied to every instance of possession operating as a constructive notice. Notwithstanding this apparent confusion in some of the decisions, I think the true rule, estab- lished alike by the weight of judicial authority and by principle, is that laid down in the text; it reconciles all apparent conflict of judicial dicta, and produces a systematic and harmonious result: See Holmes v. Powell, 8 De Gex, M. & G. 572, 5^0; Noyes v. HaU, 97 U. S. 34, 38; Cabeen v. Breckenridge, 48 HI. 91; Truesdale v. Ford, 37 HI. 210; Dunlap v. Wilson, 32 111. 517; Bradley v. Snyder, 14 111. 263, 58 Am. Dec. 564; Tankard v. Tankard, 79 N. C. 54, 56; Edwards v. Thompson, 71 N. C. 177, 179; Webber v. Taylor, 2 Jones Eq. 9; Taylor v. Kelly, 3 Jones Eq. 240; Butler V. Stevens, 26 Me. 484 (possession as against a subsequent grantee whose deed is first recorded, under a statute requiring actual notice, must be an actual, open, and exclusive occupancy. Grantor conveyed in fee, and the grantee recorded his deed, and entered upon the premises. The grantor continued to occupy with the grantee. Held, not a sufficient possession to be notice of any interest held by the grantor) ; Bell v. Twilight, 22 N. H. 500, 519 (to be notice of a prior unrecorded deed, as against a subsequent recorded deed or mortgage, the possession must be exclusive and unequiv- ocal ; a mixed possession is not sufficient) ; Wright v. Wood, 23 Pa. St. 120, 130, 131 (the general rule is admitted, but held not to apply to the § 620, (a) This sectioii is cited in in this note and the following notes, Atlanta Nat. B. & L. Ass'n, laS Fed. McCarthy v. Nierosi, 72 Ala. 332, 47 293; Gainer v. Jones, 176 Ala. 408, Am. Eep. 418; Sloss-Sheffield Steel & 58 South. 2S'8. See, in general, in Iron Co. v. TafE, 178 Ala. 382, 59 addition to the cases cited below, South. 658 (possession need not be 1185 CONCERNING NOTICE. § 621 § 621. Vacant Premises — Constructive Possession, — If the possession is vacant at the time when the contract, con- veyance, or mortgage is executed — that is, if the premises are entirely unoccupied — the purchaser cannot be affected case of a mere intruder; the possession must be of one claiming a right) ; Coleman v. Barklew, 27 N. J. L. 357», 359 (possession of a first grantee whose deed is not recorded may be notice to a second grantee whose deed is recorded; but it must be actual, distinct, and manifested by such acts of ownership as would naturally be observed and known by others; e. g., land with no building was used by the first grantee and others for pasturing cattle, and this was held not such a visible, open, exclusive possession as would constitute a notice to the second grantee); to the same effect are Williams v. Spriggs, 6 Ohio St. 585, 594; Ely v. Wilcox, 20 Wis. 523, 531, 91 Am. Dec. 436; Wickes v. Lake, 25 Wis. 71; Troy City Bank v. Wilcox, 24 Wis. 671; Bogue v. Williams, 48 111. 371; Patten v. Moore, 32 N. H. 382; Martin v. Jackson, 27 Pa. St. 504, 506, 67 Am. Dec. 489; Meehan v. Williams, 48 Pa. St. 238; McMechan v. Grifftng, 3 Pick. 149, 15 Am. Dec. 198; Hohnes v. Stout, 4 N. J. Eq. 492, 10 N. J. Eq. 419 (mere cutting timber on the premises from time to time is not a sufficient pos- session) ; Brown v. Volkening, 64 N. Y. 76, 82, 83. On the other hand, in Krider v. Lafferty, 1 Whart. 303, a grantee whose deed was not regis- tered took possession of the ground, planted it with willows so as to obtain materials in his trade of basket-making, and continued to use the land in this manner, growing the willows and cutting them every year for his business. This was held to be a change in the condition of the premises and a visible occupation of them sufficient to affect a subsequent purchaser with notice. In Hatch v. Bigelow, 39 111. 136, paving the sidewalk in front of a lot, putting up a placard on the lot offering it for sale, and receiving applicants and referring them to the party's agent, were held a sufficient possession of the lot to constitute notice. of such a character that, if main- them) ; Bryee v. McCullocli, 3 "Watts tained for the necessary period, it & S. (Pa.) 429, 39 Am. Dec. 35; and would ripen into title; Hillman v. see Hodge v. Amerman, 40 N. J. Eq. Levy, 55 Cal. 117; Hayward v. 99, where the court said: "It need Mayse, 1 App. D. C. 133; Sanford not be hy actual residence on the V. "Weeks, 38 Kan. 319, 5 Am. St. land, but where there is no actual Rep. 748, 16 Pac. 465; Galley v. pedis possessio, dominion must be "Ward, 60' N. H. 331; Cox v. Mvin- manifested by such open and notori- ney, 65 N. J. L. 389, 47 Atl. 569 (the ous acts of ownership as will natu- occupation does not suggest that any rally he observed by others, and the one other than the reputed owner acts must be of a character so cer- of the premises is in possession of tain and definite in denoting owuer- 11—75 §621 EQUITY JURISPRUDENCE. 1186 by any notice arising from possession. He is not thereby put upon an inquiry concerning the title or interest of the ship as not to be liable to be mis- understood or misconstrued." Exclusive Occupancy. — Tbia re- quirement is illustrated by numer- ous cases where the grantee under an unrecorded conveyance continues to reside on the land as a member of the grantor's family, or where the grantor otherwise exercises acts of ownership concurrently with the grantee: Adams-Booth Co. v. Reid, 112 Fed. 106 (residence of sons with father); Motley v. Jones, 98 Ala. 443, 13 South. 782. (deed from hus- band to wife); Munn v. Achey, 110 Ala. 628, 1& South. 299 (occupancy of a widowed mother, together with her sons, who were holders of the record title, not notice of her equi- ties) ; Wells V. American Mortgage Co., 109 Ala. 430, 20 South. 136; O'Neal V. Prestwood, 153 Ala. 443, 45 South. 251; Carroll v. Draughon, 173 Ala. 327, 56 South. 207 (joint occupation of widow with her chil- dren no notice of her claim against them); Christopher v. Curtis-Attalla Lumber Co., 175 Ala. 484, 57 South. 837; Jerome v. Carbonate Nat. Bk., 22 Colo. 37, 43 Pao. 215; Manning V. Manning, 135 Ga. 597, 69 S. E. 1126 (daughter occupies with moth- er) ; Harris v. Mclntyre, 118 lU. 275, 8 N. B. 182 (occupancy of brother and sister) ; Lindley v. Mar- tindale, 78 Iowa, 379, 43 N. W. 233 (mother allowed title to stand in name of son); Elliot v. Lane, 82 Iowa, 484, 31 Am. St. Rep. 504, 48 N. W. 720; Nagelspach v. Shaw, 146 Mich. 493, 109 N. W. S43, 111 N. W. 343 (son's occupancy with father not notice of former's interest); Butler V. Wheeler, 72 N. H. 156, 59 Atl. 935 (both grantor and grantee use land for pasturing); Eankin v. Coar, 46 N. J. Eq. 566, 11 L. B. A. 661, 22 Atl. 177 (joint occupancy of son and mother) ; Geyer v. Geyer, 75 N. J. Eq. 124, 78 Atl. 449 (father and son); Pope v. Allen, 90 N. Y. 298; Patterson v. Mills, 121 N. C. 258, 28 S. E. 368 (deed to grantors' sisters); Derrett • v. Britton (Tex. Civ. App.), 80 S. W. 562; Puekett v. Eeed (Tex. Civ. App.), 22 S. W. 515. "The occupation of land by minor children with their parents is en- tirely consistent with the full, legal and equitable title in the parents, and is not of itself any notice of a claim on the part of the children": Attebery v. O'Neil, 42 Wash. 487, 85 Pac. 270. The fact that a child is living on the premises with her uncle and his family, who claimed to be the owner, does not constitute notice of her claim: Bubel v. Parker, 107 Ark. 314, 155 S. W. 114. Pos- session by relatives of a man after his death during administration is consistent with the right of the es- tate, and is not notice of an unre- corded deed made just prior to the death of the decedent: Jackson v. Berliner (Tex. Civ. App.), 127 S. W. 1160. In general, the possession of a wife, being referable to that of her husband, is not notice of secret equi- ties in her favor: Langley v. Pulliam, 162 Ala. 142, 50 South. 365; Garrard V. Hull, 92 6a. 787, 20 S. E. 357 (where the husband was a tenant of the holder of the legal title) ; Gray v. Lamb, 207 111. 228, 69 N. E. 794; Roderick v. McMeekin, 204 111. 625, 68 N. E. 443; Thomas v. Ken- nedy, 24 Iowa, 397, 95 Am. Dec. 740 (legal title in husband). But the 1187 CONCERNING NOTICE. §621 last occupant who has given up the possession, and is not charged with a constructive notice of facts which he might possession of the wife is not refer- able to the husband alone, where neither of them held the record title, to the extent of excusing a pur- chaser from inquiry of either of them: Kirby v. Tallmadge, 160 TJ. S. 379, 16 Sup. Ct. 349; especially in view of the frequency with which homestead property is taken in the name of the wife: Id. So, where the deed was made to the husband by mistake, and not recorded, the fact tha*' the husband also occupied the farm with his wife does not prevent her possession from imparting no- tice: Brown v. Carey, 149' Pa. St. 134, 23 Atl. 1103. See, also, Broome V. Davis, S'7 Ga. 584, 13 S. E. 749 (if premises occupied by husband and wife be a homestead, the cred- itors of the wife have constructive notice of its character, though the formal paper title is in the wife);" Allen V. Moore, 30 Colo. 307, 70 Pac. 682 (open and exclusive possession by a married woman after separation from her husband puts a purchaser on inquiry as to her rights). In Townsend v. Little, 109 U. S. 510, 3 Sup. Ct. 357, the fact that an appar- ent wife lived with her apparent husband, in whose name the title stood, was held not to be constructive notice of a secret equity in the wife. Insufficient Acts of Ownership. — Jerome v. Carbonate Nat. Bank; 22 Colo. 37, 43 Pac. 215 (making of im- provements, payment of taxes, etc., not notice, unless brought to the attention of the person sought to be charged, especially where the gran- tor exercises concurrent acts of ownership); Mack v. Mcintosh, 181 111. 633, 54 N. E. 1019 (no possession of building by storing goods in cellar under sidewalk); Wright v. Kaynor, 150 Mich. 7, 113 N. W. 779 (employ- ing a person to watch the land and to trim the trees); Holland v. Brown, 140 N. Y. 344, 35 N. E. 577 (occu- pation of uplands adjoining the shore of navigable waters is not possession of the shore unless by visible bound- aries or monuments at or near the shore its relation to the uplands is suggested) ; Billington v. Welsh, 5 Binney (Pa.), 129, 6 Am. Dec. 406 (nothing to distinguish occupancy of vendee of a portion from his vendor's occupancy of the rest of the land) ; Gulf, C. & S. F. E. Co. v. Gill, 5 Tex. Civ. App. 496, 23 S. W. 142 (construction of railroad track does not affect purchaser of land 132 feet from the track with notice of the railroad's claim to such land); Wright V. Lassiter, 71 Tex. 640, 10 S. W. 295 (possession taken under unrecorded title bond and part of land actually occupied not the sub- ject of dispute); Tolar v. South Texas Improvement Co. (Tex. Civ. App.), 153 S. W. 911 (mere inclos- ure of land by & fence). A purchaser of mineral rights who merely digs a test pit occasionally, while his grantor remains, in pos- session of the surface, has not such possession as to give notice of his rights: Kendrick v. Colyar, 143 Ala. 579, 42 South. 110. Where posses- sion is equivocal, and is not held in such a way as to show it is in an- other than the debtor, a creditor is not charged with notice: Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S. W. 174. Sufficient Acts of Ownership. — In general, to constitute actual, open and visible possession, only that use §621 EQUITY JTJEISPBXTDENCE. 1188 have learned by means of sucli inquiry.^ While this rule is equally clear and just in its theory, great doubt and diffi- § 621, 1 Miles v. Langley, 1 Russ. & M. 39; 2 Russ. & M. 626; Jones v. Smith, 1 Hare, 43, 62; Meehan v. Williams, 48 Pa. St. 238; Boggs v. Varner, 6 Watts & S. 474; Hewes v. Wiswell, 8 Me. 94. is required of which the land is ca- pable and to which it is adapted. See Simmons Creek Coal Co. v. Doran, 142 U. S. 417, 12 Sup. Ct. 239 (use of uninclosed land as a cattle range); Sloss-Sheffield Steel & Iron Co. V. Taff, 178 Ala. 382, 5& South. 658 (annual cultivation of land) ; Carolina Portland Cement Co. V. Roper, 68 Fla. 29», 67 South. 115; Tate V. Pensacola, Gulf L. & D. Co., 37 Fla. 489, 53 Am. St. Eep. 251, 20 South'. 542 (trees used for fire- wood, and limit of the possession claimed plainly marked); Eock Is- land & P. E. Co. V. Dimiek, 144 111. 628, 19 L. E. A. 105, 32 N. E. 291 (suflScient use of farm passageway beneath railroad; such use may be intermittent) ; Ashelf ord v. Willis, 194 111. 492, 62 N. E. 817 (use of a right of way); Mason v. MuUahey, 145 111. 383, 34 N. E. 36 (cutting timber from a tract of woodland and paying taxes thereon); White v. White, 105 111. 313 (tract inclosed, owner gathered fruit yearly) ; Sog- ers V. Turpin, 105 Iowa, 183, 74 N. W. 925 (use of land as pasture) ; Bolland V. O'Neal, 81 Minn. 15, 83 Am. St. Rep. 362, 83 N. W. 471 (timber land occupied by logging camps); Millard V. Wegner (Neb.), 94 N. W. 802 (tract inclosed and used as pasture); Gardom v. Chester, 60 N. J. Eq. 238, 46 Atl. 602 (occupancy not neces- sarily continuous; interrupted occu- pation of house at a summer resort) ; League v. Buena Ventura Stock Co., 2 Tex. Civ. App. 448, 21 S. W. 307 (inclosing the land with other land in a large pasture containing 28,000 acres); Ely v. Johnson, 114 Va. 31, 75 S. E. 748 (clearing, cultivating and fencing). In general, as to the sufficiency of the acts of occupation, see Smith v. Gale, 144 V. S. 509, 12 Sup. Ct. 674 (possession of part is sufficient); Terrell v. McLean, 130 Ga. 633), 61 S. E. 485 (residence on land, and cultivation of part, sufficient) ; Mal- lett V. Kaehler, 141 111. 70, 30 N. E. 549 (one of the lots occupied partly by a barn, timber and grass taken from both lots) ; Boyer v. Chandler, 160 111. 394, 32 L. E. A. 113, 43 N. E. 803 (possession of floor of building is notice of contract to pur- chase the entire premises); Tillot- son V. Mitchell, 111 111. 518 (suffi- cient although owner was a carpen- ter and was engaged in the construc- tion of a house on the lot); Truth Lodge, No. 213, A. F. & A. M. v. Barton, 119 Iowa, 230, 97 Am. St. Eep. 303, 93 N. W. 106 (possession of upper floor of building); Matt- field V. Huntington (Tex. Civ.. App.), 43 S. W. 53 (possession by lessee of part is notice of landlord's right to the whole) ; Hottenstein v. Lerch, 104 Pa. St. 454 (actual cultivation as farm land every year is sufficient) ; Sweatman v. Edmunds, 28 S. C. 62, 5 S. E. 165 (possession of part is sufficient); Huffman v. Cooley, 2S 8. D. 475, 134 N. W. 49 (clearing and cultivating an acre out of sixty acres of timbered land) ; Eamirez v. Smith, 94 Tex. 184, 59 S. W. 258 (possession of part notice of claim 1189 CONCERNING NOTICE. § 621 culty might arise in its application, especially under the conditions of land^ownership wMch ordinarily exist in this country. Does the vacancy of possession within the true meaning of the rule include every case where the premises are not in the visible, actual, continuous occupation of some person claiming a right as owner, tenant, or otherwise? or is it confined to those cases where no person is known to exercise any acts of dominion or ownership over the land? The answer to this question given by the English courts is very definite and certain. It is well settled in England that the possession which may amount to a constructive notice need not be that of the actual occupant, the terre-tenant. Where the purchaser of land has knowledge or information that its rents and profits are received by a person other than his grantor or vendor, who claims to be .the owner, this fact is constructive notice to the purchaser of the title and interest of the one thus receiving the rents and profits, and of the rights of all parties holding under such title.^ a it §621, 2 Knight v. Bowyer, 2 De Gex & J. 421; 23 Beav. 609. Of course, the mere fact that a third person is receiving the rents and profits to whole); KuH v. Lightle, 29 Wash. exist and be exercised of the min- 137, 69 Pae. 630 (Icnowledge of the eral as distinct from the surface, or erection of a schcolhouse puts on of the surface as distinct from the inquiry as to an unrecorded deed to mineral. It was said to be for the the school district) ; Dennis v. North- jury to determine the character of em Pae. E. Co., 30 Wash. 320, 55 the possession. If the finding should Pac. 210 (occupation by railway be of a possession of the surface tracks of a strip of the land pur- only, such possession would not be chased puts on inquiry as to the notice of an unrecorded deed of the width of the right of way). See to minerals: Sloss-ShefSeld Steel. & Iron same effect, Bay v. Railroad Co., 41 Co. v. Taff, 178 Ala. 382, 59 South. Ohio St. 392; Ward v. Metropolitan 658. In Virginia, it is held that El. Ry. Co., 152 N. T. 39, 46 N. E. possession of the surface is posses- 319, afSrming 82 Hun, 545, 31 N. Y. sion of all untouched minerals under Supp. 527 (operation of an elevated the surface. Hence possession of the railway in a street is open possession surface is notice of claim to min- of the easements appurtenant to erals: Clinchfield Coal Corp. v. Stein- abutting lots), man, 217 Fed. 875, 133 C. C. A. 585. Possession of Mineral Land. — In §621, (a) Though the purchaser's Alabama, it is held that possession actual knowledge that the rents are of land in which mineral lies may paid to some person whose receipt is § 621 EQUITY JUEISPRUDENCE. 1190 is also settled by tlie English decisions that a rightful pos- session, in order to put a subsequent purchaser upon in- quiry, and to affect him with constructive notice, need not be an actual occupation, continually visible or actively as- serted without cessation. "If a man has once received rightful and actual possession of land, he may go to any distance from it without authorizing any servant, or agent, or other person to enter upon it or look after it ; may leave it for years uncultivated and unused ; may set no mark of ownership upon it, — and his possession may nevertheless still continue, at least unless his conduct afford evidence of intentional abandonment, which such conduct as I have mentioned would not necessarily do."^^ In order that such a constructive possession by a person claiming right- fully should charge the purchaser with notice of the party's interests, the purchaser must receive information or have knowledge of the actual possession originally taken, the actual occupation of the premises originally maintained, by the adverse claimant. Unless this prior fact should be brought to the knowledge of the purchaser, there would cer- tainly be nothing in the circumstances described sufficient to put him upon an inquiry. The effect thus given to a is not of itself any notice to a purchaser; the purchaser must receive information or acquire knowledge of such fact, in order that he may he affected with notice. It is plain, also, that this particular case falls under the second general rule as stated ante, in § 615. § 621, 3 Hohnes v. Powell, 8 De Gex, M. & d. 572, 581, per Turner, L. J. ; see ante, § 614, note, where the passage is quoted ia f uU. See, also, to the same general, effect, Wilson v. Hart, L. R. 1 Ch. 463, 467; 2 Hem. & M. 551; Clements v. Welles, L. R. 1 Eq. 200; 35 Beav. 513; Feilden v. Slater, L. R. 7 Eq. 523; Parker v. Whyte, 1 Hem. & M. 167; and com- pare the American cases Hatch v. Bigelow, 39 111. 136; Krider v. Lafferty, 1 Whart. 303. inconsistent with the title of the 1 Ch. 45, 70 Law J. Ch. 30, 83 Law vendor is notice of that person's T. (N. S.) 479, 49 Wkly. Eep. 155. rights, knowledge that they are paid § ^^^' ^''^ "^^ *^« ^^^^ effect, , . Chapman v. Chapman, 91 Va. 397, to a real estate agent does not put ^^ ^^ g^ ^^^ ^^^^ ^^ ^ ^ ^^^^ upon inquiry: Hunt v. Luck, [1901] relying on Holmes v. Powell. 1191 CONCERNING NOTICE. § 621 mere constructive possession by the English courts cannot be reconciled, in my opinion, with rules concerning the notice resulting from possession which have been estab- lished in this country by the overwhelming weight of au- thority, especially when taken in connection with our statu- tory system of recording, and the judicial interpretation which has been given to that legislation. It seems to be a necessary conclusion from the unvarying line of deci- sions, some of which are cited in the foregoing paragraphs, that as against a subsequent grantee or encumbrancer whose deed or mortgage has been duly recorded, no mere constructive possession of a prior and even rightful claim- ant, consisting only of an original act of taking actual possession, followed by a leaving of the premises entirely vacant and unoccupied, can amount to the constructive notice from possession as recognized by the American law." This result seems necessarily to follow from the provisions of the recording acts, and the judicial interpretation given to them in many of the states.^ ^ § 621, 4 See Brown v. Volkening, 64 N. Y. 76, 82, 83, in which the efifect of a mere constructive possession as operating to charge a suhsequent purchaser with notice under the reeording statutes is discussed, and the positions of the text are fully sustained. § 621, (e) This sentence of the text joining lot, using the wall of the is quoted in Allen v. Daniel, 94 Ark. first building as part of the wall of 141, 126 S. W. 384. the second. He then deeded his see- § 621, (d) In United States v. ond building to a corporation of Minor, 29 Fed. 134, it was held that which He was the principal stock- possession of agricultural lands, over holder, and also deeded to the cor- a quarter of a mile away from a poration half of the wall, but this tract of uninclosed and uncultivated latter deed was not recorded. He timber land, was not constructive added three stories to the first build- notice to a hona Ude purchaser of the ing and mortgaged it to a mortgagee timber land. who had no notice of the unrecorded In order that possession may he deed. The court said: "A person notice, it must be visible. This is examining outside appearances would well illustrated by the case of Fire have noticed the seven-story Bethel Proof Storage Co. v. St. Paul Bethel Building, two and partly three Ass'n, 118 Minn. 47, 136 N. W. 407. stories higher than the opera house The owner of land built a building behind it, the rear wall of the former upon it and later built on an ad- carried to the top in a straight line, §§ 622, 623 EQUITY JXJEISPEUDEN-CE. 1192 § 622. Time of the Possession. — In order that any kind of possession, whether actual and visible, or simply con- structive, or consisting in the rightful receipt of rents and profits, may put a purchaser upon an inquiry, and operate as a constructive notice, it must exist at the time of the transaction by which his rights and interests are created. A possession which had ended before, or which did not commence until after, the sale to him was made, or the conveyance or encumbrance was executed, could not affect him with any constructive notice. ^ * § 623. The Presumption is Rebuttable. — ^We have seen that the rationale of the doctrine consists in the legal pre- sumption that the party dealing with respect to the estate, seeing, hearing, or learning that it was possessed by a stranger, thereupon made an inquiry into the grounds of such possession, and became informed of all the facts which could be ascertained through a diligent inquiry, and this presumed information is the constructive notice. The question is therefore a vital one, whether this legal pre- sumption is absolute and conclusive, so that the party is § 622, 1 Meehan v. Williams, 48 Pa. St. 238; Boggs v. Vamer, 6 Watts & S. 474; Hewes v. Wiswell, 8 Me. 94; Wright v. Wood, 23 Pa. St. 120, 130, 131. with nothing to indicate that the in connection with other evidence, opera house had any support for tend to show actual knowledge of either roof or floor galleries in that antecedent claim). See, also, Kous- wall. An examination "of the in- sain v. Norton, 53 Minn. 560, 55 side of either building would not be N. W. 747 ("a former possession, likely to give any better informa- which has ceased, will not suffice, tion of any possession by the opera although there be evidence of its house corporation in this wall." And having existed still apparent on the it was held that the possession was land") ; Scotch Lumber Co. v. Sage, not so visible as to amount to notice. 132 Ala. 598, 90 Am. St. Rep. 932, § 622, (a) This paragraph is quoted 33 South. 607; Chapman v. Chap- in O'Neal V. Prestwood, 153 Ala. 443, man, 91 Va. 397, 50 Am. St. Eep. 45 South. 251, and cited in Chris- 846, 21 S. E. 813 (citing this section topher V. Curtis-Attalla Lumber Co., of the text) ; King v. Porter, 69 W. 175 Ala. 484, 57 South. 837 (but Va. 80, 71 S. E. 202 (a mere mark such prior possession, actually known of former possession, such as a to second purchaser, may, especially vacant house, not notice). 1193 CONCERNING NOTICE. § 623 necessarily charged with the notice, or whether it is only prima facie and rebuttable. In a very large number of the decided cases, the language used by the court, while dealing with constructive notice arising from possession, does un- doubtedly speak of this presumption, without any limita- tions, as though it were absolute and conclusive, and as though the constructive notice were necessary and certain.^ If we should rely solely upon the general language of these judicial dicta, and upon the great preponderance in num- bers of the cases in which such expressions of opinion are to be found, we should certainly be compelled to regard the question as definitely answered, — the presumption as abso- lute and conclusive. When, however, we examine these ju- dicial utterances, when we apply to them the settled rules of interpretation, when we go below their surface and dis- cover the real points decided, we shall find that the courts have not, in the vast majority of instances, consciously and intentionally defined the nature of the presumption, and have not in an authoritative manner passed upon the question. Such a scrutiny will show very clearly that in by far the greater number of these decisions the real nature of the presumption was not consciously and intentionally before the courts for examination. The cases referred to, with a few possible exceptions, belong to one or another of the three following groups : 1. In some of them the court is simply announcing, in its most general form, the doctrine concerning constructive notice arising from possession by a stranger. The general rule is stated in its broadest manner; all special facts and circumstances which might modify it are passed over in silence; all restrictions and limitations which might apply to it are tacitly ignored, or postponed for future consideration whenever occasion may require it.^ The sweeping language used by judges in cases of this kind is clearly not decisive upon the nature of the presumption. 2. A second group includes those § 623, 1 See ante, cases under § § 614, 615. § 623, 2 See ante, cases under §§ 614, 615. § 623 EQX7ITY JUKISPRUDENCE. 1194 cases in which, upon the special facts and circumstances before it, the court really decides that a purchaser or en- cumbrancer, knowing the fact of possession by a stranger, and being put upon inquiry thereby, has either wholly neglected to make any inquiry, or has failed to prosecute it with due diligence, and is therefore conclusively pre- sumed to have obtained full information, and is absolutely charged with notice. In cases of this kind, the language of the judges, however general it may be, must, upon the most elementary rules of interpretation, be confined to the very facts of the particular controversy; and the court only intends to decide that a party, being put upon an inquiry, and failing to prosecute the inquiry in a proper manner, is conclusively presumed to have obtained all the information possible, and is affected with an absolute notice.3 In still a third group the courts have merely held that where a prior grantee is in rightful possession under an unrecorded conveyance, and his possession is open, notorious, visible, and exclusive, a subsequent purchaser or encumbrancer, even though his deed or mortgage is put upon record, becomes charged with an absolute notice. This is, as it seems to me, only another mode of stating the well-settled rule, that when a party is put upon an inquiry and the circumstances are such that the inquiry, if duly prosecuted, must necessarily lead to knowledge of the prior adverse title, the presumption that he obtained the knowledge is conclusive. In short, the facts of these § 623, 3 Many of the cases which seem to treat the presumption as con- elusive properly belong to this group : Gouverneur v. Lynch, 2 Paige, 300 ; Grimstone v. Carter, 3 Paige, 421, 24 Am. Dec. 230 ; Brice v. Brice, 5 Barb. 533; Tuttle v. Jackson, 6 Wend. 213, 21 Am. Dec. 306; Hanly v. Morse, 32 Me. 287; McLaughlin v. Shepard, 32 Me. 143, 52 Am. Dec. 646; Web- ster V. Maddox, 6 Greenl. 256; Kent v. Plummer, 7 Greenl. 464; Jaques V. Weeks, 7 Watts, 272; Kerr v. Day, 14 Pa. St. 112, 53 Am. Dec. 526; Hardy v. Summers, 10 Gill & J. 316, 32 Am. Dec. 167; Macon v. Shep- pard, 2 Humph. 335 ; Morton v. Robards, 4 Dana, 258 ; Brush v. Halloway, 2 J. J. Marsh. 180 ; Burt v. Cassety, 12 Ala. 739 ; Scroggins v. Dougal, 8 Ala. 382; and see notes under §§ 614, 615. 1195 CONCEENING NOTICE. § 624 cases are so strong that the party put upon the- inquiry cannot by any evidence rebut and overcome the prima facie presumption.* ^ § 624. Same Continued. — There is, on the other hand, an able and well-considered series of decisions in which the nature of the legal presumption arising from possession has been directly and intentionally examined. In all these cases, where the court has deliberately met the question, has intentionally investigated the presumption arising from possession, and has definitely passed upon its nature, it has been held that the presumption, under ordinary cir- cumstances, or independently of special and controlling cir- cumstances, is not a conclusive one, but is only prima facie, and may be rebutted and overcome by proper evidence showing that the party has made a diligent inquiry, and has nevertheless failed to discover the real truth concern- ing the existence of an adverse right or interest. This conclusion may be considered as settled by the decided weight of judicial authority, English and American. ^ ^ It § 623, 4 School Dist. v. Taylor, 19 Kan. 287; Noyes v. Hall, 97 U. S. 34, 38; Cabeen v. Breckenridge, 48 111. 91; Truesdale v. Ford, 37 lU. 210; Dunlap V. Wilson, 32 111. 577; Emmons v. Murray, 16 N. H. 385; Farm- ers' L. & T. Co. V. Maltby, 8 Paige, 361; Strickland v. Kirk, 51 Miss. 795, 797; Moss v. Atkinson, 44 Cal. 3, 17; Killey v. Wilson, 33 Cal. 690; Rus- sell V. Sweezey, 22 Mich. 235, 239 ; Tunison v. Chamblin, 88 111. 378, 390. And see Tankard v. Tankard, 79 N. C. 94, 56; Edwards v. Thompson, 71 N. C. 177, 179. §624, IWhitbread v. Jordan, 1 Younge & C. 303, per Alderson, B.; Jones V. Smith, 1 Hare, 43, 60-70, per Wigram, V. C. ; Hanbury v. Litch- §623, (a) See, also. Tankard v. O'Connell, 19 N. M. 565, 145 Pac. Tankard, 84 N. C. 286. 123 (where a subsequent purchaser § 624, (a) Emerie v. Alvarado, 90 shows that he pursued an inquiry, Cal. 444, 471-474, 27 Pac. 356 (since with proper diligence, and failed to possession is only evidence tending obtain the knowledge of the unre- to show notice, a finding of posses- corded instrument or of the rights sion is consistent with a finding of of the party claiming under it, he is no notice) ; Hillman v. Levy, 55 Cal. not charged with notice) ; Alliance 117; Seheerer v. Cuddy, 85 Cal. 271, Trust Co. v. O'Brien, 32 Or. 333, 50 34 Pac. 713; Penrose v. Cooper, 86 Pae. 801, 51 Pac. 640, citing § 623 Kan. 597, 121 Pac. 1103; McBee v. of the text (presumption of notice § 624 EQUITY JUEISPBUDENCE. 1196 is also in complete conformity with principle. Undoubt- edly, in ordinary cases, where a third person is possessed under a claim of right or title which is actually valid, an inquiry prosecuted with reasonable diligence from parties naturally conversant with the facts will generally result in a discovery of the truth, and the presumption thus be- comes conclusive, not because it is essentially so, but because it is necessarily confirmed by the existing facts, — no evidence can overturn it. A different condition of circumstances, however, might easily exist, and often does exist. The purchaser put upon an inquiry might exhaust all the reasonable modes of acquiring knowledge ; he might receive incorrect information from the parties acquainted with the real facts, and on whom he had a right to rely; he might even be misled by the person in possession; he might act in the most perfect good faith, — and come to the reasonable conclusion that the possession was not based upon any adverse claim, and was wholly subordinate to his own right and thai of his immediate grantor or mort- gagor. To say that the presumption is, under such cir- field, 2 Mylne & K. 629, 633; WUliamson v. Brown, 15 N. Y. 354, 360, 362 (see opinion quoted ante, in note under § 606) ; Thompson v. Pioche, 44 Cal. 508, 516; Fair v. Stevenot, 29 Cal. 486; Rogers v. Jones, 8 N. H. 264; riagg v. Mann, 2 Sum. 486, 554; Kerr v. Day, 14 Pa. St. 112, 53 Am. Dec. 526; and see, on the general question of the presumption aris- ing from facts sufficient to put a party upon inquiry being overcome by evidence of an inquiry diligently made, but unsuccessful, Penny v. Watts, 1 Macn. & G. 150; Ware v. Lord Egmont, 4 De Gex, M. & G. 460; Roberts V. Croft, 2 De Gex & J. 1; Espin v. Pemberton, 3 De Gex & J. 547; Hunt v. Elmes, 2 De Gex, F. & J. 57a; Hewitt v. Loosemore, 9 Hare, 449. from possession fails where an in- a recorded title is upon the person quiry would not be likely to elicit claiming notice, and not upon a bona the truth, as where the occupant put fide purchaser: Olmsted v. McCrary, the apparent ■ legal title in another 158 Wis. 323, 148 N. W. 871. When for the purpose of defrauding ered- the facts are established, the ques- itors); Huffman v. Cooley, 2S' S. D. tion as to whether due diligence has 475, 134 N. W. 49. been used is a question of law for The burden of showing that a pos- the court: Penrose v. Cooper, 88 Kan. session of a third person is refer- 210, 128 Pac. 362. able to an unrecorded rather than 1197 CONCERNING NOTICE. § 625 CTimstances, conclusive, and the constructive notice is abso- lute, would be to violate all the equitable reasons upon which the whole doctrine of constructive notice is f ounded.^ § 625. Possession by a Lessee or Tenant. — It is the set- tled rule in England that possession by a lessee is con- structive notice to a purchaser not only of the tenant's rights and interests directly growing out of or connected with the lease itself, but also of all rights and interests which he may have acquired by other and collateral agree- ments, as, for example, from a contract to convey the land, or to renew the lease, and the like. This rule has also been adopted by American courts.^ ^ It applies to a lessee, a sublessee, and a tenant from year to year.2 Upon the § 624, 2 As a simple illustration, suppose the subsequent purchaser, who is put upon an inquiry, should go to the party in possession, and should categorically demand from him an explanation, — a statement of the right under which he claimed to hold his possession — and he should be told in explicit terms that the possession was based upon no right, — was merely by sufferance of the owner and grantor, — and that it could not in any way interfere with the purchaser's title; would the possessor be permitted to contest the purchaser's right, to allege that he was charged with notice, because the presumption arising from his own possession was conclusiye? See Leach v. Ansbacher, 55 Pa. St. 85.'* § 625, 1 Daniels v. Davison, 16 Ves. 249; 17 Ves. 433; Douglas v. Wit- terwronge (cited), 16 Ves. 253; Knight v. Bowyer, 23 Beav. 609, 641; Lewis V. Bond, 18 Beav. 85; Wilbraham v. Livesey, 18 Beav. 206; Meux V. Maltby, 2 Swanst. 277, 281; Crofton v. Ormsby, 2 Schoales & L. 583; Powell V. Dillon, 2 Ball & B. 416; Bailey v. Richardson, 9 Hare, 734; Barnhart v. Greenshields, 9 Moore P. C. C. 18, 33, 34; Kerr v. Day, 14 Pa. St. 112, 53 Am. Dec. 526; Cunningham v. Pattee, 99 Mass. 248, 252. § 625, 2 Feilden v. Slater, L. R. 7 Eq. 523 ; Parker v. Whyte, 1 Hem. & M. 167; Wilson v. Hart, L. R. 1 Ch. 463; 2 Hem. & M. 551; Clements v. Welles, L. R. 1 Eq. 200; 35 Beav. 513. § 624, (*) That the presumption of W. Va. 414, ao 8. E. 183, opinion of notice is overcome where, upon in- English, J. quiry being made, the iJccupant § 625, (a) See ante, § 616, and disclaims title, see Trumpower v. notes; Morrison v. Herrick, 130 111. Marcy, 92 Mich. 529, 52 N". W. 999; 631, 22 N. E. 537; Dengler v. Fow- Barchent v. Sellick, 69 Minn. 513, ler, 94 Neb. 621, 143 N. W. 944; Ches- 95 N. W. 458; Ellison v. Torpin, 44 terman v. Gardner, 5 Johns. 29, 9 § 625 EQUITY JUKISPKUDENCB. 1198 question whether the lessee's possession is also a con- structive notice of the lessor's title, there seems to be a conflict among the English and American decisions. It is settled in England that a purchaser or encumbrancer is not by such possession charged with a constructive notice of the nature or extent of the landlord's title and in- terest.3 ^ This restrictive rule of the English courts has been adopted and followed by some of the American cases.* Another and more numerous group of decisions by the courts of various states hold that a purchaser, by means of a lessee's possession, is put upon an inquiry respecting all the rights and interests under which he holds and which affect the property, and is therefore charged with a constructive notice of the lessor's title and estate.5<= § 625, 3 Jones v. Smith, 1 Hare, 43, 63, per Wigram, V. C. ; Bamhart v. 'Greenshields, 9 Moore P. C. C. 18, 36; and -when the person in actual possession is a sublessee, a purchaser is not thereby affected with notice of covenants contained in the original lease from which his right is derived : Hanbury v. Litchfield, 2 Mylne & K. 629, 633; Jones v. Smith, 1 Hare, 43, 62 ; and see ante, § 618. § 625, 4 Flagg V. Mann, 2 Sum. 486, 557; Jaques v. Weeks, 7 Watts, 261, 272; Beattie v. Butler, 21 Mo. 313, 64 Am. Dec. 234. § 625, 5 O'Rourke v. O'Connor, 39 Cal. 442, 446; Thompson v. Pioche, 44 Cal. 508, 516; Dickey v. Lyon, 19 Iowa, 544; Nelson v. Wade, 21 Iowa, 49; Morrison v. March, 4 Minn. 422; Bank v. Godfrey, 23 111. 579, 607; Pittman v. Gaty, 5 Gihn. 186; Bank v. Flagg, 3 Barb. Ch. 316; Kerr v. Day, 14 Pa. St. 112, 53 Am. Dec. 526; Sergeant v. Ingersoll, 15 Pa. St. 343, 348; Wright v. Wood, 23 Pa. St. 120, 130; Hood v. Tahnestock, 1 Pa. St. 470, 44 Am. Dec. 147; Sailor v. Hertzog, 4 Whart. 259. Am. Dec 265; Phelan v. Brady, 119 §625, (b) Hunt v. Luck, [1901] 1 N. Y. 587, 8 L. E. A. 211, 23 N. E. Ch. 45, 70 Law J. Ch. 30, 83 Law 1109; Anderson v. Brinser, 12» Pa. T. (N. S.) 479, 49 Wkly. Eep. 155; St. 376, 6 L. R. A. 205, 11 Atl. 809, affirmed on appeal, [1902] 1 Ch. 428. IS' Atl. 520; Smith v. James, 22 Tex. See ante, § 618. andnotes. Civ. App. 154, 54 S. W. 41; Allen V. §625, (e) See ante, § 618, and Gates, 73 Vt. 222, 50 Atl. 1092 (eit- notes; Crawford v. Chicago etc. B. E. ing this section of the text). Contra, Co., 112 111. 31-4; Thomas v. Burnett, see Red Eiver Val. L. & I. Co. v. 128 111.' 37, 4 L. R. A. 222, 21 N. E. Smith, 7 N. D. 23, 74 N. W. 194; 352; Haworth v. Taylor, 108' 111. 275; Brown v. Roland, 11 Tex. Civ. App. Mallett v. Kaehler, 141 111. 70, 30 648, 33 S. W. 273; Smith v. Miller, N. E. 549; A. R. Beek Lumber Co. v. 63 Tex. 72. Eupp, 188 111. 562, 80 Am, St. Eep. 1199 CONCERNING NOTICE. §626 From the number and authority of the decisions by which it is sustained, this conclusion may justly be regarded as the American doctrine. § 626. 3. By Recital or Reference in Instruments of Title — General Rule. — ^Wherever a purchaser holds under a conveyance, and is obliged to make out his title through that deed, or through a series of prior deeds, the general 190, 59 N. E. 42&; Rea v. Grossman, 96 111. App. 70; Gallagher v. North- rup, 215 111. 563, 74 N. E. 711; Bow- man V. Anderson, 82 Iowa, 210, 31 Am. St. E«p. 473, 47 N. W. 10S7; Hannan v. Seidentopf, 113 Iowa, 658, 86 N. W. 44; O'Neill v. Wileox, 115 Iowa, 15, 87 N. W. 742; Townsend V. Blanchard, 117 Iowa, 36, 90 N. W. 519; Brady v. Sloman, 156 Mich. 423, 120 N. W. 795; Wilkins v. Bevier, 43 Minn. 213, 19 Am. St. Eep. 238, 45 N. W. 157 (dictum); Wolf v. Zabel, 44 Minn. 90, 4'6 N. W. 81; North- western Land Co. v. Dewey, 58 Minn. 359, 59 N. W. 1085; Ludowess v. Amidon, 124 Minn. 288, 144 N. W. 965; Bratton v. Eogers, 62 Miss. 281; McBee v. O'Connell, 19 N. M. 565, 145 Pac. 123 (citing the text) ; Ran- dall V. L-ingwall (Or.), 73 Pac. 1; Hottenstein v. Lerch, 104 Pa. St. 454; Lance v. Gorman, 136 Pa. St. 200, 20 Am. St. Eep. 914, 20 Atl. 792; DufE v. McDonough, 155 Pa. St. 10, 25 Atl. 608; Woodson v. Collins, 56 Tex. 168'; Glendenning v. Bell, 70 Tex. 632, 8 S. W. 3'24; League v. Snyder, 5' Tex. Civ. App. 13, 23 S. W. 825; Le Doux v. Johnson (Tex. Civ. App.), 23 S. W. 902; I>uncan v. Matula (Tex. Civ. App.), 26 S. W. 638; Allison v. Pitkin (Tex. Civ. App.), 33 S. W. 293; Mattfield v. Huntington, 17 Tex. Civ. App. 716, 43 S. W. 53; Huntington v. Mattfield (Tex. Civ. App.), 55 S. W. 361; Diffie V. Thompson (Tex. Civ. App.), 90 S. W. 193; Garth v. Stuart, 59 Tex. Civ. App. 391,- 125 S. W. 611; Tolar V. South Texas Development Co. (Tex. Civ. App.), 153 S. W. 911; Ellison V. Torpin, 44 W. Va. 414, 30 S. E. 183, opinion of Brannon, P.; Coe V. Manseau, 62 Wis. 81, 22 N. W. 155. The possession of a ten- ant of the grantor who holds over and attorns to the grantee has been held to impart notice to a subsequent purchaser of the grantee's unre- corded conveyance: Mainwarring v. Templeman, 57 Tex. 205, 213; Dun- can V. Matula (Tex. Civ. App.), 26 S. W. 638; DufE v. McDonough, 155 Pa. St. 10, 25 Atl. 608; but other cases require such a visible change as to arrest attention and put cred- itors and subsequent purchasers upon inquiry: Veasie v. Parker, 23 Me. 170; Bymim' v. Gold, 106 Ala. 427, 17 South. 667; Griffin v'. Hall, 111 Ala. 601, 20 South. 485, 115 Ala. 647, 22' South. 156; Powers v. State, 129 Ala. 126, 29 South. 784; Troy v. Walter, 87 Ala. 233, 6 South. 54; McCullars V. Reaves, 162 Ala. 158, 50 South. 313; Brown v. International Har- vester Co., 179 Ala. 563, 60 South. 841; Wahrenberger v. Waid, 8 Colo. App. 200, 45 Pae. 518; Stockton v. National Bank (Fla.), 34 South. 897; Stevens v. Magee, 81 Miss. 644, 33 South. 73; Wilkins v. Bevier, 43 Minn. 213, 19 Am. St. Eep. 238, 45 N. W. 157. § 626 EQUITY JURISPKUDENCE. 1200 rule is firmly established that he has constructive notice of every matter connected with or affecting the estate which appears, either by description of parties, by recital, by reference, or otherwise, on the face of any deed which forms an essential link in the chain of instruments through which he must derive his title. The reasons for this doc- trine are obvious and most convincing ; in fact, there could be no security in land ownership unless it were strictly enforced.* The right of such a purchaser is, under our system of conveyancing, confined to the instruments which constitute his chain of title, which are his title deeds, and everything appearing in those instruments and forming a legitimate -part thereof is a necessary element of his title. The rationale of the rule is equally clear and certain. Any description, recital of fact, reference to other documents, puts the purchaser upon an inquiry; he is bound to follow up this inquiry step by step, from one discovery to an- other, from one instrument to another, until the whole series of title deeds is exhausted, and a complete knowledge of all the matters referred to in their provisions and affecting the estate is obtained. Being thus put upon the inquiry, he is conclusively presumed to have prosecuted it until its final result, and with -ultimate success. The purchaser's ignorance that a particular instrument form- ing a link in his chain of title was in existence, and his consequent failure to examine it, would not in the slightest affect the operation of the rule. An imperative duty is laid upon him to ascertain all the instrunaents which constitute essential parts of his title, and to inform himself of all that they contain.! b § 626, 1 Trye v. Partridge, 82 HI. 267, 270 ; Chicago etc. R. R. Co. v. Kennedy, 70 lU. 350, 361, 362; Rupert v. Mark, 15 111. 540; Merrick v. Wallace, 19 111. 486; Morrison v. Kelly, 22 111. 610, 74 Am. Dec. 169; Mor- §626, (a) The text is quoted in Volk v. Eaton, 219 Pa. St. 649, 69 Mathieson v. Craven, 225' Fed. 345; Atl. 91. Goodell V. Taylor (N. J. Eq.), 97 §626, (b) The text, §§ 626-631, is Atl. 569; Thompson v. Green Eiver cited in Oglebay v. Todd, 166 Ind. Power Co., 154 N. C. 13, 69 S. E. 756; 250, 76 N. E. 238. This portion of 1201 CONCERNING NOTICE. § 627 § 627. Nature of the Notice. — The flotice whicli thus re- sults from recitals and other matters contained in title ris V. Hogle, 37 111. 150, 87 Am, Dec. 243; Doyle v. Teas, 4 Scam. 202; McConnell v. Reed, 4 Scam. 117 ; Allen v. Poole, 54 Miss. 323 ; Deason v. Taylor, 53 Miss. 697, 701; Wiseman v. Hutchinson, 20 Ind. 40; Croskey V. Chapman, 26 Ind. 333 ; Johnston v. Gwathmey, 4 Litt. 317, 14 Am. Dec. 135; Corbitt v. Clenny, 52 Ala. 480, 483; Dudley v. Witter, 46 Ala. 664, 694, 695; Bureh v. Carter, 44 Ala. 115, 117; Campbell v. Roach, 45 Ala. 667; Witter v. Dudley, 42 Ala. 616, 621, 625; Newsome v. Collins, 43 Ala. 656, 663; Major v. Buckley, 51 Mo. 227, 231; Ridgeway v. Holliday, 59 Mo. 444; Willis v. Gay, 48 Tex. 463, 26 Am. Rep. 328; Wood v. Krebbs, 30 Gratt. 708; Burwell's Es'rs v. Fauber, 21 Gratt. 446; Long v. Weller's Ex'rs, 29 Gratt. 347; Brush v. Ware, 15 Pet. 93, 114; Mueller v. Engein, 22 Bush, 441, 444; Stidham v. Matthews, 29 Ark. 650, 659, 660; Pringle V. Dunn, 37 Wis. 449, 464, 19 Am. Rep. 772; Fitzhugh v. Barnard, 12 Mich. 105; Case v. Erwin, 18 Mich. 434; Baker v. Mather, 25 Mich. 51, 53 ; Frost v. Beekman, 1 Johns. Ch. 288, 298 ; Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478; Gibert v. Peteler, 38 N. Y. 165, 97 Am. Dec. 785; Acer v. Westcott, 46 N. Y. 384, 7 Am. Rep. 355; Murrell v. Watson, 1 Tenn. Ch. 342; Rafferty v. Mallory, 3 Biss. 362, 368, 369; Green v. Early, 39 Md. 223, 229; White v. Foster, 102 Mass. 375, 380; Acer v. Westcott, 1 Lans. 193, 197; Sigoumey v. Munn, 7 Conn. 324; Christmas v. Mitchell, 3 Ired. Eq. 535; Hagthrop v. Hook's Adm'rs, 1 Gill & J. 270; the text is quoted in Headley v. 243; Whitney v. Whitney Elevator Hoopengarner, 60 W. Va. 626, 55 & Warehouse Co., 183 Fed. 67S', 106 S. E. 744. This section of the text CO. A. 28; Board of Com'rs. v. A. V. is cited in Cooke v. Caswell, 81 Tex. Wills & Sons, 236 Fed. 362; Thomp- 678, 17 S. W. 385; Williamson v. son v. Sheppard, 85 Ala. 611, 5 South. Jones, 43 W. Va. 562, 64 Am. St. Eep. 334; Gaines v. Summers, 50 Ark. 322, 891, 27 S. E. 411 (purchaser at ju- 7 S. W. 301; White v. Moffett, 108 dicial sale has notice of all the facts Ark. 490, 158 S. W. 505; Herring v. which the record, if inspected, would Fitts, 43 Fla. 54, &9 Am. St. Eep. communicate); Green v. Maddox, 97 108, 30 South. 804; Simms v. Freihen, Ark. 397, 134 S. W. 931; Loomis v. 100 Ga. 607, 28 S. E. 288; Atlanta Cobb (Tex. Civ. App.), 159 S. W. Land & Loan Co. v. Haile, 106 Ga. 305; Simmons v. Parker, 61 Ind. 498, 32 S. E. 606; Kerfoot v. Cronin, App. 403, 112 N. E. 31 (purchaser of 105 111. 609; Crawford v. Chicago etc. land from husband and wife has no- E. Co., 112 111. 314; Stokes v. Eiley, tiee that they hold as tenants by 121 111. 166, 11 N. E. S77; Leiter v. entirety). See, also, Patman v. Har- Pike, 127 111. 287, 20 N. E. 23; Lar- land, L. E. 17 Ch. Div. 353; Central ranee v. Lewis, 51 Ind. App. 1, 98 Trust Co. V. W. St. L. & P. E. Co., N. B. 892; Zear v. Boston Safe Dep. 29 Fed. 546; S. C. on appeal, Joy v. & Tr. Co., 2 Kan. App. 505, 43 Pac. St. Louis, 138 U. S. 1, 11 Sup. Ct. 977; Knowles v. Williams, 58 Kan. 11—76 § 627 EQUITY JUBISPRUDENCB. 1202 deeds, within the operation of the general rule, is absolute in its nature. The party having been put upon an inquiry, Kerr v. Kitchen, 17 Pa. St. 433; Malpas v. Ackland, 3 Russ. 273; Davies V. Thomas, 2 Younge & C. 234; Greenfield v. Edwards, 2 De Gex, J. & S. 582; Pilcher v. Rawlins, L. R. 11 Eq. 53; Robson v. Flight, 4 De Gex, J. & S. 608; Clements v. Welles, L. R. 1 Eq. 200; Wilson v. Hart, L. R. 1 Ch. 463. The facts and decisions in a few of the earlier English cases throw much light upon the general rule, its operation and foundation. In Moore v. Bennett, 2 Ch. Cas. 246, and Bacon v. Bacon, Toth. 133, it was said that where a purchaser can only make out title by a deed which leads him to another fact, he shall not be deemed a purchaser without notice of that fact, but shall be presumed cognizant thereof; for it-is crassa negli- gentia that he sought not after it. In Biseo v. Earl of Banbury, 1 Ch. Cas. 287, the rule was stated very clearly. A purchaser had actual notice of a certain mortgage. This mortgage deed referred to other encum- brances; and he was held to be charged with constructive notice of these encxunbrances thus referrred to in the mortgage. The court said: "The purchaser could not be ignorant of the mortgage, and ought to have seen it, and that would have led bim to the other deeds, in which, pursued from one to another, the whole case must have been discovered to him." In Coppin v. Eemyhough, 2 Brown Ch. 291, it was held that a purchaser who has actual notice of one instrument affecting the estate has constructive notice of all other instruments to which an examination of the first could have led him. 221, 48 Pac. 856; Taylor v. Mitchell, of Commerce v. Morris, 114 Mo. 255, 58 Kan. 194, 48 Pae. 859; Shuttle- 35 Am. St Eep. 754, 19 L. E. A. 463, worth v. Kentucky C, I. & D. Co., 21 S. W. 511; Seiberli^g v. Tipton, 22 Ky. Law Rep. 1806, 61 S. W. 1013; 113 Mo. 373, 21 S. W. 4; Loring v. Farmers & Drovers' Bk. v. German Groomer, 110 Mo. 633, 19 S. W. 950; Ins. Bank, 23 Ky. Law Eep. 2008, Turner v. Edmonston, 210 Mo. 411, 66 S. W. 2S0; International Dev. Co. 124^ Am. St. Eep. 739, 109 S. W. 33; V. Howard, 24 Ky. Law Eep. 266, 68 Adams v. Gossom, 228' Mo. 566, 129 S. W. 459; Dotson v. Merritt, 141 S. W. 16; Hubbard v. Knight, 52 Ky. 155, 132 S. W. 181; Smith v. Neb. 400, 72 N. W. 473; Carter v. Burgess, 133 Mass. 513, citing §§ Leonard (Neb.), 91 N. W. 574; 626-628 of the text; Norris v. Hill, Buchanan v. Balkum, 60 N. H. 406; 1 Mich. 202; Stewart .v. Matheny, 66 Westervelt v. Wyckoff, 32 N. J. Eq. Miss. 21, 14 Am. St. Eep. 538, 5 188;" Spielman v. Hunt, 36 N. J. Eq. South. 387, Gulf Coast Canning Co. v. 199, 206; Jennings v. Dixey, 36 N. J. Foster (Miss.), 17 South. 683; Binder Eq. 490; Condit v. Bigalow, 64 N. J. V. Weinberg, 94 Miss. 817, 48 South. Eq. 504, 54 Atl. 100; Boll v. Rea, 50 lO'lS; Berryman v. Becker, 173 Mo. N. J. Law, 264, 12 Atl. 905, citing App. 346, 158 S. -W. 899; Lydings v. this section; Imperial Realty Co. v. Pitcher, 82 Mo. 379; National Bank West Jersey & S. E. Co., 78 N. J. 1203 CONCBENING NOTICE. §627 the presumption that he obtained a knowledge of all the facts which could be ascertained by means of a diligent inquiry prosecuted through the entire chain of title deeds, and through all the instruments referred to, is conclusive ; it cannot be rebutted by any evidence of a failure to dis- cover the truth, nor even by proof of ignorance that in- struments affecting the title were in existence. This Eq. 110, 77 Atl. 1041; Sweet v. Henry, 175 N. Y. 268, 67 N. E. 574; Creek Land & Imp. Co. v. Davis, 28 Okl. 579, 115 Pac. 468; Drilling v. Smith, 61 Or. 413, 122 Pac. 899; Gibson v. Winslow, 46 Pa. St. 380, 84 Am. Dec. 552; Hancock v. McAvoy, 151 Pa. St. 439, 25 Atl. 48; Tate v. Clement, 176 Pa. St. 550, 35 Atl. 214; Jennings v. Bloomfield, 199 Pa. St. 638, 49 Atl. 135; Payne v. Aber- crombie, 10 Heisk. 161; Teague v. Sowder, 121 Tenn. 132, 114 S. W. 4S4; Christian v. Hughes, 12 Tex. Civ. App. 622, 86 S. W. 298; Mont- gomery V. Noyes, 73 lex. 203, 11 S. W. 138; Bergman v. Blackwell (Tex. Civ. App.), 23 S. W. 243; Pow- ers V. Smith (Tex. Civ. App.), 29 S. W. 416; Lindley V. Nunn, 17 Tex. Civ. App. 70, 42 S. W. 310; O'Connor V. Vineyard (Tex. Civ. App.), 43 8. W. 55; Jemison v. .Scottish- American Mortgage Co., 19 Tex. Civ. App. 232, 46 S. W. 886; Smith v. Farmers' Loan & Trust Co., 21 Tex. Civ. App. 170, 51 S. W. 515; Stone v. Kahle, 22 Tex. Civ. App. 185, 54 S. W. 375; Wells v. Houston, 23 Tex. Civ. App. 629, 57 S. W. 584; White V. Provident Nat. Bank, 27 Tex. Civ. App. 487, 65 S. W. 498; McCoy v. Cunningham, 27 Tex. Civ. App. 476, 65 S. W. 1084; Montgomery v. Noyes, 73 Tex. 203, 11 S. W. 138; Golson V. Fielder, 2 Tex. Civ. App. 400, 21 S. W. 173; Waggoner v. Dodson, 96 Tex. 415, 73 S. W. 517; Brotherton V. Anderson, 27 Tex. Civ. App. 587, 66 S. W. 682; Gilbough v. Runge, 99 Tex. 539, 122. Am. St. Bep. 659, 91 S. W. 566; Veatch v. Gilmer (Tex. Civ. App.), Ill S. W. 746; Lovejoy V. Raymond, 58 Vt. 509, 2 Atl. 156; Planary v. Kane (Va.), 46 S. E. 312; Roanoke Brick & Lime Co. v. Sim- mons (Va.), 20 8. E. 955; Robinson V. Crenshaw, 84 Va. 348, 5 S. E. 222; Graff V. Castleman, 5 Rand. 207, 16 Am. Dec. 741; Saffell v. Orr, 109 Va. 768, 64 S. E. 1057; Peterson v. Weist, 48 Wash. 339, 93 Pac. 519; Burr v. Dyer, 60 Wash. 603, 111 Pac. 866; Morehead v. Horner, 30 W. Va. 548, 4 8. E. 448; Hoback v. Miller (W. Va.), 29 8. E. 1014 (one claiming title through a judicial sale charged with notice that the decree was void for want of jurisdiction) ; Pocahontas Tanning Co. v. St. Lawrence Boom & Mfg. Co., 63 W. Va. 685, 60 8. E. 890; Town v. Gensch, 101 Wis. 445, 76 N. W. 1096, 77 N. W. 893; Reich- ert V. Neuser, 93 Wis. 513, 67 N. W. 939. Of course recitals in deeds out- side the chain of title do not con- stitute constructive notice: Jenkins V. Southern Ry. Co., 109 Ga. 36, 34 S. E. 355; Ramirez v. Smith, 94 Tex. 1S4, 59 8. W. 258 (recitals in judg- ment) ; Volk V. Eaton, 219 Pa. 649, 69 Atl. 91. See post, § 658. A recital in a deed that it is made "in consideration of $2,000 xind other considerations" does not give notice that part of the consideration is un- paid: Spellman v. McKeen, 96 Miss. 693, 51 South. 914. § 628 EQUITY JUEISPEXJDENCE. 1204 presumption extends to unrecorded documents as well as to those which have been duly recorded.^ ^ § 628. Extent of the Notice. — ^Where, under the opera- tion of the foregoing general rule, a purchaser has notice of a title deed, he is presumed to know all its contents, and is bound thereby. As an illustration, notice of a lease in- cludes in its effects a constructive notice of all its cove- nants.iS' Furthermore, the necessity of prosecuting the § 627, 1 Corbitt v. Clenny, 52 Ala. 480, 483; Stidham v. Matthews, 29 Ark. 650, 659, 660; Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478; 4 Sand. 565; Johnson v. Thweatt, 18 Ala. 741; Wailes v. Cooper, 24 Miss. 208; Honore's Ex'rs v. Bakewell, 6 B. Men. 67, 43 Am. Dec. 147; Nelson v. Allen, 1 Terg. 360; and see many of the cases cited in the last preceding note. In fact, all the decisions, either explicitly or implicitly, treat the presmnption as conclusive, and the notice as absolute. §628, 1 Taylor v. Stibbert, 2 Ves. 437; Hall v. Smith, 14 Ves. 426; Walter v. Maunde, 1 Jacob & W. 181; Tanner v. Florence, 1 Ch. Cas. 259; Cosser v. CoUinge, 3 Mylne & K. 282 ; Pope v. Garland, 4 Younge & C. 394; Martin v. Cotter, 3 Jones & L. 496, 506; Lewis v. Bond, 18 Beav. 85; WUbraham v. Livesey, 18 Beav. 206 ; Cox v. Coventon, 31 Beav. 378 ; Drys- dale V. Mace, 2 Smale & G. 225 ; Smith v. Capron, 7 Hare, 185 ; Clements V. Welles, L. R. 1 Eq. 200, 35 Beav. 513. To this rule there is an important limitation. In suits for specific performance of a contract the vendee will not always be charged with notice of all the covenants contained in a lease of the premises, of which lease he has a general notice. This is especially so where the lease contains unusual covenants seriously affecting the value of the property, and information concerning them has not been given. Lord Chancellor Sugden said of such a case : "It is a question of bona fides. Where the purchaser has completed his purchase, the rule [i. e., the rule stated in the text] is right ; but where the purchaser is only bidding for something, and has not been informed of the obligations to- § 627, (a) The text is cited in land, whioli included that conveyed Oglebay v. Todd, 166 Ind. 250, 76 to him, some parcels, not designated, N. E. 238. See Hancock v. MeAvoy, had been conveyed to purchasers, but 151 Pa. St. 439, 25 Atl. 48; Tolbert has no intimation that any of these v. HoTton, 31 Minn. 518, 18 N. W. purchasers had failed to record their 647; Mahoney v. Flanagan (Tex. Civ. deeds, need not look beyond the rec- App.), 78 S. W. 245. In Boll v. Eea, ords; see, also, Paul v. KerswelL 50 N. J. Law, 264, 12 Atl. 905, it (N. J. Eq.), 37 Atl. 1102. was held that a purchaser who was § 628, (a) See, also, Gordon v. Con- informed by a deed in his chain of stantine Hydraulic Co., 117 Mich^ title that out of a large tract of 620, 76 N. W. 142; Spielman v> 1205 CONCERNING NOTICE. § 628 inquiry, and the constructive notice arising therefrom, extend to every instrument forming an essential link in the direct chain of title through which the purchaser holds ; that is, to the ultimate source of his title, and to every succeeding deed through which the title must be di- rectly traced, and which is necessary to its establishment. The purchaser is thus charged with notice of every pro- vision in each separate instrument constituting the entire series by which his own interest can be affected, or from which others have derived or may derive any rights.^ i> which he will be liable in beQoming the purchaser, it is always a question of good faith" : Martin v. Cotter, 3 Jones & L. 496, 506. In Wilbraham v. Livesey, 18 Beav. 206, Sir John Romilly, M. E., held that while a person who contracts for a lease from another, with knowledge that he holds under a leasehold title, has notice of the ordinary .covenants in the original lease, he will not be held to have notice of peculiar and unusual covenants. See, also. Van v. Corpe, 3 Myhie & K. 269, 277; Flight v. Barton, 3 Mybie & K. 282; Pope v. Garland, 4 Younge & C. 394, 401. The reason of this limitation is, that the remedy of specific performance is somewhat discretionary; or to speak more accurately, it will not be granted unless the position of the plaintiff is perfectly equitable, fair, and just. § 628, 2 See the cas^s cited ante, under § 626 ; also Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478, 4 Sand. 565; Guion v. Knapp, 6 Paige, 35, 29 Am. Dec. 741; Harris v. Ply, 7 Paige, 421; Acer v. West- cott, 1 Lans. 193; Jumel v. Jumel, 7 Paige, 591; Briggs v. Palmer, 20 Barb. 392, 20 N. Y. 15, 21 N. Y. 574; Babcock v. Lisk, 57 111. 327; Dargin v. Beeker, 10 Iowa, 571; Hamilton v. Nutt, 34 Conn. 501; McAteer v. McMullen, 2 Pa. St. 32; Martin v. Nash, 31 Miss. 324; George v. Kent, 7 Allen, 16; Pike v. Goodnow, 12 Allen, 472, 474; Brown v. Simons, 44 N. H. 475; Sanborn v. Robinson, 54 N. H. 239; and the same is true of parties deriving title from or through public grants or patents : Brush v. Ware, 15 Pet. 93, 111; Bonner v. Ware, 10 Ohio, 465. Kliest, 36 N. J. Eq. 199, 206; Peer tions. — A particular application of V. Wadsworth (N. J. Eq.), 58 Atl. the rule is made in cases where the 379; Sweet v. Henry, 175 N. T. 268, question has arisen as to whether 67 N. E. 574; Croasdale v. Hill, 78 the purchaser of a lot has notice Kan. 140, 96 Pao. 37 (mortgage re- that building restrictions in his deed ferring to note, notice of terms of were intended to inure to the benefit note). of other lot owners. It is held that §628, (h) See, also, ■ Eobinson v. a purchaser is affected with notice Crenshaw, 84 Va. 345', 5 S. E. 222. of all duly recorded conveyances by Chain of Title — Building Eestric- his grantor affecting his title, and § 628 EQUITY JUEISPRUDENCE. 1206 Not only is a purchaser thus charged with a constructive notice of everything material in the deeds which form the direct chain through which his title is deduced, but if any of these conveyances should contain a recital of or refer- ence to another deed otherwise collateral, and not a part of the direct series, he would by means of such recital or reference have notice of this collateral instrument, of all its contents, and of all the facts indicated by it which might be ascertained through an inquiry prosecuted with reason- able diligence. 3 c Finally, the notice extends to all deeds §628, 3 Deason v. Taylor, 53 Miss. 697, 701; George v. Kent, 7 Allen, 16; Judson v. Dada, 79 N. Y. 373, 379; Green v. Slayter, 4 Johns. Ch.. 38; Cambridge Bank v. Delano, 48 N. Y. 326; Hope v. Liddell, 21 Beav. 183; Jones V. Smith, 1 Hare, 43, 1 Phili; Ch. 244. Deason v. Taylor, 53 Miss. 697, is a very illustrative case. It holds that a purchaser is not only bound by notice of all recitals in the deed to himself, and of everything stated in the several conveyances which make up his direct chain of title, but he must investigate and explore every collateral matter to which his attention is thus directed. Tor example, a prior deed in a chain of title recited that the sale to the grantee therein was on credit. Held, that a subsequent purchaser was charged with constructive notice of the prior grantor's lien on the premises, and he was bound to ascertain whether that purchase price referred to had been paid or was still unpaid ; and the fact that the time of payment as stated in the prior deed had passed did not ex- cuse or in any way affect the necessity of his making inquiry. The court cited, as sustaining the rule thus laid down, Wiseman v. Hutchinson, 20 that conveyances of other lots are tained in other deeds in the same al- within his chain of title so far lotment. Unless there is a plan of as recitals therein affect his lot: restriction indicated on the recorded King V. St. Louis Union Trust Co., plat, one purchaser is not affected if26 Mo. 351, 1S6 S. W. 415, citing with constructive notice of a cove- the authorities. In Howland v. An- nant not in his chain of title, drus, 80 N. J. Eq. 276, 82 Atl. 982, § 628, (c) The text is quoted in it is held that a purchaser under such Hyde Park Supply Co. v. Peck- Will- circumstances must at least examine iamson Heating & Ventilating Co., the records of conveyances of ad- 176 Ky. 513, 195 S. W. 1115. See joining lots. In Kiley v. Hall Fouse v. Gilfillan, 45 W. Va. 213, (Ohio), 117 N. E. 359, however, it 32 S. E. 178, 185 (deed referred to was held that a purchaser of a lot mechanic's lien, and notice of lien ra- whose deed contains restrictions as ferred to contract. This put on in- to its use is not chargeable with no- quiry as to other liens), tice that like restrictions are con- 1207 CONCERNING NOTICE. § 628 I and other instruments properly falling within the two pre- ceding rules, whether they are recorded or unrecorded. In other words, a purchaser is charged with notice of any deed forming a part of his direct chain of title, and of every collateral instrument recited or referred to, as well when it is unrecorded as when it is recorded.* * Ind. 40 ; Croskey v. Chapman, 26 Ind. 333 ; Johnston v. Gwathmey, 4 Litt. 317, 14 Am. Dec. 135; Honore v. Bakewell, 6 B. Mon. 67, 43 Am. Dec. 147; Thornton v. Knox, 6 B. Mon. 74.«* In Avent v. McCorkle, 45 Miss. 221, it was held that under the same circumstances- a subsequent purchaser may assume the prior purchase price to have been paid, when a sufficient time has elapsed to bar any claim for such price under the statute of limitations. It has also been held that where one executes a deed, release, or other instrument affecting the title to real estate, which contains a reference to some other deed for a more complete description of the premises, or for some other purpose, he thereby becomes charged with notice of the instrument thus referred to, of its contents, and of the facts which it indicates: See Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478, 4 Sand. 565 ; Guion v. Knapp, 6 Paige, 35, 29 Am. Dec. 741. In Howard Ins. Co. v. Halsey, supra, the rule was certainly carried to its extreme limits.^ ' § 628, 4 Stidham v. Matthews, 29 Ark. 650, 659, 660; Baker v. Mather, 25 Mich. 51, 53; White v. Foster, 102 Mass. 375, 380; Howard v. Chase, § 628, (d) See, to the same effect, quired by deed, condemnation pro- Thompson V. Sheppard, 85 Ala. 611, ceeding, judgment, or otherwise, the 5 South. 334; Tydings v. Pitcher, 82 recital was held to constitute notice Mo. 379 (purchaser put on inquiry of the existence and contents of a as to the fact that the lien may have previous deed in escrow to the city been extinguished by an unrecorded by the grantor: Lester v. Pike, 127 deed reconveying the premises to the 111. 287, 20 N. E. 23. former owner). §628, (f) The text is quoted in § 628, (e) And where the recitals Hyde Park Supply Co. v. Peck-Will- in a recorded deed clearly indicate iamson Heating & Ventilating Co., a resulting trust in favor of parties 176 Ky. 513, 195 S. W. 1115. See, not named, whose relinquishment of also, Central Trust Co. v. W. St. L. a right referred to in the deed con- & P. E. Co., 29 Fed. 546; Green v. stitutes its consideration, a pur- Maddox, 97 Ark. 397, 134 S. W. 931; chaser is thereby put on inquiry, and Talmadge v. Interstate B. & L. is charged with notice of what might Ass'n, 105 Ga. 550, 31 S. E. 618; have been learned by such inquiry: Crawford v. Chicago etc. E. Co., 112 Montgomery v. Noyes, 73 Tex. 203, 111. 314; Weigel v. Green, 218 111. 11 S. W. 138. And where a deed 227, 75 N. E. 913 (recitals in deed recited that it was made subject to that grantor is only heir and legatee Buch fights as a city might have ae- of X, late of X county, state of Z, § 629 EQUITY JUKISPEUDENCE. 1208 §629. Limitation — ^Matters Purely Collateral.* — To -the general rule defining constructive notice from title papers, and to the subordinate rules contained in the preceding paragraph, there are one or two necessary limitations. In the first place, a purchaser is not charged with constructive notice ^ of absolutely every matter or fact stated in the in- struments forming his direct chain of title, or in a collateral instrument connected with the direct series by reference or recital. The rules do not extend to, and he is not con- structively bound -by, a recital in any deed or other title paper of matter which is wholly foreign to the nature and objects of the instrument. In other wotds, he has no con- structive notice of any matter contained in a recital which does not affect his own interest in the property held under 104 Mass. 249; George v. Kent, 7 Allen, 16; Garrett v. Puckett, 15 Ind. 485; Ross v. Worthington, 11 Minn. 438, 88 Am. Dec. 95; Price v. Mc- Donald, 1 Md. 403, 54 Am. Dec. 657; Hudson v. Warner, 2 Har. & G. 415. In Baker v. Mather, 25 Mich. 51, a second mortgagee had con- structive notice of a prior unrecorded mortgage expressly mentioned in and excepted from the deed to his mortgagor, although this deed itself was also unrecorded. In White v. Foster, 102 Mass. 375, 380, a deed referred to a mortgage of the land by the grantor, which was on record, and which reserved "all the trees growing on the land, the same having been sold to A." Held, that the grantee thereby had notice of A's title as a valid title, although A's deed of the trees was not recorded. § 629, 1 Of course he may have actual notice of any and every matter so stated, if it can be proved that he actually saw and read the provision containing the statement. Example of no such notice. See Sleeper v. Chapman, 121 Mass. 404. import notice of terms of will, St. 550, 35 Atl. 214; Moore v. Seott though that was insuflSeiently T-eeord- (Tex. Civ. App.), 3S' S. W. 394; Rob- ed); Taylor v. Mitchell, 58 Kan. ertson v. Guerin, 50 Tex. 317; Gar- 194, 48 Pac. 859; National Bank of rett v. Parker (Tex. Civ. App.), 39 Commerce v. Morris, 114 Mo. 255, 35 S. W. 147 ; Town v. Genseh, 101 Wis. Am. St. Rep. 754, 19 L. R. A. 463, 445, 76 N. W. 1096, 77 N. W. 893; 21 S. W. 511; feuchanan v. Balkum, Eeichert v. Neuser, 93 Wis. 513, 67 60 N. H. 406; Westervelt v. Wyckoff, N. W. 939. But see Crofut v. Wood, 32 N. J. Eq. 188; Sweet v. Henry, 3 Hun, 571. See, also, § 627. 175 N. Y. 268, 67 N. E. 574; McKee §629, (a) Cited in Cooke v. Cas- V. Perchment, 69 Pa. St. 342; Han- well, 81 Tex. 678, 17 S. W. 385; also cock V. McAvoy, 151 Pa. St. 439, in Knox v. Gruhlkey (Tex. Civ. 25 Atl. 48: Tate v. aement, 176 Pa. App.), 192 S. W. 334. 1209 CONCERNING NOTICE. § 630 or through, the conveyance, or from which other persons do not derive any rights in such property; he is not charged with notice of any fact wholly collateral and foreign to the objects and effects of the instrument as a conveyance of an estate or interest to himself.^ ^ In the second place, the rules do not extend to any recital or statement contained in an instrument which is purely collateral, and deals with another subject-matter, and which is not connected with the direct series of title deeds by reference, although such collateral instrument may have been executed between the same parties. The purchaser is not charged with con- structive notice of such a recital or statement.^ e § 630. Particular Instances. — The constructive notice arises not only from recitals, references, and other similar statements of fact, but also from the character and descrip- tion of the parties to a deed or other instrument of title. A purchaser may thus be charged with notice of the rights held by third persons, from the fact that they are joined as parties to a conveyance, or from the character or descrip- tion of them appearing in the instrument, as married women, trustees, administrators, executors, and the like.i §629, 2 Mueller v. Engeln, 12 Bush, 441, 444; Burch v. Carter, 44 Ala. 115, 117, Mueller v. Engeln, 12 Biish, 441, admirably illustrates this limitation. A purchaser held under a deed of land. It was held that he had no constructive notice of a clause in such deed which pur- ported to be a bill of sale of certain chattels from the grantor, and at- tempted to reserve a lien thereon in favor of the grantor. § 629, 3 Boggs V. Vamer, 6 Watts & S. 469; Burch v. Carter, 44 Ala. 115, 117; Sleeper v. Chapman, 121 Mass. 404 (clause in a chattel mort- gage). § 630, 1 As illustrations : A grantee by a deed, in which the grantor is described as an administrator -and conveys as such, has constructive notice of the trust and of all rights under it, and obtains no title as against the heirs to whom the land had descended: Rafferty v. Mallory, 3 Biss. 362, 368, 369; a married woman being a party is notice of her §629, (b) The text is quoted in §629, (c) The text is quoted in Hyde Park Supply Co. v. Peck- Hyde Park Supply Co. v. Peck-Will- Williamson Heating & Ventilating iamson Heating & Ventilating Co., Co., 176 Ky. 513, 195 S. W. 1115. 176 Ky. 513, 195 S. W. 1115. §630 EQUITY JXTRISPBUDENCE. 1210 The immediate parties — ^grantor and grantee, mortgagor and mortgagee — by wliom and to whom the instrument is directly executed have, of course, a notice of everything which it contains. The notice is then really an actval one, rather than constructive; for the immediate parties are interest: Steedman v. Poole, 6 Hare, 193; the fact that persons uniting as parties are described as devisees may be notice of their rights: Bur- gojnie V. Hatton, Barn. Ch. 237; and see Attorney-General v. Hall, 16 Beav. 388. A purchaser by a deed from a grantor who is a trustee, whose only title is that of a trustee, may have notice of ihe trust, and will cer- tainly have such notice if the grantor executes the deed in his char- acter as trustee: See Sergeant v. IngersoU, 7 Pa. St. 340, 15 Pa. St. 343, 348; Dudley v. Witter, 46 Ala. 664, 694; Johnson v. Thweatt, 18 Ala. 741; Witter v. Dudley, 42 Ala. 616, 621, 625; Coy v. Coy, 15 Minn. 119." A grantee from one of two joint owners has constructive notice § 630, (a) In general, for illustra- tions of the rule that a party deal- ing with a trustee with reference to trust property, having notice of its character, is charged with notice of the terms of the trust, see Smith v. Ayer, 101 XJ. S. 320; Sternfels v. Watson, 139 Fed. 505; Leake v. Wat- son, 58 Conn. 332, 18 Am. St. Eep. 270, 20 Atl. 343; Gale v. Hardy, 20 Pla. 171; H. B. Claflin Co. v. King, 56 Fla. 767, 48 South. 37; Hill v. Fleming, 128 Ky. 201, 16 Ann. Cas. 840, 107 S. W. 764; Williamson v. Morton, 2 Md. Ch. 94; Abell v. Brown, 55 Md. 217; Marbury v. Ehlen, 72 Md. 206, 20 Am. St. Kep. 467, 19 Atl. 648 (corporation bound with such notice when stock trans- ferred on its books to a person des- ignated as "trustee") ; Alexander v. Fidelity & Deposit Co., lOS Md. 541, 70 Atl. 209 (signature as "execu- tor"); Allen V. Puritan Trust Co., 211 Mass. 409, L. R. A. 1915C, 518, 97 N". E. 916; Mercantile Nat. Bank V. Parsons, 54 Minn. 56, 40 Am. St. Eep. 299, 55 N. W. 825; Snyder v. Collier, 85 Neb. 552, 133 Am. St. Eep. 682, 123 N. W. 1023; JefEray v. Tower, 63 N. J. Eq. 530, 53 Atl. 182; Harrison v. Fleischman, 70 N. J. Eq. 301, 61 Atl. 1025 (executrix); Swarey v. De Montigny, 37 N. Y. Supp. 503; Thompson v. Green Biver Power Co., 154 N. C. 13, 69 S. E. 756; In re Nimick's Estate, 179 Pa. St. 591, 36 Atl. 350 (property charged by decree with payment of partner- ship debts); Montgomery v. True- heart (Tex. Civ. App.), 146 S. W. 284; Roberts v. W. H. Hughes Co., 86 Vt. 76, 83 Atl. 807; Hale v. Wind- sor Sav. Bank, 90 Vt. 487, 98 Atl. 993; Case v. Goodman, 250 Mo. 112, 156 S. W. 69&. Compare Baxter v. Ft. Payne Co., 182 Ala. 249, 62 South. 42. When a recorded deed shows on its face, by proper construction, that the grantee does not take the beneficial interest in the property conveyed, but takes in trust for his wife, a purchaser from him is charged with notice of the trust: Creswell v. Jones, 68 Ala. 420. 1211 CONCEENING NOTICE. § 631 assumed to have read their own conveyance, and to have become acquainted with all of its contents.^ ^ § 631. When the Notice Arises. — The doctrine of con- structive notice from title deeds applies only to instru- ments actually in existence; it does not extend to deeds which may be executed in the future, and which may pos- sibly affect the subject-matter. A purchaser is therefore not charged with constructive notice of the contents of a deed which is merely in contemplation or which may by possibility be executed, even though it should afterwards become operative.^ In applying the general doctrine, it is of the interest held by the other joint owner : Campbell v. Koach, 45 Ala. 667. A grantee from one who holds only under a land contract has notice of his own grantor's interest, and of the rights held by the vendor in the contract: Newsome v. Collins, 43 Ala. 656, 663. § 630, 2 Tot example : Where a deed of land described it as encum- bered by a mortgage, the grantee would have actual notice of such encum- brance : Guion v. Knapp, 6 Paige, 35, 29 Am. Dec. 741 ; Bellas v. Lloyd, 2 Watts, 401; Kerr v. Kitchen, 17 Pa. St. 433; Knouff v. Thompson, 16 Pa. St. 357, 364; Hackwith v. Damrore, 1 Mon. 235. Tor instances in which a grantee has notice of his grantor's title as trustee, or as a joint owner, or as a vendee, under the deed of conveyance executed be- tween them, see Sergeant v. Ingersoll, 7 Pa. St. 340, 15 Pa. St. 343, 348 ; Dudley v. Witter, 46 Ala. 664, 694; Witter v. Dudley, 42 Ala. 616, 621, 625; Johnson v. Thweatt, 18 Ala. 741; Campbell v. Eoach, 45 Ala. 667; Newsome v. Collins, 43 Ala. 656, 663. § 631, 1 Cothay v. Sydenham, 2 Brown Ch. 391. A purchaser was in- formed that a draught of a deed had been prepared, but not that it was §630, (b) S. H. Harmon Lumber Adams, 67 N. H. 440, 39 Atl. 333; Co. V. Brown, 165 Cal. 19-3, 131 Pac. Mulholland's Estate, 224 Pa. St. 536, 368; Council Bluffs Lodge v. Billupa, 132 Am. St. Eep. 791, 73 Atl. 932; 67 Iowa, 674, 25 N. W. 846; Tolbert Texas Tram & Lumber Co. v. Gwin, V. Horton, 31 Minn. 518, 18 N. W. 29 Tex. Civ. App. 1, 67 S. W. 892, 647 (recital in party's own mortgage .68 S. W. 721; Keyser v. Clifton (Tex. of a prior mortgage); Bergstrom v. Civ. App.), 50 S. W. 957; Passumpsie Johnson, 111 Minn. 247, 126 N. W. Sav. Bank v. Buck, 71 Vt. 190, 44 899; Knox County v. Brown, 103 Mo. Atl. 93; Pouse v. GilfiUan, 45 W. Va. 223, 15 S. W. 382; Buchanan' v. 213, 32 S. E. 178, 1S5. Balkum, 60 N. H. 406; McMurphy v. § 631 EQUITY JUBISPBUDENCB. 1212 also settled by the English courts that where a person re- ceives actual notice of a deed, and this notice is at the same time accompanied by an erroneous statement as to its contents, under such circumstances that he may reason- ably rely upon the information, he is not thereby charged with a constructive notice of the real contents.^ A recital, executed. He was held not to be charged with notice of the instrument as a deed, although it had in fact been executed. Lord Thurlow stated the rule in such cases as follows: "If the notice had been of a deed actu- ally executed, it certainly would do; but where the notice is not of a deed, but only of an intention to execute a deed, it is otherwise; there is no case nor reasoning which goes so far as to say that a purchaser shall be affected by notice of a deed in contemplation." § 631, 2 Jones v. Smith, 1 Hare, 43, 60-70, per Wigram, V. C. The opinion in this case is very iustructive: Allen v. Knight, 5 Hare, 272; Bird V. Pox, 11 Hare, 40; Harryman v. Collins, 18 Beav. 11; Ware v. Lord Egmont, 4 De Gex, M. & G. 460, 473; and see eases cited ante, in note under § eie.* It has been held in some American decisions that the grantee by a quitclaim deed is charged with notice of any defects in the title, and cannot be a purchaser without notice: See Ridgeway v. HoUi- day, 59 Mo. 444; Smith v. Dun ton, 42 Iowa, 48; Watson v. Phelps, 40 Iowa, 482 ; but see post, § 753, note. § 631, (a) In the recent case of Ms title, while in the present ease Patman v. Harland, L. R. 17 Ch. Biv. the lessee had notice that the deed 353, it was held by Jessel, M. B., did affect his vendor's title. It that a purchaser or lessee having no- would seem to follow from these de- tice of a deed forming part of the cisions that a subsequent vendee or chain of title of his vendor or lessor lessee may rely upon representations has constructive notice of the con- of his vendor or lessor that a prior tents of the deed, and is not pro- deed does not affect his title; but if teeted from the consequences of not he has notice that it does affect the looking at the deed, even by the title, he is bound to examine the most express representations of the deed for himself, and cannot rely vendor or lessor that it contains no upon the representations of his lessor restrictive covenants nor anything or vendor as to the nature of its eon- affecting the title. The master of tents. This distinction is followed the rolls distinguished this case from in the recent cases, English & Scot- the ease of Jones v. Smith, 1 Hare, tish Mercantile Co. v. Brunton, 43, and the other cases cited, by [1892] 2 Q. B. 700, and In re Valle- reason of the fact that in Jones v. tort Steam Laundry Co., Ltd., [1903] Smith, 1 Hare, 43, the purchaser in 2 Ch. 654. See, also, Simpson v. Hin- that case was told by the vendor son, ante, § 601, note (b). that the prior deed did not affect 1213 CONCERNING NOTICE. § 632 reference, or other statement in a title deed, in order to operate as notice, must be so definite and distinct that it conveys some information to the party, or else arouses his attention by directing him to the source of informa- tion. A statement may be so vague and uncertain in its terms that it will not put a purchaser upon an inquiry, and will not therefore affect his conscience with notice.^ ^ Finally, the notice arising from title deeds, like every other instance or kind of constructive notice, does not operate be- tween the immediate parties to a conveyance, — the grantor and grantee, mortgagor and mortgagee, — ^but only between a purchaser, grantee, or mortgagee and some prior party holding or claiming to hold an adverse right, interest, or title.4 1 § 632. By Lis Pendens — Rationale of the Doctrine.a^ — ^It has been stated in numerous judicial opinions, and the same view has been repeated by text-writers, that the rule con- cerning the effect of lis pendens is wholly referable to the general doctrine of constructive notice. It has been said § 631, 3 White v. Carpenter, 2 Paige, 217, per Walworth, C. : "The recital must be such as to explain itself by its own terms, or refer to some deed or circumstance which explains it or leads to its explanation." See Bell V. Twilight, 22 N. H. 500; Kaine v. Denniston, 22 Pa. St. 202; French v. The Loyal Co., 5 Leigh, 627. § 631, 4 Champlin v. Laytin, 6 Paige, 189, 203. § 631, (b) In the following eases 791, the recitals were sufficiently the recitals were held insufficient to definite. A recital charges with no- amount to notice: Bailey v. South- tiee only by putting on such inquiry ern Ey. Co., 22 Ky. L. Eep. 1397, 60 as the information points to: Whit- S. W. 631; Eobinson v. Owens, 103 field v. Eiddle, 78 Ala. 99. Tenn. 91, 52 S. W. 870; McDaniel v. §631, (o) Wertheimer v. Thomas, Harley (Tex. Civ. App.), 42 S. W. 168 Pa. St. 168, 47 Am. St. Eep. 882, 323; McBride y. Moore (Tex. Civ. 31 Atl. 1096. App.), 37 8. W. 450; Durst v. Daugh- erty, 81 Tex. 650, 17 S. W. 388. In § 632, (a) Sections 632 et seq. are Mahoney v. Flanagan (Tex. Civ. cited, generally, in Portland & Seat- App.), 78 S. W. 245, Bergstrom v. tie Ey. Co. v. Ladd, 47 Wash. 88, 91 Johnson, 111 Minn. 247, 126 N. W. Pac. 573. This section is cited in 899, and Commercial & Farmers' Buser v. Shepard, 107 Ind. 417, 8 Bank v. Vass, 130 N. C. 590, 41 S. E. N. E. 280. § 632 EQUITY JTJBISPKUDENCE. .1214 that a pending suit in equity operates as a constructive notice to the world, and that a purchaser pendente lite is bound by the final result of the litigation, because he is charged with such a notice of the proceeding, entirely irre- spective of any information which he may or may not have had. Courts of the highest ability and authority have, however, adopted a somewhat different theory. According to this view, "it is not correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, though undoubtedly the language of the courts often so describes its operation. It affects him, not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litigation, rights to the prop- erty in dispute, so as to prejudice the opposite party. Where a litigation is pending between a plaintiff and a defendant as to the right to a particular estate, the necessi- ties of mankind require that the decision of the court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. If this were not so, there could be no certainty that the litigation would ever come to an end. A mortgage or sale made before final decree to a person who had no notice of the pending pro- ceedings would always render a new suit necessary, and so interminable litigation might be the consequence. " ^ ^ It must not be supposed that this mode of explanation § 632, 1 Bellamy v. Sabine, 1 De Gex & J. 566, 578, 584. In this most carefully considered ease the theory given in the text was fully adopted and made the basis of decision by the court of appeal in chancery. Lord Chancellor Cranworth, after using the language which I have quoted in § 632, (b) This theory is adopted instructive opinion by Pitney, V. C, in nearly all the recent cases. The citing many cases); Southern Eock text is cited in Hayden v. Thrasher, Is. Plow Co. v. Pitliik (Tex. Civ. App.), 28 Fla. 162, 9 South. 855; Norris v. 63 S. W. 354. The present note is He, 152 m. 190, 199, 43 Am. St. Rep. cited in Bridger v. Exchange Bank, 233, 38 N. E. 762; Turner v. Houpt, 126 Ga. 821, 115 Am. St. Rep. 118, 8 53 N. J-. Eq. 526, 33 Atl. 28 (a most L. R. A. (N. S.) 463, 56 S. E. 97. See, 1215 CONCEBNING NOTICE, § 632 affects in the sligMest degree the settled rules concerning lis pendens, or alters the rights and liabilities of alienees from a party to a suit during its pendency; it may, how- ever, prevent the extension of the doctrine, and restrict its the text, proceeded as follows (p. 579) : "That this is the true doctrine as to lis pendens appears to me to be not only founded on principle, but also consistent with the authorities." He cites Culpepper v. Aston, 2 Ch. Cas. 115, 221; Sorrell v. Carpenter, 2 P. Wms. 482, and adds: "In both these cases the doctrine really was, that, pending a litigation, the defend- ant cannot by alienation affect the rights of the plaintiff to the property in dispute; and the same principle is applicable against a plaintiff, so as to prevent him from alienating to the prejudice of the defendant where, from the nature of the suit, he may have in the result a right against the plaintiff; as on a bUl by a devisee to establish a will against an heir, if in the result the devise is declared void, the heir is not to be prejudiced by an alienation of the devisee (plaintiff) pendente lite: See Garth v. Ward, 2 Atk. 174. The language of the court in these eases, as well as in Worsley v. Earl of Scarborough, 3 Atk. 392, certainly is to the effect that lis pendens is implied notice to all the world. I confess I think that is not a perfectly correct mode of stating the doctrine. What ought to also, Cherry v. Dickerson (Aik.), 194 Lamont T. Cheshire, 65 N. Y. 30; S. "W. 690 ; Moody v. Miller, 103 Ga. Hailey v. Ano, 136 N. T. 569, 32 452, 30 S. E. 258; Eeid, Murdock&Co. Am. St. Eep. 764, 32 N". E. 1068; V. Sheffy, 75 lU. App. 136; Farmers' , Jennings v. Kiernan, 35 Or. 349, 55 Bank v. First Nat. Bank, 30 Ind. Pac. 443, 56 Pae. 72; Dovey's Ap- App. 520, 66 N. E. 503; Olson v. peal, 97 Pa. St. 153; Dupee v. Salt Liebpke, 110 Iowa, 594, 80 Am. St. Lake Valley, etc., Co., 20 Utah, 103, Kep. 327, 81 N. W. 801; Noyes v. 77 Am. St. Bep. 902, 57 Pac. 845; Crawford, 118 Iowa, 15, 96 Am. St. Sharitz v. Moyers, 99 Va. 519, 3 Va. Eep. 363, 91 N. W. 799; Taylor v. Sup. Ct. Eep. 359, 39 S. B. 166; XJ. S. B. & L. Assn's Assignee, 22 Cresap v. Brown, 69 W. Va. 65S', 72 Ky. L. Eep. 1560, 60 S. W. 927; Eob- S. B. 751; GofE v. McLain, 48 W. Va. erts v. Cardwell, 154 Ky. 483, Ann. 445, 86 Am. St. Eep. 64, 37 8. E. 566 ; Cas. 1915C, 515, 157 S. W. 711; Smith Brown v. Cohn, 95 Wis. 90, 60 Am. T. Hodsdon, 78 Me. 180, 3 Atl. 276; St. Eep. 83, 69 N. W. 71. In Dovey's Moulton V. Kolodzik, 97 Minn. 423, Appeal, 97 Pa. St. 153, it was held, 7 Ann. Cas. 1090, 107 N. W. 154; in considering the rationale of the Dodd V. Lee, 57 Mo. App. 167; Mun- doctrine of lis pendens, that a pur- ger V. T. J. Beard & Bro., 79 Neb. chaser was not aflEected because the 764, 126 Am. St. Eep. 688, 113 N. W. Us pendens amounted to notice, but 214; Geishaker v. Paneoast, 57 N. J. because the law does not allow liti- Eq. 60, 40 Atl. 200 (the doctrine is gant parties to give to others, pend- direetly involved in the decision of ing the litigation, rights to the prop- this case; see post, § 638, note (b); erty in dispute so as to prejudice § 633 EQUITY JUEISPKTJDENCE. 1216 further application to particular persons and conditions of fact.o § 633. The General Rule. — If we accept this rationale of the doctrine as correct, the general rule may be accurately- formulated as follows : During the pendency of an equitable suit, neither party to the litigation can alienate the prop- erty in dispute, so as to affecl; the rights of his opponent. This brief proposition in reality contains the entire doc- trine.* Adopting, however, the ordinary mode of ex- planation, which regards the effect of lis pendens as merely a particular instance of constructive notice, "the general and established rule is," using the language carefully be said is, that, pendente lite, neither party to the litigation can alienate the property in dispute so as to affect his opponent." The Lord Justice Turner gives the same rationale of the doctrine. He says (p. 584) : "The doctrine of lis pendens is not, as I conceive, founded upon any of the peculiar tenets of a court of equity as to implied or constructive notice. It is, as I think, a doctrine common to the courts both of law and of equity, and rests, as I apprehend, upon this foundation, that it would plainly be impossible that any action or suit could be brought to a suc- cessful termination, if alienations pendente lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defend- ants alienating before the judgment or decree, and would be driven to commence his proceedings de novo, subject again to be defeated by the same course of proceeding. That this doctrine belongs to a court of law no less than to courts of equity appears from a passage in the Institutes, vol. 2, p. 375, by Lord Coke." Kjiight Bruce, L, J., concurred in these opinions. the opposite party, and defeat the St. Rep. 118, 8 L. E. A. (N. S.) 463, execution of the decree to be entered 56 S. E. 97; Wood v. Price, 79 N. J. in the cause. And the doctrine was Eq. 620, Ann. Cas. 1913A, 1210, 38 consequently said to have no appli- L. E. A. (N. S.) 772, 81 Atl. 983. cation except in those cases where § 633, (a) This statement of the the lis in question is of such a char- rule is quoted in, Turner v. Houpt, acter as to enable a definite decree 53 N. J. Eq. 526, 33 Atl. 28; Noyes v. to be entered therein deciding the Crawford, 118 Iowa, 15, 96 Am. St. right of property between the par- Kep. 363,' 91 N. W. 799; Walker v. ties. Goldsmith, 14 Or. 125, 12 Pac. 537; §632, (c) This sentence of the Maes v. Thomas (Tex. Civ. App.), text is quofed in Bridger v. Ex- 140 S. W. 846. change Bank, 126 Ga. 821, 115 Am. 1217 CONCERNING NOTICE. § 633 chosen by Cliancellor Kent in a leading case, "that a lis pendens — a pending suit in equity — duly prosecuted, and not collusive, is notice to a purchaser of the property in dispute from a party to the litigation, so as to affect and bind his interest by the decree ; and the lis pendens begins from the service of the subpoena after the bill is -filed." ^ ^ Wherever, therefore, an equitable suit affecting the title § 633, 1 The following resume of the doctrine is given in the recent case of Allen v. Poole, 54 Miss. 323, 333, by Simrall, C. J. : "Was Allen a purchaser pendente lite? and if so, what are the consequences? A Us pendens begins from the service of the subpcena, and not from the filing the bill or issuance of the writ: Allen v. Mandaville, 26 Miss. 397, 399; Murray v. Ballou, 1 Johns. Ch. 566, 576 ; 2 Sugden on Vendors, 7th Am. ed., 544. If a person purchases an estate pending a suit involving a ques- tion of title to it, he will be considered a purchaser with notice, although he was not a party to the suit : Newland on Contracts, 506. The lis pen- dens continues until the final disposition of the suit : Sugden on Ven- dors, 281, 285. A bill to foreclose a mortgage on the premises is a suit involving the title within the rule : Choudron v. Magee, 8 Ala. 570. Equally so must be a suit asserting the vendor's lien. Lis pendens is, in law, notice of every fact averred in the pleadings pertinent to the mat- ter in issue or the relief sought, and of the contents of exhibits filed and proved : Center v. Bank, 22 Ala. 743, 757. But in order that the notice may attach, the property involved in the suit must be so pointed out in the proceedings as to warn the public that they intermeddle at their peril: Miller v. Sherry, 2 "Wall. 237; Green v. Slayter, 4 Johns. Ch. 38; Sugden on Vendors, 344. At the time Allen bought the property from Scott, the solicitor and agent of Brooks & Co., Emily Poole had filed her bill, and had obtained service of a summons upon Scott. There was a lis pendens, and he was chargeable with notice of the character and ex- tent of Mrs. Poole's claim on the land, — of everything which the plead- ings and exhibits set forth. The. technical notice arising from lis pendens has its foundation in necessity; 'for it would be impossible for any suit to be brought to a successful termination if alienations pending the suit could prevail.' " It will be observed that in this last sentence the learned judge quotes the very language of Turner, L. J., in Bellamy v. Sabine, 1 De Gex & J. 566, cited under the preceding paragraph, and thereby adopts the theory sanctioned by that case. In Center v. Bank, 22 Ala. §633, (b) The text is cited to this G. C. A. 386; Harrod v. Burke, 76 eflEect in United States v. Cooper, Kan. 909, 123 Am. St. Rep. 179, 92 196 Fed. 584; United States v. Gal- Pae. 1128. casieu Timber Co., 236 Fed. 196, 149 11—77 § 633 EQUITY JXJRISPBUDENCB. 1218 to a particular estate as its subject-matter has been begun by service of process, and is prosecuted in good faith, whether we say that the lis pendens is constructive notice to all the world, or regard the doctrine as necessarily rest- 743, 757, it was said : "Lis pendens, which in a chancery suit begins with the filing of the bill and service of subpcsna, and contimies until the final orders are taken in the case, is notice of every fact contained in the pleadings which is pertinent to the issue, and of the contents of exhibits to the bill which are produced and proved." The leading American cases by which the. general rule, originally established by the English court of chancery, was adopted were Murray v. Ballou, 1 Johns. Ch. 566; Murray V. Lylburn, 2 Johns. Ch. 441; Murray v. Finster, 2 Johns. Ch. 155,— all decided by Chancellor Kent. See, also, as sustaining the doctrine stated in the text, Real Estate Sav. Inst. v. CoUonious, 63 Mo. 290, 294; Turner V. Babb, 60 Mo. 342j O'ReiUy v. Nicholson, 45 Mo. 160; Blanehard v. Ware, 43 Iowa, 530, 531, 37 Iowa, 305, 307; Hblman v. Patterson's Heirs, 29 Ark. 357; Brundage v. Biggs, 25 Ohio St. 652; Seabrook v. Brady, 47 Ga. 650; Douglass v. McCrackin, 52 Ga. 596; Tharpe v. Dun- lap, 4 Heisk. 674, 686; Salisbury v. Morss, 7 Lans. 359, 365, 366; Cook v. Mancius, 5 Johns. Ch. 89, 93; Sedgwick v. Cleveland, 7 Paige, 287; Van Hook V. Throckmorton, 8 Paige, 33; White v. Carpenter, 2 Paige, 217, 252; Hayden v. Bucklin, 9 Paige, 512, 514; Jackson v. Losee, 4 Sand. Ch. 381; Jackson v. Andrews, 7 Wend. 152, 156 ; Parks v. Jackson, 11 Wend. 442, 451, 457, 25 Am. Dec. 656; Hopkins v. McLaren, 4 Cow. 667; Griffith v. Griffith, 1 Hoff. Ch. 153; Leitch v. Wells, 48 Barb. 637; 48 N. Y. 585; Chapman v. West, 17_N. T. 125; Patterson v. Brown, 32 N. Y. 81; Mit- chell V. Smith, 53 N. Y. 413; Ayrault v. Murphy, 54 N. Y. 203; Har- rington V. Slade, 22 Barb. 161; Pratt v. Hoag, 5 Duer, 631; Norton v. •Birge, 35 Conn. 250; Borrowseale v. Tuttle, 5 Allen, -377; Haven v. Adams, 8 Allen, 363, 367, per Chapman, J.; Beeckman v. Montgomery, 14 N. J. Eq. 106, 80 Am. Dec. 229; McPherson v. Housel, 13 N. J. Eq. 299; Hersey v. Turbett, 27 Pa. St. 418; Boulden v. Lanahan, 29 Md. 200; Inloes's Lessee v. Harvey, 11 Md. 519; Tongue v. Morton, 6 Har. 6 J. 21; Edwards v. Banksmith, 35 Ga. 213; Brandon v. Cabaness, 10" Ala. 155; Choudron v. Magee, 8 Ala. 570; Hoole v. Attorney-General, 22 Ala. 190; Ashley v. Cunningham, 16 Ark. 168; Whiting v. Beebe, 12 Ark. 421, 564; Gossom v. Donaldson, 18 B. Mon. 230; Owings v. Myers, 3 Bibb, 278; Roberts v. Fleming, 53 111. 196, 198; Jackson v. Warren, 32 111. 331; Gilman v.. Hamilton, 16 111. 225; Kern v. Hazlerigg, 11 Ind. 443, 71 Am. Dec. 360; Truitt v. Truitt, 38 Ind. 16; Green v. White, 7 Blackf. 242; McGregor v. McGregor, 22 Iowa, 441; Knowles v. Rablin, 20 Iowa, 101; Loomis v. Riley, 24 111. 307; Cooley v. Brayton, 16 III. 10; 1219 CONCERNING NOTICE. §633 ing upon a basis of expediency, tlie result is the same ; an alienee of the subject-matter from either party during the Culpepper v. Aston, 2 Ch. Cas. 115, 221; Preston v. Tubbin, 1 Vern. 286; Sorrell v. Carpenter, 2' P. Wms. 482; Garth v. Ward, 2 Atk. 174; Worsley V. Earl of Scarborough, 3 Atk. 392; Higgins v. Shaw, 2 Dru. & War. 356; Tredway v. McDonald, 51 Iowa, 663.« § 633, (c) See, in addition to the cases cited in the notes, post and supra, the following, chiefly recent, illustrations of the general rule: Walden v. Bodley, 9 How. (50 U. S.) 34, 49; Byster v. Gaff, 91 U. S. 521; Tilton V. Cofield, 93 U. S. 163; War- ren County V. Marcey, 97 TJ. S. 96; Union Trust Co. v. Southern I, N. & I. Co.,*130 U. S. 565, 570, 9 Sup. Ct. 606; Mellen v. Iron Works, 131 U. S. 352, 371, 9 Sup. Ct. 781; Thompson v. Baker, 141 U. S. 648, 13 Sup. Ct. 89; Lacassagne v. Cha- puis, 144 V. S. 119, 12 Sup. Ct. 659 (Louisiana); Armstrong v. Ashley, 204 U. S. 272, 51 L. Ed. 482, 27 Sup. Ct. 270; Presidio County v. Noel- Young Bond & Stock Co., 212 XT. S. 58, 53 L. Ed. 402, 29 Sup. Ct. 237; Kimberling v. Hartly, 1 Ted. 571; Allen V. Halliday, 28 Fed. 261; Farmers' Loan & T. Co. v. Meridian Waterworks Co., 139 Fed. 661; Rickey Land & Cattle Co. v. Miller & Lux, 152 Fed. 11, 81 C. C. A. 207; School District No. 11 v. Chapman, 152 Fed. 8S7, 83 C. C. A. 35; Wheel- ing Creek Gas, Coal & Coke Co. v. Elder, 170 Fed. 215; Eexford v. Brunswick-Balke-Collender Co., 181 Fed. 462, 104 C. 0. A. 210; City of Laporte v. Northern Trust Co., 187 Fed. 20, 109 C. C. A. 74; North Caro- lina Land & L. Co. v. Boyer, 191 Fed. 552, 39 L. B. A. (N. S.) 627, 112 C. C. A. 162; United States V. Cooper, 196 Fed. 584; Owen v. Kilpatrick, 96 Ala. 421, 11 South. 476; Wells V. American Mtg. Co., 109 Ala. 430, 20 South. 136 (citing §§ 633 et seq. of the text); Stein v. McGrath, 128 Ala. 175, 30 South. 792; J. L. Knox & Co. V. Parker, 167 Ala. 647, 52 South. 438; Johnson v. Gart- man, 173 Ala. 290, 55 South. 906; Daggs V. Wilson (Ariz.), 59 Pac. 150; Brandt v. Seribner, 13 Ariz. 169, 108 Pac. 491; Hale v^ Warner, 36 Ark. 217; Marchbanks v. Banks, 44 Ark. 48; Pickett v. Ferguson, 45 Ark. 177, 55 Am. Kep. 545; Boynton v. Chicago Mill & Lumber Co., 84 Ark. 203, 105 S. W. 77; Reaves v. Coffman, 87 Ark. 60, 112 S. W. 194; Abbott v. '76 Land & Water Co., 161 Cal. .42, 118 Pac. 425; Central Sav. Bank v. Smith, 43 Colo. 90, 95 Pac. 307; Harding v. Burris, 52 Colo. 132, 119 Pac. 1063; Lockwood v. Bates, 1 Del. Ch. 435, 12 Am. Dec. 121; Hayden v. Thrasher, 2& Fla. 162, 9 South. 855 (citing this section of the text); Lenders v. Thomas, 35 Fla. 518, 48 Am. St. Eep. 255, 17 South. 633; Elizabeth Cordage Co. v. Whitloek, 37 Fla. 190, 20 South. 255; Smith v. Coker, 65 Ga. 461; Wilson v. Wright, 72 Ga. 848; Bridger v. Exchange Bank, 126 Ga. 821, 115 Am. St. Rep. 118, 8 L. R. A. (N. S.) 463, 56 S. E. 97; Marshall v. Whatley, 136 Ga. 805, 36 L. R. A. (N. S.) 552, 72 S. E. 244; Hallorn v. Trum, 125 111. 247, 17 N. E. 823; Harding v. American Glucose Co., 182 111. 551, 74 Am. St. Rep. 189, 55 N. E. 577, 60S'; Brach- tendorf v. Kehm, 72 111. App. 228; Catholic University of America v. Boyd, 227 111. 281, 81 N. E. 363 ; Fox §633 EQUITY JXTEISPBUDENCB.- 1220 pendency of the suit takes it subject to tlie rights of the other party involved in the controversy, and is bound by the decree or judgment finally rendered. In the great majority of ordinary litigations the rule has naturally been applied to an alienee of the defendant; but it is also extended, wherever the nature and object of the suit re- V. Simons, 251 Dl. 316, 96 N. E. 233; Lyon V. Moore, 259 111. 23, 102 N. E. 179; Aetna Life Ins. Co. v. Stryker, 42 Ind. App. 57, 83 N. E. 647; Haverly t. Alcott, 57 Iowa, 171, 10 N. W. 326; Bacon v. Early (Iowa), 90 N. W. 353; Myers v. Jones, 61 Kan. 191, 59 Pae. 275; Caldwell v. Bigger, 76 Kan. 49, 90 Pae. 1095; Tidball v. Schmeltz, 77 Kan. 440, 127 Am. St. Eep. 424, 94 Pae. 794; Parker V. Vaughn, 85 Kan. 324, 116 Pae. 882; Kitchener v. Jehlik, 85 Kan. 684, 118 Pae. 105? ; Bell v. Diesem, 86 Kan. 364, 121 Pae. 335; Henderson V. Pickett's Heirs, 20 Ky. (4 T. B. Mon.) 54, 16 Am. Dec. 130; Fried- man V. Janssen, 23 Ky. L. Eep. 2151, 66 S. W. 752; Woodward v. Jphnson, 122 Ky. 160, 90 S. W. 1076; Morton V. Jones, 136 Ky. 797, 125 S. W. 247; Eoberts v. Cardwell, 154 Ky. 483, 157 S. W. 711; Louisiana Civ. Code, art. 2453; Smith v. Hodsdon, 78 Me. 180, 3 Atl. 276; Sehaferman v. O'Brien, 28 Md. 565, 92 Am. Dec. 708; Long V. Richards, 170 Mass. 120, 64 Am. St. Eep. 281, 48 N. E. 1083; Hall Lumber Co. v. Gustin, 54 Mich. 624, 20 N. W. 616; Hammond v. Pax- ton, 58 Mich. 393, 25 N. W. 321; Cos- sett V. O'Eiley, 160 Mich. 101, 125 N. W. 39; Moultou v. Kolodzik, 97 Minn. 423, 7 Ann. Cas. 1090, 107 N. W. 154; W. H. Gallaspy's Sons Co. V. Massey, 99 Miss. 20S, Ann. Cas. 1913D, 947, 54 South. 805; SeharfE v. McGaugh, 205 Mo. 344, 103 S. W. 550; Hope v. Blair, 105 Mo. 85, 24 Am. St. Eep. 3CG, 16 S. W. 595; Becker v. Stroeher, 167 Mo. 306, 66 S. W. 1083; Turner v. Edmonds- ton, 210 Mo. 411, 124 Am. St. Eep. 739, 109 S. W. 33; Tate v. Sanders, 245 Mo. 186, Ann. Cas. 1914A, 998, 149 S. W. 485; Troll v. City of St. Louis, 257 Mo. 626, 168 S. W. 167; Lincoln Eapid Transit Co. v. Bundle, 34 Neb. 559, 52 N. W. 563; Hulen t. Chilcoat, 79 Neb. 595, 12« Am. St. Eep. 681, 113 N. W. 122; Munger T. T. J. Beard & Bro. 79 Neb. 764, 126 Am. St. Eep. 688, 113 N. W. 214; Powell V. Campbell, 20 Nev. 232, 19 Am. St. Eep. 350, 2 L. E. A. 615, 20 Pae. 156; Sanford v. Keer (N. J. Eq.), 74 Atl. 291; Mabee v. Mabee, 85 N. J. Eq. 353, 96 Atl. 495; Hovey V. Elliott, IIS^ N. T. 132, 23 N. E. 475; Shannon v. Pentz, 1 App. Div. 331, 37 N. Y. Supp. 304; Schomacker V. Michaels, 189 N. Y. 61, 81 N. E. 555; Simmons v. Fleming, 157 N. C. 389, 72 S. E. 1082; Bryant Timber Co. V. Wilson, 151 N. C. 154, 134 Am. St. Eep. 982, 65 S. E. 932; Hol- land V. Cofield, 27 Okl. 469, 112 Pae. 1032; Blackwell v. Harts (Okl.), 167 Pae. 325; Walker v. Goldsmith, 14 Or. 125, 12 Pae. 537; Puekett v. Puckett, 21 Or. 370, 28 Pae. 65; (Gardner v. Peckham, 13 E. I. 102; Arnold's Petition, 15 E. I. 15, 23 Atl. 31; Baum v. Trantham, 45 S, C. 291, 23 S. E. 54; MeVay v. Tousley, 20 S. D. 258, 129 Am. St. Eep. 927, 105 N. W. 932; Calkins v. First Nat. Bank, 20 S. D. 466, 107 N. W. 675; Gilman v. Carpenter, 22 S. D. 123, 115 N. W. 659; Williamson v. Will 1221 CONCERNING NOTICE. §633 quire, to one who derives title from the plaintiff.* The same principle embraces actions at law, as well as suits in equity ; but from the essential nature of legal titles, it need not ordinarily be invoked at law. In all actions at law to which the doctrine could apply, — as, for example, in actions of ejectment, — if the plaintiff recovers a judg- ment against the defendant, he has also a perfect title against any alienee of the defendant, since he must neces- sarily recover upon the strength of his own legal title; in other words, the defendant can never give to an assignee or alienee a better title against the plaintiff than that iamSj 11 Lea (Tenn.), 355; Wood- folk V. Blount, 4 Tenn. (3 Hayw.) 147, 9 AM. Dec. 736; Wagner v. Smith, 81 Tenn. (13 Lea) 560; Eus- sell V. Kirkbride, 62 Tex. 455; Hoff- man V. Blume, 64 Tex. 334; Randall V. Snyder, 64 Tex. 350; Eeppetoe v. Dwyer, 65 Tex. 703; Wortham v. Boyd, 66 Tex. 401, 1 S. W. 109; Pax- ton V. Meyer, 67 Tex. 96, 2 S. W. 817; Moore V. Moore, 67 Tex. 293, 3 S. W. 284; Smith v. Cassidy, 73 Tex. 161, 12 S. W. 13; Evans v. Walborn, 74 Tex. 530, 15 Am. St. Rep. 85S ; Portia V. Hill, 30 Tex. 529, 98 Am. Dec. 481; Latta V. Wiley (Tex. Civ. App.), 92 S. W. 433; Bryson & Hartgrove v. Boyce, 41 Tex. Civ. App. 415, 92 S. W. 820; Humphrey v. Beaumont Irrigating Co., 41 Tox. Civ. App. 308, 93 S." W. 180; Frey v. Myers (Tex. Civ. App.), 113 S. W. 592; Meador Bros. V. Hines (Tex. Civ. App.), 165 S. W. 915; Armstrong v. Broom, 5 Utah, 176, 13 Pac. 364; Bell's Adm'r V. St. Johnsbury & L. C. E. Co., 85 Vt. 240, 81 Atl. 630'; Wright v. Jes- sup, 44 Wash. 618, 87 Pao. 930; Lyneh v. Andrews, 25 W. Va. 751; Stone V. Tyree, 30 W. Va. 687, 5 S. E. 878; Wilfong v. Johnson, 41 W. Va. 283, 23 S. K 730; Despard v. Bespard, 53 W. Va. 443, 44 S. E. 448; Dent v. Piekens, 59 W. Va. 274, 53 S. E. 154; Dunfee v. Childs, 59 W. Va. 225, 53 S. E. 209; Wingfield v. Neall, 60 W. Va. 106, 116 Am. St. Rep. 882, 9 Aim. Cas. 982, 10 L. R. A. (N. S.) 443, and note, 54 S. E. 47; Gaynor v. Blewitt, 82 Wis. 313, 33 Am. St. Rep. 47, 52. N. W. 313. In the monographic note to Stout v. Phillippi Mfg. Co., 41 W. Va. 339, 56 Am. St. Rep. 853-878, all the phases of the doctrine, except as it depends upon statutes, are treated with Mr. Freeman's customary vigor and clearness. §633, (d) See post, § 638. The text is cited to this effect in Bridger V. Exchange Bank, 126 Ga. S21, 115 Am. St. Rep. 118, 8 L. B. A. (N. S.) 463, 56 S. E. 97. See, also, Hender- son V. Wanamaker, 79 Fed. 736, 25 C. C. A. 181; Olson v. Liebpke, 110 Iowa, 594, 80 Am. St. Rep. 327, 81 N. W. 801; Garver v. Graham, 6 Kan. App. 344, 51 Pac. 812; Cook v. French, 96 Mich. 525, 56 N. W. 101; Turner v. Edmonston, 210 Mo. 411, 124 Am. St. Rep. 739, 109 S. W. 33; Bryson & Hartgrove v. Boyce, 41 Tex. Civ. App. 415, 92 S. W. 820. A suit and cross-suit constitute only one action, and notice of the suit is notice of the cross-suit also: Hall Lumber Co. v. Gustin, 54 Mich. 624, 20 N. W. 616. § 634 EQUITY JURISPEUDENCE. 1222 which he himself holds.2 e It is otherwise in many equi- table suits. Where the plaintiff in equity has only an equitable title or right to the property in dispute, it might be possible for the defendant to transfer the subject-matter to a bona fide purchaser, and thus to clothe such transferee with a title overriding the equity of the plaintiff. The doctrine of constructive notice by lis pendens is therefore an essential incident of many equitable suits, in order to prevent a failure of justice. It naturally came to be re- garded as peculiar to proceedings in courts of equity, although the same principle would operate, if necessary, at law. This analysis and description, it should be ob- served, are entirely independent of any statutory modifica- tions which have been made in some of the states and in England. § 634. Requisites of the Lis Pendens. — ^Having thus ex- plained the general rule and the reasons upon which it rests, I shall very briefly state those incidents of the pending suit which must exist in order that the rule may operate and its effects may be produced upon an alienee. The lis pendens and the consequent notice, to use the lan- guage ordinarily employed, only begin from the service of a subpoena or other process after the filing of the biU, so that the court may have acquired jurisdiction of the defendant.! «• The effect of the suit as notice continues § 633, 2 Sheridan v. Andrews, 49 N. T. 478. § 634, 1 Allen v. Poole, 54 Miss. 323, 333; Allen v. Mandaville, 26 Miss. 397, 399; Center v. Bank, 22 Ala. 743; Farmers' National Bank v. Fletcher, 44 Iowa, 252; Murray v. Ballon, 1 Johns. Ch. 566, 576; Hayden V. Bucklin, 9 Paige, 512; Leitch v. Wells, 48 N. T. 585; but see King V. Bell, 28 Conn. 593; Norton v. Burge, 35 Conn. 250, 280; Dresser v. Wood, 15 Kan. 344; Haughwout v. Murphy, 21 N. J. Eq. 118; Weeks v. Tomes, 16 Hun, 349. §633, (e) The text is quoted in tions) ; Johnson v. Gartman, 173 Ala. Smith V. Hodsdon, 78 Me. ISO, 3 Atl. 290, 55 South. 906 (doctrine applies 2-76. See, also, Latta y, Wiley (Tex. to proceedings in probate court). Civ. App.), 92 S. W. 433 (doctrine ex- § 634, (a) Begins from Service of isted in old common-law real ae- Subpoena. — Games v. Stiles, 14 Pet. 1223 CONCERNING NOTICE. §634 through, the entire time of its pendency, and ends when 326; McClaskey v. Barr, 48 Fed. 130; Armstrong Cork Co. v. Merchants' Refrigerating Co., 184 Ted. 199, 107 C. C. A. 93; United States v. Cooper, 196 Fed. 584 (Montana); Banks v. Thompson, 75 Ala. 531; Rooney v. Michael, 84 Ala. 585, 4 South. 421; Majors v. Cowell, 51 Cal. 478; Grant V. Bennett, 96 111. 513; Hallorn v. Trum, 125 111. 247, 17 N. E. 823 (service by publication); Allison v. Drake, 145 111. 500, 32 N. E. 537; Norria v. He, 152 111. 190, 199, 43 Am. St. Kep. 233, 38 N. E. 762; Eeid, Murdoch & Co. v. Shefiey, 75 111. App. 136; Hansen v. Klieka, 78' 111. App. 177; liyon v. Moore, 259 HI. 23, 102 N. E. 179 (voluntary appearance is equivalent to service of process); Wellsford v. Ihirst, 8 Kan. App. 231, 55 Pac. 493 (no notice when service of summons set aside) ; Campbell's Case, 2 Bland, 209, 20 Am. Dec. 360; H. L. Spencer Co. v. Koell (Minn.), 97 TSr. W. 974; Lincoln Eapid Transit Co. V. Bundle, 34 Neb. 559, 52 N. W. 563 (from service or publication of summons, by Code, § 85) ; Jackson v. Dickenson, 15 Johns. 309, 8 Am. Dec. 236; Walker v. Goldsmith, 14 Or. 125, 12 Pac. 537, dissenting opinion, citing the text; Duft v. McDonough, 155 Pa. St. 10, 25 Atl. 608 (from service of copy of bill, which is equivalent to service of subpoena) ; Miller v. Kershaw, 1 Bail. Eq. 479, 23 Am. Dec. 183 ; Williamson v. Will- iams, 79 Tenn. (11 Lea) 355; Wool- ridge' v. Boyd, 81 Tenn. (13 Lea) 151; : Staples V. White, 88 Tenn. (3 Pick.l 30, 12 S. W. 339; Smith v. Cassidy, 73 Tex. 161, 12 S. W. 13 (service by publication) ; Hanrick v. Gurley (Tex. Civ. App.), 48 S. W. 994 (where summons is not served until after return day, no lis pendens until an- swer filed); Humphrey v. Beaumont Irrigating Co., 41 Tex. Civ. App. 308, 93 S. W. 180; Meador Bros. v. Hinos (Tex. Civ. App.), 165 S. W. 915; see, also, 8. C, 54 S. W. 347; Stone v. Tyree, 30 W. Ya. 6S7, 5 S. E. 878. In Williamson v. Williams, 11 Lea (Tenn.), 355, it was held that the lis pendens did not operate as notice until the service of process upon the defendant, even though a copy of the bill had been previously read to such defendant by a co-defendant who had been served with process. It seems that if the bill is filed after the service of summons, the lis pendens, upon filing of the bill, re- lates to the time of service; that service of summons upon a person not named in the bill does not affect him with lis pendens notice; but that he may supply such defect in the bill by making a voluntary appearance: Eeid, Murdoch & Co. v. Sheffy, 75 III. App. 136. In a few states, by statutory pro- vision, the lis pendens begins from the 'jUiing of the bill, complaint, or petition: Bridger v. Exchange Bank, 126 Ga. 821, 115 Am. St. Kep. 118, 8 L. R. A." (N. S.) 463, 56 S. E. 97; Iowa Code, see. 2628; Fisher v. Shropshire, 147 IT. S. 133, 13 Sup. Ct. 201 (Iowa); Haverly v. Alcott, 57 Iowa, 171, 10 N. W. 376, holding also that the improper indexing of the complaint in the appearance docket does not destroy its effect as _ notice; Wilkinson v. Elliott, 43 Kan. 590, 19 Am. St. Rep. 158, 23 Pac. 614 (a permanent filing is meant; see this case for definition of such filing); Morgan v. Bostic, 132 N. C. 743, 44 S. E. 639; Simmons v. Flem- ing, 157 N. C. 389, 72 S. E. 1082. In Kentucky, the notice begins from the §634 EQUITY JUBISPBTJDENCE. 1-224 the suit is really ended by a final judgment.^ ^ In order, however, that a purchaser pendente lite may be thus af- fected, the suit must be prosecuted in good faith, with aU § 634, 2 Ibid. ; Turner v. Crebill, 1 Obio, 372 ; and see Lee Co. v. Rogers, 7 Wall. 181; Jackson v. Warren, 32 111. 331; Winborn v. Gorrell, 3 Ired. Eq. 117, 40 Am. Dec. 456; Page v. Waring, 76 N. Y. 463. issuance at summona on the filing of the complaint, since, under the Code, the action is then "commenced": Eothsehild's Admrs. v. Kohn, 93 Ky. 107, 40 Am. St. Hep. 184, 19 S. W. 180. In Arkansas, also, it is stated to be the rule that the suit was not commenced "until the bill was filed, and a writ was issued, or publication made, or defendant's appearance en- tered": Hale V. Warner, 36 Ark. 217; Burleson v. McDermott, 57 Ark. 229, 21 S. W. 222; Boynton v. Chicago Mill & Lumber Co., 84 Ark. 203, 105 S. W. 77 (constructive service; no- tice effective though full time for publishing of notice has not expired). In Albro v. Blume, 5 App. Wv. 309, 39 N. Y. Supp. 215, it was held that a notice of lis pendens is of no effect unless it is followed by the filing of a complaint: See, also, Morgan v. Bostic, 132 N. C. 743, 44 S. E. 639. In Kellogg V. Fancher, 23 Wis. 21, 99 Am. Dec. 96, it was held that a lis pendens does not date from the time of the service of the subpcena, unless the papers are filed at such time. That jurisdiction of the subject- matter of the suit, as well as of the defendant's person, is necessary, see Pearson v. Keedy, 6 B. Mon. (45 Ky.) 128, 43 Am. Dec. 160; Troll v. City of St. Louis, 257 Mo. 626, 16& S. W. 167; Benton v. Shafer, 47 Ohio St. 117, 7 L. E. A. 812, 24 N. E. 197. §634, (b) See, also, Whitfield v. Riddle, 78 Ala. 99. liSect of Abandonmemt or Dis- missal. — ^If the suit be ended by an dbcmdonment or dismissal by the ad- verse party, the rights of the pur- chaser remain as if the suit had never been commenced; the doctrine of lis pendens applies only to suits that proceed to a final decree, not to a suit that is voluntarily dismissed by the complainant: Wortham v. Boyd, 66 Tex. 401, 1 S. W. 109, cit- ing this section of the text; Allison v. Drake, 145 HI. 500, 32 N. E. 537; Karr v. Burns, 1 Kan. App. 232, 40 Pac. 1087; Valentine v. Austin, 124 N. Y. 400, 26 N. E. 973; MeVay v. Tousley, 20 S. D. 258, 129 Am. St. Eep. 927, 105 N. w". 932; Williams v. Smith, 128 Ga. 306, 57 S. E. 801. And a suit is deemed to have been abandoned, within the meaning of this rule, when another suit seeking the same relief is instituted and car- ried to a decree in its place. The lis pendens filed«in the first suit will not be given effect in the second: Hammond v. Paxton, 58 Mich. 393, 25 N. 'W._321; but see Seharff v. Mc- Gaugh, 205 Mo. 344, 103 S. W. 550. As a general rule, one who pur- chases after dismissal of the suit and before it is revived or a new action commenced, is not charged with no- tice: Cherry v. Diekerson (Ark.), 194 S. W. 690; Pipe v. Jordan, 22 Colo. 392, 55 Am. St. Eep. 138, 45 Pac. 371; Trentor v. Pothen, 46 Minn. 298, 24 Am. St. Eep. 225, 49 N. W. 129; Ludlow's Heirs v. Kidd's Exrs., 3 Ohio, 541. But that the purchaser 1225 OONCERNING NOTICE. §634 reasonable diligence, and without unnecessary delay. A neglect to comply with this requisite would relieve a pur- chaser from the effect of the Us pendens as notice.^ o The § 634, 3 Murray v. BaHou, 1 Johns. Ch. 566, per Kent, C. ; Harrington V. McCollum, 73 111. 476; Petree v. Bell, 2 Bush, 68; Clarkson v. Morgan, 6 B. Mon. 441, 448; Watson v. Wilson, 2 Dana, 406, 26 Am. Dec. 459; Price cannot rely on an entry, mistakenly made in the appearance docket, to the effect that the ease was settled, when later entries, before the time of his purchase, showed that the suit was treated by the parties as still pending, see Furry v. Ferguson, 105 Iowa, 231, 74 N. W. 903. § 634, (c) Suit must be Prosecuted With Diligence. — Quoted in Taylor v. Carroll, 89 kd. 82, 44 L. R. A. 479, 42 Atl. 920 (delay of twenty years fatal); cited in Hayes v. Nourse, 114 N. T. 607, 11 Am. St. Kep. 700, 22 N. E. 40 (failure to prosecute for forty years, and purchase sixteen years after the last proceeding in the suit); Tinsley v. Eice, 105 Ga. 285, 31 S. E. 174 (the doctrine was said to rest not on negligence alone, bat on estoppel).; Boice v. Conover, 69 N. J. Eq. 5S0, 61 Atl. 159. See, also. United States v. Fletcher, 231 Fed. 326 (delay of thirty-five years); Pipe V. Jordan, 22 Colo. 392, 55 Am. St. Eep. 138, 45 Pac. *371; Durand v. Lord, 115 HI. 610, 4 N. E. 483 (in- ference of abandonment justified from a delay of four years in filing, in the trial court, the mandate of the supreme court) ; Wallace v. Mar- quett, 88 Ky. 130, 10 S. W. 374 (de- lay of twenty-three years fatal); Kelley v. Culver's Admr. (Ky.), 75 S. W. 272; Woodward v. Johnson, 122 Ky. 160, 90 S. W. 1076 (delay of thirty years; mistaken advice of counsel no excuse) ; Roberts v. Card- well, 154 Ky. 483, Ann. Cas. 1915C, 515, 157 S. W. 711; Hammond v. Paxton, 58 Mich. 393, 25 N. W. 321 (suit abandoned by institution of an- other seeking the same relief); Fox V. Eeeder, 28 Ohio St. 181, 22 Am. Eep. 870 (delay of twenty-seven years) ; Bybee v. Summers, 4 Or. 354; Mann v. Roberts, 79 Tenn. (11 Lea) 57 (delay of three and a half years). But, "as a genera] role, there will be no estoppel against the right to enforce the lis pendens, un- less the complainant has been so neg- ligent in its prosecution as to induce the belief that such prosecution has been abandoned": Norris v. He,- 150 HI. 190, 203, 43 Am. St. Eep. 233, 38 N. E. 762; Olson v. Liebpke, 110 Iowa, 594, 80 Am. St. Eep. 327, 81 N. W. SOI (where numerous suits were brought by plaintiff in the same county, all involving a federal ques- tion, and it was stipulated that ap- peals should be continued in all ex- cept two of the eases until a final decision of those cases by the federal courts, the requirement of diligence in prosecution is satisfied); Hillside Coal & Iron Co. v. Heermans, 191 Pa. St. 116, 43 Atl. 76 (delay of fourteen years) ; Johnson v. Gart- man, 173 Ala. 290, 55 South. 906. In Jones V. Kobb (Tex. Civ. App.), 80 S. W. 395, it was held that failure to prosecute a suit between the years 1866 and 1870 was not negligence, the disturbed condition of the coun- try being an excuse. § 634 EQUITY JURISPRUDENCE. 1226 question of reasonable diligence in prosecuting the suit must, however, depend upon the circumstances of each case.*i Thus the abatement of the suit by the death of a party will not destroy its effect as lis pendens, provided it is revived without unnecessary delay.* ^ Even a judgment in favor of the defendant does not necessarily at once ter- minate the lis pendens. If the unsuccessful party is en- titled to appeal, the constructive notice continues during a reasonable time for an appeal to be taken.^ ^ The effect V. McDonald, 1 Md. 403, 412, 54 Am. Dec. 657; Gibler v. Trimble, 14 Ohio, 323 ; Trimble v. Boothby, 14 Ohio, 109, 45 Am. Dec. 526. § 634, 4 Ashley v. Cunningham, 16 Ark. 168 ; Debell v. Foxworthy, 9 B. Mon. 228; Watson v. Wilson, 2 Dana, 406, 26 Am. Dec. 459. In the last-named case the effect of a death, and the necessity of a revivor with- out delay, are fiilly and carefiJly examined by the court. And see, also, Herrington v. McCoKum, 73 111. 476. § 634, 5 When an appeal is thus taken vdthout delay, the lis pendens is, of course, prolonged until the final decision: DebeU v. Toxworthy, 9 B. Mon. 228; Gilman v. Hamilton, 16 lU. 225. § 634, (d) The text is quoted in Elston, 101 Ind. 375; Farmers' Bank Latta V. Wiley (Tex. Civ. App.), 92 v. First Nat. Bank, 30 Ind. App. 520, S. W. 433. In this case the court 66 N. E. 503; Olson v. Liebpke, 110 said: "Upon the whole, the doctrine Iowa, 594, 80 Am. St. Eep. 327, 81 seems to be that the delay which N. W. 801; MeClung v. Hohl, 10 may relieve a purchaser from the Kan. App. 93, 61 Pac. 507; Boyd v. rule of lis pendens must proceed from Emmons, 103 Ky. 393, 45 S. W. 364 gross negligence, or, in other words, (long delay, but several appeals, and be inexcusable; and, like all ques- continuous effort made to settle es- tions of negligence, is ordinarily one tate); Cook v. Srench, 96 Mich. 525, of fact and not of law." 56 N. W. 101; Smith & Vaile Co. v. §634, (e) That the revivor must Burns, 72 Miss. 966, 18 South. 483; be without unnecessary delay, see, St. Kegis Paper Co. v. Santa Clara also, Shiveley's Admrs. v. Jones, 6 L. Co., 69 N. Y. Supp. 904, 34 Misc. B. Mon. (Ky.) 274, 276. Eep. 428; Bird v. Gilliam, 34 S. E. § 634, (f ) Notice Pending Reason- 196, 125 N. C. 76 (purchase before able Time for Appeal. — The text is expiration of time for motion for re- cited to this eflfeet in McLean v. hearing) ; Kandall v. Snyder, 64 Tex. Stith, 50 Tex. Civ. App. 323, 112 350^ Glaze v. Johnson (Tex. Civ. S. W. 355; Boiee v. Conover, 69 N. J. App.), 65 S. W. 662; Wick v. Daw- Eq. 580, 61 Atl. 159 (appeal must be son, 48 W. Va. 469, 37 S. E. 639 prosecuted with diligence) ; Dunfee (although lis pendens released by or- V. Childs, 59 W. Va. 225, 53 S. E. 209 der of the court). But, see, Oly- (same). See, also, Dunnington v. phant v. Phyfe, 27 Misc. Rep. 64, 1227 CONCEBNING NOTICE. §634 of lis pendens upon the rights of an alienee depends not only upon this element of time, but also ilpon the aver- ments of the pleadings. Proper and specific allegations are a necessary requisite. Lis pendens is notice of every- 58' N. Y. Supp. 217. In West Vir- ginia, an appeal is held to be a new suit, and a puTchaser after final de- cree in the lower court and before appeal is protected: Ihinfee v. Childs, 59 W. Va. 225, 53 S. E. 209; Wing- field V. Neall, 60 W. Va. 106, 116 Am. St. Rep. 882, 9 Ann. Cas. 982, 10 L. E. A. (N. S.) 443, and note, 54 S. E. 47; Wheeling Creek Gas, Coal & Coke Co. V. Elder (W. Va.), 170 Fed. 215. In Foulke v. Zimmerman, 81 U. S. (14 Wall.) 113, a will of a resident of New York was pro- bated in liouisiana. The proceedings showed an appeal in New York. The devisee sold the land in Louisiana, and then a new trial was granted in New York. It was held that the purchaser was protected. It has been held that the lis pend- ens does not continue as against a purchase made after judgment and before a writ of error is sued out, since proceedings by writ of error constitute a wholly new and inde- pendent suit: Cheever v. Minton, 12 Colo. 557, 13 Am. St. Rep. 258, 21 Pac. 710; Eldridge v. Walker, 80 111. 270; Wadhams v. Gay, 73 III. 415, 422; McCormiek v. McClure, 6 Blackf. (Ind.) 466; Macklin v. Allen- berg, 100 Mo. 337, 13 S. W. 350; Taylor v. Boyd, 3 Ohio, 337, 352, 17 Am. Dec. 603; but the more reason- able opinion makes no distinction between writ of error and appeal as regards the continuance of the lis pendens: Moore v. Moore, 67 Tex. 293, 3 S. W. 284; Harle v. Langdon's Heirs, 60 Tex. 555, 562; Bryson & Hartgrove v. Boyce, 41 Tex. Civ. App. 415, 92 S. W. 820; Turner v. Edmonston, 210 Mo. 411, 124 Am. St. Rep. 739, 109 S. W. 33; Board of Trustees of Westminster College v. Ery, 192 Mo. 552, 91 S. W. 472. "There is also some conflict of opin- ion as to whether a person who pur- chases property from a party to a suit after final decree therein, and within the time limited by law for filing a hill of review, is a purchaser pendente lite, and is bound by a de- cree of reversal on a bill of review subsequently filed. This question was answered in the affirmative in Earle v. Couch, 3 Met. (Ky.) 453, and in Clarey v. Marshall's Heirs, 4 Dana (Ky.), 95, 96. The decision in these cases is based upon the ground that a purchaser under such circum- stances is presumed to know that the decree may be reversed on a bill of review, or, in other words, that he buys with the knowledge that the litigation is not at an end until the period has expired for filing a bill of review or taking an appeal. On the other hand, a different conclusion was reached in a very well-consid- ered ease in the state of Ohio: Lud- low V. Kidd, 3 Ohio, 541. . . . [Cit- ing, also, Lee County v. Rogers, 7 Wall. 181; Cole v. Miller, 32 Miss. 89, 101.] We are of the opinion, both on principle and authority, that a bill of review ought not to be regarded as a continuation of the original suit, merely for the purpose of affecting a purchaser in good faith, after a final decree, with no- tice. In our judgment, one who thus purchases after the lapse of the term at which a final decree on the merits is rendered, without notice that a §634 EQUITY JUKISPEDDENOE. 1228 thing averred in the pleadings pertinent to the issue or to the relief sought, and of the contents of exhibits filed and proved. 6 s In order that the notice may thus operate, the specific property to which the suit relates must be pointed out in the pleadings in such a manner as to call the atten- tion of all persons to the very thing, and warn them not to intermeddle. It is not necessary that the land should be described by metes and bounds; certainty to a common intent — reasonable certainty — is' sufficient. The specific subject-matter should be so described and iden- tified that no one, upon reading the allegations, could have a reasonable doubt as to what was intended. The aver- ments of the bill "must be so definite that any one on § 634, 6 Allen v. Poole, 54 Miss. 323, 333; Center v. Bank, 22 Ala. 743, 757. bill of review is in contemplation, or will be exhibited, should be protected from the effect of a decree on such a bUl if it is subsequently filed. After a final decree the losing party, by proper diligence, can always guard against the risk of losing the fruits of the litigation by a sale to an intermediate purchaser; and, on grounds of public policy, it is better to exact of him such diligence in the prosecution of his claim, than to sufl'er the title of valuable property to be clouded for an indefinite period by the possibility that the litigation may be renewed by a bill of review": Sector V. Fitzgerald, 59 Fed. 808, 811, 812, 19 TJ. S. App. 423, 8 C. C. A. 277, per Thayer, D. J. To the same effect, Dunfee v. Childs, 59 W. Va. 225, 53 S. E. 209; Perkins v. Pfalz- graff, 60 W. Va. 121, 53 S. E. 913. A purchaser from a wife who has just been divorced is affected by subsequent ruling vacating the de- cree: Gato V. Christian, 112 Me. 427, Ann. Cas. 1917A, 592, 92 Atl. 489. That the notice continues pending a writ of error from the state su- preme court to a federal court, see Olson V. Liebpke, llO Iowa, 594, 80 Am. St. Rpp. 327, 81 N. W. 801. One purchasing after the time for appeal (Aldrich v. Chase, 70 Minn. 243, 73 N. W. 161), or for bill of review (Bector v. Fitzgerald, 59 Fed. 808, 19- €. S. App. 423, 8 C. C. A. 277) has expired, is protected; or, at any rate, must be made a party to a statutory proceeding for vacating or modifying the decree: Aldrich v. Chase, 70 Minn. 243, 73 N. W. 161. The loss of the papers in the case does not destroy the effect of the lis pendens: Latta v. Wiley (Tex. Civ. App.), 92 S. W. 433; nor will a change of venue: Id. § 634, (g) The text is quoted in Bridger v. Exchange Bank, 126 Ga. 821, 115 Am. St. Hep. 115', 8 L. E. A. (N. S.) 463, 56 S. E. 97. See, also, Norris v. He, 152 III. 190, 204, 43 Am. St. Eep. 233, 38 N. E. 762; Stout V. Philippi Mfg. etc. Co., 41 W. Va. 339, 56 Am. St. Eep. 843, 23 S. E. 571. 1229 CONCERNING NOTICE. §^34 reading it can learn what property was intended to be made the subject of litigation. " '^ ^ The notice arising from a pending suit does not affect property not embraced within the descriptions of the pleading; nor does its operation extend beyond the prayer for relief, ^i I would remark, §634, 7 Allen v. Poole, 54 Miss. 323, 333; Miller v. Sherry, 2 Wall. 237; Green v. Slayter, 4 Johns. Ch. 38; Griffith v. Griffith, 9 Paige, 315, 317, 1 Hofe; Ch. 153; Low v. Pratt, 53 111. 438; Lewis v. Madisons, 1 Munf . 303. See Brown v. Goodwin, 75 N. Y. 409 ; Jones v. McNarrin, 68 Me. 334, 28 Am. Eep. 66; Jaffray v. Brown, 17 Hun, 575. § 634, 8 Ibid. See Chapman v. West, 17 N. Y. 125, for peculiar cir- cumstances in which the notice extends to a portion of the premises not directly embraced within the objects of the suit; Drake v. Crowell, 40 N. J. L. 58. §634, (h) Pleadings must Point Out Subject-matter. — McLean v. Baldwin, 136 Cal. 565/ 69 Pac. 259; Coulter V. Lumpkin, 94 Ga. 225, 21 S. E. 461; Geo. D. Washburn & Co. v. Danneuberg Co., 117 Ga. 567, 44 S. E. 97; Norris v. He, 152 111. 190, 202, 43 Am. St. Rep. 233, 38 N. E. 762; Citizens' Sav. Bank v. Stewart, 90 Iowa, 467, 57 N. W. 957; Wilkinson V. Elliott, 43 Kan. 590, 19 Am. St. Eep. 158, 23 Pae. 614; Boyd v. Em- mons, 103 Ky. 393, 45 S. W. 364; Morton v. Jones, 136 Ky. 797, 125 S. W. 247; Hailey v. Ano, 136 N. Y. 569, 32 Am. St. Kep. 764, 32 N. B. 1068; Oliphant v. Bums, 146 N. Y. 218, 40 N. E. 980; Arnold's Petition, 15 R. I. 15, 23 Atl. 31; Eussell v. Kirkbride, 62 Tex. 455; Seibel v. Bath, 5 Wyo. 409, 40 Pac. 756. In Arnold's Petition, 15 E. I. 15, 23 Atl. 31, it was held that a prayer that "a receiver of the property, bqfks, papers, debts, choses in action, and estate of every kind of said B. & A., both as copartners aforesaid and in- dividually, may be appointed," suffi- ciently points out the property of an insolvent firm. An omission to state the number of feet of street frontage is immaterial when the de- scription is otherwise definite: Clark v. ■ Empire Lumber Co., 87 Ga. 742, 13 S. E. 826. Part of this paragraph of the text is quoted in Arrington v. Arrington, 114 N. 0. 151, 19 S. E. 351, where a statement that all the property of the defendant was in- volved was held sufficient. The court said that much greater par- ticularity is required where one of several parcels, or a part of a single parcel, of land is the siibject of liti- gation. That the Us pendens applies to timber growing upon the laud in suit, and removed therefrom during the litigation, see Alliance Trust Co. v. Nettleton Hardwood- Co., 74 Miss. 585, 60 Am. St. Eep. 531, 36 L. E. A. 155, 21 South. 396; GofE v. McLain, 48 W. Va. 445, 86 Am. St. Kep. 64, 37 S. E. 566; contra, Gardner v. Peek- ham, 13 E. I. 102, on the ground that the doctrine of Us pendens enables the successful litigant to follow spe- cific property but not to recover its value. §634, (i) The text is quoted in Bridger v. Exchange Bank, 126 Ga. 821, 115 Am. St. Eep. 118, 8 L. E. A. §634 EQUITY JURISPKUDENCB. 1230 in passing, that while the general doctrine of notice by lis pendens and the foregoing special rules have ordinarily been applied to real property described by the plaintiff in his bill of complaint, they should, upon principle, apply with equal force to the "counterclaims" and "cross- (N. S.) 463, 56 S. E. 97; Central Sav. Bank v. Smith, 43 Colo. 90, 95 Pac. 307; McGuire v. Gilbert, 270 111. 160, 110 N. E. 377. Since opera- tion of the lis pendens does not ex- tend beyond the prayer for relief, a cross-bill in an action for divorce is- ineffectual as a lis pendens unless it asks to have property specifically de- scribed appropriated to the payment of the judgment: Sun Ins. Co. v. White, 123 Cal. 196, 55 Pac. 902. To the effect that the operation does not extend beyond the prayer for relief, see New England L. & T. Co. v. Mil- ler (Tex. Civ. App.), 40 S. W. 646; Adoue V. Tankersley (Tex. Civ. App.), 28 S. W. .346; Keid v. Gorman, 37 S. D. 314, 158 N. W. 780. When the suit does not involve the land pur- chased, the rule of lis pendens does not apply: Woods v. Douglass, 52 W. Va. 517, 44 S. E. 234. Effect of Amending the Bill. — A bill so defective in its averments as not to create lis pendens may be sub- sequently cured by amendment, and the lis pendens will commence at the time of filing the amendments, if the defendant has been served with pro- cess: Norris v. He, 152 111. 190, 202, 43 Am. St. Eep. 233, 38 N. E. 762; Miller v. Sherry, 2 Wall. 237 (origi- nal bill radically defective for want of description of the property; Us pendens dates from amendment) ; Morton v. Jones, 136 Ky. 797, 125 S. W. 247 (same). In general, amendments which do not change the identity of the suit relate back to its commencement, for the purposes of lis pendens, "The question of the continued pendency of the suit is one of actual and substantial identity. Are the parties the same, the prop- erty to be affected the same, and the general purpose and object the same?" Turner v. Houpt, 53 N. J. Eq. 526, 33 Atl. 28, by Pitney, V. C. (in a suit for rescission, amendments merely introducing new evidence of fraud); Norris v. He, 152 111. 190, 203, 204, 43 Am. St Eep. 233, 3S N. E. 762 (amendment setting up new evidence) ; Burt v. Gamble, 9& Mich. 402, 57 N. W. 261 (in a bill to foreclose a mortgage, an amend- ment set up an additional claim un- der an agreement modifying the mortgage; but the original bill claimed the total amount, and the de- cree was rendered for that amount; held, lis pendens not affected); Cot- ton v. Dacey, 61 Fed. 481; Tilton v. Cofield, 93 U. S. 163; Arnold's Dev- isees T. Arnold's Exr. (Ky.), 17 S. W. 203; Stoddard v. Myers, 8 Ohio, 203; Gibbon v. Dougherty, 10 Ohio St. 365; Landon v. Morris, 5 Sim. 247. See, also, Brandt v. Scribner, 13 Ariz. 169, 108 Pac. 491; Bell v. Diesem, 86 Kan. 364, 121 Fac. 335; Hulen V. Chilcoat, 79 Neb. 595, 126 Am. St. Rep. 681, 113 N. W. 122. On the other hand, see Gage v. Parker, 178 HE 455, 53 N. E. 317 (supplemental bill equivalent to amendment setting up new matter) : "The abandonment of one cause of action and the adop- tion of a new one, by amendment, is, in effect, the dismissal of the former suit and the commencement 1231 CONCERNING NOTICE. 634 complaints" authorized by tlie reformed procedure, by "which the defendant alleges some equitable interest or right, and demands some affirmative equitable relief. In such pleadings the defendant becomes the actor, and is to all intents and purposes a plaintiff.3 of a new one upon a different cause of action"; and the lis pendens dates from the filing of the amendment: Wortham v. Boyd, 66 Tex. 401, 1 S. W. 109 (original snit to cancel a deed, amended so- as to afirm the deed and enforce a grantor's lien). "The suit pending at the time of the transfer ... is the one that must serve as a basis for the rule of lis pendens, and not matters raised by subsequent amendment or suits": Mansur & Tebbetts Impl. Co. v. Beer, 19 Tex. Civ. App. 311, 45 S. W. 972; Letcher v. Eeese, 24 Tex. Civ. App. 537, 60 S. W. 256; and see Stone v. Connelly, 58 Ky. (1 Met.) 652, 71 Am. Dec. 499; Hulen v. Chilcoat, 79 Neb. 595, 126 Am. St. Bep. 681, 113 N. W. 122. Statements implying that the continuity of the suit may be broken by a simple amendment, found in Mitf. Eq. PI. 330, 1 Daniell Ch. Pr. 402, and Story Eq. P., sec. 904, are shown to be unfounded, by Pitney, V. C, in Turner v. Houpt, 53 N. J. Eq. 526, 33 Atl. 28, 42. Where a statute requires the record- ing of a notice of lis pendens, an amendment of the complaint will not validate an invalid notice: Brox v. Eider, 67 N. T. Supp. 772, 56 App. Div. 388. § 634, (j) This passage is quoted in Walker v. Goldsmith, 14 Or. 125, 12 Pac. 537 ; and in Bridger v. Exchange Bank, 126 Ga. S21, 115 Am. St. Eep. 118, 8 L. B. A. (N. S.) 463, 56 S. B. 97. It is there intimated, but not decided, that the lis pendens should not become operative to bind a purchaser from the plaintiff until the answer is filed setting up such equitable Telaim. In McGuire v. Gil- bert, 270 lU. 160, 110 N. E. 377, it is held that the claim of a defend- ant does not give notice until the filing of the cross-bill, and does not relate back. But see Hall Lumber Co. V. Gustin, 54 Mich. 624, 20 N. W. 616. There, in a suit to foreclose a mortgage, the mortgagor and certain junior mortgagees were made parties defendant, and after a demurrer to the bill was overruled, the mort- gagor conveyed an interest in the mortgaged premises to a third party. Subsequently, the junior mortgagees filed a cross-bill asserting the mort- gages made to them, and insisting upon a foreclosure in their own be- half, and they subsequently recov- ered judgment for the relief prayed for. It was claimed that the pur- chaser pendente lite was not affected by this foreclosure on the ground that no notice had been filed respect- ing the cross-complaint, but the court held that the defenses interposed and the action taken by the subsequent mortgagees were what might reason- ably have been expected, that the cross-suit and original suit constituted but one cause, and that the notice given of the original suit was con- structive notice to the parties and all persons subsequently acquiring title under them, and bound the latter by the decree finally entered, though It involved the assertion of claims held by the junior mortgagees. The notice of lis pendens arising from a cross- § 635 EQUITY JUEISPEUDENCE. 1232 § 635. To What Kinds of Suits the Rule Extends— Suits Concerning Land. — ^It may be stated as a general proposi- tion that the doctrine of notice by lis pendens extends to all equitable suits which involve the title to a specific tract of land, or which are brought to establish any equitable estate, interest, or right in an identified parcel of land, or to enforce any lien, charge, or encumbrance upon land. Among the most familiar instances in which the rule ap- plies are suits to foreclos°e mortgages, to enforce vendor's liens, to establish trusts, and the like.^ * § 635, 1 Allen v. Poole, 54 Miss. 323, 333 ; Choudron v. Magee, 8 Ala. 570; Real Estate Sav. Inst. v. CoUonious, 63 Mo. 290, 294 (suit to set aside a partition sale on account of fraud) ; Blanchard v. Ware, 43 Iowa, 530, 531; 37 Iowa, 305, 307 (suit to specifically perform a contract for sale' of land fraudulently concealed by the grantor) ; Brundage v. Biggs, 25 Ohio St. 652, 656 (equitable interest in the land set up by the defend- ant in a "counterclaim," or cross-complaint) ; Seabrook v. Brady, 47 Ga. 650 (suit to enforce a charge on land) ; Tharpe v. Dunlap, 4 Heisk. 674, 686 (suit involving the title to land) ; Salisbury v. Morss, 7 Lans. 359, 365 (suit to enforce a charge created by will on land devised) ; Edwards V. Banksmith, 35 Ga. 213; Knowles v. Rablin, 20 Iowa, 101; Wickliffe v. Breckinridge, 1 Bush, 427; Bayer v. Cockerill, 3 Kan. 282; Horn v. Jones, bill continues, although the original 94 Pac. 794. Injunction against tax suit may be dismissed for want of sale : Hixon v.. Oneida County, 8(2 Wis. prosecution: Bryson & Hartgrove v. 515, 52 N. W. 445. Petition for Boyce, 41 Tex. dv. App. 415, 92 S. W. receiver of partnership property : Ar- 820. nold's Petition, 15 E. I. 15, 23 Atl. § 635, (a) This section of the text 31. Foreclosure of liens — Vendor's is cited in Mansur & Tebbetta Impl. lien: Owen v. Kilpatrick, 96 Ala. 421, Co. V. Beer, 19 Tex. Oiv. App. 311, 11 South. 476; Hale v. Warner, 36 45 S. W. 972; Wilkerson v. PhilUps Ark. 217; Swift v. Dederiek, 106 Ga. (Ky.), 81 S. W. 691; United States 35, 31 S. E. 788. Attorney's lien: v. Calcasieu Timber Co., 236 Fed. 196, Wilson v. Wright, 72 Ga. 848. Suit 149 C. C. A. 386. to contest validity of will: Mcllwrath See, also, the following recent illus- v. Hollander, 73 Mo. 105, 39 Am. Rep. trations: Foreclosure of mortgage: 484. Swit by administrator to settle Norris v. He, 152 III. 190, 43 Am. St. estate or for sale of land: Parks v. Eep. 233, 38 N. E. 762. Partition: Smoot's Adm'r, 105 Ky. 63, 48 S. W. McClaskey v. Barr, 48 Fed. 130; 146; Harris v. Davenport, 132 N. C. Harms v. Jacobs, 1€0 HI. 589, 43 N. B. 697, 44 S. E. 406; Johnson v. Gart- 745; aark v. Charles, 55 Neb. 202, man, 173 Ala. 290, 55 South. 906. 75 N. W. 563; Tidball t. Schmeltz, Swit to set aside fraudulent deed: 77 Kan. 440, 127 Am. St. Rep. 424, Dorgan v. Waring, 11 Ala. 988, 46 1233 CONCERNING NOTICE. §636 § 636. Suits Concerning Personal Property. — ^While the doctrine, in general, applies to all equitable suits in which the subject-matter is land, or any estate or interest therein, the proposition is equally true and general that it does not 28 Cal. 194; Coekrill v. Maney, 2 Tenn. Ch. 49; Watson v. Wilcox, 39' Wis. 643, 20 Am. Eep. 63; Truitt v. Truitt, 38 Ind. 16. The action of ejectment by which an equitable interest was enforced under the peculiar practice prevailing in Pennsylvania operated as notice within the prin- ciple of the rules: Bollin v. Connelly, 73 Pa. St. 336; Hersey v. Turbett, 27 Pa. St. 418; Hill v. Oliphant, 41 Pa. St. 364. A suit to foreclose an Am. Dec. 234. Specific performance smt: Marshall v. Whatley, 136 Ga. 805, 36 L. R. A. (N. S.) 552, and note, 72 S. E. 244 (though the suit need not be brought in county' where Vhe land is situated). Suit to en- force constnictive ■ trust: Fox v. ' Simons, 251 lU. 316, 96 N. E. 233. Condemnation procee^mgs : Portland & Seattle E'y Co. v. Ladd, 47 Wash. 88, 91 Pae. 573. Action for divorce and alimony, where the disposition of property is involved: Wilkinson v. Elliott, 43 Kan. 590, 19 Am. St. Rep. 158, 23 Pae. 614; W. H. Gallaspy's Sons Co. V. Massey, 99 Miss. 208, Ann. Oas. 1913D, 947, 54 South. 805; provided the complaint describes specific property and asks tEat it be set aside to the complainant; Garver V. Graham, 6 Kan. App. 344, 51 Pao. 812| Powell V. Campbell, 20 Nev. 232, 19 Am. St. Rep. 350, 2 L. R. A. 615, 20 Pae. 156; Tolerton v. Wil- liard, 30 Ohio St. 579; Daniel v. Hodges, 87 N. C. 95; otherwise such action does not bind the property that may eventually be decreed as alimony: Sun Ins. Co. v. White, 123 Cal. 196, 55 Pae. 902; Feigley v. Peigley, 7 Md. 537, 61 Am. Dec. 375; Houston V. Timmerman, 17 Or. 499, 11 Am. St. Rep. 848; Sapp v. Wight- man, 103 111. 150 (bill sets forth the defendant's lands as affecting the n— 78 amount of alimony to be allowed, but asserts and seeks no right in respect to them). , But an action to recover damages for trespass is not a suit involving the title to laud, within the mean- ing of the doctrine: Hailey v. Ano, 136 N. T. 569, 32 Am. St. Rep. 764, 32 N. E. 10-68 (though as between the parties in such action the judg- ment may be conclusive as to the title) ; London v. Mullins, 52 111. App. 410. Notice of intention to apply for a receiver does not amount to lis pendens: Murray v. Blatchford, 1 Wend. 583, 19 Am. Dec. 537. The doctrine was held not applicable in a suit in which a bond and mortgage were in litigation but the laud en- cumbered by them was not: Green v. Rick, 121 Pa. St. 130, 6 Am. St. Rep. 670, 2 L. B. A. 48, 15 Atl. 497; and in a. suit of forcible detainer by a landlord against his tenant, as such a suit involves no question of title, and consequently does not charge third parties with notice of an as- sertion of title by the tenant incon- sistent with his lease: Hoffman v.. Blume, 64 Tex. 334. The doctrine does not apply to an action collu- sively prosecuted, when the parties to it all know that there is no right to enforce: Kippetoe v. Dwyer, 65 Tex. 703. 636 EQUITY JTJEISPRUDBNCE. 1234 extend to ordinary suits concerning personal property, goods and chattels, securities or money .»■ The reason for this restriction is obyious ; there is no necessity for invok- ing the rule in such litigations, under all ordinary circum- stances. The decisions have, however, admitted an exception to this general proposition in one class of suits. Actions brought to enforce a trust extending over personal property, goods, and securities not negotiable in their nature are held to be within the operation of the rule. A purchaser of such trust property from the trustee, during the pendency of the action, is charged with constructive notice, and his purchase is invalid as against the plaintiff • unrecorded mortgage may thus operate as a notice of the mortgage to subsequent purchasers in place of an actual recording: Center v. Bank, 22 Ala. 743; Chapman v. "West, 17 N. T. 125; but not, perhaps, where a statute requires an actual notice of the prior unrecorded mortgage: Mc- Cutchen v. Miller, 31 Miss. 65; Newman v. Chapman, 2 Rand. 93, 14 Am. Dec. 766.* § 635, (J») See, also, Moody v. Mil- ieu, 103 Ga. 452, 30 S. E. 258; Douglass V. McCrackin, 52 Ga. 596. § 636, (a) The text is quoted in Central Savings Bank v. Smith, 43 Colo. 90, 95 Pac. 307 (suit concerning shares of stock). This section is cited in Wilkerson v. Phillips (Ky.), SI S. W. 691. See, alSo, Miles v. Lefi, 60 Iowa, 168, 14 N. W. 233. Not to litigation over a mere de- mand for money: Hailey v. Ano, 136 N. Y. 569,, 32 Am. St. Bep. 764, 32 N. E. 1068; London v. MuUins, 52 111. App. 410; Armstrong v. Carwile, 56 S. C. 463, 35 S. E. 196; Bayley v. Bayley (N. J. Eq.), 57 Atl. 271. See, further, J. L. Knox & Co. v. Parker, 167 Ala. 647, 52 South. 438; Morton V. Jones, 136 Ky. 797, 125 S. W. 247; Tate V. Sanders, 245 Mo. 186, Ann. Cas. 1914 A, 998, 149 S. W. 485; Hulen V. Chilcoat, 79 Neb. 595, 126 Am. St. Eep. 681, 113 N. W. 122. A mort- gagee of a band of horses is not charged with notice of a. pending suit to recover the property: Calkins V. First Nat. Bank, 20 S. B. 466, 107 N. W. 675. Suit on promissory note does not affect purchaser of land: Carson v. Fears, 91 Ga. 482, 17 S. E. 342. Does not apply to action of slander: Bay v. Eoe, 2 Blackf. 258, 18 Am. Dec. 15l In England, the question had never been decided un- til recently, when it was settled that the doctrine does not apply to per- sonal property other than chattel in- terests in land: Wigram v. Buekly, [1894] 3 Ch. 4S'3. This case does not admit the exception mentioned in the text, viz., an action to enforce a trust in personal property; but no such trust was involved in the case. In Mabee v. Mabee, 85 N. J. Eq. 353, 96 Ath 495, it is stated that the Eng- lish rule is probably not the law in the United States. 1235 CONCERNING NOTICE. § 636 whose rights are established by the final decree.^ ^ It is well settled that the doctrine of constructive notice from Us pendens does jiot embrace suits concer-ning negotiable instruments or moneys, so as to affect the title of a trans- § 636, 1 Murray v. Lylburn, 2 Johns. Ch. 441; Leitch v. Wells, 48 Barb. 637; 48 N. Y. 585; Scndder v. Van Amburgh, 4 Edw. Cb. 29; Diamond V. Lawrence Co. Bank, 37 Pa. St. 353, 78 Am. Dec. 429; Boiling v. Car- ter, 9 Ala. 921; Shelton v. Jpbnson, 4 Sneed, 672, 70 Am. Dec. 265. This exception has, however, been admitted by the courts with great caution, and within narrow limits, so as not to interfere with that freedom of transfer and certainty of title requited by the interests of mercantile and commercial business. It has never been extended to securities or other personal property which are negotiable or even semi-negotiable in the transactions of commerce. The leading case is Murray v. Lylburn, 2 Johns. Ch. 441. A bUl had been filed against one Winter, who held land as trustee for the plaintiff, charging a breach of trust; and an injunction was issued restraining W. from disposing of such trust property or pro- ceeds thereof. Pending this suit, W. sold and conveyed a parcel of the trust land, and took back a bond and mortgage for the price. These se- curities he assigned to Lylburn, who paid value for them, and had no actual notice of the pending suit against W. The plaintiff thereupon filed this supplemental bill against L. and W. to reach the bond and mort- gage so transferred. Chancellor Kent, after saying that the plaintiff's right to relief against L. depended entirely upon the former suit being constructive notice to L., proceeded: "The object of that suit was to take the whole subject of the trust out of W.'s hands, together with all the § 636, (b) The doctrine has also W. Va. 309, 84 S. E: 914; to subject been held applicable in a suit to a debt specifically; described: Hacker establish a lien on personal property: v. White, 23 Ky. Law Eep. 849, 64 Hovey v. Elliott, 118 N. Y. 132, 23 S. W. 446; to set aside a fraudulent N. E. 475 (bonds); to foreclose a conveyance of personalty: Dillard & chattel mortgage: North Carolina CofBn Co. v. Smith, 105 Tenn. 372, Land & L. Co. v. Boyer, 191 Fed. 552, 59 S. W. 1010; to suits relating to 39 L. R. A. (N. S.) 627, 112 C. C. A. slaves: Meux v. Anthony, 11 Ark. 162 (mortgage on a locomotive) ; Arm- (6 Eng.) 411, 52 Am. Dec. '274; strong V. Broom, 5 Utah, 176, 13 Pac. Fletcher v. Ferr^ll, 39 Ky. (9 Dana) 364; in this case a chattel mortgage, 372, 35 Am. Dec. 143; Cromwell v. valid for only a limited time as Clay, 31 Ky. (1 Dana) 57S', 25 Am. against the mortgagor's creditors, Dec. 165; in suits to wind up the af- was kept alive by the suit begun fairs of insolvent corporation: Powell within such time; to a suit for v. National Bank of Commerce (Colo. specific performanoe of a contract for App.), 74 Pac. 536; Mellen v. Moline sale of corporate stocTc: People's Ironworks, 131 U. S. 352, 9 Sup. Ct. Bank v. Columbia Collieries Co., 75 781; Belmont Nail Co. v. Columbia § 636 EQUITY JURISPRUDENCE. 1236 feree for value and in good faith during the pendency of the action, even when the transfer was made in direct vio- lation of an injunction, so that the indorser or assignor would be punishable for the contempt.^ o papers and securities relating thereto. If W. had held a number of mort- gages and other securities in trust, when the suit was commenced, it would not be pretended that he might safely defeat the object of the suit and the justice of the court by selling these securities. If he possessed cash, as proceeds of the trust estate, or negotiable paper not due, or perhaps movable personal property, such as horses, cattle, grain, etc., I am not prepared to say the rule is to be carried so far as to affect such sales. The safety of commercial dealings would require a limitation of the rule ; but bonds and mortgages are not the subjects of ordinary commerce, and they formed one of the specific subjects of the suit against W. If the trustee, pending the suit, changed the land into personal security, I see no good reason why the cestui que trust should not be at liberty to affirm the sale, and take the security; and whoever afterwards purchased it was chargeable with notice of the suit." In Leitch v. Wells, 48 Barb. 637, the supreme court of New York applied the same rule to a purchaser of stocks during the pendency of a similar suit; but this decision was re- versed on appeal: Leitch v. Wells, 48 N. Y. 585. The court of appeals did not decide, however, that the rule cannot apply to stocks. The rule seems also to have been held applicable, by Judge Story, to a suit brought for the settlement of partnership affairs, and to enforce the partner's lien upon property of the firm: Hoxie v. Carr, 1 Sum. 173; Dresser v. Wood, 15 Kan. 344. § 636, 2 The evident reasons for this distinction are based upon the exi- gencies of cormnerce, and the familiar doctrines respecting negotiable I. & S. Co., 46 Fed. 8. The rule Sheffy, 75 III. App. 136; Bergman applies to a suit by taxpayers to en- v. Bergman, 43 Or. 456, 99 Am. St. join a city from exceeding a con- Eep. 771, 72 Pac. 1086, 73 Pae. 341. stitutional limit of indebtedness by § 636, (e) The text is quoted in making a' contract with and taking Central Savings Bank v. Smith, 43 stock in a water company, so as to Colo. 90, 95 Pac. 307 (stock). See, bind purchasers of bonds of the also, Cass County v. Gillett, 100 water company secured by mortgage U. S. 585; Orleans v. Piatt, 99 TJ. S. on its plant, consisting of real and 676 (county bonds); Warren County personal property: City of Laporte v. Marey, 97 U. S. 96 (bonds); Car- V. Northern Trust Co., 187 Fed. 20, roll County v. Smith, 111 U. S. 556, 109 C. C. A. 74. For further instance 562, 4 Sup. Ct. 539 (bonds) ; Presidio where the doctrine has been applied County v. Noel-Young Bond & Stock to suits concerning personal prop- Co., 212 V. S. 58, 53 L. Ed. 402, 29- erty, see Eeid, Murdoch & Co. v. Sup. Ct. 237; Hill v. Scotland County,. 1237 CONCEKNING NOTICE. §637 § 637. What Persons are Affected by the Notice. — As- suming that all the foregoing requisites exist, the con- structive notice by the pendency of the suit extends only to those who derive title from a party or privy pendente paper: Murray v. Lylbum, 2 Johns. Ch. 441, per Kent, C; Leitch v. Wells, 48 N. Y. 585; Stone v. Elliott, 11 Ohio St. 252, 260; Winston v. Westfeldt, 22 Ala. 760, 58 Am. Dec. 278; Kieffer v. Ehler, 18 Pa. St. 388, 391; Hibernian Bank v. Everman, 52 Miss. 500; M'ayberry v. Morris, 62 Ala. 113. As to the effect of a "creditor's suit," and how far it operates as notice to a purchaser pendente lite of property which it claims to reach by means of an equitable lien, see McDermutt v. Strong, 4 Johns. Ch. 687; Hadden v. Spader, 20 Johns. 554; Weed v. Pierce, 9 Cow. 722; Ed- meston v. Lyde, 1 Paige, 637, 19 Am. Dec. 454 ; Corning v. White, 2 Paige, 567, 22 Am. Dec. 659; Farnham v. Campbell, 10 Paige, 598; Miller v. Sherry, 2 Wall. 237; United States Bank v. Burke, 4 Blackf. 141; Norton V. Birge, 35 Conn. 250; Watson v. Wilson, 2 Dana, 406, 26 Am. Dec. 459; Blake v. Bigelow, 5 Ga. 437; McCutchen v. Miller, 31 Miss. 65.* 34 Fed. 208 (bonds); Myers v. Haz- zard, 50 Fed. 155; Farmers' Loan & T. Co. V. Young, 54 Fed. 759, 772, 4 C. C. A. 561, 6 IT. S. App. 469 (bonds); School District No. 11 v. Chapman, 152 Fed. 887, 82 C. C. A. 35 (bonds); City of Laporte v. Northern Trust Co., 187 Fed. 20', 10'9 C. C. A. 74; Mims v. West, 3& Ga. 18, 95 Am. Dec. 379; State v. Board of Com'rs of Wichita County, 59 Kan. 512, 53 Pac. 526 (bonds); Carr V. Lewis Coal Co., 96 Mo. 157, 9 Am. St. Eep. 328, 8 S. W. 907; Pitts- burgh, C, C. & St. L. E. Co. V. Lynde, 55 Ohio St. 23, 44 N. E. 596 (bonds); Howe v. Hartness, 11 Ohio St. 449, 78 Am. Dec. 312; Day. v. Zimmerman, ^ Pa. St. 72, 8 Am. Rep. 157; Mansur & Tebbetts Impl. Co. V. Beer, 19 Tex. Civ. App. 311, 45 S. W. 972; Gannon v. Northwestern Nat. Bank, 88 Tex. 274, 18 8. W. 573; Farmers & Merchants' Nat. Bank v. Waco Elect. B. & L. Co. (Tex. Civ. App.), 36 S. W. 131; Kellogg v. Faneher, 23 Wis. 21, 99 Am. Dec. 96. Where (as in Missouri) a bona fide indorsee of negotiable paper secured by mortgage takes the mort- gages free from equities between the original parties only, such pur- chaser may be affected by a Us pendens: Dodd v. Lee, 57 Mo. App. 167. To the same effect, see Bow- man V. Anderson, 82 Iowa, 210, 31 Am. St. Eep. 473, 47 N. W. 1087. §636, (d) Kimberling v. Hartly, 1 Fed. 571; Hallorn v. Trum, 125 111. 247, 17 N. E. S23; Union Nat. Bank v. Lane, 177 111. 171, 69 Am. St. Eep. 216, 52 N. E. 361; Keith v. Losier, 88 Iowa, 649, 55 N. W. 952; Euth V. Wells,^13 S. D. 482, 79 Am. St. Eep. 902, 83 N. W. 568 (does not operate to keep the judgment alive after the statutory period for which the judgment is made a lien); Will- iamson V. Williams, 11 Lea (Tenn.), 355; GofE v. McLain, 48 W. Va. 445, S6 Am. St. Eep. 64, 37 S. E. 506; Dent V. Pickens, 59 W. Va. 274, 53 S. E. 154. § 637 EQUITY JUBISPKUDENCE. 1238 lite. A purchaser of the very land described in the plead- ings from one who is not a party to the suit, or a" privy to such party, is never chargeable with ^the constructive notice.! ^ If, however, a person has acquired a prior right §"637, 1 Miller v. Sherry, 2 WaU. 237; Stuyvesant v. Hone, 1 Sand. Ch. 419; Stuyvesant v. Hall, 2 Barb. Ch. I5I4 Parks v. Jackson, 11. Wend. 442, 25 Am. Dec. 656; French v. The Loyal Co., 5 Leigh, 627; Clarkson V. Morgan, 6 B. Mon. 441; Scarlet v. Gorham, 28 111. 319; Parsons v. Hoyt, 24 Iowa, 154; Herrington v. Herrington, 27 Mo. 560. In Miller v. Sherry, 2 Wall. 237, Swayne, J., said : "Another reason why the bill could not operate as constructive notice, — ^Williams, who held the legal title, was not a party. We apprehend that to affect a person as a purchaser pen- dente lite, it is necessary to show that the holder of the legal title was im- pleaded before the purchase which is to be set aside." In Brundage v. Biggs, 25 Ohio St. 652, 656, the defendant, by a cross-complaint, set up an . 503 (purchaser from one not Cal. 52, 18 Pae. 878 (statutory notice named in the statutory notice as a does not affect persons who enter party); Marchbanks v. Banks, 44 into possession adversely to all the Ark. 48 (purchaser from one who parties); Merrill v. Wright (Neb.), was not a party at •'the time, but 91 N. W. 697 (citing this section was brought in afterwards, not of the text); Arnold v. Smith, 80 bound). If a fore_elosure purchaser Ind. 417, 422; Noyes v. Crawford, is looked upon as a successor to the 118 Iowa, 15, 96 Am. St. Eep. 363, equitable interest of the mortgagee, 91 N. W. 799; Jaycox v. Smith, 45 and not as a purchaser from the N. Y. Supp. 299, 17 App. Div. 146; mortgagor, he is not bound by a lis Becker v. Howard, 4 Hun, 361 (does pendens in a prior suit against the not affect purchaser at tax sale); mortgagor to which the mortgagee is 1239 CONCERNING NOTICE. §637 to the specific land, the commencement of a suit affecting the same land will not invalidate any act which he may subsequently do in pursuance of such antecedent right, or for the purpose of carrying it into effect.^ ^ §637, 2 Farmers' Nat. Bank v. Fletcher, 44 Iowa, 252; Stuy- vesant v. Hone, 1 Sand. Ch. 419; Stuyvesant v. Hall, 2 Barb. Ch. 151; Parks V. Jackson, ,11 Wend. 442, 25 Am. Dec. 656 ; Clarkson v. Morgan, not made a party: Hokanson v. Gun- derson, 54 Minn. 499, 40 Am. St. Rep. 354, 56 N. W. 172; Sprague v. White, 73 Iowa, 670, 35 N. W. 751; Eoosevelt v. Land & Biver Co., 108 Wis. 653, 84 N. W. 157; but see Laeassagne v. Chapuis, 144 U. S. 119, 12 Sup. Ct. 659. § 637, (b) The text is cited to this effect in Whatley v. Marshall, 139 Ga. 148, 76 S. B. 1025. Thus, where a mortgagee purchases at his own foreclosure sale, his title on such purchase relates back to the date of his mortgage, and is not affected by a mechanics' lien suit against the mortgagor begun after the com- mencement of the foreclosure suit: Andrews v. National Foundry & Pipe Works, 77 Fed. 774, 36 L. R. A. 153, 23 C. C. A. 454; National Foundry & Pipe Works v. Oconto City Water Supply Co., 113 Fed. 793, 802, 51 C. C. A. 465; see, also, Sprague v. White, 73 Iowa, 670, 35 N. W. 751; Laccassaigne v. Abra- ham, 48 La. Ann. 1160, 20 South. 672; Oetgen v. Boss, 47 111. 142, 95 Am. Dec. 468 (landlord who stakes premises after lease has expired, without notice of pending ejectment suit against tenant, is not subject thereto). Where a bond is given for title before suit, a conveyance after is not subject to lis pendens: Parks V. Smoot's Adm'r, 105 Ky. 63, 48 S. W. 146; Wille v. Ellis, 22 Tex. Civ. App. 462, 54 S. W. 922. And see Jackson v. Dickenson, 15 Johns. 309, 8 Am. Dec. 236. Upon the question whether the holder of an unrecorded deed or mortgage who does not record it until after the lis pendens notice, is in effect a purchaser pendente lite, there is a sharp conflict between the cases. That he is not a purchaser pendente lite, see Warnock v. Har- low, 96 Cal. 29S', 31 Am. St. Rep. 209, 31 Pac. 168, Grant v. Bennett, 96 111. 513; Noyes v. Crawford, 118 Iowa, 15, 96 Am. St. Rep. 363, 91 N. W. 799; Hammond v. Paxton, 58 Mich. 393, 25 N. W. 321; Baker v. Bartlett, 18 Mont. 446, 56 Am. St. Rep. 594, 45 Pac. 1084; Haughwort V. Murphy, 22 N. J. Eq. 531; Lament V. Cheshire, 65 N. Y. 30; Walker v. Goldsmith, 14 Or. 125, 12 Pac. 537; Jennings v. Kiernan, 35 Or. 349, 56 Pac. 72, 55 Pac. 443 (if the plain- tiff has notice of the unrecorded deed) ; Irvin's Lessee v. Smith, 17 Ohio 226, 239; Kohn v. Lapham, 13 S. D. 78, 82 N. W. 408; Eldridge V. Stenger, 19 Wash. 697, 54 Pac. 541 (plaintiff had notice of the un- recorded deed); Webster v. Pierce, 108 Wis. 407, 83 N. W. 938 (in ejectment; this result depends on construction of the lis pendens stat- utes). The reasons for this view were forcibly expounded by Dwight, Com'r, in the leading case of Lament V. Cheshire, 65 N. Y. 30, 37, 3S'. The statute there construed, like that iu §638 EQUITY JUEISPRUDENOE. 1240 § 638. To a Purchaser from Either Litigant Party. — The question yet remains whether the rule of constructive notice applies to a purchaser pendente lite from either party to the litigation. The principle upon which the 6 B. Mon. 441; Trimble v. Boothby, 14 Ohio, 109, 45 Am. Dec. 526; Gibler V. Trimble, l4 Ohio, 323. For example, the bringing a suit against A as the owner of land is not notice to B, a prior vendee from A, who is in many other states, read "Every per- son whose conveyance or encum- brance is subsequently executed or subsequently recorded shall be deemed a subsequent purchaser or encumbrancer, and shall be bound by all proceedings taken after filing of such notice, to the same extent as if he were made a party to the action." After considering the gen- eral nature and function, of a notice lis pendens, the learned commissioner continues: "It has been seen in the course of this discussion that the theory of a Us pendens is that there must be no innovation in the pro- ceedings so as to prejudice the rights of the plaintiff. It is simply a rule to give effect to the rights ultimately established by the decree. Apply- ing this doctrine to the present case, it would be impossible to claim that a lis pendens could give a creditor under an attachment a lien superior to the title of a purchaser under an unrecorded conveyance. The statute distinctly provides that a person whose conveyance is executed or recorded subsequent to the filing of a notice shall be deemed a subse- quent purchaser, and bound by the proceedings to the same extent as if he were a party to the action. It is necessary to ascertain therefore what would have been the effect if the defendants had been made par- ties to the action. Had the plain- tiff made the defendants parties, to the action, his attachment proceed- ings would of course have been nugatory. As soon as the whole case had been disclosed it would have appeared that he was making ar claim against a person who was in no respect liable to him; and his complaint would have been dis- missed. How can he under the stat- ute have any greater claims by omitting him? The' words 'to the same extent as if he were a party to the action' cannot be. omitted in construction." Similar statutes were construed to the same effect in Kohn v. Lapham, 13 S. D. 78, 82 N. W. 408; Koblin v. Palmer, 9 S. D. 36, 67 N. W. 949; Bateman v. Backus, 4 Bak. 433, 34 N. W. 66; Eldridge V. Stenger, 19 Wash. 697, 54 Pac. 541. In several states the same re- sult is reached by holding that the filing of a lis pendens is not a "sub- sequent purchase" under the record- ing acts, entitled to priority by vir- tue of prior registration: Warnoek V. Harlow, 96 Cal. 298, 31 Am. St. Eep. 209, 31 Pac. 168; Noyes v. Crawford, 118 Iowa, 15, 96 Am. St. Kep. 363, 91 N. W. 799; Baker v. Bartlett, 18 Mont. 446, 56 Am. St Kep. 594, 45 Pac. 1084. On the other hand, that such holder of a prior unrecorded deed or encum- brance is a pendente lite purchaser, see Fisher v. Shropshire, 147 XT. S. 133, 13 Sup. Ct. 201; dissenting opin- ion in Grant v. Bennett, 96 HI. 513 1241 CONCERNING NOTICE. 638 doctrine is based, and all the reasons of policy by which it is supported, clearly extend alike to both the litigants. In the great majority of instances, it has undoubtedly been a purchaser from the defendant who has been charged with actual possession, and will not prevent him from subsequently taking the necessary steps to complete the purchase and obtain a deed of convey- ance." (a strong presentation of this view) ; Ferris v. Udell, 139 Ind. 579, 38 N. E. 180^ Smith v. Worster, 59 Kan. 640, 68 Am. St. Rep. 385, 5i Pae. 676 (grantee of mortgagor before fore- closure suit, without ntrtioe to mort- gagee) ; Caldwell v. Bigger, 76 Kan. 49, 90 Pac. 1095; Kitchener v. Jehlik, 85 Kan. 684, 118 Pac. 1058 ; Smith v. Hodsdon, 78 Me. 180, 3 Atl. "276; Wilson v. Robinson, 21 N. M. 422, 155 Pac. 732 ; Williams v. Kerr, 113 N. C. 306, 18 S. E. 501; Collingwood v. Brown, 106 N. C. 366, 10 S. E. 868 ; Simmons v. Fleming,. 157 N. C. 389, 72 S. E. 1082; Holland v. Cofield, 27 Okl. 469, 112' Pac. 1032 ; Bryson & Hartwood v. Boyce, 41 Tex. Civ. App. 415, 92 S. W. 820. Most of these decisions were made under that type of recording act which declares that' unrecorded instruments shall be in- valid except as between the parties thereto and persons having actual no- tice thereof. "The statute does not declare that an unrecorded deed shall be invalid as against subsequent pur- chasers or other particular classes of persons. It declares generally that such deed shall be invalid ;^ and that means invalid as against all classes of persons, with any and all kinds of rights"^ Smith v. Worster, 59 Kan. 640, 644, 68 Am. St. Rep. 385, 388, 54 Pac. 676. A statute making lis pendens constructive notice to holders of prior unrecorded liens or convey- ances was declared unconstitutional, on purely technical grounds affecting its mode of enactment, in Sheasley v. Keens, 48 Neb. 57, 66 N. W. 1010. The renewal of a mortgage after commencement of suit, where the original mortgage lien is not canceled, will not render the mortgagee subject to the lis pendens: Farmers' Loan & Trust Co. V. Meridian Waterworks Co., 139 Fed. 661. §637, (c) As in Parks v. Smoot's Adm'rs, 105 Ky. 63, 48 S. W. 146 (cit- ing Clarkson v. Morgan's Devisees, 6 B. Mon. 444; Parks v. Jackson, 11 Wend. 444) ; Moulton v. Kolodzik, 97 Minn. 423, 7 Ann. Cas. 1090, 107 N. W. 154; Meador Bros. v. Hines (Tex. Civ. App.), 165 8. W, 915; Walker v. Goldsmith, 14 Or. 125, 12 Pac. 537. In the last case, however, the prior vendee was not in possession. In the dissenting opinion, quoting the above passage of the text and this note, such possession, it was insisted, was essential to the vendee's priority in the case put by the author. Where land is sold to a hona fide purchaser, and suit is subsequently brought against the vendor for the recovery of the property, this wiU not affect the vendee under the doc- trine of lis pendens. Nor' will such suit adversely affect a purchaser from such vendee, although the purchaser might have been chargeable with no- tice of the pending suit : ■ Planters' Loan & Sav. Bank v. Johnson, 70 Ga. 302. Who aie "Purchasers." — Assignees in bankruptcy, so far as relates to § 638 EQUITY JURISPRUDENCE. 1242 the constructive notice. The plaintiff, however, is equally prevented from alienating the subject-matter of the con- troversy, to the prejudice of the defendant, wherever, from the nature of the suit, he might have in the result, by the final decree, a right established as against the plain- tiff. ^ ^ Finally, is a purchaser from one defendant pen- dente lite affected by the right of another defendant in the same suit? This special question has, upon careful con-" sideration, been answered in the negative. It has been held that where a person without actual notice of a suit purchases from one of the defendants property which is the subject of it, he is not, in consequence of the pendency of the suit, affected by an equitable title of another defend- ant which appears on the face of the proceedings, but of which he has no notice, and to which it is not necessary for any purposes of the suit to give effect.^ i> § 638, 1 For example, in a suit brought by a devisee against the heirs, to establish a will, the final decree might declare the devise void and estab- lish the title of the defendant. Plainly, in such a case, the plaintiff can- not alienate the land pendente lite, and thus cut off the defendant's pos- sible iiltimate rights: Garth v. Ward, 2 Atk. 174; Bellamy v. Sabine, 1 De Gex & J. 566, 580, per Lord Cranworth. § 638, 2 Bellamy v. Sabine, 1 De Gex & J. 566. The full court of ap- peal in chancery, Lord Chancellor Cranworth and Lord Justices Knight Bruce and Turner, held that the case did not come either within the prin- ciple of the rule nor within the authorities. pending suits to enforce liens on the 200, excluding from the protection of bankrupt's property, are on the same the lis pendens the interest of an- footing as purchasers pendente lite: other than the complainant, although Kimberling v. Hartly, 1 Fed. 571. such interest was disclosed by the § 638, (a) See, also, Henderson v. bill. See, also, Kiekbuseh v. Cor- Wanamaker, 79 Fed. 736, 25 CCA. with, 108 Wis. 634, 85 N. W. 148. 181; Olson v. Liebpke, 110 Iowa, 594, A ereditof's bill is not notice of the 80 Am. St. Rep. 327, 81 N. W. 801; claims of other creditors than the Cook V. French, 96 Mich. 525, 56 N. W. plaintiff: Stout v. Philippi Mfg. & 101; Turner v. Edmonston, 210 Mo. Mere. Co., 41 W. Va. 339, 56 Am. St 411, 124 Am. St. Rep. 739, 109 S. W. Rep. 843, 23 S. E. 571 ; St. John v. 33. Strauss, 60 Kan. 136, 55 Pae. 845. § 638, (b) The principle of Bellamy The nature of a partition suit, how- T. Sabine was applied in Geishaker v. ever, is such that it is notice of the Paneoast, 57 N. J. Eq. 60, 40 Atl. rights of all parties to the final de- 1243 COKCEBNING NOTICE. §§639,640 § 639. The Statutory Notice of Lis Pendens.— The gen- eral rule concerning constructive notice by lis pendens, although firmly settled, has always been regarded by the courts as a very harsh one in its application to bona fide purchasers for value; it has only been tolerated from the supposed necessity.* It has not been a favorite with courts of equity, and has never been enlarged in its operation be- yond its well-settled limits.^ These considerations have led the English Parliament and the legislatures of many states to interfere, and to create most important statutory modifications and restrictions. It should be observed that wherever the terms of these statutes, and the alterations made by them, apply only to suits concerning real estate, — which is true in much of the state legislation, — the rule as to suits concerning personal property remains unchanged, the same as at the common law.^ § 640. Modem Statutory Provisions. — ^By the English statute, a pending suit will not affect a purchaser for value and without express notice,, unless a notice of lis pendens has been properly registered in compliance with the statu- tory directions.^ One quite general type of the American statutes enacts that in every suit relating to or affecting real estate the plaintiff may at the time of commencing the action, or afterwards, prior to final judgment, file or pro- § 639, 1 See Leitch v. Wells, 48 N. Y. 585, 609, per Earl, J.; Hayden V. Bucklin, 9 Paige, 512, per Walworth, C. § 639, 2 Leitch v. Wells, 48 N. Y. 585, 602, per Hunt,- J. Speaking of the statute in New York, the learned judge says: "This relaxation of a rigorous rule applies to real estate only, and as to personal property the rule remains as at the common law." § 640, 1 Stats. 2 & 3 Vict., c. 11, see. 7.» eree, whether original parties or the rule which made the lis pendens brought in by amendment: McClaa- begin from the service of the sub- key V. Barr, 48 Fed. 130. pcena, often before the bill was filed §639, (a) This paragraph is cited showing the nature of the suit: Dodd in Hardin v. Hardin, 33 S. D. 202, v. Lee, 57 Mo. App. 167. 145 N. W. 432. An important' mo- § 640, (a) By this act, as amended tive for the modem statutes was to by 18 & 19 Vict., c. 15, it is provided remedy the difSculty arising from that a lis pendens should not bind § 640 EQUITY JUKISPEUDENOE. 1244 cure to be recorded in the clerk's or recorder's office of the county in which the land is situated a written notice de- scribing the lands affected and the general nature of the action, and that no suit concerning real estate shall be notice to a purchaser pendente lite for value and without actual notice unless and until such a notice of lis pendens has been thus filed or recorded.2> The terms of these § 640, 2 Mew Torfc.— Code Proc, see. 132 (old code) ; Code Civ. Proc. (new code), Bliss's ed., vol. 2, p. 104, see. 1670. California.— CoA-e. Civ. Proc. 1880, p. 142, sec. 409. Connecticut. — Rev. Stats. 1875, p. 402, sec. 4. Illinois. — Rev. Stats. 1880, p. 149, sec. 9. Iowa.— 2 Rev. Code 1880, p. 664, sees. 2628, 2629. Michigan. — 2 Comp. Laws 1871, p. 1535, sec. 29; p. 1805, see. 10. Minnesota. — Gen. Stats. 1878, p. 819, see. 34. MissoMj-i.— Winslow's Code Proc. 1879, p. 103, sec. 420. Nevada.— ^iais. 1869, p. 215, sec. 128. New Jersey. — ^Rev. 1877, p. 49, sec. 43. North Carolina. — Code Civ. Proc. 1868, p. 36, sec. 90. Ohio.— 2 Rev. Stats. 1880, p. 1233, sec. 5056. Oregon. — Code Civ. Proc. 1863, p. 38, sec. 149. Pennsylvania.- — Dunlop's Dig., p. 677, sec. 6. Rhode Island. — Gen. Stats. 1872, p. 456, sec. 12. South Carolina.— Rev. Stats. 1873, p. 600, sec. 155. Virginia. — Code 1860, p. 770, sec. 5. West Virginia.— "i Rev. Stats. 1879, p. 932, see. 14. Wisconsin. — 2 Rev. Stats. 1871, p. 1428, sec. 7. a purchaser or mortgagee pendente 60 N. Y. Supp. 608 (not to suit lite, without express notice thereof, for damages and to enjoin eneroach- unless a, notice of the pendency of the ment on street) ; Olyphant' v. Phyfe, suit were registered, and that the 48 App. Div. 1, 62 N. Y. Supp. registered notice should become void 688, modifying 27 Misc. Eep. 64, at the end of five years, unless it 58 N. Y. Supp. 217 (not to pro- should be re-reglstered. ceedings for sale of lands to pay debts § 640, (b) New Yorfc.— Code Civ. of decedent) ; Moeller v. Wolkenburg, Proc, § 1670. To what proceedings 67 App. Div. 487, 73 N. Y. Supp. 890 the statute is applicable: see In re (injunction against adding to party Bingham, 127 N. Y. 296, 27 N. E. wall) ; Schomacker v. Michaels, 189 1055, 57 Hun, 586, 10 N. Y. Supp. N. Y. 61, 81 N. E. 555. 325; Baehmann v. Wagner, 61 Hun, Index of lis pendens notices: Code 625, 16 N. Y. Supp. 67 (suit to Civ. Proc, §1672; Hartwell v. Riley, impress lien on real estate) ; Acker- 47 App. Div. 154, 62 N. Y. Supp. man v. True, 44 App. Div. 106, 317. Cancellation of the notice is 1245 CONCERNING NOTICE.. §640 statutes apply alike to legal and to equitable actions. The second type of these statutes differs from the former one provided for in certain cases : Code Civ. Proc, § 1674; see Murray v. Earth, 30 Abb. N. C. 303, 24 N. Y. Supp. 921; Townsend v. Work, 79 Hun, 381, 29 N. Y. Supp. 791; Breen V. Lennon, 10 App. Div. 36, 41 N. Y. Supp. 705; Fitzsimons v. Drought, 15 App. Div. 413, 44 N. Y. Supp. ■453; Cohen v. Levy, 58" N. Y. Supp. 721; Valentine v. Austin, 124 N. Y. 400, 26 N. E. 973 (actual knowledge of a canceled lis pendens notice does not put on inquiry as to the nature of the suit). Arlcansas. — Acts. 1903, p. 118; Reaves v. Coffman, 87 Ark. 60, 112 S. -W. 194; Henry Wrape Co. v. Cox, 122 Ark. 445, 183 S. W. 955; Jones V. Ainell, 123 Ark. 532, 186 8. W. 65. California. — ^See Pearson v. Creed, 78 Cal. 144, 20 Pac. 302. The notice applies to proceedings for the con- demnation of land: Bensley v. Moun- tain Lake W. Co., 13 Cal. 307, 319, 73 Am. Dec. 575; Roach v. Riverside W. Co., 74 Cal. 263, 15 Pac. 776; and a party acquiring a homestead inter- est in property after the filing of a lis pendens is a purchaser, and charged with BonstiTictive notice: Id. The notice does not affect persons who enter into possession adversely to all the parties to the action in which the notice is filed: Irving v. Cunningham, 77 Cal. 52, 18 Pac. 878. That it does not apply to an action of ejectment, affecting possession but not title, see Long V. Neville, 29 Cal. 132, 135. But see Nemo v. Farrington, 7 Cal. App. 443, 94 Pac. 874, 877.' The no- tice is not necessary in an action to enforce the lien of a tax: Reeve v. Kennedy, 43 Cal. 643. CoZorodo.— Code Proc. 1890, sec. 36. See People v. El Paso Co. Dist. Ot., 19 Colo. 348, 35 Pac. 731; Buckhorn Plaster Co. v. Consolidated Plaster Co., 47 Colo. 516, 108 P'ae. 27. The notice is not necessary in an action to enforce a mechanic's lien, since the notice of lien suffices: Empire Land & Canal Co. v. Bngley, 18 Colo. 388, 33 Pac. 153. Connecticut. — Gen. Stats. 1888, sees. 916, 947. See Longstaff v. Hurd, 66 Conn. 350, .34 Atl. 91 (an application by a partner for the appointment of a receiver for the settlement of the partnership is not an "action intended to affect real estate," though, by stat- ute, the real estate of the partnership vests in the receiver on his appoint- ment). Florida. — In general, see Ray v. Hocker, 65 Pla. 265, 61 South. 500 (party who takes with notice of pend- ency of suit is bound thereby although no lis pendens filed.) Illinois.— Huidi'a Rev. Stats. 1889, e. 11, sec. 9. Indiana.— Hey. Stats. . 1894, § 327 et seq. (Rev. Stats. 1881, § 825 et seq.) require a lis pendens notice in a suit to enforce a lien upon realty, not founded on an instrument executed by the party holding the legal title as appears of record: e. g., a vendor's lien: Pennington v. Martin, 146 Ind. 635, 45 N. E. 1111. In general, see Aetna Life Ins. Co. v. Stryker, 42 Ind. App. 57, 83 N. E. 647; City of Laporte v. Northern Trust Co., 187 Fed. 20, 109 C. C. A. 74. Iowa. — McClain's Code, 1888, sees. 3834, 3835. Kansas. — Code Civ. Proc, § 81; Garver v. Graham, 6 Kan. App. 344; 51 Pac. 812; Wellsford v. Durst, 8 Kan. App. 231, 55 Pac. 493. §640 EQUITY JUEISPBTJDENCE. 1246 only in the provisions being more general, and extending to all suits which could possibly furnish an occasion for the Kentucky.— Kj. Stats. 1903, § 2358a. See Donacher v. TafCerty, 147 Ky. 337, 144 S. "W. 13; Fletcher v. Wire- man, 152 Ky. 565, 153 S. W. 982 (party filing lis pendens notice in proper form protected, though clerk fails to index it properly); Tennis Coal Co. V. Saekett, 172 Ky. 729, Ann. Cas. 1917E, 629, 190 S. W. 130. Louisiana. — Act 22 of 1904; United States V. Calcasieu Timber Co., 236 Fed. 196, 149 C. C. A. 386. Michigan. — Comp. Laws, § 441 ; Howell's Stats. 1882, sees. 6619, 7995. See Lockwood v. Noble, 113 Mich. 418, 71 N. W. 856 {lis pendens dates from record of the notice),; Detroit Citi- zens' St. E'y Co. V. City of Detroit 124 Mich. 449, 83 N. W. 104 (right to maintain and operate a street rail- way on a street is an "interest in land," under the statute). Minnesota. — Gen. Stats. 1894, § 5866 ; Joslyn v. Schwend, 89 Minn. 71, 93 N. W. 705 {lis pendens once filed in a proper action cannot be dis- charged by the court while suit is pending). The notice does not afEect prior rights. Where property has been sold under an executory contract of sale prior to the filing of a lis pendens, the purchaser is protected in the rights already acquired; but the lis pendens affects him as to subsequent payments : Moulton V. Kolodzik, 97 Minn. 423, 7 Ann. Cas. 1090, 107 N. W. 154. Mississippi. — Code 1892, ch. 85, suits to enforce a lien upon, or any interest in, real estate; does not in- clude creditors' suits to set aside fraudulent conveyances under § 503 ; Fernwood Lumber Co. v. Meehan- Eounds Lumber Co. (Miss.), 37 South. 502. Montana.— Coi& Civ. Proc. (1887), §70. Nebraska. — See Munger v. T. J. Beard & Bro., 79 Neb. 764, 126 Am. St. Eep. 688, 113 N. W. 214. New Jersey. — See McDowell v. Avon-by-the-Sea Land & Imp. Co., 71 N. J. Eq. 109, 63 Atl. 13; Wood v. Price, 79 N. J. Eq. 1, 81 Atl. 1093 (statute does not apply where there has been a sequestration of the prop- erty, since that is constructive notice to all the world) ; Sanford v. Keer (N. J. Ch.), 74 Atl. 291 (statute does not apply as between the parties). New Mexico. — Comp. Laws, § 1853; Bell V. Gaylord, 6 N. M. 227, 27 Pac. 494 (action wherein real property is attached is an action "affecting" real property) . North Carolina.— -Goie 1883, § 229; Todd V. Outlaw, 79 N- C. 235; Dancy V. Duncan, 96 N. C. Ill, 1 S. E. 455; Spencer v. Credle, 102 N. C. 68, 78, 8 S. E. 901; Collingwood v. Brown, 106 N. C. 362, 10 S. E. 868; Arring- ton V. Arrington, 114 N. C. 151, 159, 19 S. E. 351; Morgan v. Bostie, 132 N. C. 743, 44 S. E. 639; Simmons .. Fleming, 157 N. C. 389, 72 S. E. 1082. Ohio. — Benton v. Shafer, 47 Ohio St. 117, 7 L. E. A. 812, 24 N. E. 197 (the notice does, not affect land lying in another county). Oklahoma. — In this state the filing of a suit to foreclose a vendor's lien gives notice to subsequent purchasers, without the filing of a notice: Hol- land V. Cofield, 27 Okl. 469, 112 Pac. 1032. The statute provides that sum- mons must be issued within sixty days ; but this has been interpreted so that the suit has the effect of notice if the summons is issued prior to the pur- 1247 CONCERNING NOTICE. §640 operation of the original doctrine. The constructive notice in all actions to which the equitable rule would have applied is made to depend upon the filing or recording of chase: Shnfeldt v. Jefcoat (Okl.), 151 Pac. 595. Pennsylvania. — Brightly's Purdon's Dig. 1883, p. 641, sec. 24. Shade Island. — Pub.- Stats. 1882, p. 567, sec. 12; Gen. Laws, c. 246, § 6 ; Campbell v. Metcalf , 20 E. I. 352, 39 Atl. 190 (in a suit for accounting, a notice that the decree would be levied on certain land belonging to the defendant is not authorized). South Carolina. — C. C. P., § 153. See Baufli v. Trantham, 45 S. C. 291, 23 S. E. 54; Armstrong v. Carwile, 56 S. C. 463, 35 S. E. 196. South Dakota. — Gilman v. Carpenter, 22 S. D. 123, 115 N. W. 659 (under Eev. Code Civ. Proc, see. 108, a pur- chaser has notice only from the filing of a lis pendens) • Hardin v. Hardin, 33 S. D. 202, 145 N. W. 432. ZJiaft.— Laws 1884, § 266, p. 200. Virginia. — Code 1887, sec. 3566 ; Code 1904, sec. 3566; Vicars v. Sayler, 111 Va. 307, 68 S. E. 988 . (in ab- sence of actual notice, lis pendens must not only be recorded, but must be properly indexed) ; Hum v. Keller, 79 Va. 415. Washington. — By sec. 5518, Bal- linger's Ann. Codes & Stats., judg- ment in an action to recover possession of land from a party in possession is binding "upon the party against whom the same is given, and against all persons claiming from, through or un- der such party after the commence- ment of such action," with certain exceptions. Under this statute, it is not necessary to file a lis pendens to charge a pendente lite purchaser: May v. Sutherlin, 41 Wash. 609, 84 Pac. 585. In general, a lis pendens should be filed, however, in an action affect- ing real property; Wright v. Jessup, 44 Wash. 618, 87 Pac. 930. It should be filed in an action to condemn a railroad right of way: Portland & Seattle Ky., Co. v. Ladd, 47 Wash. 88, 91 Pac. 573. Where a lis pendens is filed, it holds until the termination of the case. Hence, in an action to fore- close a mortgage, it is not necessary to record the certificate of sale in order to give notice: Hyde v. Heaton, 43 Wash. 433, 86 Pac. 664. It must be filed at the time of, or after, the commencement of suit: Burwell v. Smith, 63 Wash. 1, 114 Pac. 876. "The notice of lis pendens, as we view it, has no practical effect on the sub- stantive rights of the respective par- ties, but is only a method of forcing a purchaser under a subsequently re- corded conveyance to set up his claim of right in tliat action or have the decree therein, which may be rendered in favor of the plaintiff, made effect- tive against him as well as the original defendant": Merrick v. Pattison, 85 Wash. 240, 147 Pac. 1137. West Virginia. — Code 1891, c. 139, sec. 13; Osborne v. Glasscock, 39 W. Va. 749, 20 S. E. 702; Shumate's- Ex'rs T. Crockett (W. Va.), 27 S. E. 240 (when notice not necessary) ; O'Connor v. O'Connor, 45 W. Va. 354, 32 S. E. 276 (same) ; Herring v. Bender, 48 W. V. 498, 37 S. E. 568 (release of notice on discontinuance of suit). Wisconsin. — § 3187 (actions relating to rKil property generally) ; § 3088 (actions of ejectment). See Webster V. Pierce, 108 Wis. 407, 83 N. W. 938, § 640 EQUITY JUBISPKTJDEKCE. 1248 a proper notice.^ It is only necessary to add that all the special rules collected in the foregoing paragraphs con- cerning the commencement of the lis pendens, its continu- ance as long as the suit is diligently prosecuted, its ter- mination by the final judgment which ends the action, the sufficient description or identification of the subject- matter by the allegations of the pleadings, and the persons who are affected by the constructive notice, are still in force, and apply to all cases which come within the opera- tion of the statutory provisions.^ ^ § 640, 3 In some of these statutes the operation of the statutory notice is eonflned to particular kinds of personal property." Kansas. — Dassler's Comp. Laws 1881, p. 612. Maine.— Rev. Stats. 1871, p. 620, sec. 24; p. 626, see. 56. Massachusetts. — Gen. Stats. 1860, p. 626, see. 51; p. 627, sec. 57; also Supp. 1860, p. 12, sec. 1; Supp. 1873, p. 46, sec. 1. New Hampshire.— Gen. Laws 1878, p. 518, sec. 3; p. 519, see. 16. Vermont.-Qen. Stats. 1870, p. 294, sec. 37; p. 997, sec. 1. § 640, 4 See, as illustrations, Todd v. Outlaw, 79 N. C. 235; Majors v. Cowell, 51 Cal. 478; Dresser v. Wood, 15 Kan. 344; Mills v. Bliss, 55 N. Y. 139; Sheridan v. Andrews, 49 N. Y. 478; Brown v. Goodwin, 75 N. Y. 409; Mitchell v. Smith, 53 N. Y. 413; Ayrault v. Murphy, 54 N. Y. 203; Puller v. Scrihner, 76 N. Y. 190; Page v. Waring, 76 N. Y. 463; Farmers' Nat. Bank v. Fletcher, 44 Iowa, 252; Stuyvesant v. Hall, 2 Barb. Ch. 151; Stuyvesant v. Hone, 1 Sand. Ch. 419; White v. Perry, 14 W. Va. 66; Mayberry v. Morris, 62 Ala. 113; Tredway v. McDonald, 51 Iowa,. 663; 2 N. W. 567; Jones v. McNarrin, 68 Me. 334, 28 Am. Eep. 66; Weeks v. Tomes, 16 Hun, 349; Jaffray v. Brown, 17 Hun, 575; Drake v. Crowell, 40 N. J. L. 58. § 640, (c) Kansas. — Comp. Laws § 640, (d) In general, that the 1885, c. 80; Gen. Stats. 1901, sec. effect of the statutes is simply to limit 4515. See Harrod v. Burke, 76 Kan. the method of creating the lis pendens, 909, 123 Am. St. Eep. 179, 92 see Warnock v. Harlow, 96 Cal. 298, Pae. 1128 (statute designed to embody 31 Am. St. Eep. 209, 31 Pae. 166; Pen- the doctrine of equity) ; TidbaU v. nington v. Martin, 146 Ind. 635, 45 Schmeltz, 77 Kan. 440, 127 Am. St N. E. 1111; Harrod v. Burke, 76 Kan. Eep. 424, 94 Pae. 794 (applies to par- 909, 123 Am. St. Eep. 179, 92 Pae. tition suits). 1128; Merrill v. Wright (Neb.), 91 Maine. — Kev. Stats. 1883, e. 81, N. W. 697 (affects only titles derived sees. 24, 59. from parties to the suit); Johnson v. Massachusetts.— Fuh. Stats. 1882, Irwin, 16 Wash. 652, 48 Pae. 345 c. 126, sec. 13. (same) ; Smith v. Gale, 144 U. S. 509, Vermont. — Eev. Laws 1880, see. 12 Sup. Cf. 674 (Dakota territory) ; 874. Hayes v. Nourse, 114 N. Y. 607, II 1249 CONCEBNING NOTICE. §641 § 641. 5. By Judgments.^ — ^By the original doctrine of equity, independent of all statutory changes, it was settled that a final judgment or decree by which the lis pendens is ended and the controversy is terminated was not a construc- tive notice to persons not parties to. the suit,^ except to a purchaser pendente lite.^ It should be remembered in this connection that a decree in chancery originally acted only upon the person of a defendant, and did not create any in- terest or title in or lien upon the property affected by the suit.3 While this original rule was still unmodified by stat- §641, IWorsley v. Earl of Scarborough, 3 Atk. 392; Churehil v. Grove, 1 Ch. Gas. 35; Freem. Ch. 176; Lane v. Jackson, 20 Beav. 535; Lee V. Green, 6 De Gex, M. & G. 155. § 641, 2 The notice then arose from the Us pendens, and not by virtue of any particular attribute of the judgment itself. See ante, §§ 633, 634, on the effect of a lis pendens. § 641, "3 See Lee v. Green, 6 De Hex, M. & G. 155, 168, per Cranworth, L. C. Am. St. Eep. 700, 22 N. E. 40 (muBt be diligence in prosecution, citing this section of the text) ; Lamont v. Caieshire, 65 N. T. 30, 37. The com- mon law governs in all cases not cov- ered by the statute. The notice is not necessary as against a purchaser or en- cumbrancer who is not one bona fide and ioT value; Buckhorn Plaster Co. V. Consolidated Plaster Co., 47 Colo. 516, 108 Piac. 27 (purchaser knowing that writ of error is pending takes subject to final outcome) ; Eay v. Hoeker, 65 Fla. 265, 61 South. 500; Thompson's Executor v. Stiltz (Ky.), 96 S. W. 884; City of Middlesborough V. Coal & Iron Bank (Ky.), 110 S. W. 355; Holman v. Lewis, 107 Me. 28, 76 Atl. 966; Dunning v^ Crane, 61 N. J. Eq. 634, 47 Atl. 420; Wood v. Price, 79 N. J. Eq. 620, 38 L. E. A. (N. S.) 772, 81 Atl. 983; Vance v. Wesley, 85 Fed. 157, 29 C. C. A. 63 (South Carolina) ; Whitt'aker v. Green- 11—79 wood, 17 Utah, 33, 53 Pac. 736 (actual notice) ; Hum v. Kelly, 79 Va. 415 (actual notice) ; Brown v. Cohn, 95 Wis. 90, 60 Am. St. Rep. 83, 69 N. W. 71 (purchaser of a tax title) ; Bell v. Peterson, 105 Wis. 607, 81 N. W. 279 (same). That the statute applies only to purchases during a. pending suit, and that after termination of the suit and decree divesting defend- ant of title, a purchaser takes with notice , see Steinman v. Clinehfield Coal. Corp. (Va.), 93 S. E. 684. The lis pendens statutes do not apply to suits in the .federal courts; Stewart v. Wheeling & L. E. E. Co., 53 Ohio St. 151, 29 L. E. A. 438, 41 N. E. 247; McClaskoy v. Barr, 48 Fed. 130 ; Ruth- erglen v. Wolf, , 1 Hughes C. C. 78, Fed. Cag, No.' 12,175; Wilson v. § 641, (a) "This paragrapii is cited ,ln -McLean v. Stith, 50 Tex. Civ. App. 323,' 112 S. W. .355. § 641 EQUITY JUEISPETJDENCB. 1250 ute, a purchaser of the property affected by a judgment, even though it was not docketed, would be bound by it, pro- vided he had, prior to the purchase, received actual notice of it.4 If it was shown that a subsequent purchaser had made a search for judgments, actual notice of an existing judgment might also be inferred from that fact.^ The British Parliament has, within the past generation, com- pletely changed the original law concerning the Effect of judgments, and has adopted another policy for England and Ireland, which is carried out by very stringent statutory en- actments. By a progressive series of statutes, a system of registration has been established for all judgments and de- crees ; if duly registered within the times and in the modes prescribed by the statutes, they operate as constructive no- tice ; all judgments and decrees not thus duly registered with- § 641, 4 Davis v. Strathmore, 16 Ves. 419. § 641, 5 Proctor v. Cooper, 2 Drew. 1; 18 Jur. 444, 1 Jur., N. S., 149. As to the effect of notice or want of notice of a registered judgment upon a purchaser, see Knight v. Pocock, 24 Beav. 436; Governors of the Gray Coat Hospital v. Westminster etc. Com'rs, 1 De Gex & J. 531; Freer V. Hesse, 4 De Gex, M. & G. 495. Hefain, 81 Ind. 35; Majors v. Oowell, state officials over whoin the federal 51 Cal. 478. Tie subject is dis- courts have no power. If the Virginia cussed quite fully in King v. Davis, legislature were to enact a statute 137 Fed. 222, where the court sum- making it the duty of state court marizes its conclusions as follows: clerks to record memoranda of pend- "The true ground for holding that ing suits and attachments in the fed- the Us penSens statute does not eral courts, there might possibly be no apply to suits pending in the fed- further difficulty." Contra, United eral courts is that suggested above, . States v. Chicago, M. & St. P. R. B. and stated in the numerous federal Co., 172 Fed. 271 ; United States v. decisions holding that state statutes Calcasieu Timber Co., 236 Fed. 196, requiring judgments to be docketed in 149 C. C. A. 386, holding that the lis the county where the land lies do not pendens statute creates a substantive affect the judgments of the federal law relating to the acquisition and courts in such states. It is that Con- ownership of real estate, and that such gross does not intend, when adopting law, being a rule of property, is bind- state laws, to adopt such as have the ing upon and to be applied by the effect of limiting or controlling the federal court's; Tennis Coal Co. v. jurisdiction and power of the federal Sackett, 172 Ky. 729, Aim. Cas. courts, when such effect can only be 1917E, 629, 190 8. W. 130. obviated by the voluntary act of the 1251 CONCEENING NOTICE, § 642 in the times and in the manner prescribed are declared to be void or to lose their priority, both in law and in equity, as against subsequent purchasers, mortgagees, and creditors, notwithstanding any notice which the latter-named persons may have had.^ Under these statutes, no notice, either con- structive or actual, can take the place of a regular registry. A subsequent purchaser, mortgagee, or creditor obtaining an interest in or claim on the land, where the prior judg- ment or decree was not properly registered in pursuance of the statute, is protected, even though he had received the most complete actual notice of such judgment or decree. The legislative policy is, that a purchaser or encumbrancer should not be obliged to look beyond the official records or books of registry; if a faithful search discloses no judg- ment, the statute has made him absolutely secure.'^ § 642. American Legislation. — ^A statutory policy with respect to judgments has also been adopted in this coun- § 641, 6 See the following English statutes: 1 & 2 Vict., c. 110; 2 & 3 Viet., c. 11; 3 & 4 Vict., c. 82; 18 & 19 Vict., c. 15; 23 & 24 Vict., c. 38; 27 & 28 Viet., e. 112. As an illustration of the provisions of these statutes and of the system which they establish, I quote a part of section 4 of the act of 18 & 19 Vict., c. 15. After reciting the provisions of the act of 1 & 2 Viet., c. 110, as enlarged by the act of 3 & 4 Vict., e. 82, said section enacts "that no judgment or decree, order or rule, which might be registered under said act of the first and second years of her Majesty shall affect any lands, tenements, or hereditaments, at law or in equity, as to purchasers, mortgagees, or creditors, unless and until such a memorandum or minute as in the said act mentioned shall have been left with the proper officer of the proper court, any notice of any such judgment, decree, order, or rule to any such purchaser, mortgagee, or creditor in any wise notwithstanding." The next section (sec. 5 of the same act of 18 & 19 Vict., c. 15), after re- citing provisions of the prior statutes, and explaining the same, adds : "So that notice of any judgment, decree, or rule not duly registered shall not avail against purchasers, mortgagees, or creditors as to lands, tenements, or hereditaments." § 641, 7 Greaves v. Tofleld, L. R. 14 Ch. Div. 563, 565, per Jessel, M. R., p. 571, per James, L. J.; p. 575, per Baggallay, L. J.; Lee v. Green, 6 ,De G,ex, M. & G. 155, 168, per Cranworth, L. C; Beavan v. Earl of Oxford, 6 De Gex, M. & G. 492, 499, 500; Hickson v. Collis, 1 Jones & L. 94, 113, i 643 EQXHTY JUEISPEUDENCB. 1252 try, which is substantially the same throughout all the states. The state statutes have generally provided, with variations in the detail, a mode of docketing judgments at law; and the same method has been extended in many states to equitable decrees and judgments for the recovery of money. This docketed judgment or decree is gener- ally made a lien, for a prescribed period of time, upon all lands of the judgment debtor situated within the same county, and a constructive notice to all subsequent pur- chasers and encumbrancers of such lands. Intended pur- chasers or encumbrancers are therefore obliged, for their own protection, to make a search of the official records over the period during which the statutory effect is given to the docketed judgment. In many of the states provi- sion is also made, by the statutes for the registration or recording of equitable decrees, and for the effect of such recording or registration upon those persons who subse- quently acquired interests in the property covered by the decree. § 643. In giving an interpretation to these statutes con- cerning the docketing of judgments and registration of de- crees, and in determining the questions which have arisen therefrom concerning the constructive notice created by the docket or record, and concerning any notice which may supply the want of a proper docket or record, rules have been adopted in the various states quite analogous to those established by the courts with reference to the recording or registration of deeds, mortgages, and other instruments. The statement and discussion of these rules and of the questions connected therewith, so far as they faU within per Lord St. Leonards; Shaw v. Neale, 6 H. L. Cas. 581; reversing 20 Beav. 157. For the statutory system of registration established in Ireland, see the following acts: 3 & 4 Vict., c. 105; 11 & 12 Vict., e. 120; 13 & 14 Vict., c, 29; 34 & 35 Vict., c. 72; and Hickson v. CoUis, 1 Jones & L. 94, 113 ; Eyre v. McDowell, 9 H. L. Cas. 619 ; see, also, the English editor's note to Le Neve v. Le Neve, 2 Lead. Cas. Eq.,-4th Am. ed., sees. 140, 141, 142. 1253^ CONCEENING NOTICE. § 644 the domain of equity, will therefore find their proper place under the next following section concerning priorities.^ ^ § 644. 6. By Registration or Recording of Instruments. The subject to be considered under this subdivision is one of the highest practical importance, both at law and in equity, throughout all the American states. While the de-* cisions of the English courts growing out of the local regis- tration statutes of that country are few, and of little assist- ance to the American lawyer, those arising under our own statutory system are exceedingly numerous, and often in- volve questions of great magnitude and difficulty. Many of the questions suggested by these recording acts, and among them those which are the most difficult, and which have occasioned the greatest conflict of judicial opinion, properly belong to the general subject of priorities, and will be examined in the subsequent sections which treat of Priorities and the Effects of Notice, and of Purchasers in Good Faith without Notice. In the present subdivision I shall simply consider the effect of the statutory record as a notice ; when, how far, and of what the record is a notice ; and when and how far any other notice may supply the want of that created by a statutory registration. The whole discussion will be separated into the following sub- ordinate heads: 1. Statement of the statutory system; 2. General theory, object, and scope of the' statutes ; 3. Eequi- sites of the record, in order that it may be a constructive notice; 4. Of what the record is a constructive notice; 5. To whom it is a notice; 6. Effect of other kinds of notice in the absence of a record; 7. What kind of notice is suffi- cient to produce such effect; 8. Judgments under the re- cording acts. §643, 1 See f)os« J § 721-724. § 643, (a) See, also, on the subject sions in names, and of omission to of notice by docketing judgments, index or imperfect indexing, mono- including the effect of irregrularities graphic note, 87 Am. St. Rep. 665- in the docketing, of errors or omis- 673. § 645 EQUITY JURISPRUDENCE. 1254 § 645. (1) The Statutory System in England.— No gen- eral system of registration has ever been adopted in Eng- land. For certain special reasons, however, local statutes were passed early in the last century providing for a regis- tration in two or three counties or parts of counties. Other ^statutes have extended the method of registration into Ire- land. The provisions of the different English statutes are the same. They enact, in substance, that a "memorial" of all deeds and conveyances affecting lands within the speci- fied county .may be registered in a prescribed manner, and that ' ' every such conveyance shall be adjudged fraudulent and void against any subsequent purchaser or mortgagee for a valuable consideration," unless a memorial thereof shall be registered before the registering of a memorial of the conveyance under which such subsequent purchaser or mortgagee shall claim.^ It will be observed that this lan- guage providing for registration is permissive, not compul- sory ; and nothing is said concerning the registry operating as a notice, either actual or constructive, to subsequent purchasers and encumbrancers. In construing this stat- § 645, 1 See Kegistry Act for the West Riding of Yorkshire, 2 & 3 Anne, e. 4; Registry Act for Middlesex, 7 Anne, c. 120; for North Riding of Yorkshire, 8 Geo. II., c. 6; for East Riding of Yorkshire, 6 Anne, c. 35; for Kingston-upon-HuU, 6 Anne, c. 35; Irish Registry Act, 6 Anne, c. 2. There is a very substantial difference between the wording of the Irish act and that of the English statutes, and it more resembles in its design and effect the system which prevails in the United States. It expressly gives an absolute priority to the deed or conveyance first registered, and a subse- quent purchaser for value holding the legal estate, even though he has no actual notice of an equitable estate previously registered, is nevertheless bound by such prior registered interest, and compelled to give effect to it. In other words, the prior registry in Ireland is a constructive notice to all subsequent purchasers. In this respect the Irish act is the same in its scope and effect as the American system. See the following eases, which give a construction to this statute: Bushell v. Bushell, 1 Schoales & L. 98; Latouche v. Lord Dunsany, 1 Schoales & L. 159, 160; Thompson v. Simp- son, 1 Dru. & War. 459; Drew v. Lord Norbury, 3 Jones & L. 267; 9 Ir. Eq. 171; Mill V. Hill, 12 Ir. Eq. 107; 3 H, L. Cas. 828; Hunter v. Kennedy, 1 Ir. Ch. 148; Corbett v. Cantillon, 5 Ir. Ch. 126; In re Driscoll, 1 1. R. Eq. 285; 2 Lead. Cas. Eq., note of English editor, 4th Am. ed., 119. 1255 CONCEKNING NOTICE. § 646 lite, the English courts have given a broad meaning to the word "conveyance," in the clause which provides for the registration of any "deed or conveyance." They hold that it denotes any instrument which carries from one person to another an interest, whether legal or equitable, in land. It would therefore embrace any instrument in writing, though not under seal, which created an equitable lien or charge, as well as one creating an estate.^ § 646. In the United States. — ^While there is some varia- tion in the detail among the statutes of the various states, the central conception and essential plan of the system are substantially the same in all. Many of the acts provide in general terms for the recording -of deeds and conveyances ; others specifically enumerate the kinds of writings which may be registered, including deeds, leases, mortgages, as- signments of mortgages and of leases, agreements for the purchase and sale of land, and in fact all species of written instruments by which any estate, interest, or encumbrance, legal or equitable, in or upon land, is created or trans- § 645, 2 Credland v. Potter, L. E. 10 Ch. 8, 12, per Cairns, L. C. A mortgage had been given which provided for future advances to be made by the mortgagee, and for his being secured by it with respect to such ad- vances. This mortgage had been duly registered under the West Riding act. The mortgagee made a subsequent further advance, and to secure its payment the mortgagor gave a written instrument, not under seal, creating a further charge upon the premises. The question arose whether this instrument should have been registered so as to give the mortgagee priority over a subsequent second mortgage which was registered. The court held that the instrument was a "conveyance," and should have been registered. Lord Cairns said : "There is no magical meaning in the word 'conveyance'; it denotes an instrument which carries from one person to another an interest in land. Now, an instrument giving to a person a charge upon land gives him an interest in the land; if he has a mortgage already, it gives him a further interest; and so, whether made in favor of a person who has already a charge, or of another person, it is a conveyance of an interest in the land." I see no reason why this decision should not apply, and why the same interpretation should not be given, to the word "conveyance," when it is used in the analogous statutes of the American states. § 646 EQUITY JUEISPRUDENCE. 1256 ferred.i In most of the states this language authorizing a registration is permissive only, but in a few of them it is virtually mandatory. Every such conveyance or other in- § 646, 1 Tor additional cases interpreting these statutes, see post, § 664. Some knowledge of the material portions of these different statutory forms is absolutely essential to any correct imderstanding of the rules laid down by the courts. The decisions in one state might be entirely misleading in another state, unless the peculiar statutory language in the first were ob- served. As mentioned in the text, several types of legislation prevail in the various states. I have arranged the statutes into classes, according to these types, which are determined by the material and controlling terms found in each. The statutes of each class are substantially alike, with re- spect to these main features, although their language may vary consider- ably. In almost every state it is enacted that filing or depositing the instrument for record in the proper ofl&ee has the same effect with respect to notice, priority, etc., as the actual registration produces. First Class. — ^No period is specified within which the record must be made. No express mention is made of notice, actual or constructive, in place of a record. The material provision is, in substance, that every conveyance not duly recorded shall be void as against subsequent purchasers or mortgagees in good faith and for a valuable consideration whose conveyance is first duly recorded. In several of these states, creditors are joined with subsequent purchasers. In some, "conveyance" includes every instrument affecting land ; and assignments of mortgages are often expressly mentioned in stat- utes belonging to all the classes. New York.«—2 Rev. Stats., p. 1119, sec. 165; 1 Fay's Dig. of Laws 1876, p. 580. See Westbrook v. Gleason, 79 N. Y. 23, and cases cited; -Judson v. Dada, 79 N. Y. 373; Page v. Waring, 76 N. Y. 463; Lacustrine etc. Co. v. Lake Guano etc. Co., 82 N. Y. 476; Hoyt v. Thompson, 5 N. Y. 347; Newton §646, (a) New TorJc. — l Eev. 9 N. E. 323; McPherson v. EoUins, Stats., p. 762, sees. 37, 38; p. 755, 107 N. Y. 316, 1 Am. St. Rep. 826, sees. 1 et seq.; 2 Eev. Stats., p. 286, 14 N. E. 411; Bradley v. Walker, sec. 61; Laws 1826, e. 313; Laws 138 N. Y. 291, 33 N. E. 1079; Kirsch 1843, c. 199; 4 Eev. Stats., 8th ed., v. Tozier, 143 N. Y. 390, 42 Am. St. 2469. Sec Jackson v. Eiee, 3 Wend. Eep. 729, 38 N. E. 375, Oliphant v. 180, 20 Am. Dec. 683; Ackernian v. Burns, 146 N. Y. 218, 40 N. E. 980. Hunsicker, 85 N. Y. 43, 49, 39 Am. See, also, Gay v. Hudson Eiver Elec- Rep. 621; Tarbell v. West, 86 N. Y. trie Power Co., 190 Fed. 773. The 280; Mutual Life Ins. Co. v. Dake, assignment of a mortgage is within 87 N. Y. 257; Bacon v. Van Schoon- the operation of the statute: Brew- hover, 87 N. Y. 447; Parker v. Con- ster v. Carnes, 103 N. Y. 556, 9 ner, 93 N. Y. 118, 45 Ain. Rep. 178; N. E. 323; Bacon v. Van Schoon- Brewster v. Carnes, 103 N. Y. 556, hoveu, 87 N. Y. 447. 1257 CONCERNING NOTICE. §646 strument, unless recorded, is declared to be void as iagainst subsequent purchasers or encumbrancers in good faith for a V. McLean, 41 Barb. 285; Schutt v. Large, 6 Barb. 373; Truseott y. King, 6 Barb. 346 ; Tort v. Burch, 6 Barb. 60. b California."— Ci-v. Code, sees. 1107, 1213-1217, 2934, 2935, 2950. See Odd Fellows' Sav. Bank v. Banton, 46 Cal. 603 ; McMinn v. O'Connor, 27 Cal. 238; Pogarty v. Sawyer, 23 Cal. 570; Woodworth v. Guzman, 1 Cal. 203; Call v. Hastings, 3 Cal. 179; Bird v. Dennison, 7 Cal. 297; Chamber- lain V. BeU, 7 Cal. 292, 68 Am. Dec. 260; Dennis v. Burritt, 6 Cal. 670; Hunter v. Watson, 12 Cal. 363, 73 Ain. Dec. 543; McCa;be v. Grey, 20 Cal. 509; Snodgrass v. Eicketts, 13 Cal. 359; Landers v. Bolton, 26 Cal. 393; Frey v. Clifford, 44 Cal, 335 ; Packard y. Johnson, 51 Cal. 545 ; WUcoxson V. Miller, 49 Cal. 193; Patterson v. Donner, 48 Cal. 369; Long v. Dollar- hide, 24 Cal. 218; Fair v. Stevenot, 29 Cal. 486; Mahoney v. Middleton, 41 Cal. 41; Jones v. Marks, 47 Cal. 242; O'Kourke v. O'Connor, 39 Cal. 442; Smith v. Yule, 31 Cal. ISO; Thompson v. Pioche, 44 Cal. 508; Lawton v. Gordon, 37 Cal. 202; Vassault v. Austia, 36 Cal. 691. Colorado.^ — Gen. Laws, p. 139, c. 18, sec. 17. § 646, (b) Alaska. — Waskey v. Countj; Bank of San Luis Obispo v Chambers, 224 U. S. 564, 56 L. Ed. 885, 32 Sup. Ct. 597; see Act of June 6,' 1900, 31 V. S. Stats, at L. 321, 505, chap. 786, title 3, § 98. §646, (e) California. — Wolf v. Fogarty, 6 Cal. 224, 65 Am. Dec. 509; Chamberlain v. Bell, 7 Cal. 293, • 68 Am. Dec. 260; Hassey v. Wilke, 55 Cal. 525; Donald v. Seals, 57 Cal. 399; McNeil v. Polk, 57 Cal. 323; Meherin v. Oaks, 67 Cal. 57, 7 Pac. 47; Scott V. Sierra Lumber Co., 67 Cal. 71, 7 Pac. 131; Frink v. Eoe, 70 Cal. 296, 11 Pac. 820; Karns v. Olney, 80 Cal. 90, 13 Am. St, Kep. 101, 22 Pac. 57; Emeric v. Alva- rado, 90 Cal. 444, 478, 27 Pac. 356; Warnoek v. Harlow, 96 Cal. 298, 31 Am. St. Bep. 209, 31 Pac. 166; Wat- kins V. Wilhoit, 104 Cal 395, 38 Pac. 53; Davis v. Ward, 109 Cal. 186, 50 Am. St. Rep. 29, 41 Pac. 1010; Adler v. Sargent, 109 Cal. 42, 41 Pac. 799; Rea v. Haffenden, 116 Cal. 596, 48 Pac. 716; Prouty v. Devlin, 118 Gal. 258, 50 Pae. 380; Fox, 119 Cal, 61, 51 Pac. 11; Wood ward V. Brown, 119 Cal. 283, 63 Am, St. Rep. 108, 51 Pae. 2, 542; Lee v Murphy, 119 Cal. 364, 51 Pac. 549 Commercial Bank of Santa Ana v, Pritehard, 126 Cal. 600, 59 Pae. 130 Cady V. Purser, 131 Cal. 552, 82 Am St. Rep. 391, 63 Pac. 844. See, also, Bobinson v. Muir, 151 Cal. 118, 90 Pac. 521; Bothiu v. California Title Ins. & Trust Co., 153 Cal. 718, Ann. Cas. 1914D, 634, 96 Pac. 500; Zenda Min. & Mill Co; v. Tiflfen, 11 Cal. App. 62, 104 Pac. 10; Sanguinetti v. Eossen, 12 Cal. App. 623, 107 Pac. 560; McCarthy v. Moir, 12 Cal. App. 441, 107 Pac. 628; House v. Ponee, 13 Cal App. 279, 109 Pae. 161; Pol- lard V. Eebman, 162 Cal. 633, 124 Pac. 235; Shurtlefe v. Kehrer, 163 Cal. 24, 124 Pac. 724; Standard Oil Co. V. Slye, 164 Cal. 435, 129 Pac. 589; Parkside Eealty Co. v. Mc- Donald, 1C6 Cal. 426, 137 Pac. 21. §646, (d) Colorado.— MOIb's Stats. 1891, sec. 446. See Appelman v. §646 EQUITY JURISPKUDEITCE. 1258 valuable consideration whose muniments of title are first put on record. In several of the states the effect of a no- Dakota.—Rev. Code 1877, p. 341, sec. 671. Idaho.— Rev. Laws 1875, p. 601.« Michigan.* — Comp. Laws 1871, pp. 1345, 1346, see. 423. See .Doyle v. Stevens, 4 Mich. 87; Warner v. Whittaker, 6 Mich. 133; 72 Am. Dec. 65; Barrows v. Baughman, 9 Mich. 213; Willcox v. Hill, 11 Mich. 256, 263; Rood V. Chapin, Walk. Ch. 79; Godfroy v. Disbrow, Walk. Ch. 260. Minnesota.^ — Stats. 1878, p. 537, c. 40, sec. 21 ; Smith v. Gibson, 15 Minn. 89, 99; Coy v. Coy, 15 Minn. 119, 126. Gara, 22 Colo. 397, 45 Pac. 366; Annie C. Gold M. Co. v. Marks, 13 Colo. App. 248, 58 Pac. 404; Board of Commissioners v. Ingram, 31 Colo. 319, 73 Pae. 37. See, also, Mulford ■V. Rowland, 45 Colo. 172, lOO Pac. 603; Hallett v. Alexander, 50 Colo. 37, Ann. Cas. 1912B, 1277, 34 L. R. A. (N. S.) 328, 114 Pac. 490; Carroll V. Kit Carson Land Co., 24 Colo. App. 217, 133 Pac. 148. §646, (e) Idaho. — See Oregon Short Line R. Co. v. Stalker, 14 Idaho, 362, 94 Pae. 56; Harris v. Reed, 21 Idaho, 364, 121 Pac. 780. § 646, (t) Michigan. — Howell's Stats. 1882, sec. 5683. See Ander- son V. Baughman, 7 Mich. 69, 74 Am. Dec. 699; Dewey v. IngersoU, 42 Mich. 18, 3 N. W. 235; Sinclair V. Slawson, 44 Mich. 123, 38 Am. Eep. 235, 6 N. W. 207; Heim v. Ellis, 49 Mich. 241, 13 N. W. 582; Edwards v. McKernan, 55 Mich. 521, 22 N. W. 20; Ingalls v. Bond, 66 Mich. 338, 33 N. W. 404; Balen V. Mereier, 75 Mich. 42, 42 N. W. 666; Cook v. French, 96 Mich. 525, 56 N. W. 101; Williams v. Hyde, 98 Mich. 152, 57 N. W. 98; Corey v. Smalley, 106 Mich. 257, 58 Am. St. Eep. 474, 64 N. W. 13; Gordon v. Constantine Hydraulic Co., 117 Mich. 620, 76 N. W. 142; Grouse v. Mitchell, 130 Mich. 347, 97 Am. St. Eep. 479, 90 N. W. 32. See, also, Meacham v. Blaess, 141 Mich. 258, 104 N. W. 579; Grand Rapids Nat. Bank v. Ford, 143 Mich. 402, 114 Am. St. Eep. 66«, 8 Ann. Cas. 102, 107 N. W. 76; People v. Burns, 161 Mich. 169, 137 Am. St. Eep. 466, 125 N. W. 740; Johnson v. Cook, 179 Mich. 117, 146 N. W. 343. § 646, (s) Minnesota. — ^Bufman v. James, 34 Minn. 547, 27 N. W. 66; Geib V. Reynolds, 35 Minn. 331, 28 N. W. 923; Bailey v. Galpin, 40 Minn. 319, 41 N. W. 1054; Byers v. Orensstein, 42 Minn. 386, 44 N. W. 129; Bank of Benson v. Hove, 45 Minn. 40, 47 N. W. 449; Marston v. Williams, 45 Minn. 116, 22 Am. St. Eep. 719, 47 N. W. 644; Cable v. Minneapolis Stock- Yards & P. Co., 47 Minn. 417, 50 N. W. 528; Welch v. Ketchum, 48 Minn. 241, 51 N. W. 113; Sioux City & St. P. R. Co. v. Singer, 49 Minn. 301, 32 Am. St. Eep. 554, 51 N. W. 905; Sehoch v. Birdsall, 48 Minn. 441, 51 N. W. 382; Pinney v. Russell, 52 Minn. 447, 54 N. W. 484; St. Paul Title Ins. & Tr. Co. v. Berkey, 52 Minn. 497, 55 N. W. 60; Miller v. Stod- dard, 54 Minn. 486, 56 N. W. 131; Roussain v. Norton, 53 Minn. 560, 55 N. W. 747; Beardsley v. Day, 54 Minn. 504, 55 N. W. 46; Bank of Ada V. Gullikson, 64 Minn. 91, 66 1259 CONCERNING NOTICE. §646 tice of a prior unregistered instrument is expressly recog- nized by the statute ; in a few of them such a notice is re- Montana.^—Lsiws 1872, pp. 400, 401. Nevada* — Comp. Laws 1873, p. 38, sees. 252-254. See Grellet v. Heilshom, 4 Nev. 526. North CaroUna.i—BeAtle's Kev. 1873, p. 354, o. 35, sec. 12. Unless re- corded, conveyance is void as against creditors and subsequent purchasers for value. No notice whatever will take the place of a record: Robinson N. W. 131; Kellogg v. Kelly, 69 Minn. 124, 71 N. W. 924; Eobertson V. Eentz, 71 Minn. 489, 74 N. W. 133. See, also, Huitink v. Thomp- son, 95 Minn. 392, 111 Am. St. Kep. 476, 5 Ann. Cas. 338, 104 N. W. 237; Niles V. Cooper, 98 Minn. 39, 13 L. B. A. (N. S.) 49, 107 N. W. 744; Foss V. DuUam, 111 Minn. 220, 126 N. W. 820; Board of Education v. Hughes, 118 Minn. 404, 41 L. R. A. (N. S.) 637, 136 N. W. 1095; Berk- ner v. D'Evelyn, 119 Minn. 246, 137 N. W. 1097; Crowley v. Norton, 131 Minn. 99, 154 N. W. 743; Shraiberg v. Hanson (Minn.), 163 N. W. 1032; United States v. Wesely, 189 Fed. 276. § 646, (li) Montana.— Middle Creek Ditch Co. V. Henry, 15 Mont. 558, 39 Pae. 1054; Baker v. Bartlett, 18 Mont. 446, 56 Am. St. Eep. 594, 45 Pac. 1084. See, also, Cori^ish v. Woolverton, 32 Mont. 456, 108' Am. St. Eep. 598, 81 Pac. 4; Dubbels v. Thompson, 49 Mont. 550, 143 Pac. 986. §646, (1) Nevada. — Gen. Stats. 1885, see. 2595. § 646, (J) North Carolina. — Code, §§ 3758, 3664; Code 1883, sec. 1254. See Metts v. Bright, 4 Dev. & B. 173, 32 Am. Dec. 683; Davis v. Inscoe, 84 N. C. 396; Hinton v. Leigh, 102 N. C. 28, 8 S. E. 890; Killebrew v. Hines, 104 N. C. 182, 17 Am. St. Eep. 672, 10 S. E. 159, '251; Duke v. Markham, 105 N. C. 131, 18. Am. St. Rep. 889, 10 S. E. 1003, 1017; Cunninggim v. Peterson, 109 N. C. 33, 13 S. E. 714; Cowen v. Withrow, 109 N. C. 636, 13 S. E. 1022; Long v. Crews, 113 N. C. 256, 18 S. E. 499; Allen v. Bolen, 114 N. C. 560, 18 S. B. 560; Davis v. Whitaker, 114 N. C. 279, 41 Am. St. Eep. 793, 19 S. E. 699; Quinnerly v. Quinnerly, 114 N. C. 145, 19 S. E. 99; Maddox v. Arp, 114 N. C. 585, 19 S. E. 665; Barber v. Wadsworth, 115 N. C. 29, 20 S. E. 178; Hooker V. Nichols, 116 N. C. 157, 21 S. E. 207; Cowen v. Withrow, 116 N. C. 771, 21 S. E. 676; Bostick v. Young, 116 N. C. 766, 21 S. E. 552; Eoyster V. Lane, 118 N. C. 156, 24 S. E. 796; Allen V. Allen, 121 N. C. 328, 28 S. E. 513; Bernhardt v. Brown, 122 N. C. 587, 65 Am. St. Eep. 725, 29 S. E. 884; Dewey Vi. Sugg, 109 N. C. 328, 14 L. E. A. 393, 13 S. E. 923; McAllister v. Purcell, 124 N. C. 262, 32 S. E. 715; Hallyburton v. Slagle, 130 N. C. 482, 41 S. E. 877; Bell v. Couch, 132 N. C. 346, 43 S. E. 911; Colling v. Davis, 132 N. C. 106, 43 S. E. 579. See, also. Eureka Lum- ber Co. V. Satehwell, 148 N. C. 316, 62 S. E. 310; Combes v. Adams, 150 N. C. 64, 63 S. E, 186; Smith v. Ful- ler, 152 N. C. 7, 67 S. E. 48; Wood v. Lewey, 153 N. C. 401, 69 S. E. 268; Withrell v. Murphy, 154 N. C. 82, 69 S. E. 748; Commercial & Farm- ers' Bank v. Scotland Neck Bank, 158 N. C. 238, 73 S. E. 157. §646 EQUITY JUBISPBTJDENCE. 1260 quired to be "actual"; while in the majority the legislation V. Willoughby, 70 N. C. 358; Fleming v. Burgin, 2 Ired. Eq. 584 j Leggett V. Bullock, Busb. 283. k Washington} — ^Laws 1859, p. 299. TriscowsJn.=»— Rev. Stats. 1871, p. 1147, see. 27. See Ely v. Wilcox, 20 Wis. 551, 91 Am. Dec. 436. Possession a constructive notice : Ely v. Wil- cox, 20 Wis. 551, 91 Am. Dec. 436; Stewart v. McSweeney, 14 Wis. 468; Fery v. Pfeiffer, 18 Wis. 510; Gee v. Bolton, 17 Wis. 604. § 646, (k) North Dakota. — Sarles V. M&Gee, 1 N. D. 365, 26 Am. St. Rep. 633, 48 N. W. 231; Eoliy v. Bismarck Nat. Bank, 4 N. D. 156, 50 Am. St. Kep. 633, 59 N. W. 719; Doran v. Dazey, 5 N. D. 167, 57 Am. St. Hep. 550, 64 N. W. 1023; Hen- niges v. Paschke, 9 N. D. 489, 81 Am. St. Bep. 588, 84 N. W. 350. See, also. Merchants' State Bank of Fargo V. Tufts, 14 N. D. 238, 116 Am. St. Rep. 682, 103 N. W. 760; Vallely v. First Nat. Bank of Graf- ton, 14 N. D. 580, 116 Am. St. Rep. 700, 5 L. R. A. (N. S.) 387, 106 N. W. 127; Patnode v. Deschenes, 15 N. D. 100, 106 N. W. 573; Goas V. Herman, 20 N. D. 295, 127 N. W. 78; Adam v. McClintock, 21 N. D. 488, 131 N. W. 394; Styles v. Theo. P. Scotland & Co., 22 N. D. 469, 134 N. W. 708; Simonson v. Wenzel, 27 N. D. 638, 147 N. W. 804; Atlas Lumber Co. v. Canadian-American Mtge. & T. Co., 36 N. D. 39, 161 N. W. 604. §646, (1) Washington. — Ritchie v. Griffiths, 1 Wash. 429, 22 Am. St. Rep. 155, 12 L. R. A. 384, 25 Pac. 341; Howard v. Shaw, 10 Wash. 151, 38 Pae. 746; Malbon v. Grow, 15 Wash. 301, 46 Pac. 330; Congrega- tional Church Bldg. Soc. v. Scandi- navian Free Church, 24 Wash. 433, 64 Pac. 750. See, also,' Swanstrom v. Washington Trust Co., 41 Wash. 561, 83 Pac. 1112; Attebery v. O'Neil, 42 Wash. 487, 85 Pac. 270; Dial V. Inland Logging Co., 52 Wash. 81, 100 Pac. 157; Kinney v. McCall, 57 Wash. 545, 107 Pae. 385; George M. McDonald & Co. v. Johns, 62 Wash. 521, 33 L. R. A. (N. S.) 57, 114 Pae. 175; Ross v. Kenwood Investment Co., 73 Wash. 131, 131 Pac. 649; Ackerson v. Elliott (Wash.), 165 Pac. 899. Under the Washington statute, BaJ. Ann. Codes, § 4535, "All deeds . . . shall be re- corded . . . and shall be valid as against iona fide purchasers from the date of their filing for record in such office, and when so filed shall be notice to all the world," a bona fide purchaser is protected if he takes his deed before the deed of the earlier purchaser is recorded, al- though the earlier deed is recorded before the later deed: Swanstrom v. Washington Trust Co., 41 Wash. 561, 83 Pac. 1112; compare Wiscon-. sin cases infra. § 646, (m) Wisconsin. — Sanborn and Berryman's Stats. 1889, sec. 2241. See Erwin v. Lewis, 32 Wis. 276; Girardin v. Lampe, 58 Wis. 267, 16 N. W. 614; Mackey v. Cole, 79 Wis. 426, 24 Am. St. Rep. 728, 48 -N. W. 520; Hiles v. Attee, 80 Wis. 219, 27 Am. St. Rep. 32, 49 N. W. 816; Davis v. Steeps, 87 Wis. 472, 41 Am. St. Rep. 51, 23 L. R. A. 818, 58 N. W. 769; McDonald v. Sul- livan, 135 Wis. 361, 116 N. W. 10; 1261 CONCEBNING NOTICE. §646 is silent upon the subject of notice in the place of record- Connectieut.'" — ^Rev. 1875, p. 353, sec. 11 : Quite different in terms from the foregoing. No conveyance is eflfeetual against any other person except the grantor and his heirs, until' recorded. Record of an instrument creating an equitable interest is notice to every one of such interest. See Hartmyer V. Gates, 1 Root, 61 ; Ray v. Bush, 1 Root, 81 ; Franklin v. Gannon, 1 Root, 500; Welch v. Gould, 2 Root, 287; Judd v. Woodruff, 2 Root, 298. Pri- ority : St. Andrews v. Lockwood, 2 Root, 239 ; Hall's Heirs v. Hall, 2 Root, 383 ; Beers v. Hawley, 2 Conn. 467 ; Hinman v. Hinman, 4 Conn. 575 ; Hine V. Robbins, 8 Conn. 342; Wheaton v. Dyer, 15 Conn. 307. Defective deed no notice : Watson v. WeUs, 5 Conn. 468 ; Carter v. Champion, 8 Conn. 549, 21 Am. Dec. 695; Sumner v. Rhoda, 14 Conn. 135. Equitable conveyance : Dickenson v. Glenney, 27 Conn. 104. New Hampshire." — Gen. Laws 1878, p. 323, e. 135, sec. 4: Like Con- necticut. See Patten v. Moore, 32 N. H. 382, 384. Bhode Island.v— Gen. Stats. 1872, p. 350, e. 162, sec. 4: Like Connecticut. Vermont.'' — Gen. Stats. 1870, p. 448, sec. 7: Like Connecticut. See Griswold v. Smith, 10 Vt. 452. Marling v. Nommensen (Marling v. Milwaukee Eealty Co.), 127 Wis. 363, 115 Am. St. Kep. 1017, 7 Ann. Cas. 364, 5 L. R. A. (N. S.) 412, 106 N. W. 844 (statutes so interpreted that the second purchaser, the first purchase being unrecorded, is pro- tected as a bona fide purchaser, though the second purchaser's deed in fact is not recorded until after the first purchaser's deed; compare Washington cases, supra. § 646, (n) Connecticut. — Gen. Stats. 1888, sec. 2961. See Booth v. Barnum, 9 Conn. 286, 23 Am. Dec. 339; Beach v. Osborne, 74 Conn. 405, 50 Atl. 1019; Wheeler v. Young (Conn.), 55 Atl. 670. §646, (o) New Hampshire. — Sal- vage V. Haydoek, 68 N. H? 484, 44 Atl. 696. § 646, (P) Shode Island. — Pub. Stats. 1882, p. 443, see. 4. See Cook V. Cook (K. I.), 43 Atl. 537. § 646, (a) South DaTcota. — Comp. Laws, §§ 3293, 3272; Cannon v. Dem- ing, 3 S. D. 421, 53 N. W. 863; Par- rish V. Mahany, 10 S. D. 276, 66 Am. St. Rep. 715, 73 N. W. 97; Citi- zens' Bank v. Shaw, 14 S. D. 197, 84 N. W. 779; Shelby v. Bowden (S. D.), 94 N. W. 416. See, also, Tilton V. Mormann, 22 S. D. 324, 117 N. W. 377; FuUerton Lumber Co. V. Tinker, 22 S. D. 427, IS Ann. Cas. 11, 118 N. W. 700. §646, (r) Vermont.— UeY. Laws 1880, see. 193L See Ludlow v. Gill, N. Chipman (Vt.), 33, 1 Am. Dec. 695; Sawyer v. Adams, 8 Vt. 172, 30 Am. Dec. 459; Bigelow v. Topliff, 25 Vt. 273, 60 Am. Dec. 264; John- son V. Burden, 40 Vt. 567, 94 Amj Dec. 436; Morrill v. Morrill, 53 Vt. 74, 38 Am. Rep. 659; Lovejoy v. Raymond, 58 Vt. 509, 2 Atl. 156; Johnson v. Valido Marble Co., 64 Vt. 337, 25 Atl. 441; Howard v. Clark, 71 Vt. 424, 76 Am. St. Rep. 782; Hunt v. Allen, 73 Vt. 322, 50 Atl. 1103. See, also, Van Dyke y. Cole, 81 Vt. 379, 70 Atl. 593, 1103. 646 EQUITY JUEISPBUDENCE. 1262 ing, and its effect is thus left to judicial construction. It Second Class. — No period is specified -within which a record must be made. It is provided in substance that conveyances not recorded are void as to subsequent purchasers and encumbrancers in good faith without no- tice whose instruments are first recorded. In some states, creditors are added to subsequent purchasers. s Arkansas* — Dig. 1874, p. 275, sec. 861 : No deed or instrument for the conveyance of any real estate, or by which the title thereto may be affected, shall be valid against a subsequent purchaser for a valuable consideration without actual notice or against any creditor, unless it be filed for record. See Byers v. Engles, 16 Ark. 543 ; Hamilton v. Fowlkes, 16 Ark. 340 ; also Dig. 1874, p. 770, sec. 4288. Mortgages are a lien only from time of filing for record : See Dacoway v. Gait, 20 Ark. 190. Delawarje.^ — Laws 1874, p. 504, c. 83, sees. 17, 19 : As to mortgages, like Arkansas. Deeds must be recorded within one year, or else invalid against •subsequent fair creditors, mortgagees, or purchasers for a valuable con- sideration and without notice. Florida."^ — Bush's Dig., p. 151 : Unless recorded, void as against creditors nnd subsequent purchasers for value and without notice. § 646, (») Arizona. — Kev. Stats., pars. 2601, 2621; Eeid v. Kleyen- steuber (Ariz.), 60 Pac. 879. See, also, Luke v. Smith, 13 Ariz. 155, 108 Pac. 494. §646, (t) ArTcansas. —Dig. 1884, sec. 671. See Ford v. Burks, 37 Ark. 91; Dodd v. Parker, 40 Ark. 536; Martin v. Ogden, 41 Ark. 187; Meyer v. Portis, 45 Ark. 420; Tur- man v. Bell, 54 Ark. 273, 26 Am. St. Rep. 35, 15 S. "W. 886; Fincher v. Harregan, 59 Ark. 151, 24 L. R. A. 543, 26 S. W. 821; Allen West Comm. Co. v. Brown, 69 Ark. 163, 61 S. W. 913; Kendall v. J. I. Porter Lumber Co., 69 Ark. 442, 64 S. W. 220; Penrose v. Doherty, 70 Ark. 256, 67 S. W. 398. See, also, Eozell V. Chicago Mill & Lumber Co., 76 Ark. 525, 89 S. W. 469; Thompson V. Bowen, 87 Ark. 490, llj S. "W. 26; Singer v. Naron, 99 Ark. 446, 138 S. W. 958; Abbott v. Parker, 103 Ark. 425, 147 S. W. 70; White V. Moffett, 108 Ark. 490, 158 S. W. 505; Hebert v. Pellhelmer, 115 Ark. 366, 171 S. W. 144; Driver v. Lacer, 124 Ark. 150, 186 S. W. 824; Neas V. Whitener-London Realty Co., 119 Ark. 301, Ann. Cas. 1917B, 780, 178 S. W. 390. § 646, (o) Delaware. — The time limit has been reduced to three montlis: See Mathieson v. Craven, 228 Fed. 345. , §646, (T) Florida. — McClellan's Dig. 1881, p. 215; Rogers v. Mun- nerlyn, 36 Fla. 591, 18 South. 669; McKeown v. Collins, 38 Fla. 276, 21 South. 103; Stockton v. National "Bank of Jacksonville (Fla.), 3i South. 897. See, also, Mansfield v. Johnson, 51 Fla. 239, 120 Am. St. Rep. 159, 40 South. 196; Axtell v. Smedley & Bodgers Hardware Co., 59 Fla. 430, 52 South. 710; Taylor v. American National Bank of Pen- sacola, 64 Fla. 525, 60 South. 783; Cawthon v. Stearns Culver Lumber 1263 CONCERNING NOTICE. §646 ■would be impossible to give in the text any more exact ac- Illinois.'" — ^Hurd's Rev. Stats. 1880, p. 271, sec. 30 : Unless recorded, are void as against creditors and subsequent purchasers for value without notice. lowa.^ — ^Miller's Rev. Code 1880, p. 527, sec. 1941: Substantially same as last. See, concerning notice, Senter v. Turner, 10 Iowa, 517 ; Brinton v. Co., 60 na. 313, 53 South. 738; Tyler v. Johnson, 61 Fla. 730, 55 South. 870. §646, (w) 7Himoi«.— Stats. 1889, e. 30, sec. 30. See Carpenter v. Mitchell, 54 111. 126; Alvis v. Mor- rison, 63 111. 181, 14 Am. Rep. 117; Shannon v. Hall, 72 111. 354, 22 Am. Kep. 146; Hosmer v. Campbell, 98 111. 578; Kerfoot v. Cronin, 105 111. 609; Warder v. Cornell, 105 111. 169; Grundies v. Eeid, 107 111. 304; Ha- worth V. Taylor, 108 111. 275; Pry v. Pry, 109 111. 466; Stokes v. Biley, 121 111. 166, 11 N. E. 877; Franklin Sav. Bank v. Taylor, 131 111. 376, 23 N. E. 397; Lagger v. Mutual Union L. & B. Assn., 146 111. 283, 33 N. E. 946; Hagan v. Varney, 147 111. 281, 35 N. E. 219; Stevens v. Shannahan, 160 111. 33a, 43 N. E. 350; Robertson V. Wheeler, 162 111. 566, 44 N. E. 870; Waughop v. Bartlett, 16S HI. 124, 46 N. E. 124; Lomax v. Picker- ing, 165 111. 431, 46 N. E. 238; Slo- eum v. O'Day, 174 111. 215, 51 N. E. 243; Mack v. Mcintosh, 181 111. 633, 54 N. E. 1019; Lanphier v. Des- mond, 187 111. 370, 58 N. E. 343 (aflf. 86 111. App. 101); Gardner v. Cohn, 191 111. 553, 61 N. E. 492 (afe. 95 HI. App. 26); Bliss v. Seeley, 191 111. 461, 61 N. E. 524; Schaeppi v. Glade, 195 111. 62, 62 N. E. 874 (aff. 95 111. App. 500); Ogden B. & L. Assn. v. Mensch, 196 111. 554, 99 Am. St. Rep. 330, 63 N. E. 1049 (aff. 99 111. App. 67); Booker v. Booker (111.), 70 N. E. 709; Mansfield v. Excelsior Refining Co., 135 U. 8. 326, 10 Sup. Ct. 825; Lewis V. Earnhardt, 43 Fed. 854. See, also, Eohde v. Eohn, 232 111. 180, 83 N. E. 465; Blake v. Blake, 260 111. 70, 102 N. E. 1007; Morri- son V. Miles, 270 111. 41, 110 N. E. 410; Thorpe v. Helmer, 275 111. 86, 113 N. E. 954. §646, (x) Iowa.— MeClain's Code 1888, see. 3112. See Jones v. Berk- shire, 15 Iowa, 248, 83 Am. Dec. 412; Barney v. McCarthy, 15 Iowa, 510, 83 Am. Dec. 427; Cummings v. Long, 16 Iowa, 41, 85 Am. Dec. 502; Hodgson V. Lovell, 25 Iowa, 97, 95 Am. Dec. 775; Heber v. Bossart, 70 Iowa, 718, 722, 29 N. W. 608; Hib- bard v. Zenor, 75 Iowa, 471, 9 Am. St. Rep. 497, 39 N. W. 714; ^tna Life Ins. Co. v. Hesser, 77 Iowa, 381, ' 14 Am. St. Rep. 297, 4 L. R. A. 122, 42 N. W. 325; Milner v. Nelson, 86 Iowa, 452, 41 Am. St. Rep. 506, 53 N. W. 405; Sims v. Gray, 93 Iowa, 38, 61 N. W. 171; Sherod v. Ewell, 104 Iowa, 253, 73 ,N. W. 493; Hig- gins V. Dennis, 104 Iowa, 605, 74 N. W. 9; Pinnkney v Pinckney, 114 Iowa, 441, 87 N. W. 406; Blackman v. Henderson, 116 Iowa, 578, 56 L. R. A. 902, 87 N. W. 655; Koch v. West, 118 Iowa, 468, 96 Am. St. Rep. 374, 92 N. W. 663; Dickinson V. Crowell, 120 Iowa, 254, 94 N. W. 495; Farmers & Merchants' Bank v. Stoekdale (Iowa), 96 N. W. 732. See, also, Liudberg v. Thomas, 137 Iowa, 48, 114 N. W. 562; James v. Newman, 147 Iowa, 574, 126 N. W. 781; Loser v. Plainfield Sav. Bank, 149 Iowa, 672, 31 L. IR,. A. (N. S.) 1112, 128 N. W. 1101. § 646 EQUITY JUKISPBUDENCB. 1264 count of tMs legislative system, but I have added in the Seevers, 12 Iowa, 389; Dargin v. Beeker, 10 Iowa, 571; Koons v. Grooves, 20 Iowa, 373; Bringholfi v. Munzenmaier, 20 Iowa, 513; Gardner v. Cole, 21 Iowa, 205; Willard v. Kramer, 36 Iowa, 22. Subsequent purchasers: Calvin v. Bowman, 10 Iowa, 529; Scoles v. Wilsey, 11 Iowa, 261; MiUer v. Bradford, 12 Iowa, 14; Bostwick v. Powers, 12 Iowa, 456; English v. Waples, 13 Iowa, 570; Haynes v. Seachrest, 13 Iowa, 455; Breed v. Conley, 14 Iowa, 269; 81 Am. Dec. 485; Stewart v. Huff, 19 Iowa, 557; Gower v. Doheney, 33 Iowa, 36. JSroTCSos.y— Dassler's Comp. Laws 1879, p. 212, sec. 1043 : Filing for rec- ord is notice. Until so filed, instruments are not valid except between the parties and as to persons having actual notice. See, concerning notice. School Dist. V. Taylor, 19 Kan. 287; Simpson v. Munder, 3 Kan. 172; Brown v. Simpson, 4 Kan. 76; Claggett v. Crall, 12 Kan. 393, 397; Wicker- sham V. Chicago etc. Co., 18 Kan. 487, 26 Am. Rep. 784; Johnson v. Clark, 18 Kan. 157, 164; Jones v. Lapham, 15 Kan. 540. Kentucky.'^ — Gen. Stats. 1873, p. 256, sec. 10 : Until filed for record are invalid against subsequent purchasers for value without notice, or against creditors. See Graves v. Ward, 2 Duvall, 301. Effect of notice: Fore- paugh V. Appold, 17 B. Mon. 625, 631. Maine."'"' — Kev. Stats. 1871, p. 560, c. 73, sec. 8 : Unless recorded, are not valid against any one except the grantor, his heirs, devisees, and persons § 646, (y) Kansas. — Laws 1885, don, 24 Ky. (1 J. J. Marsh.) 222, 19 c. 22, sec. 20. See Milton ville State ' Am. Dec. 70; Ward v. Thomas, 81 Bank v. Kuhnle, 50 Kan. 420, 34 Ky. 452; Buekner v. Davis, 19 Ky. Am. St. Eep. 129, 31 Pac. 1067; Wis- Law Eep. 1349, 43 S. W. 445; Mar- comb V. Cubberly, 51 Kan. 580, 33 tin v. Bates, 20 Ky. Law Eep. 1798, Pae. 320; Pope v. Nichols, 61 Kan. 50 S. W. 38; Webb v. Austin, 22 230, 59 Pae. 257; American Inv. Co. Ky. Law Eep. 764, 58 S. W. 808; V. Coulter, 8 Kan. App. 841, 61 Pac. Shively v. Gilpin, 23 Ky. Law Eep. 820. See, also, Zeiner v. Edgar Zinc 2090, 66 S. W. 763. See, also. In re Co., 79 Kan. 406, 99 Pac. 614; Har- Watson, 201 Fed. 962; Tennis Coal ris V. Defenbangh, 82 Kan., 765, 109 Co. v. Asher & Hensley, 143 Ky. Pac. 681; Paris v. Pinnup, 84 Kan. 223, 136 S. W. 197; Cain v. Gray, 122, 113 Pae. 407; Kline v. Cowan, 146 Ky. 402, 142 S. W. 715. The 84 Kan. 772, 115 Pae. 587; Banister notice required to affect an antece- V. Pallis, 85 Kan. 320, 116 Pac. 822; dent creditor of a voluntary convey- Nordman v. Eau, 86 Kan. 19, Ann. anee must be actual, and construc- Cas. 1913B, 1068, 38 L. R. A. (N. S.) tive notice arising from registration 400, 119 Pae. 351. of the deed is insufiicient: Ward v. §646, {«) Kentuclcy. — Gen. Stats. Thomas, 81 Ky. 452. 1887, c. 24, see. 10. See Conn v. § 646, (aa) Maine. — See, also, Manifee, 9 Ky. (2 A. K. Marsh.) Hooper v. Leavitt, 109 Me. 70, 82 396, 12 Am. Dec. 417; Breekenridge Atl. 547; Central Trust Co. v. Bod- V. Todd, 19 Ky. (3 T. B. Mon.) 52, well Water Power Co., 181 Fed. 735. 16 Am. Dec. 83; Garrison v. Hay- 1265 CONCERNING NOTICE. §646 preceding footnote an abstract of the statutes, tlie states having actual notice. See Porter v. Sevey, 43 Me. 519 ; Goodwin v. Cloud- man, 43 Me. 577; Merrill v. Ireland, 40 Me. 569; Hanly v. Morse, 32 Me. 287; SpoflEord v. Weston, 29 Me. 140; Butler v. Stevens, 26 Me. 484; Rob- erts V. Bourne, 23 Me. 165, 39 Am. Dec. 614; Veazie v. Parker, 23 Me. 170; Pierce v. Taylor, 23 Me. 246; Rackleff v. Norton, 19 Me. 274; Law- rence V. Tucker, 7 Me. 195 ; Kent v. Plummer, 7 Me. 464. Massachusetts}'^ — Gen. Stats., p. 466, c. 89, sees. 1-3: Same as Maine. See Stetson v. Gulliver, 2 Cush. 494, 497; Dole v. Thurlow, 12 Met. 157, 163; Bayley v. Bailey, 5 Gray, 505, 510; Marshall v. Fisk, 6 Mass. 24, 30, 4 Am. Dec. 76; Coffin v. Ray, 1 Met. 212; Flynt v. Arnold, 2 Met. 619; Curtis V. Mundy, 3 Met. 405; Houghton v. Bartholomew, 10 Met. 138; Pomroy v. Stevens, 11 Met. 244; Stewart v. Clark, 13 Met. 79. Mississippi."" — ^Rev. Code 1871, p. 503. Unless filed for record, are void against creditors and subsequent purchasers for value without notice. Missouri.^^ — ^Wagner's Stats. 1872, p. 217, c. 25, sees. 25, 26 : Same as Kansas. See Reed v. Ownby, 44 Mo. 204; Valentine v. Harner, 20 Mo. 133; Davis v. Ownsby, 14 Mo. 170, 55 Am. Dec. 105. § 646, (bl») Massachusetts. — Pub. Stats. 1883, e. 120, sec. 4. See Morse v. Curtis, 140 Mass. 112, 54 Am. Eep. 456; Gillespie v. Eogers, 146 Mass. 610, 16 N. E. 711; Toupln V. Peabody, 162 Mass. 473, 39 N. E. 280; Pord v. Ticknor, 165 Mass. 276, 47 N. E. 877. § 646, (cc) Mississippi. — Code 1880, sees. 1209-1212. See Nugent V. Priebatseh, 61 Miss. 402; Man- gold V. Barlow, 61 Miss. 593, 48 Am. Eep. 84; Plant v. Shryock, 62 Miss. 821; Bank of Mobile v. T. Sav. Inst., 62 Miss. 250; Drane v. Newsom, 73 Miss. 422, 19 South. 200; Savings B. & L. Assn. v. Tart, 81 Miss. 276, 32 South. 115; Sim- mons V. Hutchinson, 81 Miss. 351, 33 South. 21; Henry Marx & Sons V. Jordan (Miss.), 36 South. 3»6. See, also, Tinnin v. Brown, 98 Miss, 378, Ann. Cas. 1913A, 1081, 53 South. 780; Baldwin v. Anderson, 103 Miss. 462, 60 South. 578. § 646, (dd) Missouri. — ^Youngblood V; Vastine, 46 Mo. 239, 2 Am. Eep. 11—80 509; Welfs v. Pressey, 105 Mo. 164, 16 S. W^ 670; Trigg v. Vermillion, 113 Mo. 230, 20 S. W. 1047; Flecken- stein V. Baxter, 114 Mo. 493, 21 S. W. 852;-Hickman v. Green (Mo.), 22 S. W. 455; Pord v. Unity Church Soc, 120 Mo. 498, 41 Am. St. Eep. 711, 23 L. E. A. 561, 25 S. W. 394; Greer v. Missouri L. & M. Co., 134 Mo. 85, 56 Am. St. Eep. 489, • 34 S. W. 1099; Ladd v. Anderson, 133 Mo. 625, 34 S. W. 872; German-Am. Bank v. Carondelet R. E. Co., 150 Mo. 570, 51 S. W. 691; Ozark Land & Lumber Co. v. Franks, 156 Mo. 673, 57 S. W. 540; Smith v. Boyd, 162 Mo. 146, 62 S. W. 439; Green v. Meyers, 98 Mo. App. 438, 72 S. W. 128; Finley v. Babb, 173 Mo. 257, 73 S. W. 180; Be Lassus v. Winn, 174 Mo. 636, 74 S. W. 635; Williams v. Butterfield (Mo.), 81 S. W- 615. See, also, Gross v. Watts, 206 Mo. 373, 121 Am. St. Eep. 662, 104 S. W. 30; Williams v. Butterfield, 214 Mo. 412, 114 S. W. 13; Shelton v. Frank- lin, 224 Mo. 342, 135 Am. St. Eep. §646 EQUITY JUEISPEUDENCE. 1266 being arranged in classes, according to the varying types of their legislation. Nebraska."" — Comp. Stats. 1881, p. 389, c. 73, sec. 16 : Unless recorded, are void against subsequent purchasers and encumbrancers in good faith and without notice who obtain the first record. See, as to constructive no- tice, Edminster v. Higgins, 6 Neb. 269 ; Galway v. Malchow, 7 Neb. 289, overruling Bennet v. Fooks, 1 Neb. 465 ; Metz v. State Bank of BrownvUle, 7 Neb. 171; Colt v. Du Bois, 7 Neb. 394; Dorsey v. Hall, 7 Neb. 465; Mans- field V. Gregory, 8 Neb. 435 ; Berkley v. Lamb, 8 Neb. 399. Consideration necessary: Merriman v. Hyde, 9 Neb. 120. Priority: Harral v. Gray, 10 Neb. 189; Lincoln etc. Ass'n v. Hass, 10 Neb, 583; Hooker v. Hammill, 7 Neb. 234; Jones v. Johnson Harvester Co., 8 Neb. 451. New Mexico.** — Comp. Laws 1865, c. 44 : Substantially same as Kansas. Tennessee.^^ — Code, sees. 2005, 2032. Unless recorded, void against ex- isting or subsequent creditors, or bona fide purchasers without notice. Fil- ing for record is notice. See Thomas v. Blackemore, 5 Yerg. 113, 124; Hays McGuire, 8 Yerg. 92, 100, Vance v. McNairy, 3 Yerg. 176, 24 Am. Dec. 553; Shields v. Mitchell, 10 Yerg. 8; May v. McKeenon, 6 Humph. 209. 537, 123 S. W. 1084; White v. Him- melberger-Harrison Lumber Co., 240 Mo. 13, 42 L. R. A. (N. S.) 151, 139 S. W. 553; Berryman v. Becker, 173 Mo. App. 346, 158 S. W. 899; Organ V. Bunnell (Mo.), 184 S. W. 102. § 646, (ee) NeirasTca. — Traphagen V. Irwin, 18 Neb. 19-5, 24 N. W. 684; Keeling v. Hoyt, 31 Neb. 453, 48 N. W. 66; Deming v. Miles, 35 Neb. 739, 37 Am. St. Rep. 464, 53 N. W. 665; Burrows v. Hoveland, 40 Neb. 464, 58 N. W. 947; Eggert v. Beyer, 43 Neb. 711, 62 N. W. 57; Sheasley V. Keens, 48 Neb. 57, 66 N. W. 1010; Wehn v. Fall, 55 Neb. 547, 70 Am. St. Rep. 397, 76 N. W. 13; Veeder v. McKinley-Lansing L. & T. Co.,. 61 Neb. 892, 86 N. W. 982; Ames V. Miller (Neb.), 91 N. W. 250; Benedict v. T. L. V. Land & Cattle Co. (Neb.), 92 N. W. 210. See, also. Citizens' Bank v. Young, 78 Neb. 312, 110 N. "W. 1003; Kaze- beer v. Nunemaker, 82 Neb. 732, 118 N. W. 646; Eichards v. Smith, 88 Neb. 444, 129 N. W. 983; Jones v. Fisher, 88 Neb. 627, 130 N. W. 269; Burns v. Cooper, 140 Fed. 273, 72 C. C. A. 25. § 646, (it) New Mexico. — Stearns- Boger Mfg. Co. v. Aztec Gold Min. & Mill Co., 14 N. M. 300, 93 Pac. 706; McBee v. O'Connell, 16 N. W. 469, 120 Pac. 734; Smith & Bicker v. Hill Bros., 17 N. M. 415, 134 Pae. 243. §646, (ss) 0Manoma.—8ee Ran- dall Co. V. Glendenning, 19 Okl. 475, 92 Pac. 158; Cooper v. Flesner, 24 Okl. 47, 20 Ann. Cas. 29, 23 L. R. A. (N. S.) 1180, 103 Pac. 1016; Keys .% Co. V. First National Bank, 22 Okl. 174, 18 Ann. Cas. 152, 104 Pae. 346; Krauss v. Potts, 38 Okl. 674, 135 Pac. 362. §648, (Uh) Tranessee.^Craig v. Leiper, 2 Yerg. (Tenn.) 19i3, 24 Am. 1267 CONCERNING NOTICE. §647 § 647. (2) General Theory, Scope, and Object, of the Statutes. — ^Under this head I shall explain, without enter- Texas." — ^Paschal's Dig., sees. 4334, 4988, 4994: Substantially same as ■ Illinois. Dec. 479; Rogers' Lessee v. Cawood, 31 Tenn. (1 Swan) 142, 55 Am. Dec. 729; Harton v. Lyons, 97 Tenn. (13 Pickle) 180, 36 S. W. 851; Hughes V. Powers, 99 Tenn. 480, 42 S. W. 1; Citizens' Bank of Jellieo v. McCarty, 99 Tenn. 463, 42 S. W. 4; CantreU V. Ford (Tenn. Ch. App.), 46 S. W. 581; Chicago Sugar Eef. Co. v. Jack- son Brewing Co. (Tenn. Ch. App.), 48 S. W. 275; Southern B. & L. Assn. V. Eodgers, 104 Tenn. 437, 58 S. W. 234; Whiteside v. Watkins (Tenn. Ch. App.), 58 S. W. 1107; Parker v. Meredith (Tenn. Ch. App.), 59 S. W. 167. See, also, Childera v. Wm. H. Coleman Co., 122 Tenn. 109, 118 S. W. 1018; Hitt V. Caney Fork Gulf Coal Co., 124 Tenn. 334, 139 S. W. 693; Smith v. Cross, 125 Tenn. 159, 140 S. W. 1060; Campbell v. Home Ice & Coal Co., 126 Tenn. 524, 150 S. W. 427. § 646, (tl) Texas.— TajlOT v. Har- rison, 47 Tex. 454, 26 Am. Eep. 304; Gaston v Dashiell, 55 Tex. 516; Kennard v. Mabry, 78 Tex. 151, 14 S. W. 272; Clementz v. M. T. Jones Lumber Co., 82 Tex. 424, 18 S. W. 599; Frank v. Heidenheimer, 84 Tex. 642, 19 S. W. 855; Swearingen V. Eeed, 2 Tex. Civ. App. 364, 21 S. W. 383; Broussard v. Dull, 3 Tex. Civ. App. 59, 21 S. 'W. 937; Lig- noski V. Crooker, 86 Tex. 324, 24 S. W. 278, 788; Ward v. League (Tex. Civ. App.), 24 S. W. 986; Kalamazoo Nat. Bank v. Johnson, 5 Tex. Civ. App. 535, 24 S. W. 350; Brown v. Lazarus, 5 Tex. Civ. App. 81, 25 S. W. 71; Maulding v. Cofan, 6 Tex. Civ. App. 416, 25 S. W. 480; Moran v. Wheeler, 87 Tex. 179, 27 S. W. 54; Patterson v. Tuttle (Tex. Civ. App.), 27 S. W. 758; Laughlin v. Tips, 8 Tex. Civ. App. 649, 28 S. W. 551; Massie v. Yates (Tox. Civ. App.), 29 S. W. 1132; Brown V. Henderson (Tex. Civ. App.), 31 S. W. 315; Daugherty v. Yates, 13 Tex. Civ. App. 646, 35 S. W. 937; Murchison v. Mexia (Tex. Civ. App.), 36 S. W. 828; Texas Consol. C. & M. Assn. V. Dublin C. & M. Co. (Tex. Civ. App.), 38 S. W. 404; Terry v. Cutler, 14 Tex. Civ. App. 520, 39 S. W. 152; Parker v. Walker, 15 Tex. Civ. App. 370, 39 S. W. 611; Southern B. & L. Assn. v. Brackett (Tex. Civ. App.), 39 S. W. 619; Eork V. Shields, 16 Tex. Civ. App. 640, 42 S. W. 1032; Williams v. Slaughter (Tex. Civ. App.), 42 S. W. 327; Mattfield v. Huntington, 17 Tex. Civ. App. 716, 43 S. W. 53; Hart V. Patterson, 17 Tex. Civ. App. 591, 43 S. W. 545; Hays. v. Tilson, 18 Tex. Civ. App. 610, 45 S. W. 479; Dean v. Gibson (Tex. Civ. App.), 48 S. W. 57, 58 S. W. 51, 79 S. W. 363; Eobertson v. McClay (Tex. Civ. App.), 48 S. W. 35; White v. Mc- Gregor, 92 Tex. 556, 71 Am. St. Kep. 875, 50 S. W. 564; La Pice v. Cad- denhead, 21 Tex. Civ. App. 363, 53 S. W. 66; Southwestern Mfg. Co. v. Hughes, 24 Tex. Civ. App. 637, 60 S. W. 684; Turner v. Cochran, 94 Tex. 480, 61 S. W. 923; Neyland v. Texas Yellow Pine Lumber Co., 26 Tex., Civ. App. 417, 64 S. W. 696; Hall V. Eead, 28 Tex. Civ. App. i8, 66 S. W. 809; Pierson v. McClintock (Tex. Civ. App.), 78 S. W. 706; §647 EQUITY JUBISPRUDENGB. 1268 ing into any discussion -of details, the general interpreta- West Virginia^ — Code 1870, e. 74, sees. 5-8: Substantially as Illinois. Third Class. — The peculiar features of the statutes of this class are, that they require the record to be made within a specified period after execu- tion of the instrument, or else it is void as against subsequent purchasers who are without notice, and in some states creditors are added. Filing for .record is generally made equivalent to an actual recording. Aldbama?^^ — Code 1867, p. 364, sees. 1557, 1558 ; Conveyances of uncon- ditional estates, mortgages, and similar instruments to secure a debt created at the date thereof are void as to purchasers for a valuable consideration, mortgagees, and judgment creditors, having no notice, unless recorded Laufer v. Powell, 30 Tex. Civ. App. 604, 71 S. W. 549. See, also, Mans- field V. Wardlow (Tbx. Civ. App.), 91 S. W. 859; Hamilton v. Green (Tex. Civ. App.), 101 S. W. 280; Hix V. Armstrong (Tex. Civ. App.), 108 S. W. 797; Eyle v. Davidson (Tex. Civ. App.), 116 S. W. 823; William Carlisle & Co. v. King (Tex. Civ. App.), 122 S. W. 581; 103 Tex. 620, 133 S. W. 241; Lightfoot v. Horst (Tex. Civ. App.), 122 S. W. 606; Hampshire v. Greeves (Tex. Civ. App.), 130 S. W. 665; Dixon v. McNeese (Tex. Civ. App.), 152 S. W. 675; Busch v. Brown (Tex. Civ. App.), 152 S. W. 683; Cetti v. WU- son (Tex. Civ. App.), 168 S. W. 996. §646, (ij) West Virginia.— 'Koult V. Donahue, 21 W. Ta. 294; Cox v. Wayt, 26 W. Va. 807; Atkinson v. Miller, 34 W. Va. 115, 9 L. B. A. 544, 11 S. E. 1007; Troy Wagon Co. V. Hutton, 53 W. Va. 154, 44 S. E. 135. See, also. South Penn Coal Co. V. Smith, 63 W. Va. 587, 60 S. E. 593; Hall v. Williamson Grocery Co., 69 W. Va. 671, 72 S. E. 780; Weth- ered v. Conrad, 73 W. Va. 551, 80 S. E. 953; South Penn Oil Co. v. Blue Creek Development Co. (W. Va.), 88 S. E. 1029. §646, (tfc) Alabama.— CoAe 1886, sees. . 1810, 1811. See Steiner v. Clisby, 95 Ala. 91, 10 South. 240, 11 South. 294; Chadwick v. Carson, 78 Ala. 116; Wood v. Lake, 62 Ala. 489; Bailey v. Levy, 115 Ala. 565, 22 South. 449; Johnson v. Wilson & Co., 137 Ala. 46?«, 97 Am. St, Eep. 52, 34 South. 392.. See, also. Chap- man & Co. V. Johnson, 142 Ala. 633, 4 Aim. Cas. 559, 38 South. 797; New England Mortgage Security Co. v. Fry, 143 Ala. 637, 111 Am. St. Eep. 62, 40 South. 57; Kendrick v. Cdl- yar, 143 Ala. 597, 42 South. 110; Blakeney v. Du Bose, 167 Ala. 627, 52 South. 746; Stiekney v. Dunaway & Lambert, 169 Ala. 464, 53 South. 770; Amos v. Givens, 179 Ala. 605, 60 South. 829; Winters v. Powell, 180 Ala. 425, 61 South. 96 (an an- omalous decision; see the valuable dissenting opinion); Dixie Grain Co. V. Quinn, 181 Ala. 208, 61 South. 886; Enslen v. Thornton, 182 Ala. 314, 62 South. 525; Brannan v. Mar- shall, 184 Ala. 375, 63 South. 1007; Alexander v." Fountain, 195 Ala. 3, 70 South. 669. Equitable interests are not required to be recorded: Bailey v. Timberlake, 74 Ala. 221. A conveyance recorded within the three months allowed by the stat- ute has relation to and takes effect from the day of its execution: Cope- land V. Kehoe, 67 Ala. 594. 1269 CONCERNING NOTICE. § 647 tion wMch has been put upon this legislation by the courts; within three months^^ from their date. Other deeds and mortgages are void as to the same parties, unless recorded before the rights of such par- ties accrue. See Coster v. Bank of Georgia, 24 Ala. 37; De Vendal v^ Malone, 2" Ala 272, Gray's Admr's v. Cruise, 36 Ala. 559. Notice m place of recording: Wallis v. Rhea, 10 Ala. 451; 12 Ala. 646; Jordan v. Mead, 12 Ala. 247; Bearing v. Watkins, 10 Ala. 20; Boyd v. Beck, 29 Ala. 703; Wyatt v. Stewart, 34 Ala. 716. Valid without a rec- ord between the parties and against creditors not by judgment: Ohio Life etc. Co. v. Ledyard, 8 Ala. 866; Daniel v. Sorrells, 9 Ala. 436; Andrews v. Burns, 11 Ala, 691; Smith v. Branch Bank, 21 Ala. 125; Center v. P. & M. Bank, 22 Ala. 743. Filing for record crea:tes notice, and a mistake in copying by the recorder does not affect it : Mims V. Mims, 35 Ala. 23. ■ District of Columbia. — ^Rev. Stats. 1873, pp. 52, 53 : Must be recorded within six months, or else void as to all subsequent purchasers without notice. Georgia.™"' — Code 1873, sees. 1955-1960 ; Deeds must be recorded within one year, and mortgages within three months; otherwise they lose their priority over subsequent deeds, purchases, and liens recorded in time, and ^without notice of the first. A record after the prescribed period is notice from that time. See Hardaway v. Semmes, 24 Ga. 305. As to notice, Herndon v. Kimball, 7 Ga. 432, 50 Am. Dec. 406; Rushin v. Shields, 11 Ga.-636,. 56 Am. Dec. 436; Telton v. Pitman, 14 Ga. 536; Wyatt v. Elam, 19 Ga. 335; Burkhalter v. Ector, 25 Ga. 55; Lee v. Cato, 27 Ga. 637, 73 Am. Dec. 746; Allen v. Holding, 29 Ga. 485, 32 Ga. 418; Williams v. Logan, 32 Ga. 165 ; Williams v. Adams, 43 Ga. 407. Ohio.""—l Rev. Stats. 1880, p. 1034, sees. 4133, 4134: All instruments for the conveyance or encumbrance of land must be recorded within six §646, (11) Now thirty days. strong, 128 Ga. 804, 58 S. E. 624; §646, (mm) Georgia.— Co(le 1895, Culbreath v. Martin, 129 Ga. 280, § 2778. Mortgages must be recorded 58 S. E. 832 (under Georgia record- witljin thirty days: Code 1882. See ing acts, a .liona flde purchaser for Shepherd v. Burkhalter, 13 Ga. 443, value is protected from a prior re- 58 Am. Dec. 523; Chatham v. Brad- corded deed of gift, of which he ford, 50 Ga. 327, 15 Am. Eep. 692; had no actual notice); Donalsou v. Wise V. Mitchell, 100 Ga. 614, 28 Thomason, 137 Ga. 848, 74 S. E. 762; S. E. 382; New South B. & L. Assn. Eowe v. Henderson Naval Stores V. Gann, 101 Ga. 678, 29 S. E. 15; Co., 139 Ga. 318, 77 8. E. 17. Lytle V. Black, 107 Ga. 386, 33 S. B. § 646, (nu) OMo.— Eev. Stats., 414; Durrence v. Northern Nat. §§4106, 4133; Kemper v. Campbell, Bank, 117 Ga. 385, 43 S. E. 726. 44 Ohio St. 210, 6 N. E. 566; Bet2 See, also, Williams v. Smith, 128 Ga. v. Snyder, 48 Ohio St. 492, 13 L. B. 306, 57 S. E. 801; Hendersoia v. Arm- A. 235, 28 N. E. 234; Varwig y. § 647 EQUITY JUKISPRUDENCE. 1270 its general object, scope, and design ; how far it is intended months; otherwise are deemed fraudulent as to any subsequent bona fide purchaser having at the time of his purchase no knowledge of the existence , of such prior instrument. Record made after the six months is notice from the date thereof. See Doe v. Bank of Cleveland, 3 McLean, 140; Smith V. Smith, 13 Ohio St. 532 ; Lessee of Cunningham v. Buckingham, 1 Ohio, 264; Lessee of Allen v. Parish, 3 Ohio, 107; Northrup's Lessee v. Brehmer, 8 Ohio, 392; Lessee of Irvin v. Smith, 17 Ohio, 226; Spader v. Lawler, 17 Ohio, 371, 49 Am. Dec. 463 ; Leiby's Ex'rs v. Wolf, 10 Ohio, 83 ; Price v. Methodist Episcopal Church, 4 Ohio, 515 ; StanseU v. Roberts, 13 Ohio, 148, 42 Am. Dec. 193; Mayham v. Coombs, 14 Ohio, 428; Bloom V. Noggle, 4 Ohio St. 45; Bercaw v. Cockerill, 20 Ohio St. 163. , South Carolina."" — Rev. Stats. 1873, pp. 422, sec. 1, 424: Conveyances must be recorded within six months and mortgages within sixty days, or else invalid against subsequent creditors, purchasers and encumbrancers for value and without notice. See Williams v. Beard, 1 S. C. 309; Boyce v. Shiver, 3 S. C. 515; Steele v. Mansell, 6 Rich. 437; Stokes v. Hodges, 11 Rich. Eq. 135; Bank of State v. S. C. Mfg. Co., 3 Strob. 190; Tact v. Craw- ford, 1 McCord, 265; Massey v. Thompson, 2 Nott & McC. 105; Dawson v. Dawson, Rice Eq. 243; McFall v. Sherr^rd, Harp. 295. Virginia.vv — Code 1873, c. 114, sees. 4^9 : Mortgages, unless recorded, are void as to creditors and subsequent purchasers for value and without notice. Cleveland, C, C. & St. L. E. Co., 772, 22 S. E. 763; Levi v. Gardner, 54 OHo St. 455, 44 N. E. 92; Stern- 53 S. C. 24, 30 S. E. 617; Turpin berger v. Kagland, 57 Ohio St. 148, v. Sudduth, 53 S. C. 295, 31 S. E. 48 N. E. 811; Amick v. Woodworth, 245, 306; Blackwell v. British- Am. 58 OMo St. 86, 50 N. E. 437; Wright Mtge. Co., 65 S. C. 105, 43 S. E. 395. V. Eranklin Bank, 59 Ohio St. 80, 51 See, also, Manigault v. Lofton, 78 N. E. 876; Stivens v. Summers, 68 S. C. 499, 59 S. E. 534; Smyly v. Col- Ohio St. 421, 67 N. E. 884. leton Cypress Co., 95 S. C. 347, 78 §646, (oo) South Carolina.— O^n. S. E. 1026; Foster v. Bailey, 82 S. C. Stats. 1882, sec. 1776. The time al- 378, 64 S. E. 423; Brown v. Sartor, lowed for recording both mortgages 87 S. C. 116, 69 S. E. 88; Folk v, and conveyances is forty days. See Brooks, 91 S. C. 7, 74 S. E. 46; Eich- Wingo V. Parker, 19 S. C. 9; Mowry ardson v. Atlantic Coast Lumber v. Crocker, 33 S. C. 436, 12 S. E. 3; Corp., 93 S. C. 254, 75 S. E. 371. Kennedy v. Boykin, 35 S. C. 61, 28 Failure to record does not invaU- Am. St. Rep. 838, 14 S. E. 809; Ar- date the instrument as to the par- thur V. Screven, 39 S. C. 77, 17 S. ties thereto: Wingo v. Parker, 19 E. 640; Trustees of Poor School v. S. C. 9; Greenwood Loan & G. Co. Jennings, 40 S. C. 168, 42 Am. St. v. Childs (S. C), 45 S. E. 167; Mc- Eep. 855, 18 S. E. 257, 891; Inter- Ghee v. Wells, 57 S. C. 280, 76 Am. Stat-, B. & L. Assn. v. McCartha, St. Eep. 567, 35 S. E. 529. 43 S. C. 72, 20 S. E. 807; Armstrong §646, (PP)' Fir^inta.— Code 1887, V. Austin, 45 S. C. 69, 29 L. E. A. sees. 2403-2469. See Horsley v. 1271 CONCERNING NOTICE. §647 that a record should be constructive notice to those who Deeds, unless recorded within sixty days, are void as to same parties. See Beverley v. Ellis, 1 Rand. .102; Bird v. Wilkinson, 4 Leigh, 266; Beck's Adm'rs V. De Babtists, 4 Leigh, 349 ; Lane v. Mason, 5 Leigh, 520 ; McClure V. Thistle's Ex'rs, 2 Gratt. 182; Glazebrook's Adm'r v. Eagland's Adm'r, 8 Gratt. 344. Fourth Class. — The statutes of this class resemble those of the last one, in requiring the record to be made within a prescribed period of time after the execution; but they make no mention of the presence or absence of notice in connection with the subsequent purchasers, etc., who obtain a first record. Indiana.'^^ — Gavin and Herd's Stats., p. 260, sec. 16, p. 261: Every con- veyance, etc., not recorded within ninety days is void against a subsequent purchaser or mortgagee in good faith and for a valuable consideration. See Reasoner v. Edmundson, 5 Ind. 393. Garth, 2 Gratt. 471, 44 Am. Dec. 393; Dobyns v. Waring, 82 Va. 159; Bowdeu v. Parrish, 86 Va. 67, 9 S. E. 616; Nieholson v. Gloucester Charity, School, 93 Va. 101, 24 S. E. 899; Lynchburg P. B. & L. Co. v. Fellers, 96 Va. 337, 70 Am. St. Rep. 851, 31 S. E. 505; Mercantile Co-op. Bank v. Brown, 96 Va. 614, 32 S. E. 64; Price v. Wall's Ex'r, 97 Va. 334, 75 Am. St. Eep. 788, 33 S. E. 599; Florence v. Morien, 98 Va. 26, 34 S. E. 890; National Mutual B. & L. Assn. v. Blair, 98 Va. 490, 36 S. B. 513; Bridgewater EoUer Mills Co. v. Strough, 98 Va. 721, 2 Va. Sup. Ct. Eep. 593, 37 S. E. 290; Bankers' L. & I. Co. V. Blair, 99 Va. 606, 86 Am. St. Rep. 914, 39 S. E. 231; Hun- ton V. Wood (Va.), 43 S. E. 186. See, also, Eeid v. Rhodes, 106 Va. 701, 56 S. E. 722; Merritt v. Bunt- ing, 107 Va. 174, 12 Ann. Cas. 954, 57 S. E. 567; Vicars v. Sayler, 111 Va. 307, 68 S. E. 988'; Clinchfield Coal Corporation v. Steinman, 213 Fed. 557, 130 C. C. A. 137. Un- recorded contract for sale of real estate is void as to creditors, whether with or without notice: Dobyns v. Waring, 82 Va. 159. §646, (aa) Indiana. — Eev. Stats. 1888, sec. 2931. Must be recorded within forty-five days. See Lasselle v. Barnett, 1 Blackf. 150, 12 Am. Dec. 217; Gilchrist v. Gough, 63 Ind. 576, 30 Am. Rep. 250; Hutchinson V. First Nat. Bank, 133 Ind. 271, 30 N. E. 952, 36 Am. St. Rep. 537; Fisher v. Bush, 133 Ind. 315, 32 N. E. 924; Walls v. State, 140 Ind. 16, 38 N. E. 177; Frick v. Godare, 144 Ind. 170, 42 N. E. 1015; John- son V. Schloesser, 146 Ind. 509, 58 Am. St. Kep. 367, 36 L. R. A. 59, 45 N. E. 509; Carson v. Eickhofif; 148 Ind. 596, 47 N. E. 1067; Ellison V. Branstrator, 153 Ind. 146, 54 N. E. 433; National State Bank v. Sandford Fork & Tool Co., 157 Ind. 10, 60 N. E. 699; Kirkham v. Moore, 30 Ind. App. 549, 65 N. E. 1042; Osborn v. Hall (Ind.), 66 N. E. 457. See, also, Gregory v. Arms, 48 Ind. App. 562, 96 N. E. 196; Sinclair v. Gunzenhauser, 179 Ind. 78, 98 N. E. 37, 100 N. E. 376. §647 EQUITY JUEISPBUDENCB. 1272 acquire rights in the same subjeGt-matter; and what kinds and classes of interests are thus affected by anotice. Maryland."— Uev. Code 1878, p. 385, sees. 16-19 : Instruments must be recorded within six months, and then take effect from their date /otherwise they are not valid for purpose of passing title. See Byles v. Tome, 39 Md. 461; Cooke's Lessee v. KeU, 13 Md. 469; Hoopes v. Knell, 31 Md. 550; Building Ass'n v. Willson, 41 Md. 514. Effective from date when recorded : Owens V. Miller, 29 Md. 144; Leppoc v. National Union Bank, 32 Md. 136; Knell v. Building Ass'n, 34 Md. 67; Carson's Adm'rs v. Phelps, 40 Md. 97; Lester v. Hardesty, 29 Md. 50; Estate of Leiman, 32 Md. 225, 3 Am. Rep. 132. Priority: Cockey v. MUne's Lessee, 16 Md. 207; Willard's Ex'rs v. Ramsburg, 22 Md. 206; Nelson v. Hagerstown Bank, 27 Md. 51; Walsh v. Boyle, 30 Md. 267; Glenn v. Davis, 35 Md. 215, 6 Am. Rep. 389; Busey v. Reese, 38 Md. 264; Homer v. Grosholz, 38 Md. 521; Abrams v. Sheehan, 40 Md. 446; Kane v. Roberts, 40 Md. 590. New Jersey.'" — Rev., p. 155, sec. 14: No instrument is valid against subsequent purchasers or encumbrancers in good faith, unless filed for record within fifteen days from its date. §646, (rr) Maryland.— ^ev. Code 1888, art. 81, sees. 13-16. See Sit- ler v. MeComas, 66 Md. 135, 6 Atl. 527; Hoffman v. Gosnell, 75 Md. 577, 24 Atl. 28; Nickel v. Brown, 75 Md. 172, 23 Atl. 736; South Baltimore H. & I. Co. V. Smith, 85 Md. 537, 37 Atl.'27; Annan v. Hays, 85 Md. 505, 37 Atl. 20; Buchanan v. Lloyd, 88 Md. 642, 41 Atl. 1075; Cissel v. Hen- derson, 88 Md. 574, 41 Atl. 1068; IMck V. Balch, 33 XJ. S. (» Pet.) 30; Lambert v. Morgan, 110 Md. 1, 132 Am. St. Eep. 412, 17 Ann. Cas. 439, 72 Atl. 407; Geo. L. Cramer & Sons V. Eoderick (Md.), 98 Atl. 42. § 646, (ss) New Jersey. — Boyd v. Mundorf, 30 N. J. Eq. 545; Cogs- well v. Stout, 32 N. J. Eq. 240; Par- sons v.Lent, 34 N. J. Eq. 67; Bing- ham V. Kirkland, 34 N. J. Eq. 229; Lemos v. Terhune, 40 N. J. Eq. 364, 2 Atl. 18; Flemington Nat. Bank V. Jones, 50 N. J. Eq. 244, 486, 24 Atl. 928, 27 Atl. 636; Protection B. & L. Assn. V. Knowles, 54 N. J. Eq. 519, 34 Atl. 1083; Brinton v. Scull, 55 N. J. Eq. 747, 35 Atl. 843; Essex Co. Bank v. Harrison, 57 N. J. Eq. 91, 40 Atl. 209; Yon Schuler v. Com- mercial Inv. B. & L. Assn., 63 N. J. Eq. 388, 51 Atl. 932; Lembeck & Betz Eagle Brewing Co. v. Eelly, 63 N. J. Eq. 401, 51 Atl. 794. A re- cording in the wrong book is not notice: Parsons v. Lent, 34 N. J. Eq. 66. A lease is a conveyance within the meaning of the statute, and is entitled to be recorded: Spiel- mann v. Kliest, 36 N. J. Eq. 202; Laws of 1872, p. 93. See, also, Kel- logg V. Randolph, 71 N. J. Eq. 127, 63 Atl. 753; Longley v. Sperry, 72 N. J. Eq. 537, 66 Atl. 1062; Chand- ley V. Robinson (N. J. Eq.), 75 Atl. 180; Association to Provide and Maintain a Home for the Friend- less V. Traders' Inv. Co., 77 N. J. Eq. 580, 78 AtL 158. 1273 CONCERNING NOTICE, §648 § 648. The English Theory. — ^A very narrow interpreta- tion has been put npon their local registry acts by the Eng- Oregon.** — Gen. Laws, p. 651, sec. 26 : Unless recorded within -five days, is void against subsequent purchaser in good faith and for value whose instrument is first recorded. Pennsylvania.^^ — Purdon's Dig., p. 321, sec. 71: Instruments executed within the state must be recorded within six months, those executed out of the state within one year, otherwise they do not operate to pass the title. See, as to parties against whom unrecorded instrument is valid, Nice's Ap- peal, 54 Pa. St. 200; Speer v. Evans, 47 Pa. St. 141; Britten's Appeal, 45 §646, (tt) Oreffon.— mil's Laws 18:87, sec. 3027. See Musgrove v. Bowser, 5 Or. 313, 20 Am. Eep. 737; "Watson V. Dundee Mfg. Co., 12 Or. 474, 8 Pac. 548; Meier v. Kelly, 22 Or. 136, 29 Pac. 265; Security Sav. & Tr. Co. v. Loewenberg, 38 Or. 159, 62 Pac. 647; Zorn v. Livesley (Or.), 75 Pac. 1057. See, also, Jennings V. Lentz, 50 Or. 483, 29 L. E. A. (N. S.) 584, 93 Pac. 327; Stitt v. Stringham, 55 Or. 89, 105 Pac. 252; Kaiser v. Idleman, 57 Or. 224, 28 L. R. A. (N. S.) 169, 108 Pac. 193; Bradtl v. Sharkey, 58 Or. 153, 113 Pac. 653; Victor Land Co. v. Drake, 63 Or. 210, 127 Pac. 27; Pirat Nat. Bank of North Bend v. Gage, 71 Or. 373, 142 Pac. 539. Jennings v. Lentz, supra, by a divided court ap- pears to hold that a purchaser from A, whose deed is unrecorded, not only takes at the peril that a later deed from A's grantor may be re- corded, as explained in § 658, post, but is even postponed to a prior un- recorded purchase from A. The court was unable to find any au- thority in support of its decision. The assignment of a mortgage is not required to be recorded: Watson v. Dundee, etc., Mortgage Co., 12 Or. 474, 8 Pac. 548. § 646, («n) Pennsylvania. — Purd. Dig. 565, 568, 588'; 1 Purdon's Dig. 1883, p. 583, see. 94. See Manufac- turers & Mechanics' Bank v. Bank of Pennsylvania, 7 Watts & S. 335, 42 Am. Dec. 240; Bidgway's Appeal, 15 Pa. St. 177, 53 Am. Dec. 586; Me- Kean & Elk Land Imp. Co. v. Mitchell, 35 Pa. St. (11 Casey) 269, 78 Am. Dec. 335; Lereh's Appieal, 44 Pa. St. 140; Schell v. Stein, 76 Pa. St. (26 P. F. Smith) 398, 18 Am. Rep. 416; Pepper's Appeal, 77 Pa. St. 373; Homing's Ex'rs Appeal, 90 Pa. St. 388; Stockwell v. McHenry, 107 Pa. St. 237, 52 Am. Rep. 475; Green v. Eiek, 121 Pa. St. 130, 6 Am. St. Rep. 760, 2 L. R. A. 48; Crouse v. Murphy, 140 Pa. St. 335, 23 Am. St. Rep. 232, 12 L. R. A. 58, 21 Atl. 358'; Fries v. Null, 154 Pa. St. 573, 26 Atl. 554, 32 Wkly. Notes Cas. 236 (afarmed, 158 Pa. St. 15, 27 Atl. 867); Foster v. Carson, 159 Pa. St. 477, 39 Am. St. Rep. 696, 28 Atl. 356 33 Wkly. Notes Cas. 517, Col- lins V. Aaron, 162 Pa. St. ,539, 29 Atl. 724; Farabee v. MeKerrehan, 172 Pa. St. 234, 51 Am. St. Rep. 734, 33 Atl. 583; Lulay v. Barnes, 172 Pa. St. 331, 34 Atl. 52, 37 Wkly. Notes Cas. 409; Coleman v. Rey- nolds, 181 Pa. St. 317, 37 Atl. 543; Huey V. Prince, 187 Pa. St. 151, 40 Atl. 982, 42 Wkly. Notes Cas. 441; In re Ambrose, 187 Pa. St. 178, 41 Atl. 28; Davis v. Monroe, 187 Pa. § 648 EQUITY JURISPRUDENCE. 1274 lish courts. As the language authorizing a registration is permissive merely, and as the statute is silent respecting Pa. St. 172; Mellor's Appeal, 32 Pa. St. 121; Adam's Appeal, 1 Pa. St. 447. Priority: Brooke's Appeal, 64 Pa. St. 127; Dungan v. Am. etc. Ins. Co., 52 Pa. St. 253; Bratton's Appeal, 8 Pa. St. 164; Foster's Apped, 3 Pa. St. 79; Ebner v. Goundie, 5 Watts & S. 49; Poth v. Anstatt, 4 Watts & S. 307; LigMner v. Mooney, 10 Watts, 407. Judgment creditors: Cover V. Black, 1 Pa. St. 493; Stewart v. Freeman, 22 Pa. St. 123. Applies to a bona fide purchaser only : Plumer v. Robertson, 6 Serg. & R. 179 ; Poth v. Anstatt, 4 Watts & S. 307; Bracken v. Miller, 4 Watts & S. 102; Hoffman V. Strohecker, 7 Watts, 90, 32 Am. Dec. 740; Jaques v. Weeks, 7 Watts, 261; Union Canal Co. v. Young, 1 Whart. 432, 30 Am. Dec. 212; Sailor v. Hertzog, 4 Whart. 264; Snider v. Snider, 3 Phila. 160. Notice: Chen v. Barnet, 11 Serg. & R. 389; Harris v. Bell, 10 Serg. & R. 39; Boggs v. Var- ner, 6 Watts & S. 469; Parke v. Chadwiek, 8 Watts & S. 96; Miller v. Cresson, 5 Watts & S. 284; Green v. Drinker, 7 Watts & S. 440; Krider v. Lafferty, 1 Whart. 303; Epley v. Witherow, 7 Watts, 167; Rankin v. Porter, 7 Watts, 387; Kerns v. Swope, 2 WaJ;ts, 75; Lewis v. Bradford, 10 Watts, 67; Randall v. Silverthorn, 4 Pa. St. 173; Hetherington v. Clark, 30 Pa. St. 393. Equitable title included: Bellas v. McCarty, 10 Watts, 13. Assignment of mortgage: Philips v. Bank of Lewistown, 18 Pa. St. 394; Mott V. Clark, 9 Pa. St. 399, 49 Am. Dec. 566. Mortgage of personal property: Lightner v. Mooney, 10 Watts, 407; Hoffman v. Strohecker, 7 Watts, 86, 32 Am. Dec. 740. Wyoming.^'' — Comp. Laws, c. 40 : Must be recorded within three months, and is then notice to and takes precedence of subsequent purchasers. Louisiana.'"'"— Rev. Code 1875, p. 417, sec. 2266: This statute differs much from all others in its language and details, although not much per- haps in its effects. All instruments affecting real property are utterly void St. 212, 67 Am. St. Eep. 581, 41 Atl. § 646, (tt) W^ioming.—See Bos- 44; Pjles v. Brown, 189 Pa. St. 164, well v. First Nat. Bank of Laramie, 69 Am. St. Eep. 794, 42 Atl. 11, 29 16 Wyo. 161, 92 Pac. 624. Pittsb. Leg. J. (N. S.) 311, 43 Wkly. § 646, (ww) ioiimarw.— Patterson Notes Cas. 433; Parmer v. Fister, v. De La Ronde, 75 U. S. (8 Wall.) 197 Pa. St. 114, 46 Atl. 892; Gilles- 292; Cucullu v. Hernandez, 103 U. pie V. Buffalo, E. & P. Ey. Co., 204 S. 105. See, also, John T. Moore Pa. St. 107, 53 Atl. 639; MeKeen Planting Co. v. Morgan's Louisiana V. Delancey's Lessee, 9 U. S. (5 & T. E. & S. S. Co.; 126 La. 840, 53 Cranch) 22. See, also. Burns v. South. 22; Eiggs v. Eieholz, 127 La. Eoss, 215 Pa. St. 293, 114 Am. St. 745, 53 South. 977; Albert Hanson Eep. 963, 7 L. E. A. (N. S.) 415, 64 Lumber Co., Ltd., v. Baldwin Lum- Atl. 526; Prouty v. Marshall, 225 ber Co., Ltd., 130 La. 849, 58 South. Pa. 570, 25 L. E. A. (N. S.) 1211, 74 638. Atl. 550. 1275 CONCERNING NOTICE. § 648 any notice, it is settled that the registry of a deed or con- veyance is not of itself a notice so as to affect a subsequent purchaser who has obtained the legal estate.^ If, how- ever, it be shown that a subsequent purchaser made a search of the proper records, then it may be presumed that he thereby obtained actual notice of a prior conveyance which was registered.^ The same restricted and imper- fect view was taken by a few of the early American cases, which appear to have held that a record did not operate as an absolute constructive notice to subsequent purchas- ers, and that the statutes did not embrace conveyances of equitable rights and interests, so that the record of such a conveyance would not be a notice.^ as to third persons unless publicly inscribed on the records of the parish, and become effective as to such persons from the time of filing for record; but they are valid as against the parties and their heirs. § 648, 1 Morecock v. Dickins, Amb. 678; Bushell v. Bushell, 1 Schoales & L. 90, 103; Ford v. White, 16 Beav. 120; Underwood v. Lord Courtown, 2 Schoales & L. 40 ; Wiseman v. Westland, 1 Younge & J. 117 ; Hodgson v. Dean, 2 Sim. & St. 221. Thus a prior equitable encumbrance, though regis- tered, will not affect a subsequent purchaser without notice who has obtained the legal estate; Morecock v. Dickins, Amb. 678; Bushell v. Bushell, 1 Schoales & L. 90, 103. The Irish acts seem to be different in this respect : See ante, note under § 645, and cases there cited. A prior conveyance of an equitable interest, if registered, would doubtless take precedence of a subse- quent equitable interest also registered, in pursuance of the general doctrine that among equities otherwise equal, the one prior in time must prevail. § 648, 2 Hodgson v. Dean, 2 Sim. & St. 221; Lane v. Jackson, 20 Beav. 535. § 648, 3 Grimstone v. Carter, 3 Paige, 421, 437, 24 Am. Dec. 230; Dos- well V. Buchanan, 3 Leigh, 365, 23 Am. Dec. 280. See also Gouverneur v. Ljnch, 2 Paige, 300 ; De Ruyter v. Trustees etc., 2 Barb. Ch. 556 ; Ludlow V. Van Ness, 8 Bosw. 178; Swigert v. Bank etc., 17 B. Mon. 268, 290; Corn V. Sims, 3 Met. (Ky.) 348; Walker v. Gilbert, 1 Freem. Ch. 75; Kelly v. Mills,. 41 Miss. 267; Jaques v. Weeks, 7 Watts. 261, 268, 272. I add a short extract from the opinion in Grimstone v. Carter, 3 Paige, 421, 437, 24 Am. Dec. 230, which well illustrates this partial theory. A deed had been given, absolute on its face, but really intended as a security for a debt, and it was accompanied by a verbal agreement by the grantee — the credi- tor — to reconvey upon payment. The land having been conveyed by the § 649 EQUITY JURISPRUDENCE. 1276 § 649. The American Theory. — A broader and more ef- fective interpretation has been established throughout the American states by ah overwhehniag weight of judicial authority. The recording statutes have been regarded with the utmost favor, and our whole system of conveyan- cing and of land titles has been based upon them. Indeed, the tendency of modern legislation has been to enlarge their scope and to define their operation, so that they should, in terms, include every kind of instrument by which the ownership and enjoyment of land can be affected. By this theory the object of the legislation is, that the proper record of every such instrument should be absolute notice of its contents, and of all rights, titles, or interests, legal and equitable, created by or embraced within it, to every person subsequently dealing with the subject-matter whose duty or interest it is to make a search of the records.^ The intention is, to compel every person receiving such an in- strument to place it upon the records, in order that he may thereby protect his own rights as well as those of all others who may afterwards acquire ah interest in the same prop- erty. It was designed that the public records should, in grantee to a subsequent purchaser, the question was, how far the latter's rights were affected by the verbal agreement. The court held that the re- cording or not recording of such agreement was wholly immaterial upon this question; the subsequent purchaser would be bound by the agreement,' if he had notice of it, whether it was recorded or not; he would not be bound, in the absence of notice, even though it had been recorded. Chancellor Walworth said: The design of the recording act was "to protect a subse- quent bona fide purchaser against a previous conveyance of the legal estate, or of some part thereof, and which conveyance would be valid as agaiast the subsequent purchaser or mortgagee if the recording act had not been passed. But a subsequent hona ■fide purchaser needed the aid of the regis- try act to protect him against a prior equity or a mere agreement to con- vey. Having the legal title under his conveyance, he would be able to de- § 649 (a) This passage of the text v. Thurber, 69 N. H. 480, 45 Atl. is quoted in. Jolinson v. Hess, 126 241, and in Glorieux v. Lighthipe, Ind. 298, 9 L. R. A. 471, 25 N. E'. 88 N. J. L. 199, Ann. Gas. 1917E^ 445. This section is cited in Gregg 484, 96 Atl. 94. 1277 CONCEKNTNG NOTICE. § 649 this manner, furnish an accurate and complete transcript and exhibition of all estates, titles, interests, claims, en- cumbrances, and charges, both legal and equitable, in and upon every parcel of land which had come into private ownership within the territorial limits over which the par- ticular record extends ; and that a person about to deal with respect to any parcel of land should be able to dis- cover, or find the means of discovering, every existing and outstanding estate, title, or interest in it which could affect the rights of a bona fide purchaser. This is the theory of the legislation as established by judicial interpretation; and this general design has, as far as possible, been car- ried into effect by the courts.^ It is therefore settled, even independently of the express terms of many state statutes, that equitable estates and interests, as well as legal, are embraced within the intent and operation of the recording acts, and that any instrument creating or conveying such an interest, which is duly recorded, must thereby obtain fend his title at law; and the plea that he was a bona fide purchaser for a valuable consideration would afford him a full protection against an equitable claim of which he had no previous notice." Independently of any judicial construction opposed to this view, it will be seen that the stat- utes of many states are directly in conflict with' it, since they provide in express terms for the recording of agreements to convey and other instru- ments creating only an equitable interest. § 649, 1 Bird v. Dennison, 7 Cal. 297; Chamberlain v. Bell, 7 Cal. 292, 68 Am. Dec. 260; Call v. Hastings, 3 Cal. 179; Woodworth v. Guzman, 1 Cal. 203; Dennis v. Burritt, 6 Cal. 670; Hunter v. Watson, 12 Cal. 363, 73 Am. Dec. 543; MeCabe v. Grey, 20 Cal. 509; Grant v. Bissett, 1 Caines - Cas. 112; Jackson v. Given, 8 Johns. 137, 5 Am. Dec. 328; Jackson v. Van Valkenburgh, 8 Cow. 260; Rounds v. McChesney, 7 Cal. 360; Cook v. Travis, 20 N. Y. 400; Wood v. Chapin, 13 N. Y. 509, 67 Am. Dec. 62; Web- ster V. Van Steenbergh, 46 Barb. 211; Taylor v. Thomas, 5 N. J. Eq. 331; Losey v. Simpson, 11 N. J. Eq. 246; Routh v. Spencer, 38 Ind. 393; Hol- brook V. Dickenson, 56 111. 497; Hogden v. Guttery, 58 111. 431; Harrington V. Allen, 48 Miss. 493; Ohio L. Ins. Co. v. Ledyard, 8 Ala. 866; Peychaud V. Citizens' Bank, 21 La. Ann. 262; Harang v. Plattsmier, 21 La. Ann. 426. § 650 EQUITY JUKISPKUDENCE. 1278 all the benefits which depend upon or flow from the fact of registration under these statutes.^ ^ § 650. (3) Requisites of the Record, in Order That It may be a Constructive Notice. — Since the constructive no- § 649, 2 Digman v. McCollum, 47 Mo. 372, 375, 376; U. S. Ins. Co. v. Shriver, 3 Md. Ch. 381; Alexander v. Webster, 6 Md. 359; Alderson v. Ames, 6 Md. 52; Gen. Ins. Co. v. U. S. Ins. Co., 10 Md. 517, 69 Am. Dec. 174; Bellas v. MeCarty, 10 "Watts, 13; Russell's Appeal, 15 Pa. St. 319; Siter V. McClknachan, 2 Gratt. 280; Hunt v. Johnson, 19 N. Y. 279; Doyle V. Teas, 4 Scam. 202; Wilder v. Brooks, 10 Minn. 50, 88 Am. Dec. 49; Dickenson v. Glenney, 27 Conn. 104; Parkist v. Alexander, 1 Johns. Ch. 394 ; Boyce v. Shiver, 3 S. C. 515. A mortgage by a vendee of his equitable interest under a land contract : Bank of Greensboro v. Clapp, 76 N. C. 482; Crane v. Turner, 7 Hun, 357, 67 N. Y. 437. In U. S. Ins.' Co. v. Shriver, 3 Md. Ch. 381, the court stated the doctrine as follows: The legislative in- tent was, "that all rights, encumbrances, or conveyances touching, connected with, or in any way concerning land should appear upon the public records. It followed that conveyances of equitable interests in land were vdthin the registry acts ; and that a conveyance of such an interest which, though sub- sequent in date, is first recorded must be preferred, unless the grantee had actual notice of the prior unregistered deed." As illustrations : A subsequent purchaser has constructive notice of a prior recorded encumbrance, — e. g., a mortgage or a deed of trust, — even though the encumbrancer's own title, which was a mere agreement to convey, was not recorded; Digman v; McCollum, 47 Mo. 372, 375, 376. An agreement in writing to convey land, though not under seal, creating an equitable inter- est, is protected by a record: Brotherton v. Livingston, 3 Watts & S. 334; Schutt V. Large, 6 Barb. 373 ; Kiser v. Heuston, 38 HI. 252 ; and see cases cited at the commencement of this note. The record of a voluntary con- veyance or deed without consideration is notice to a subsequent purchaser, ands tends to remove the presumption of bad faith or fraud as against such purchaser; Beal v. Warren, 2 Gray, 447; Mayor v. Williams, 6 Md. 235; Williams v. Bank, 11 Md. 198; Cooke's Lessee v. Kell, 13 Md. 469, 493. The doctrine stated in the text and sustained by the decisions cited in this note has been affirmed by several state statutes, which, in terms, provide for the recording of contracts for the sale of land, and other instruments creating a mere equitable interest. See ante, note under § 646. §649, (b) Edwards v. McKernan, 147 N. W. 804. But see, under the 55 Mich. 521, 22 N. W. 20; Shraiberg Texas statute, Cetti v. Wilson (Tex. V. Hanson (Minn.), 163 N. W. 1032; Civ. App.), 168 S. W. 996. Simonson v. Wenzel, 27 N. D. 638, 1279 CONCEENING NOTICE, § 651 tice arising from a registration is unknown to the common law, and is entirely a creation of the statute, it is plain that the provisions of the statute must be exactly com- plied with, or else there will be no resulting notice. Cer- tain requisites are prescribed by the legislation; they are all essential; without them, the object of the proceeding would wholly fail. I purpose to state and explain these requisites as they have been inferred from the statutory provisions, and settled by the decisions. They relate to the form, execution, and contents of the instrument, and to the form and manner of the registration, § 651. The Form and Kind of Instrument. — The record operates as a constructive notice only when the instrument itself is one of which the registration is required or au- thorized by the statute. The voluntary recording, there- fore, of an instrument, when not authorized by the statute, would be a mere nullity, and would not charge subsequent purchasers with any notice of its contents or of any rights arising under it.^ ^ § 651, 1 As examples : The entry upon a certain record-book in the county clerk's office of lands sold by the United States, being required by § 651, (a) The text is cited in Dial v. Cutler, 14 Tex. Civ. App. 520, 39 V. Inland Logging Co., 52 Wash. 81, S. W. 152 (void . sheriff's deed) ; 100 Pae. 157. See, also, Benedict v. Chicago Sugar Eef. Co. v. Jackson T. L. V. Land & C. Co. (Neb.), 92 Brewing Co. (Teiin. Ch. App.), 48 N. W. 210;, Chadwick v. Gulf States S. W. 275 (record of assignment of L. & i. Co., 74 ¥eA. 616, 41 U. S. chose in action not notice). See, App. 39, 20 C. C. A. 563 (record of further, Parkside Realty Co. v. Mac- deed void by statute, in Louisiana, Donald, 166 Cal. 426, 137 Pac. 21; when taxes have not been paid); Williams v. Smith, 128 Ga. 306, 57 Middle Creek Ditch Co. v. Henry, S. E. 801; Harris v. Beed, 21 Idaho, 15 Mont. 558, 39 Pac. 1054 (record- 364, 121 Pac. 780; Nordman v. Eau, ing acts do not apply to appropria- 86 Kan. 19, Ann. Cas. 1913B, 1068, tion of usufruct of water of a 38 L. E. A. (N. S.) 400, 119 Pac. stream); Spielmann v.- Kliest, 36 N. 351; Lambert v. Morgan, 110 Md. 1, J. Eq. 202 (a lease for years is a 132 Am. St. Eep. 412, 17 Ann. Cas. "conveyance" entitled to record); 439, 72 Atl. 407; People v. Burns, Pry v. Pry, 109 111. 466 (forged 161 Mich. 169, 137 Am. St. Kep. 466, deed); Burek v. Taylor,- 152 U. S. 125 N. W 740; White v. Himmel- 634, 14 Sup. Ct. 696 (same) ; Terry berger-Harrison Lumber Co., 240 Mo, § 652 EQUITY JUEISPRTJDENCB. 1280 § 652. Execution of the Instrument. — The record does not operate as a constructive notice, unless the instrument is duly executed, and properly acknowleged or proved, so as to entitle it to be recorded.^ The statutes generally re- quire, as a condition to registration, that the instrument should be legally executed, and that it should be formally acknowledged or proved, and a certificate thereof annexed. If a writing should be placed upon the records with any the statute only for purposes of taxation, is not a constructive notice to subsequent purchasers of the facts contained in it: Betser v. Rankin, 77 111. 289.'* The record of a deed transferring personal property is not a constructive notice of such transfer, even when the deed was also a con- veyance of land, and as such was entitled to be recorded : Pitcher v. Bar- rows, 17- Pick. 361, 28 Am. Dec. 306; Boggs v. Vamer, 6 Watts & S. 469.« The same is true of the recording of an assignment of a mortgage when not authorized by the statute :* James v. Morey, 2 Cow. 246, 14 Am. Dec. 475; Mott v. Clark, 9 Pa. St. *400, 49 Am. Dec. 566; see, also. Graves v. Graves, 6 Gray, 391; Villard v. Robert, 1 Strob. Eq. 393; Bossard v. White, 9 Rich. Eq. 483; Galpin v. Abbott, 6 Mich. 17; Reed v. Coale, 4 Ind. 283; Brown v. Budd, 2 Ind. 442; Commonwealth v. Rodes, 6 B. Mon. 171, 181; Parret v. Shaubhut, 5 Minn. 323; Bumham v. Chandler, 15 Tex. 441; Lewis v. Baird, 3 McLean, 56. 131, 42 L. E. A. (N. S.) 151, 139 S. 474, 8 Pac. 548, citing this section W. 553; Cetti v. Wilson (Tex. Civ. of the text; Adler v. Sargent, ia9 App.), 168 S. W. 996 (equitable Cal. 42, 41 Pac. 799. In many title). But that the record operates states, the assignment of a mort- as notice in cases where the convey- gage is held to be a "conveyance" ances are merely authorized as well within the meaning of the reeord- as where they are required to be ing acts: see ante, § 646, note; Hen- registered, see Neslin v. Wells, 104 niges v. Paschke, 9 N. D. 489, 81 U. S. 434; Pepper's Appeal, 77 Pa. Am. St. Rep. 588, 84 N. W. 350. A St. 373. similar rule as to the assignment of §651, (b) See, also, Lewis v. Barn- a lease was laid down in Crouse v. hart, 145 U. S. 56, 12 Sup. Ct. 772, Mitchell, 130 Mieh. 347, 97 Am. St. 43 Fed. 854 (Illinois) ; Lomax v. Eep. 479, 90 N. W. 32, and as to the Pickering, 165 111. 431, 46 N. E. 238. assignment of vendor's lien notes, § 651, (c) See, also, Scott v. Sierra under the Texas law; Busch v. Lumber Co., 67 Cal. 71, 7 Pac. 131. Brown (Tex. Civ. App.), 152 S. W. § 651, (d) Unauthorized Recording 683. of Assignment of Mortgage.— See, §652, (a) The text is quoted in also, Howard v. Shaw, 10 Wash. 151, South Penn Oil Co. v. Blue Creek 38 Pac. 746, citing this section of Development Co. (W. Va.), 88 S. E. the text; Watson v. Ihindee, 12 Or. 1029. 1281 CONCERNING NOTICE. §652 of these preliminaries entirely omitted or defectively per- formed, such a record would be a mere voluntary act, and would have no effect upon the rights of subsequent pur- chasers or encumbrancers.^^ § 652, 1 This rule has been applied under a great variety of circum- stances, and to many kinds of defects and imperfections : Pringle v. Dunn, 37 Wis. 449, 460, 461, 19 Am. Rep. 772; Brown v. Lunt, 37 Me. 423; De Witt V. Moulton, 17 Me. 418; Stevens v. Morse, 47 N. H. 532; Isham V. Bennington Iron Co., 19 Vt. 230; Blood v. Blood, 23 Pick. 80; Sumner V. Ehodes, 14 Conn. 135; Carter v. Champion, 8 Conn. 548, 21 Am. Dec. 695; Parkist v. Alexander, 1 Johns. Ch. 394; Green v. Drinker, 7 Watts & S. 440; Heister v. Fortner, 2 Binn. 40, 4 Am. Dec. 417; Strong v. Smith, 3 McLean, 362; Cockey v. Milne, 16 Md. 200; Johns v. Reardon, 3 Md. Ch. 57, 5 Md. 81; Hemdon v. Kimball, 7 Ga. 432, 50 Am. Dec. 406; Work v. Harper, 24 Miss. 517; Thomas v. Grand Gulf Bank, 9 Smedes & M. 201; Graham v. Samuel, 1 Dana, 166; Halstead v. Bank of Kentucky, 4 J. J. § 652, (b) This section, is quoted in Lynch v. Murphy, 161 TJ. S. 247, 16 Sup. Ct. 523. See, also, Parmelee V. Simpson, 5 Wall. (72 U. S.) 81 (record of undelivered deed not no- tice); Lewis V. Barhart, 145 XJ. S. 56, 12 Sup. Ct. Y72 (record of for- eign will insufficiently certified) ; Prentice v. Dulutt Storage & P. Co., 58 Fed. 437, 7 C. C. A. 293 (foreign deed insufficiently certified) ; Mo- Keown v. Collins, 38 Pla. 276, 21 South. 103; Williams v. Butterfield (Mo.), 81 S. W. 615 (not acknowl- edged); Salvage v. Haydock, 68 N. H. 484, 44 Atl. 696 (record of in- sufficiently attested deed) ; McKean, etc., Imp. Co. V. Mitchell, 35 Pa. St. (11 Casey) 269, 78 Am. Dec. 335; Cook V. Cook (E. I.), 43 Atl 537 (un- delivered deed); Arthur v. SCreven, 39 S. C. 77, 17 S. E. 640; Texas Consol. C. & M. Assn. v. Dublin C. & M. Co. (Tex. Civ. App.), 38 S. W. 404; Morrill v. Morrill, 53 Vt. 74, 38 Am. Eep. 659. See, also, Alaska Ex- ploration Co. V. Northern Mining & Trading Co., 152 Fed. 145, 81 C. C. II— 81 A. 363; Eandall Co. v. Glendenning, 19 Okl. 475, 92 Pae. 158 (a.ssignment of mortgage by corporation, without attestation by secretary and seal as required by statute); Williams v. Smith, 128 Ga. 306, 57 S. E. 801; Donalson v. Thomason, 137 Ga. 848, 74 S. E. 762; First National Bank of North Bend v. Gage, 71 Or. 373, 142 Pac. 539 (unsealed deed). Kecord. of Defectively Acknowl- edged Instrument not Notice. — See Eeid V. Kleyensteuber (Ariz.), 60 Pac. 899; Cumberland B. & L. Assn. V. Sparks, 111 Fed. 647, 49 G. C. A. 510 (in Arkansas, improperly ac- knowledged mortgage creates no lien against third parties, although they have actual notice of its existence and knowledge of its contents) ; Wolf V. Fogarty, 6 Cal. 224, 65 Am. Dec. 509; Emeric v. Alvarado, 90 Cal. 444, 478, 27 Pac. 356; Lee v. Murphy, 119 CaL 364, 51 Pac. 549; Milner v. Nelson, 86 Iowa, 452, 41 Am. St. Rep. 506, 19 L. R. A. 279, 53 N. W. 405 (defect which could be supplied by reference to the body of §653 EQUITY JtJRISPBUDENCB. 1282 § 653. Form and Manner of the Record. — ^Furthermore, the record of an instrument which is itself duly executed and entitled to be registered does not operate as a con- structive notice, unless it is made in the proper form and Marsh. 554; White v. Denman, 1 Ohio St. 110; Eeynolds v. Kingsbury, 15 Iowa, 238; Barney v. Little, 15 Iowa, 527; Brinton v. Seevres, 12 Iowa, 389; Hodgson v. Butts, 3 Cranoh, 140; Shults v. Moore, 1 McLean, 521; Harper v. Reno, 1 Freem. Ch. 323. The legislature, however, may provide that a defective acknowledgment shall not invalidate a record, and may even cure such a defect by a retroactive statute as between the parties, but the instrument not fatal); Sherod v. E'well, 104 Iowa, 253, 73 N. W. 493; Koch V. West, 118 Iowa, 468, 96 Am. St. Eep. 394, 92. N. W. 663; Farmers & Merchants' Bank v. Stockdale (Iowa), 96 N. W. 732; Wiscomb v. Cubberly, 51 Kan. 580, 33 Pae. 320; Sitler v. MeComas, 66 Md. 135, 6 Atl. 527; Tweto v. Burau (Minn.), 97 N. W. 128; German- American Bank v. Carondelet K. E. Co., 150 Mo. 570, 51 S. W. 691; Pin- ley V. Babb, 173 Mo. 257, 73 S. W. ISO (forged acknowledgment) ; Keel- ing V. Hoyt, 31 Neb. 453, 48 N. W. 66; Brinton v. Scull, 55 N. J. Eq. 747, 35 Atl. 843; Bradley v. Walker, 138 N. Y. 291, 33 N. E. 1079; Long V. Crews, 113 N. C. 256, 18 S. E. 499; Bernhardt v. Brown, 122 N. 0. 587, 65 Am. St. Kep. 725, 29 S. E. 884; Amick V. Woodworth, 58 Ohio St. 86, 50 N. E. 437; Murgrove v. Bow- ser, 5 Or. 313, 20 Am. Eep. 737; Can- non V. Deming, 3 S. D. 421, 53 N. W. 863; Citizens' Bank v. McCarty, 99 Tenn. 469, 42 S. W. 4; Stiles v. Japhet, 84 Tex. 91, 19 S. W. 450; Kalamazoo Nat. Bank v. Johnson, 5 Tex. Civ. App. 535, 24 S. W. 350; Daugherty v. Yates, 13 Tex. Civ. App. 646, 35 S. W. 937 (notary neg- lected to attach seal) ; Nicholson v. Gloucester Charity School, 93 Va. 101, 24 S. E. 899; Hunton v. Wood (Va.), 43 S. E. 186; Bowden v. Par- rish, 86 Va. 67, 19 Am. St. Eep. 873, 9 S. E. 616. See, also, Waskey v. Chambers, 224 U. S. 564, 56 L. Ed. 885, 32 Sup. Ct. 597; Harris v. Eeed, 21 Ida. 364, 121 Pae. 780; Sinclair v. Gunzenhauser, 179 Ind. 78, 98 N. E. 37, 100 N. E. 376; James v. New- man, 147 Iowa, 574, 126 N. W. 781; Cain V. Gray, 146 Ky. 402, 142 S. W. 715; Tinnin v. Brown, 98 Miss. 378, Ann. Cas. 1913A, 1081, 53 South. 780 (defective because one partner ac- knowledged for partnership); Long- ley V. Sperry, 72 N. J. Eq. 537^^ 66 Atl. 1062 (chattel mortgage); Me- Bee V. O'Connell, 16 N. M. 469, 120 Pae. 734; Wood v. Lewey, 153 N. C. 401, 69 S. E. 268' (acknowledgment before unauthorized official of for- eign state) ; Withrell v. Murphy, 154 N. C. 82, 69 S. E. 748; Goss v. Her- man, 20 N. D. 295, 127 N. W. 78; Childers v.Wrn. H. Coieman Co., 122 Tenn. 109, 118 S. W. 1018; South Penn Coal Co. v. Smith, 63 W. Va. 587, 60 S. E. 593; South Penn Oil Co. V. Blue Creek Development Co. (W. Va.), 88 S. E. 1029 (quoting the text). Where the acknowledgment is regular on its face, though irregu- lar in fact, as where it was taken by an officer who was disqualified by interest, but this disqualification does not appear from the record, it 1283 CONCERNING NOTIClJ. § 653 manner, in the proper book, as required by the statute. The policy of the recording acts is, that those persons who are affected with constructive notice should be able to obtain an actual notice, and even full knowledge, by means of a search. A search could not ordinarily be successful and lead the party to the knowledge which he seeks, if the instrument were recorded in a wrong book. This rule, therefore, instead of being arbitrary and technical, is ab- solutely essential to any effective working of the statutory system.i * For the same reason the operation of a record not as against one who has already purchased the land in good faith;" Watson V. Mercer, 8 Pet. 88; Gillespie v. Reed, 3 McLean, 377; Barnet v. Barnet, 15 Serg. & R. 72; Tate v. Stooltzfoos, 16 Serg. & R. 35, 16 Am. Dec. 546 ; Hughes v. Cannon, 2 Humph. 589 ; Reed v. Kemp, 16 111. 445 ; Allen V. Moss, 27 Mo. 354; Brown v. Simpson, 4 Kan. 76; Wallace v. Moody, 26 Cal. 387. The statutes in a few states provide that an instrument filed for record shall be a notice, although not properly acknowledged, but that the record cannot be used as evidence without the acknowledgment.*^ § 653, 1 Pringle v. Dunn, 37 Wis. 449, 460, 461, 19 Am. Rep. 772 ; Van ThomUey v. Peters, 26 Ohio St. 471. If the law prescribes that deeds is generally held to be sufficient for § 652, (d) See, also, Carpenter v. the purpose of imparting construe- Dexter, 8 Wall. 513; Eden Street tive notice: Ogden B. & L. Ass'n v. Permanent Building Ass'n No. 1 v. Mensch, 196 111. 554, 89 Am. St. Kep. Lu.sby, 116 Md. 173, 81 Atl. 284. 330, 63 N. E. 1049; Benson Bank v. §653, (a) Cady v. Purser, 131 Cal. Hove, 45 Minn. 40, 47 N. W. 449; 552, 82 Am. St. Rep. 391, 63 Pac. Roussain v. Norton, 53 Minn. 560, 844; Chamberlain v. Bell, 7 Cal. 293, 55 N. W. 747; Southwestern Mfg. 68 Am. Dec. 260; Williams v. Hyde, Co. V. Hughes, 24 Tex. Civ. App. 637, 98 Mich. 152, 57 N. W. 98; Gordon 60 S, W. 684. See, also, Boswell v. v. Constantine Hydraulic Co., 117 First Nat. Bank of Laramie, 16 Wyo. Mich. 620, 76 N. W. 142; Parsons v. 161, 92 Pac. 624, 93 Pac. 661; Berk- Lent, 34 N. J. Eq. 67; Sawyer v. ner v. D'Evelyn, 119 Minn. 246, 137 Adams, 8 Vt. 172, 30 Am. Dec. 459 N. W. 1097. But in a few states (recorder fraudulently recorded on the rule is otherwise, and such back leaf of a book which had been secret irregularity in the acknowl- filled for twelve years, and omitted edgment destroys the effect of the entry in index, with purpose to con- record as notice: Blackman v. Hen- ceal). See, also, Sinclair v. Gunzen- derson (Iowa), 87 N. W. 655, and hauser, 197 Ind. 78, 98 N. E. 37, 100 Iowa cases cited. N. E. 376 (when a deed is recorded § 652, (c) Blackman v. Henderson in the "miscellaneous" record in- (lowa), 87 N. W. 655; Williams v. stead of the register of deeds it is Butterfield (Mo.), 77 S. W. 729. not constructive notice, even though §653 EQmTY JUEISPEUDENCB. 1284 as constructive notice is limited territorially. A record should be recorded in certain books, — "books of deeds," — and that mort- gages should be entered in another set of books, — "books of mortgages," — the record of a mortgage in a "book of deeds," or of a deed in a "book of mortgages," would be wholly inoperative as a constructive notice: Luch's indexed in the entry book, for it would only refer an examiner to a book he was not hound to examine for deeds) ; Eiggs v. Eieholz, 127 La. 745, 53 South. 977; Grand Rapids Nat. Bank v. Ford, 143 Mieh. 402, 114 Am. St. Eep. 668, 8 Ann. Cas. 102, 107 N. W. 76 (reviewing Michigan statutes: absolute deed intended as a mortgage must he re- corded in hook of mortgages) ; John- son V. Cook, 179 Mich. 117, 146 N. W. 343. But in Merchants' State Bank of Fargo v. Tufts, 14 N. D. 238, 116 Am. St. Eep. 682, 103 N. W. 760, it is held, under the stat- ute of North Dakota, that the hook of deeds is the proper book for the recording of an absolute deed in- tended as a- mortgage. See, also, post, § 654, note (d). Notic© from Time of Filing for Record. — The statutes in many of the states contain provisions to the effect that the recording is deemed to be complete and to become opera- tive from the moment the instru- ment is left with the proper officer for record. In these states it would seem to follow, and it has been re- peatedly so decided, that no subse- quent error or omission of the ofS- cers whose duty it is to make the record, will destroy the effective- ness of the recording as construc- tive notice. The person filing the instrument, it is held, discharges his full duty when he delivers it to the recording officer with directions how to record it: Breckenridges v. Todd, 19 Ky. (3 T. B. Mon.) 52, 16 Am. Dec. 83; Gillespie v. Eogers, 146 Mass. 610, 16 N. E. 711; Heimv. Ellis, 49 Mich. 241; Mangold v. Bar- low, 61 Miss. 593, 48 Am. Eep. 84; Deming v. Miles, 35 Neb. 739, 37 Am. St. Eep. 464, 53 N. W. 665; Von Schuler v. Commercial Inv. B. & L. Ass'n, 53 N. J. Eq. 388, 51 Atl. 932; Durrence v. Northern Nat. Bank, 117 Ga. 385, 43 S. E. 726; Buckner v. Davis, 19 Ky. Law Eep. 1349, 43 S. W. 445; Webb v. Austin, 22 Ky. Law Eep. 764, 58 8. W. 808; Farabee v. McKerrihan, 172 Pa. St. 234, 51 Am. St. Eep. 734, 33 Atl. 583; Metts v. Bright, 4 Dev. & B. 173, 32 Am. Dec. 173; Legnoski v. Crocker, 86 Tex. 324, 24 S. W. 278; Throckmorton v. Price, 28 Tex. 605, 91 Am. Dec. 334; Freiberg v. Ma- gale, 70 Tex. 116, 7 S. W. 684; Hud- son V. Eandolph, 66 Fed. 216, 13 C. C. A. 402, 23 TJ. S. App. 681 (Texas); Bigelow v. Topliff, 25 Vt. 273, 60 Am. Dec. 264. See, also, Chapman & Co. v. Johnson, 142 Ala. 633, Ann. Cas. 559, and note, 38 South. 797; Enslen v. Thornton, 182 Ala. 314, 62 South. 525; Oregon Short Line E. Co. v. Stalker, 14 Idaho, 362, 94 Pae. 56 (dictum); Zeiner v. Edgar Zinc Co., 79 Kan. 406, 99 Pae. fil4; Cain v. Gray, 146 Ky. 402, 142 S. W. 715; Albert Han- son Lumber Co., Ltd., v. Baldwin Lumher Co., Ltd., 130 La. 849, 58 South. 638; Berryman v. Becker, 173 Mo. App. 346, 158 S. W. 899 (incorrect note on a mortgage rec- ord that it is canceled is no protec- tion to a second mortgagee); Atlas 1285 CONCEENING NOTICE. 653 is not a notice with respect to any land situated in a dif- Appeal, 44 Pa. St. 140; Colder v. Chapman, 52 Pa. St. 359, 91 Am. Dec. 163; McLanahan v. Reeside, 9 Watts, 508, 36 Am. Dec. 136; Colomer v. Morgan, 13 La. Ann. 202 ; Succession of CordevioUe v. Dawson, 26 La. Ann. 534; Fisher v. Tunnard, 25 La. Ann. 179; Verges v. Prejean, 24 La. Ann. Lumber Co. v. Canadian-American Mtg. & T. Co., 36 N. D. 39, 161 N. W. 604 (satisfaction entered up against the wrong lien); William Carlisle & Co. v. King (Tex. Civ. App.), 122 S. W. 581; Carter v. Ten- nessee Coal, Iron & Ey. Co., 180 Ala. 367, 61 South. 65 (constructive notice even though the deed is lost and so is never recorded at all). Where two instruments are filed for record at the same time, the officer cannot afcpct their priority by the numbers that he gives to them: Sehaeppi v. Glade, 195 111. 62, 62 N. E. 874. But in order to protect himself from the effect of the re- corder's mistake in recording the in- strument in the wrong book, it seems that the person depositing it for record must indicate its true character as a chattel mortgage, a mortgage of realty, etc.: Benedict V. T. Ii. V. Land & Cattle Co. (Neb.), 92 N. W. 210; Hunt v. Allen, 73 Vt. 322, 50 Atl. 1103. It has been held to follow from the statutory provision that where the grantee's agent filed the deed for record and afterwards, without au- thority, took it back before it was spread upon the records,, the origi- nal filing was effective as notice: Parrish v. Mahany, 10 S. D. 276, 66 Am. St. Eep. 715, 73 N. W. 97. In general, however, the withdrawal of the instrument before it is actually recorded defeats its effect as notice: the grantee's exemption from preju- dice by the misconduct of the clerk does not extend to his own acts: Turman v. Bell, 54 Ark. 273, 26 Am. St. Eep. 35, 15 S. W. 886; Webb v. Austin, 22 Ky. Law Eep. 764, 58 8. W. 808; Johnson v. Burden, 40 Vt. 567, 94 Am. Dec. 436; Mercan- tile Co-op. Bank v. Brown, 96 Va. 614, 32 S. E. 64; and a deed is not "filed for record," within the mean- ing of the statute, when it is merely left by the grantee with the re- corder with a, direction not to re- cord it until ordered to do so; Ha- worth v. Taylor, 108 III. 275. The courts of several states, on the other hand, in a number of well considered cases, have been able so to construe their statutes as to reach a conclusion in harmony with the text. This result is obtained by taking the provisions of the gen- eral recording statute in connection with entirely distinct statutes pre- scribing in detail the duties of the recording officer. Thus, in Cali- fornia, Civ. Code, § 1170, relating to the "Mode of Kecording," provides that "an instrument is deemed to be recorded when ... it is deposited . . . for record"; § 1213, relating to the "Effect of Eeeording," that "every conveyance of real property acknowledged . . . and recorded as prescribed by law, from the time it is filed with the recorder for rec- ord, is constructive notice of the contents thereof to subsequent pur- chasers and mortgagees." These sections are construed as follows: "For the purpose of complying with a statutory requirement, as in the ease of official bonds or certificates §653 EQUITY JUEISPEUDENCE. 1286 ferent county from that in which the registration is made. 78; Grimstone v. Carter, 3 Paige, 421, 24 Am. Dec. 230. In Luch's Ap-. peal, 44 Pa. St. 140, a peculiar instrument which was actually given as security for a debt, and was therefore held to be a mortgage, and not an of marriage, where the evident pur- pose of the statute is to make the instrument a matter of public rec- ord, or when the recording of an in- strument is an essential step in per- fecting some right or completing some act of the party, as in the case of a declaration of homestead, or an assignment for the benefit of creditors, the depositing of the in- strument in the recorder's office is sufficient; but, when merely making a record of the instrument is not the ultimate purpose of the party, but the recording of the instrument is the means by which his ultimate purpose is to be carried into effect, as when his purpose is to give no- tice of his interest in real estate, section 1213 requires not only that the instrument shall be filed with the recorder for record, but that it shall also be 'recorded as prescribed by law,' " that is to say, as pre- scribed by the County Government Act, which lays down in detail the recorder's duties. An instrument, therefore, is not recorded, for pur- poses of notice, until it has been transcribed into the proper book: Cady v. Purser, 131 Cal. 552, 82 Am. St. Rep. 391, 63 Pac. 844. Similarly, a statute prescribing the recorder's duties is treated as controlling the provision of the recording act that deeds and mortgages "shall be valid as against iona fide purchasers, from the date of their filing or re- cording in said office, and when so filed or recorded shall be notice to all the world," and it is inferred that the index is an essential part of the record: Eitchie v. Griffiths, 1 Wash. 429, 22 Am. St. Rep. 155, 12 L. R. A. 384, 25 Pac. 341 (a very instructive opinion). Other cases repudiate this method of statutory construction, and refuse to read the recording act in the light of separate statutes prescribing the recorder's duties: thus, in Armstrong v. Austin, 45 S. C. 69, 29 L. R. A. 772, 22 S. E. 763, it is argued that "the failure of the officer to perform a duty imposed upon him by a separate statutory provision, while it may subject him to an action at the instance of a party who may suffer by his de- fault, yet cannot affect the validity or effect of the recording.'' See, also, Davis v. Whitaker, 114 N. C. 279, 41 Am. St. Rep. 793, 19 S. E. 699; Farabee v. McKerrihan, 172 Pa! St. 234, 51 Am. St. Rep. 734, 33 Atl. 583; Sinclair v. Gunzenhauser, 179 Ind. 78, 98 N. E. 37, 100 N. E, 376; and cases cited at the begin- ning of this note; People v. Burns, 161 Mich. 169, 137 Am. St. Rep, 466, 125 N. W. 740; White v. Him- melberger-Harrison Lumber Co., 240 Mo. 13, 42 L. R. A. (N. S.) 151, 139 .S. W. 553; Prouty v. Marshall, 225 Pa. 570, 25 L. R. A. (N. S.) 1211, 74 Atl. 550 (person offering mortgage for record must at his peril see that it is properly recorded: an instruc- tive statement of the reasons for the rule), explaining Parabee v. McKerrihan, 172 Pa. St. 234, 51 Am. St. Rep. 734, 33 Atl. 583. The opinion in Mangold v. Bar- low, 61 Miss. 593, 48 Am. Rep. 84, enumerates many of the earlier 1287 CONCERNING NOTICE. §653 Tlie statutes uniformly require the instrument to be regis- absolute conveyance, had been recorded in a book of deeds; this record was held to be inoperative as a notice. In McLanahan v. Eeeside, 9 Watts, 508, 36 Am. Dec. 136, a deed absolute on its face was given, accompanied by a separate written defeasance, both constituting a mortgage. They were both recorded in the same book, but at different pages, several pages intervening between the two. The court held that no notice was thereby given of the instrument as a mortgage, because a party making a search, ^d finding the deed absolute on its face, would be misled, and suppose eases on this vexed question, and adheres to what it considers the minority view, that the grantee who lodges the deed for record cannot be prejudiced by a mistake or omis- sion on the recorder's part; citing, (Alabama) McGregor v. Hall, 3 Stew. 397; Mines v. Mines, 35 Ala. 23; (Connecticut) Franklin v. Can- non, 1 Eoot, 500; Judd v. Woodruff, 2 Eoot, 298; (Illinois) Merrick v. Wallace, 19 HI. 486; (Pennsylvania) Glading v. Frick, 88 Pa. St. 460; Clader v. Thomas, 89 Pa. St. 343; (Ehode Island) Nichols v. Eeynolds, 1 E. I. 30, 36 Am. D.ec. 238; (Vir- ginia) Beverly v. Ellis, 1 Eand. 102; and in support of the contrary view, that subsequent purchasers are bound only by what the records show, citing, (California) Chamber- lain V. Bell, 7 Cal. 292, 68 Am. Dec. 260; (Georgia) Shepherd v. Burk- halter, 13 Ga. 443, 58 Am. Dec. 523; (Iowa) Meller v. Bradford, 12 Iowa, 14; (Michigan) Barnard v. Campau, •29 Mich. 162; (Maryland) Brydon V. Campbell, 40 Md. 331; (Missouri) Terrell v. Andrew Co., 44 Mo. 309; (New York) Beekman v. Prost, 18 Johns. 544, 9 Am. Dec. 246; Frost v. Beekman, 1 Johns. Ch. 288; (Ten- nessee) Lally V. Holland, 1 Swan, 396; Baldwin v. Marshall, 2 Humph. 116; (Vermont) Sawyer v. Adams, 8 Vt. 172, 30 Am. Dec. 459; Sanger v. Craigue, 10' Vt. 555; (Wisconsin) Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772. Destruction of the Eecords. — After the recording has once been accom- plished, it is quite uniformly held that its effectiveness is not defeated by the subsequent careless or acci- dental loss of the records, as by fire: Paxson V. Brown (C. C. A.), 61 Fed. 874 (Arkansas) ; Deming v. Miles, 35 Neb. 739, 37 Am. St. Rep. 464, 53 N. W. 665; Alvis v. Morrison, 63 111. 181, 14 Am. Rep. 117; Shannon v. Hall, 72 111. 354, 22 Am. Rep. 146; Franklin Sav. Bank v. Taylor, 131 HI. 376, 23 N. E. 397; Geer v. Mis- souri L. & M. Co., 134 Mo. 85, 54 Am. St. Rep. 489, 34 S. W. 1099; Mattfield v. Huntington, 17 Tex. Civ. App. 716., 43 S. W. 53; Franklin Sav. Bank v. Taylor, 53 Fed. 854, 4 C. C. A. 55, 9 XT. S. App. 406 (but the record is superseded by a decree subsequently rendered giving the terms of the instrument in- correctly). See, also, Abbott v. Parker, 103 Ark. 425, 147 S. W. 70; Williams v. Butterfield, 214 Mo. 412, 114 S. W. 13 (line drawn through acknowledgment by unau- thorized person); Organ v. Bunnell (Mo.), 184 S. W. 102; Cooper v. Flesner, 24 Okl. 47, 20 Ann. Cas. 29, 23 L. R. A. (N. S.) 1180, 103 Pac. 1016; Wethered v. Conrad, 73 W. Va. 551, 80 S. E. 953. See 23 L. R. A. (N. S.) 1180, note. See Tolle v. 653 EQUITY JTJRISPEUDBNCE. 1288 tered in the same county in wMch the land is situated; a that there was no other instrument affecting the title : Viele v. Judson, 82 N. Y. 32. It might be supposed that the same rule should apply to a proper indexing. But in Mut. Life Ins. Co. v. Dake, 1 Abb. N. C. 381, it was expressly held that the index is not an essential part of the record ; that a mortgage otherwise duly recorded is notice although not indexed. To the same effect are Curtis v. Lyman, 24 Vt. 338, 58 Am. Rep. 174 j Bishop V. Schneider, 46 Mo. 472, 2 Am. Rep. 533 ; Throckmorton v. Price, 28 Tex. 605, 91 Am. Dec. 334; Board of Commissioners v. Babcock, 5 Or. 472. And the same as to a mistake in indexing: Green v. Garrington, l6 Ohio St. 548; but see, per contra, Speer v. Evans, 47 Pa. St. 141, per Woodward, J.* AUey (Ky.), 24 S. W. 113 (negli- gence in failing for five years to re- store the record of a mortgage, as authorized by statute, will destroy its lien as against an iunoc-ent pur- chaser from the mortgagor after the destruction of the record). § 653, (b) Index.— In further sup- port of the usual rule that a failure to index the instrument, or a mis- take in indexing, does not defeat the effect of the record as notice, see Chatham v. Bradford, 50 Ga. 327, 15 Am. Rep. 692; Mutual Life Ins. Co. v. Dake, 87 N. Y. 257; Davis V. Whitaker, 114 N. C. 279, 41 Am. St. Rep. 793, 19 S. E. 695; Hampton Lumber Co. v. Ward, 95 Fed. 3 (North Carolina); Schell v. Stein, 76 Pa. St. (26 P. F. Smith) 398, 18 Am. Rep. 416; Stockwell v. McHenry, 107 Pa. St. 237, 52 Am. Rep. 475; Armstrong v. Austin, 45 S. C. 69, 29 L. R. A. 772, 22 S. E. 763; Greenwood Loan & Guarantee Co. V. Childs (S. C), 45 S. B. 167. See, also, Eureka Lumber Co. v. Satchwell, 148 N. C. 316, 62 S. E. 310; Amos v. Givens, 179 Ala. 605, 60 South. 829. In a few. states the index is an es- sential part of the record: .3!tna Life Ins. Co. v. Hesser, 77 Iowa, 381, 14 Am. St. Rep. 297, 4 L. R. A. 122, 42 N. W. 325 (judgment against "Hesser" was indexed under name of "Hesse"); Koch v. West, 118 Iowa, 468, 96 Am. St. Rep. 394, 92 N. W. 663; Barney v. McCarthy, 15 Iowa, 510, 83 Am. Dec. 427; Hibbard v. Zenor, 75 Iowa, 471, 9 Am. St. Rep. 497, 39 N. W. 714; Ritchie v. Grif- fiths, 1 Wash. 429, 22 Am. St. Rep. 155, 12 L. R. A. 384, 25 Pac. 341; Malborn v. Grow, 15 Wash. 301, 46 Pac. 330; Congregational Church Building Society v. Scandinavian Free Church, 24 Wash. 433, 64 Pac. 750 (mistake as to name of grantor) ; Hiles V. Atlee, 80 Wis. 219, 27 Am. St. Rep. 32, 49 N. W. 816. See, also, James v. Newman, 147 Iowa, 574, 126 N. W. 781; and in Pennsyl- vania, by statute, March 18, 1875, defective indexing is fatal: Prouty V. Marshall, 225 Pa. 570, 25 L. R. A. (N. S.) 1211, 74 Atl. 550. Under this rule it is held that the index need not contain a full description of. the land; it is a sufficient description if it "challenges attention": Mal- born V. Grow, 15 Wash. 301, 46 Pae. R30. In the following cases an index in the name of the husband only of deeds executed by the husband and wife was held sufficient: Jones v. Berkshire, 15 Iowa, 248, 83 Am. Dec. 412; Hodgson v. Lovell, 25 Iowa, 97, 95 Am. Dec. 775. 1289 OONOEENING NOTICE. § 654 record in a different county is therefore inoperative as a constructive notice. ^ •> § 654. Contents of the Record. — ^A record is a construct- ive notice only when and so far as it is a true copy, sub- stantially even if not absolutely correct, of the instrument § 653, 2 King v. Portis, 77 ^N. C. 25. If a deed or mortgage covered lands situated in two different counties, and it was recorded in one of them only, it would be effective as to part of the land conveyed, but inoperative as a notice with respect to the other part: Astor v. Wells, 4 "Wheat. 466 j Lewis V. Baird, 3 McLean, 56 ; Stevens v. Brown, 3 Vt. 420, 23 Am. Dec. 215; Perrin v. Reed, 35 Vt. 2; Kerns v. Swope, 2 Watts, 75; Hundley v. Mount, 8 Smedes & M. 387; Crosby v. Huston, 1 Tex. 203; St. John v. Conger, 40 111. 535; Stewart v. McSweeney, 14 Wis. 468. In Kerns v. Swope, 2 Watts, 75, a prior deed of land lying in two counties had been recorded in one of them only, and so was not constructive notice with respect to the land situated in the other. A subsequent pur- chaser bought and took a conveyance of both tracts. The court held that while this purchaser was not charged with constructive notice with respect to the land situated in one of the counties, there arose a presumption of fact that he had examined the record, and had thus obtained actual notice of the deed of both parcels ; that a jury might rely upon such presumption of fact, and might find as a fact that he had received actual notice from such a search of the records. In my opinion, this decision pushes the doc- trine of actual notice hased upon indirect evidence to the furthest extreme. I seriously doubt its correctness. See ante, § 600, and note thereunder. § 653, (c) Record In a Different aries of the county, see Keys & Co. v. County. — The text is cited in Har- First National Bank, 22 Okl. 174, 18 din v. Hardin, 33 S. D. 202, 145 N. Ann. Cas. 152 and note, 104 Pac. 346. W. 432 (same rule applies to lis Under a statute providing that eon- pendens notice). See De Lassus v. veyanees shall be recorded in the Winn, 174 Mo. 636, 74 S. W. 635; county where the land or a part Jackson v. Eice, 3 Wend. 180, 20 thereof is situated, it has been held Am. Dec. 683; Horsley v. Garth, 2 that where one tract of land is sit- Gratt. 471, 44 Am. Dec. 393. The uated in two counties, a record in deed must be recorded in the county one is sufficient to impart notice to in which the land lies at the time it creditors: Brown v. Lazarus, 5 Tex. is deposited for registration: Garri- Civ. App. 81, 25 S. W. 71. In Ken- son V. Haydon, 24 Ky. (1 J. J. tucky a deed conveying land in two Marsh.) 222, 19 Am. Dec. 70. And counties may be recorded in the see Broussard v. Dull, 3 Tex. Civ. county in which the greater part of App. 59, 21 S. W. 937. That the the land lies, and is then construe- validity of the record is not affected tive notice: Shively v. Gilpin, 23 by a subsequent change in bound- Ky. Law Eep. 2090, 66 S. W. 763. § 654 EQUITY JURISPRUDENCE. 1290 which purports to be registered, and of all its provisions. Any material omission or alteration will certainly prevent the record from being a constructive notice of the original instrument, although it may appear on the registry books to be an instrument perfect and operative in all its parts. The test is a plain and simple one. It is, whether the record, if examined and read by the party dealing with the premises, would be an actual notice to him of the origi- nal instrument and of all its parts and provisions. By the policy of the recording acts, such a party is called upon to search the records, and he has a right to rely upon what he finds there entered as a true and complete transcript of any and every instrument affecting the title to the lands with respect to which he is dealing. A record can only be a constructive notice, at most, of whatever is contained within itself .1 ^ Finally, the record will not be a notice, § 654, 1 As illustrations of such mistakes affecting the operation of the record as a constructive notice would be an error in the description or loca- § 654, (a) This passage is quoted 61 Miss. 593, 48 Am. Rep. 84, re- in Johnson v. Hess, 126 Ind. 298, viewing the earlier cases. 9 L. R. A. 471, 25 .N. E. 445; Error in Name. — That an error in Interstate B. & L. Ass'n v. Me- the initial of the middle name Cartha, 43 S. C. 72, 20 S. C. 807, does not invalidate the record, see and in Prouty v. Marshall, 225 Pa. Fincher v. Hanegan, 59 Ark. 151 570, 25 L. R. A. (N. S.) 1211, 74 24 L. R. A. 543, and note 26 S. w! Atl. 550. As was shown in the edi- 821. That the record of a general tor's note to the last paragraph, the judgment against William M. is not statutes of many states which make constructive notice of a judgment the notice date from the filing of against H. W. M., see Johnson v. the instrument for record are inter- Hess, 126 Ind. 298, 9 L. R. A. 471 preted as exempting the person filing 25 N. E. 445. And see Eidgway's the instrument from prejudice by Appeal, 15 Pa. St. 177, 53 Am. Dec. any error or omission on the record- 586 (judgment docketed but Chris- er's part; an erroneous record, by tian names of debtors omitted; no this interpretation of these statutes, notice) ; Cummings v. Long, 16 is constructive notice of the origi- Iowa, 41, 85 Am. Dec. 502; but see nal: Zear v. Boston Safe Dep. & T. Green v. Meyers (Mo. App.), 72 S. Co., 2 Kan. App. 505, 43 Pac. 977; W. 128, for a case where the mis- Hudson v. Randolph, 66 Fed. 216, 13 take was immaterial (doctrine of C. 0. A. 402, 23 U. S. App. 681 idem sonans applied). See, also, (Texas); Meherin v. Oaks, 67 Cal. Pinney v. Russell, 52 Minn. 447, 54 57, 7 Pac. 47; Mangold v. Barlow, N. W. 484; Roberson v. Downing 1291 i CONCERNING NOTICE. §654 ■unless it and the original instrmnent of wMcli it is a copy correctly and sufficiently describe the premises which are tion of the premises included in the original deed or mortgage; an error in the name of a grantor or mortgagor ; an error in the amount of the debt for which a mortgage is a security, and the like :* Jennings v. Wood, 20 Co. (Ga.), 48 S. E. 42&, and cases cited. For other examples of errors or variances in the record as to the initials of the grantor's judgment debtor's, or mortgagor's name suffi- cient to defeat the effect of the rec- ord as notice, see Banker's Loan & I. Co. V. Blair, 99 Va. 60G, 86 Am. St. Eep. 914, 39 S. E. 231, citing this sec- tion of the text; Johnson v. Wilson & Co., 137 Ala. 468, 97 Am. St. Rep. 52, 34 South. 392; Prouty v. Marshall, 225 Pa. 570, 25 L. E. A. (N. S.) 1211, 74 Atl. 550. As to Christian names, it is held that the fact that a mort- gage is signed "Charlie" instead of "Charles" will not take it out- of the chain of title, or defeat the effect of the record as constructive notice; Styles V. Theo. P. Scotland & Co., 22 N. D. 469, 134 N. W. 708: and "Francis" may be recorded and in- dexed as "Frank"; Bums v. Eoss, 215 Pa. St. 293, 114 Am. St. Rep. 963, 7 L. E. A. (W. S.) 415 and note, 64 Atl. 526. Failure to Copy Acknowledgment. A failure of the recorder to copy the acknowledgment has been held sufScient to prevent the record from being notice: Taylor v. Harrison, 47 Tex. 454, 26 Am. Eep. 304; Dean V. Gibson (Tex. Civ. App.), 48 S. W. 57, 58 S. W. 51, 79 S. W. 363. Omission of Copy of Seal. — This is not a fatal error in the record of an instrument required to be sealed, if it otherwise appears from the rec- ord that the instrument was sealed: Beardsley v. Day, 52 Minn. 451, 55 N. W. 46. But where the record does not show that the notary had alfixed his seal to the acknowledg- ment, it is insuficient: Girardin v. Lampe, 58 Wis. 267, 16 N. W. 614. Failure to Copy Signature. — No notice: Shepherd v. Burckhalter, 13 Ga. 443, 58 Am. Dec 523. Omission of a Clause in a Trust Deed Giving Power to Appoint a Substitute Trustee does not prevent the record from being notice: Hart V. Patterson (Tex. Civ. App.), 43 S. W. 545, citing this section of the text. In Royster v. Lane, 118 N. C. 156, 24 S. E. 796, the register had made a mistake in copying the name of the mortgagor, but the debt was correctly described, referring to the proper name, and the index con- tained the proper name. It was held that the record was suflicient to impart notice. Sinclair v. Slaw- son, 44 Mich. 123, 38 Am. Eep. 235, 6 N. W. 207, was also a ease where the mistake was held im- material. The statute required the recorder to keep an entry book and to record at length in another. In the entry book the names of the mortgagor and the mortgagee ap- peared, but in the record the name of the mortgagee was omitted. The court placed its decision upon the ground that the record and the entry book together furnished all the necessary information. § 654, (•>) See Johnson v. Hess, 126 Ind. 298, 9 L. R. A. 471, 25 N. E. 445, quoting from this note. § 654 EQUITY JURISPKXJDENCE. 1292 to be affected, and correctly and sufficiently state all the other provisions which are material to the rights and Ohio, 261; Miller v. Bradford, 12 Iowa, 14; Hughes v. Debnam, 8 Jones, 127; Wyatt v. Barwell, 19 Ves. 439. In one case a mortgage was given to secure three thousand dollars. In recording it, by a mistake of the clerk or copyist in the registry office, the record was made to read only three hundred doUars. It was held to be a constructive notice only to the extent of three hundred dollars, and to constitute a lien only for that amount as against a subsequent grantee or mortgagee who had no actual notice, and who, it was held, had a right to rely on the record as correctly stating the amount of the debt and the extent of the lien : Peck v. MaUams, 10 N. Y. 509; Beekman v. Frost, 18 Johns. 544, 9 Am. Dec. 246; Terrell v. Andrew Co., 44 Mo. 309; Jennings v. Wood, 20 Ohio, 261." In this connection the question has arisen concerning the effect of a deed of land absolute on its face, but accompanied by a written defeasance, and thus constituting in reality a mortgage. It is held that both must be recorded together as a mortgage, in order that the registry may be constructive notice of the whole instrument as a mortgage. If the deed alone is recorded, without the ac- companying defeasance, it is clear that the record will not be constructive notice of the entire instrument in its intended character as a mortgage; so far as the registry would operate, the instrument, as a mortgage, would be in the position of a whoUy unrecorded mortgage, as against subsequent pur- chasers and encumbrancers:*' Brown v. Dean, 3 Wend. 208; James v. Morey, 2 Cow. 246, 14 Am. Dec. 475; Dey v. Dunham, 2 Johns. Ch. 182; Friedley v. Hamilton, 17 Serg. & R. 70, 17 Am. Dec. 638; Jaques v. Weeks, 7 Watts, 261, 287; Edwards v. Trumbull, 50 Pa. St. 509; Hendrickson's Appeal, 24 Pa. St. 363. In this last-mentioned case. Black, J., said, eon- § 654, (c) See, also, Osborn v. as to put one dealing with the Hall, 160 Ind. 153, 66 N. E. 457; grantor upon inquiry as to the gran- Gilehrist v. Gough, 63 Ind. 576, 30 tee's claim. If he contends, or has Am. Rep. 250 (the fact that the reason to believe, that the deed u amount secured by the mortgage not what it purports to be, it is his was correctly stated in the index is duty to pursue the inquiry, and as- immaterial) ; Hill V. McNicholl, 76 certain the actual claim of the gran- Me. 314. tee, and whether, notwithstanding § 654, (fl) Manufacturers' & Mech. the deed, the grantor still retains Bank v. Bank of Pennsylvania, 7 an interest in the property, and, if Watts & S. 335, 42 Am. Dec. 240. so, what it is": Kennard v. Mabry, See, also, Krauss v. Potts, 38 Okl. 78 Tex. 151, 14 S. W. 272; Marston 674, 135 Pae. 362, under the Okia- v. Williams, 45 Minn. 116, 22 Am. homa statutes. Contra, Security St. Rep. 719, 47 N. W. 644; Bank of Sav. & Tr. Co. v. LoewenlDerg, 38 Mobile v. Tishomingo Sav. Inst., 62 Or. 159, 62 Pac. 647, arguing that Miss. 250; Kemper v. Campbell, 44 "the condition of the record is such Ohio St. 210, 6 N. E. 566. 1293 CONCERNING NOTICE. § 654 interests of subsequent parties. The premises should at least be so described or identified that a subsequent pur- chaser or encumbrancer would have the means of ascer- taining with accuracy what and where they were.^ * The ceming such a record: "A mortgage, when in the shape of an absolute conveyance with a separate defeasance, the former being recorded and the latter not, gives the holder no rights against a subsequent encumbrancer. It is good for nothing as a conveyance, because it is in fact not a convey- ance ; and it is equally worthless as a mortgage, because it does not appear by the record to be a mortgage." To the same effect is Corpman v. Bac- castow, 84 Pa. St. 363. This dictum concerning the effect of such a record as a conveyance is 'certainly opposed to the doctrine which generally pre- vails through the states, and to the policy of the recording acts. A subse- quent purchaser for a valuable consideration from the grantee, under such circumstances, would, according to the generally accepted doctrine, obtain a good title as against the grantor and all persons claiming through him, as was held in Cogan v. Cook, 22 Minn. 137: The statutes in most states contain an express provision concerning the recording of absolute deeds accompanied by a defeasance.'' § 654, 2 Partridge v. Smith, 2 Biss. 183, 185, 186; Galway v. Malchow, 7 Neb. 285; Herman v. Deming, 44 Conn. 124; Murphy v. Hendricks, 57 §654, (e) As to what constitutea C. Gold Min. Co. v. Marks, 13 Colo, a valid defeasance under such stat- App. 248, 58 Pac. 404; Slocum v. utes, the record of which can oper- O'Day, 174 III. 215, 51 N. E. 243; ate as notice, see Holmes v. New- Farmers & Merchants' Bank v. man (Kan.), 75 Pac. 501 (bond for Stockdale (Iowa), 96 N. W. 732; title not equivalent to a defeasance, American Inv. Co. v. Coulter, 8 and does not, when recorded, give Kan. App. 841, 61 Pac. 820; Thur- notice that the obligee therein is in lough v. Dresser, 98 Me. 161, 56 Atl. effect a mortgagor). See, also, 654; Ozark Land & Lumber Co. v. Krauss v. Potts, 38 Okl. 674, 135 J'ranks, 156 Mo. 673, 57 S. W. 540; Pac. 362. Bank of Ada v. Gullickson, 64 §654, (f) Description of the Prem- Minn. 91, 66 N. W. 131; Bailey v. ises, etc. — The text is quoted in Galpin, 40 Minn. 319, 41 N. W. Johnson v. Hess, 126 Ind. 298, 9 1054; Henry Marx & Sons v. Jordan L. R. A. 471, 25 N. E. 445; Inter- (Mis^.), 36 South. 386; Baker v. state B. & L. Ass'n v. McCartha, 43 Bartlett, 18 Mont. 446, 56 Am. St. S. C. 72, 20 S. E. 807; and cited, in Eep. 594, 45 Pac. 1084; Southern B. Davis V. Ward, 109 Cal. 186, 50 Am. & L. Assn. v. Eodgers, 104 Tenn. St. Rep. 29, 41 Pac. 1010; Simmons 437, 58 S. W. 234; Pierson v. Me- V. Hutchinson, 81 Miss. 351, 33 Clintock (Tex. Civ. App.), 78 S. W. South. 21; Bankers' Loan & I. Co. 706; Neyland v. Texas Yellow Piiic V. Blair, 99 Va. 606, 86 Am. St. Rep. Lumber Co., 26 Tex. Civ. App. 417, 914, 39 S. E. 231. See, also, Annie 64 S. W. 696; Laughlin v. Tips, 8 654 EQXriTY JXJEISPKTJDENCE. 1294 same rule applies to the record of mortgages and all other encumbrances which can be recorded. The language, both Ind. 593; Thorp v. Merrill, 21 Minn. 336; Sanger v. Craigue, 10 Vt. 555; Brotherton v. Livingston, 3 "Watts & S. 334'; Banks v. Ammon, 27 Pa. St. 172; Mundy v. Vawter, 3 Gratt. 518; Lally v. Holland, 1 Swan, 396; Mar- tindale v. Price, 14 Ind. 115; Rodgers v. Kavanaugh, 24 111. 583; Nelson V. Wade, 21 Iowa, 49; Jones v. Bamford, 21 Iowa, 217. In Partridge v. Smith, 2 Biss. 183, 185, 186, a deed was recorded in a county where the land conveyed was situated. The description was erroneous in some im- portant particulars; but there were no other premises in the county which at all answered to the description. The court, while admitting the general rule as stated in the text, held that there was sufficient in the record to put a subsequent purchaser on an inquiry, and it therefore operated as a notice that the land had been conveyed. See, also, Thornhill v. Burthe, 29 La. Ann. 639; Slater v. Breese, 36 Mich. 77; Shepard v. Shepard^ 36 Mich. 173; Boon V. Pierpont, 28 N. J. Eq. 7, — ^which are illustrations of mistakes and omissions immaterial because the other portions of the description are rea- sonably sufficient to enable any one to identify the land. Slater v. Breese, 36 Mich. 77, is an especially instructive decision on this point.s Tex. Civ. App. 649, 28 S. W. 551. See, also, Neas v. Whitener-London Kealty Co., 1-19 Ark. 301, Ann. Cas. 1917B, 780, 178 S. W. 390; Kellogg v. Eandolph, 71 N. J. Eq. 127, 63 A.tl. 753; Thorpe v. Helmer, 275 III. 86, 113 N. E. 954; Merritt v. Bunt- ing, 107 Va. 174, 12 Ann. Cas. 954, 57 S. E. 567. But see Gillespie "v. Eogers, 146 Mass. 610, 16 N. B. 711 (the registry of a deed executed by J. N. H., in which he calls himself J. H., by which latter name he is equally well known, is not such a, mistake as will prevent the registry operating as constructive notice). § 654, (s) Immaterial Mistakes in Descriirtion. — See, also, Eea v. Haf- fenden, 116 Cal. 596, 48 Pae. 716; Morrison v. Miles, 270 111. 41, 110 N. E. 410 (erroneous description, but apparent what the error is) : Prick V. Godare, 114 Ind. 170, 42 isr. E. 1015 (^here correct bound- aries are given, description sufli- cient though the land is stated to be in the N. W. instead of the N. E. quarter section); Miltonville State Bank v. Kuhnle, 50 Kan. 420, 34 Am. St. Rep. 129, 31 Pae. 1057; Anderson v. Baughmau, 7 Mich. 69, 74 Am. Dec. 699 (word "lot" used where "block" intended. The court said that "no man of ordinary in- telligence could have been deceived as to the land intended"); Kennedy v. Boykin, 35 S. C. 61, 28 Am. St. Rep. 838, 14 S. E. 809 (where cor- rect boundaries given, error in num- ber of acres unimportant) ; Swear- ingen v. Reed, 2 Tex. Civ. App. 364, 21 S. W. 383; William Carlisle & Co. V. King (Tex. Civ. App.), 122 S. W. 581, 133 S. W. 241; Eeid v. Rhodes, 106 Va. 701, 56 S. E. 722; Florence v. Morien, 98 Va. 26, 34 S. E. 890 ("All the right, title and interest of said R. K. M. and wife in and to all the real estate lying in the county of H. of which E. M. died seised and possessed," held sufficient), citing this section of the 1295 CONCEKNING NOTICE. §654 of the original and of the record, must be such that if a subsequent purchaser or encumbrancer should examine the instrument itself, he would obtain thereby an actual notice of all the rights which were intended to be created or conferred by it.^ ^ It seems also to result from the terms § 654, 3 Youngs v. Wilson, 27 N. Y. 351; reversing 24 Barb. 510; Bab- cock V. Bridge, 29 Barb. 427; Bell v. Fleming, 12 N. J. Eq. 13, 490; Petti- text. In Bright v. Buokman, 39 Ted. 247, this rule was thus stated: "The description of the property upon which the mortgage is an en- cumbrance must be such as reason- ably to enable subsequent purchas- ers to identify the land; otherwise the record of the mortgage is not notice of any encumbrance upon it. If the description in the mortgage is erroneous, and it is apparent what the error is, then the record is constructive notice of the mort- gage upon the lots intended to be described; but if it is not apparent what the error is, the record is not constructive notice. . . . The premises should at least be so de- scribed or identified that a subse- quent purchaser would have the means of ascertaining with accu- racy what and where they were. The language, both of the mortgage and of the record of it, must be such that if a subsequent purchaser should examine the instrument it- self he would obtain thereby an ac- tual notice of all the rights which were intended to be created or con- ferred by it." This section of the text is cited. It is held in a number of eases that where it is evident from an inspection of the records that a mis- take has been made, the subsequent purchaser is put upon inquiry as to the true facts: Cable v. Minneapolis Stock-yards & P. Co., 47 Minn. 417, 50 N. W. 528; Walls v. State, 140 Ind. 16, 38 N. E. 177; Vercruysse v. Williams, 112 Fed. 206, 50 C. C. A. 486 (Kansas; the land, as described would be situated in another county) ; Kellogg v. Randolph, 71 N. J. Eq. 127, 63 Atl. 753 (erroneous statement that the property was in a certain township, or a certain city). Contra, that the record "has no operation in the way of putting him upon inquiry as to what prem- ises were intended to be conveyed, unless they be substantially de- scribed therein'': Simmons v. Hutch- inson, 81 Miss. 351, 33 South. 21 (re- corded encumbrance on "the % of" a certain quarter section ro notice of intention to encumber the East % of such quarter section). In Laughlin v. Tips, 8 Tex. Civ. App. 649, 28 S. W. 551, the principle is stated as follows: "Purchasers are pnly charged with constructive no- tice of the facts actually exhibited by the record, and not with such facts as might have been ascer- tained by such inquiries as an ex- amination of the record might have induced a prudent man to make." See, also, Neas v. Whitener-London Eealty Co., 119 Ark. 301, Ann. Cas. 1917B, 780, 178 S. W. 390. §654. (h) The text is quoted in Johnson v. Hess, 126 Ind. 298, 9 L. K. A. 471, 25 N. E. 445; and in Prouty V. Marshall, 225 Pa. 570. 25 li. R. A. (N. S.) 1211, 74 Atl. 550. § 655 EQUITY JUBISPKUDENCE. 1296 of the statute tliat the recording of a copy is not equivalent to the record of the original instrument, and is not opera- tive as a notice.* i § 655. (4) Of What the Record is a Notice.— The doe- trine formulated under this head is merely the summing up and result of the various special rules which have been stated in the preceding paragraphs. When all the fore- going requisites to a valid registration have been complied with, — when an instrument is one entitled to be recorded, and has been duly executed and acknowledged or proved, and has been recorded in the proper manner and in the proper county, — then such record becomes a constructive notice not only of the fact that the instrument exists, but of its contents, and of all the estates, rights, titles, and interests, legal and equitable, created or conferred by it or arising from its provisions.^ ^ The inquiry therefore re- mains, To what classes of persons does this notice extend? bone V. Griswold, 4 Conn. 158, 10 Am. Dec. 106 ; Hart v. Chalker, 14 Conn. 77; Viele v. Judson, 82 N..Y. 32 (record of an assignment of a mortgage). § 654, 4 Ladley v. Creighton, 70 Pa. St. 490. Unless the recording is done in pursuance of the express provisions of a statute permitting a copy to be proved and recorded when the original is lost. § 655, 1 Bancroft v. Consen, 13 Allen, 50; Orvis v. Newell, 17 Conn. 97; Bush V. Golden, 17 Conn. 594; Harrison v. Cachelin, 23 Mo. 117, 127; The debt must be described with M. T. Jones Lumber Co., 82 Tex. sufficient certainty to enable subse- 424, 18 S. W. 599. Where the mort- quent purchasers and creditors to gage purports to recite the terms of ascertain, either by the condition of the bond or notCj persons consult- the deed or by inquiry eUi/imde, tlio ing the records have a right to pre- extent of the. encumbrance: Booth sume that the bond or note is cor- V. Barnum, 9 Conn. 286, 23 Am. Dec. rectly set forth in the mortgage: 339. The mortgage need not ex- Interstate B. & L. Ass'n v. Me- pressly state the amount of the in- Cartha, 43 S. C. 72, 20 S. E. 807, debtedness, if it states facts from quoting this section of the text; which that amount can be com- Hall v. Bead, 28 Tex. Civ. App. 18, puted; as where it stated the amount 66 S. W. 809. and rate of interest, so that the § 654, (i) See, also, Mack v. Mc- ascertainment of the principal sum Intosh, 181 HI. 653, 54 N. E. 1019, was merely a matter of computa- and Illinois cases cited, tion: Gardener v. Colin, 191 111. 553, §655, (a) This section is cited in 61 N. E. 492; and see Clementz y. Johnson v. Hess, 126 Ind. 298, 9 L. 1297 OONCBENING -NOTICE. 656 §656. (5) To Whom the Record is a Notice.— What classes of persons are thus charged with constructive no- tice by a regular and lawful registration? The answer to Mesick v. Sunderland, 6 Cal. 297; George v. Kent, 7 Allen, 16; Hethering- ton V. Clark, 30 Pa. St. 393 ; Morris v. Wadsworth, 17 Wend. 103 ; Thomson V. Wileox, 7 Lans. 376; Youngs v. Wilson, 27 N. Y. 351; Dimon v. Dunn, 15 N. Y. 498, Parkist v. Alexander, 1 Johns. Ch. 394, Humphreys v New- man, 51 Me. 40; Hall v. MeDuff, 24 Me. 311; Tripe v. Marcy, 39 N. H. 439; Leach v. Beattie, 33 Vt. 195; Bolles v. Chauncey, 8 Conn. 389; Peters V. Goodrich, 3 Conn. 146 ; Barbour v. Nichols, 3 R. I. 187 ; Souder v. Mor- row, 33 Pa. St. 83; Clabaugh v. Byerly, 7 Gill, 354, 48 Am. Dec. 575; Grandin v. Anderson, 15 Ohio St. 286; Kyle v. Thompson, 11 Ohio St. 616; Leiby v. Wolf, 10 Ohio, 83; Doyle v. Stevens, 4 Mich. 87; Buchanan v. International Bank, 78 111. 500; Ogden v. Walters, 12 Kan. 282; McCabe v. Grey, 20 Cal. 509; Dennis v. Burritt, 6 Cal. 670; Montefiore v. Browne, 7 H. L. Cas. 241. Viele v. Judson, 82 N. Y. 32 (as to the effect of record of an assignment of a mortgage ; it is notice of the rights of the assignee as against any subsequent acts of the mortgagee affecting the mortgage; it protects as well against a discharge as against an assignment by the mortgagee). R. A. 471, 25 N. E. 445; Bankers' Loan & I. Co. v. Blair, 99 Va. 606, 86 Am. St. Kep. 914, 39 S. E. 231; and in Mansfield v. Wardlow (Tex. Civ. App.), 91 S. W. 859 (instrument creating trust). See, also, Scott v. Mineral Development Co. (C. C. A.), 130 Fed. 497; Meyer v. Portis, 45 Ark. 420; Warder v. Cornell, 105 111. 169; Stokes v. Biley, 121 111. 166, 11 N. E. 877; Dickinson v. Crowell, 120 Iowa, 254, 94 N. W. 495; Geib v. Reynolds, 35 Minn. 331, 2S N. W. 923 (mortgage unsatisfied of record, although the notes secured are in mortgagor's hands); Sioux City & St. P. E. Co. V. Singer, 49 Minn. 301, 51 N. W. 905 (condition subse- quent in deed); Lovejoy v. Eay- mond, 58 Vt. 509, 2 Atl. 156; Mans- field V. Excelsior Eefining Co., 135 U. S. 326, 10 Sup. Ct. 825 (record of a trust-deed is notice of subsequent proceedings thereunder). See, fur- 11—83 ther, Blakeney v. Du Bose, 167 Ala. 627, 52 South. 746 (recording of a will creating a trust is notice of the terms of the trust) ; Dixie Grain Co. V. Quinn, 181 Ala. 208, 61 South. 886 (record of mortgage containing power of sale puts on inquiry whether the power has been exer- cised): Winters v. Powell (Ala.), 61 South. 96 (deed in chain of title which recites a mere nominal con- sideration puts a purchaser on no- tice); McCarthy Co. v. Moir, 12 Cal. App. 441, 107 Pac. 628 (record of contract for sale of lots de- scribed as fronting on a street) ; Taylor v. American National Bank of Pensacola, 64 Fla. 525, 60 South. 783; Faris v. Finnup, 84 Kan. 122, 113 Pac. 407; Niles v. Cooper, 98 Minn. 39, 13 L. R. A. (N. S.) 49, 107 N. W. 744; Stitt v. Stringham, 55 Or. 89, 105 Pac. 252 (purchaser of second mortgage, where record §656 EQUITY JUEISPKUDENCE. 1298 this question must depend upon the language of the re- cording acts. While the terms of the various state stat- utes may differ, in respect to this matter, in some of their subordinate and qualifying phrases, they all agree in the main and substantial provision; they all declare that an unrecorded conveyance is invalid only as against subsequent purchasers or encumbrancers, and, as a necessary infer- ence, that the record only operates as a notice to the same persons. 1 In several of the statutes the qualification is § 656, 1 Hunter v. Watson, 12 Cal. 363, 73 Am. Dec. 543; Dennis v. Bur- ritt, 6 Cal. 670. of satisfaction of first mortgage contains nothing to suggest a right of subrogation in favor of the party paying first mortgage, takes free from such right); Boss v. Kenwood Investment Co., 73 Wash. 131, 131 Pac. 649 (in examining deeds in chain of title a purchaser need only note that a valid consideration ap- pears for the conveyance; he is not bound to inquire as to each transac- tion whether the consideration was the market value at the time, under penalty of having property im- pressed with a secret trust). The record may disclose, by the dates of the instruments, the parties to successive instruments, etc., that a breach of trust or a constructive fraud has been committed: Lagger V. Mutual Union L. & B. Ass'n, 146 111. 283, 33 N. E. 946; Fisher v. Bush, 133 Ind. 315, 32 N. E. 924; Veeder v. McKinley-Lanning L. & T. Co., 61 Neb. £92, 86 N. W. 982; Gaston v. Dashiell, 55 Tex. 516; Lombard v. La Dow, 126 Fed. 119;— but see Branch v. GrifBn, 99 N. C. 173, 5 S. E. 393, 398; Otis v. Kennedy, 107 Mi'-h. 312, 65 N. W. 219 (where rec- ords show that month elapsed be- tween purchase at executor's sale and reconveyance to the executor, subsequent purchasers not put on inquiry); — as where it shows that a trustee under a deed of trust re- leased the grantor before the matur- ity of the note and thus gained title; Appelman v. Gara, -22 Colo. 397, 45 Pac. 366; and see MePherson v. Eollins, 107 N. Y. 322, 1 Am. St. Eep. 826, 14 N. E. 411; Kirsch v. Tozier, 143 N. Y. 390, 42 Am. St. Rep. 729, 38 N. E. 375. See, also. Burns v. Cooper, 140 Fed. 2i73, 72 C. C. A. 25 (record puts on inquiry as to apparent indirect purchase by guardian at his own sale) ; Blake v. Blake, 260 111. 70, 102 N. E. 1007 (same) : Kazebeer v. Nunemaker, ■82 Neb. 732, 118 N. W. 646 (same); Lightfoot V. Horst (Tex. Civ. App.), 122 S. W. 606. As to gross inade- quacy of consideration reciled in conveyance in chain of title, and its effect as notice, see Baldwin v. Anderson, 103 Miss. 462, 60 Sonth. 578; Kinney v. McCall, 57 Wash. 545, 107 Pac. 385 (every purchaser is not bound to compare recited consideration with actual value); and see ante, § 600; post, § 747. 1299 CONCBENING NOTICE. § 657 added that the subsequent purchaser who is thus protected must be one "in good faith and for a valuable considera- tion"; in many of them this language is absent; but whether expressed or omitted by the legislature, it has uni- formly entered into and formed a part of the judicial inter- pretation. In some instances "creditors" are expressly added, § 657. Not to Prior Parties. — ^It is a fundamental propo- sition, therefore, established with complete unanimity, that a registration properly made does not operate as con- structive notice to all the world, but only to those persons who, under the policy of the legislation, are compelled to .search the records in order to protect their own interests.^ It is equally well settled that such record is not notice to the holders of antecedent rights, — that is, to those who have acquired their rights before the time when the record is made, — and this is so even when the antecedent right may, in pursuance of the statute, be defeated by the fact of the prior record. In other words, the registration of an instrument does not act as a notice backwards in time. 2 a § 657, 1 See Maul v. Rider, 59 Pa. St. 167, 171. This language, often used by the courts, is, however, a vicious reasoning in a circle, and does not really determine who are charged with notice. It simply says: "Those persons are affected with notice who are compelled to search the records in order to protect their own interests; and on the other hand, those per- sons who are charged with notice must make a search of the records." We are thus simply carried round in a circle. § 657, 2 Birnie v. Main, 29 Ark. 591; Ward's Ex'r v. Hague, 25 N. J. Eq. 397; Leach v. Beattie, 33 Vt. 195; Kyle v. Thompson, 11 Ohio St. 616. §657, (a) See, also, Waughop v. Am. St. Rep. 62, 42 South. 57; Bartlett, 165 111. 124, 46 N. E. 197.; Singer v. Naron, 99 Ark. 446, 138 Stivens v. Summers, 68 Ohio St. 421, S. W. 958 (record of mutual deeds 67 N. E. 884, citing §§ 656-658 of among cotenants of A, made in thp the text; Trustees of Poor School v. belief that A was dead, not notice Jennings, 40 S. C. 168, 42 Am. St. to A); Association to Provide and Rep. 855, 40 S. E. 257, . 891. See, Maintain a Home for the Friendless also, New England Mortgage Secur- v. Traders' Inv. Co., 77 N. ,J. Eq. ity Co. V. Fry, 143 Ala. 637, 111 580, 78 Atl. 158; Stitt v. Stringham, § 658 EQUITY JUEISPEUDENCE. 1300 § 658. Only to Purchasers under Same Grantor, Effect of Perfect Record Title — Break in Record Title. — It is not, There is an important diiference between the operation of a registration, un- der the express terms of a statute, to defeat an antecedent conveyance which is unrecorded, and the effect of a registration as a notice which has been established by the courts as a necessary inference from these provisions of the statute. Indeed, it is solely because the registration of a conveyance does, in compliance with the statute, defeat a prior unrecorded title that the record of a prior title is held to be a constructive notice to subsequent pur- chasers. As illustrations of the proposition stated in the text, see Stuy- vesant v. Hall, 2 Barb. Ch. 151; Stujrvesant v. Hone, 1 Sand. Ch. 419; Taylor v. Maris's Ex'rs, 5 Rawle, 5L The doctrine, and the circumstances under which it may be applied, are so well explained by the case reported in 1 Sand. Ch. 419, and 2 Barb. Ch. 151, that a quotation will be instructive. The facts were, briefly, as follows: A tract of land was mortgaged to Stuyvesant, and his mortgage was duly recorded. Hone subsequently ae- jquired a lien thereon by a second mortgage, which he foreclosed by a suit in chancery, and the land, which had been divided into fifty-six building lots, was sold under the decree to Thome. T. afterwards gave a mortgage upon part of these lots back to H. All the conveyances and mortgages growing out of these proceedings were duly recorded, but S. had no notice of the foreclosure suit nor of any of the proceedings. Afterwards H. fore- closed T.'s mortgage by a suit in chancery, and filed the statutory notice of 55 Or. 89, 105 Pac. 252; Kaiser v. Pae. 2, 542, citing this and the pre- Idleman, 57 Or. 224, 28 L. B. A. ceding section of the text; Hosmer (N. S.) 169, 108 Pae. 193; Bradtl v. v. Campbell, 98 111. 578; Dewey v. Sharkey, 58 Or. 153, 113 Pae. 653; Ingersoll, .42 Mich. 18, 3 N. W. 235; Van Dyke v. Cole, 81 Vt. 379, 70 -Meier v. Meier, 105 Mo. 411, 16 S. Atl. 593, 1103; George M. McDonald W. 223; Cogswell v. Stout, 32 N. J. & Co. V. Johns, 62 Wash. 521, Eq. 240; Norman v. Halsey, 132 N. 114 Pac. 175; Aekeraon v. Elliott C. 6, 43 S. E. 473; Sarles v. McGee, (Wash.), 165 Pac. 899; Hall v. Will- 1 N. D. 365, 26 Am. St. Eep. 633, 48 iamson Grocery Co., 69 W. Va. 671, N. W. 231; Homing's Ex'rs Appeal, 72 S. E. 780. As is shown in the 90 Pa. St. 388; Lynchburg P. B. & author's note, and post, § 1226, the L. Co. v. Fellers, 96 Va. 337, 70 Am. record of a subsequent conveyance St. Kep. 851, 31 S. E. 505, citing this of a parcel of the mortgaged prem- and the preceding section of the ises by the mortgagor is not a eon- text; Bridgewater Eoller-Mills Co. struetive notice to the mortgagee, v. Strough, 98 Va. 721, 37 S. E. 290, BO as to prevent him from affecting quoting the text. The record of a the equities of the -grantee by his subsequent mortgage by the mort- release of other portions of the gagor, or judgment against the premises: Woodward v. Brown, 119 mortgagor, is not notice to the mort- Cal. 283, 63 Am. St, Eep. 108, 51 gagee senior in record: Annan v. 1301 CONCEBNING NOTICE. § 658 ■however, every subsequent purchaser who comes within the purview of the statute. The mere fact that, subse- lis pendens. During the pendency of the suit, S., who had no notice of it, released to T. forty-two of the fifty-six lots from his own (S.'s) mortgage. The fourteen lots left subject to S.'s mortgage were part of those which T. had mortgaged to H., and all of T.'s lots not mortgaged to H. were released by S. S. now brings a suit to foreclose his own mortgage, and it was claimed in defense that by his releasing the forty-two lots he had destroyed the lien of his mortgage on the remaining fourteen lots. The court held, — 1. That S. was not charged with constructive notice of the first suit, nor of the sale under the decree in it; 2. That neither the second suit, nor the notice of Us pendens filed in it, operated as notice to S.; 3. That the re- cording of the subsequent deeds of T. and of T.'s mortgages was not notice to S.; and that S. on releasing was not bound to search the records for subsequent conveyances or encumbrances. The vice-chancellor said on the question (1 Sand. Ch. 419, 425) : "Notice by the recording of conveyances is created by the statutes, and its effect is to be learned from their provi- sions, and the adjudications thereon. The statute enacts that every con- veyance not recorded shall be void as against any subsequent purchaser in good faith, etc., whose conveyance shall be first recorded. Neither the pro- vision itself nor the objects of a registry law have any reference to prior encumbrances already recorded. The effect of recording a conveyance is not retrospective, nor was it designed to change rights already vested and Hays, 85 Md. 505, 37 Atl. 20; Nor- is not affected with notice of a sub- ton V. Metropolitan Life Ins. Co., 74 sequent judgment docketed against Minn. 484, 77 N. W. 298, 539; Sarles Ms vendor: Wihn v. Fall, 55 Neb. V. McGee, 1 N. D. 365, 26 Am. St. 547, 70 Am. St. Eep. 397, 76 N. W. Eep. 633, 48 N. W. 231; Johnson v. 13; Dixon v. McNeese (Tex. Civ. Valido Marble Co., 64 Vt. 337, 25 App.), 152 S._ W. 675; or execution Atl. 441; Howard v. Clark, 71 Vt. levied: Corey v. Smalley, 106 Mich. 424, 76 Am. St. Kep. 782, 45 Atl. 257, 58 Am. St. Kep. 474, 64 N. W. 1042. See, also. Association to Pro- 13; or will recorded affecting his vide and Maintain a Home for the vendor's title; Lewis v. Earnhardt, Friendless v. Traders' Inv. Co., 77 43 Fed. 854; or recorded deed; Van N. J. Eq. 580, 78 Atl. 158. As Dyke v. Cole, 81 Vt. 379, 70 Atl. to mortgages to secure future ad- 593, 1103. The record of a deed is vances, see post, § 1199; Ackerman not notice to the grantor of a mis- V. Hunsicker, 85 N. Y. 43, 49, 39 take therein: Davis v. Monroe, 187 Am. Eep. 621; Hall v. Williamson Pa. St. 212, 67 Am. St. Eep. 581, 41 Grocery Co., 69 W. Va. 671, 72 S. E. Atl. 44. The record of the assign- 780; In re Sunflower State Eefining ment of a mortgage is not generally Co., 183 Fed. 834. A vendee in pos- notice to the mortgagor: post, § 733 session under his contract, the pos- and notes. Similarly, the record of session being equivalent to a record, the assignment of a judgment is not § 658 EQiniY JUKISPEXJDENCB. 1302 quently to tlie registering of a deed of certain premises, a third person purchases the same premises, from any source of title, from any grantor whatsoever claiming to own them, does not render the purchaser necessarily charge- seeured by a recorded deed or mortgage. It simply protects a purchaser who takes the precaution to search the records and record his own convey- ance against prior unrecorded conveyances of which he had no notice." The vice-chancellor then refers to Cheesebrough v. Millard, 1 Johns. Ch. 414, 7 Am. Dec. 494, and also shows that there is nothing in the case of Guion V. Knapp, 6 Paige, 42, 29 Am. Dec. 741, opposed to the conclusion at which he had arrived. This decision was afiSrmed by Chancellor Wal- worth, in 2 Barb. Ch. 151, 157, 158; and his opinion upon the question substantially repeats the reasoning of the vice-chancellor, that a deed sub- sequently made and recorded by the mortgagor is not notice to a prior mortgagee whose mortgage is on record, so that he may release part of the premises without destroying his lien. See, also, Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478; HiU v. McCarter, 27 N. J. Eq. 41; Hoy v. Bramhall, 19 N. J. Eq. 563, 97 Am. Dec. 687; Vanorden v. Johnson, 14 N. J. Eq. 376, 82 Am. Dec. 254; Blair v. Ward, 10 N. J. Eq. 126; George V. Wood, 9 AUen, 80, 85 Am. Dec. 741; Taylor v. Maris, 5 Rawle, 51; Leiby v. Wolf, 10 Ohio, 83 ; James v. Brown, 11 Mich. 25 ; Cooper v. Bigly, 13 Mich. 463; Doolittle v. Cook, 75 111. 354; Iglehart v. Crane, 42 HI. 261; Deuster v. McCamus, 14 Wis. 307; Straight v. Harris, 14 Wis. 509; Hal- steads V. Bank of Kentucky, 4 J. J. Marsh. 558. notice to the judgment debtor: whom the record is notice, is meant Johnson v. Boice, 40 La. Ann. 273, only those the origin of whose title 8 Am. St. Eep. 528, 4 South. 163. from the original grantor is subse- Where a mortgage, recorded prior quent to the title of the grantee in to the recording of a deed by the the recorded deed. A conveyed to mortgagor, is-paid and returned to B, whose deed was recorded; later the mortgagor, and is afterwards the premises were sold on execution delivered to a third person to se- against A, and a sheriff's deed to cure a pre-existing debt, such third C was made and recorded. The rce- person is not a "prior party." As ord of this latter deed was not no- to him, the mortgage takes effect tiee of its existence to D, a subse- from its delivery to him, and is quent iona fide purchaser from B, postponed to the deed made and re- or of the fact that the original deed corded prior to such delivery: Lam- to B was made in fraud of credi- phier v. Desmond, 187 HI. 370, 58 tors: White v. McGregor, 92 Tex. N. E. 343, affirming 86 m. App. 101. 556, 71 Am. St. Eep. 875, 50 S. W. It seems that the protection of 564; Hooker v. Pierce, 2 Hill (N. the rule as to prior parties extends Y.), 650. This ease is to be distin- to bona fide purchasers from them. guished from that described in § 760, By the "subsequent purchasers" to where it is shown that it is the duty 1303 CONCERNING NOTICE. § 658 able with notice of the prior recorded conveyance.^ The only subsequent purchaser who is charged with notice of the record of a conveyance is one who claims under the same grantor from the same source of title. If two titles to the same land are distinct and conflicting, the superior- ity between them depends, not upon their being recorded, but upon their intrinsic merits. It is a settled doctrine, therefore, that a record is only a constructive notice to subsequent purchasers deriving title from the same grantor.2 ^ Intimately connected with, and indeed a § 658, 1 This is clearly shown by the uniform mode in which the records of deeds, mortgages, etc., are indexed in the public offices of record. The indexes are never arranged according to the parcels of land, so that a per- son making search follows the ownership of a particular parcel irrespective of the sources of title; they are always arranged according to the grantors and grantees, mortgagors and mortgagees. The records can only disclose the title to a particular tract, so far as they enable one making search to trace the ownership from one grantor or mortgagor to another. Records are only constructive notice of a title of which they enable a party to obtain actual notice or knowledge by means of a search." §658, 2 Baker v. Griffin, 50 Miss. 158; Tilton v. Hunter, 24 Me. 29; Bates V. Norcross, 14 Pick. 224 ; George v. Wood, 9 Allen, 80, 85 Am. Dec. 741; Murray v. Ballou, 1 Johns. Ch. 566; Embury v. Conner, 2 Sand. 98; of the purchaser to search against same land, not merely purchasers each grantor in his chain of title from same grantor; a purchaser is for conveyances made by such gran- not bound by restrictions in other tor before, but recorded after, the deeds from a grantor which are not deed through which the searcher in his chain of title). See, also, claims from him. Satterfield v. Malone, 35 Fed. 445; §658, (a) For modification of the Boyton v. Haggart, 120 Fed. 819 (C. rule of the text in states requiring C. A.) ; Lehman v. Collins, 69 Ala. other forms of indexes to be kept, 127; Tennessee Coal, I. & E. Co. v. see Fullerton Lumber Co. v. Tinker, Gardner, 131 Ala. 599, 32 South. 622; 22 S. D. 427, 18 Ann. Caa 11, 118 Scotch Lumber Co. v. Sage, 132 Ala. N. W. 700. 598, 90 Am. St. Eep. 932, 32 South. §658, (b) The text is quotel in 607; Turman v. Santord, 69 Ark. 95, Smyly v. Colleton Cypress Co., 95 61 S. W. 167; Kerfoot v. Cronin, 105 S. C. 347, 78 S. E. 1026; cited and 111. 609; Grundies v. Eeid, 107 III. followed in Garber v. Gianella, 98 304; Booker v. Booker (111.), 70 N. Cal. 527, 529, 33 Pac. 458, and in E. 709; Herber v. Bossart, 70 Iowa, Glorieux v. ' Lighthipe, 88 N. J. L. 718, 722, 29 N. W. 608; Prest v. 199, Ann. Cas. 1917E, 484, 96 Atl. Black, 63 Kan. 682, 66 Pac. 1017; 94 ("purchaser" means purchasers of Eobertson v. Eentz, 71 Minn. 489, §658 EQUITY JURISPBUDENCB. 1304 branch of, this same doctrine, is the question, How far back is a purchaser bound to search the record title of his Stuyvesant v. Hall, 2 Barb. Ch. 151, 158; Page v. Waring, 76 N. Y. 463; Cook V. Travis, 20 N. Y. 402; Farmers' L. & T. Co. v. Maltby, 8 Paige, 361; Calder v. Chapman, 52 Pa. St. 359, 91 Am. Dec. 163; Woods v. Far- mere, 7 Watts, 382, 32 Am. Dec. 772; Lightner v. Mooney, 10 Watts, 412; Hetherington v. Clark, 30 Pa. St. 393, 395; Keller v. Nutz, 5 Serg. & R. 246; Hoy v. Bramhall, 19 N. J. Eq. 563, 97 Am. Dec. 687; Losey v. Simp- son, 11 N. J. Eq. 246; Whittington v. Wright, 9 Ga. 23; Brock v. Headen, 13 Ala. 370; Dolin v. Gardner, 15 Ala. 758; Leiby v. Wolf, 10 Ohio, 80, 83; Blake v. Graham, 6 Ohio St. 580, 67 Am. Dec. 360; Iglehart v. Crane, 42 111. 261; St. John v. Conger, 40 111. 535; Crockett v. Maguire, 10 Mo. 34; Long V. DoUarhide, 24 Cal. 218, 453. Chancellor Walworth thus states the doctrine in Stuyvesant v. Hall, 2 Barb. Ch. 151 : "The recording of a deed or mortgage, therefore, is constructive notice only to those who have sub- sequently acquired some interest or right in the property under the grantor or mortgagor." While this general doctrine is accepted with complete una- nimity, and is indeed essential to any just working of the registry system, there is some difference of judicial opinion in its application to particular conditions of fact. In the case, which is not uncommon, where A conveys 74 N. W. 133; Hart v. Gardner, 81 Miss. 650, 33 South. 442; Becker v. Stroeher, 167 Mo. 306, 66 S. W. 1083; Shackleton v. Allen Chapel, A. M. E. Church, 25 Mont. 421, 65 Pae. 428; Traphageu v. Irwin, 18 Neb. 195, 24 N. W. 684; Tarbell v. West, 86 N. Y. 280 (record of conveyance of an equitable interest not notice to purchaser of legal title from one who appears by the record to be the real owner) ; Doran v. Dazey, 5 N. D. 167, 57 Am. St. Eep. 550, 64 N. W. 1023; Sternberger v. Eagland, 57 Ohio St. 148, 48 N. E. 811; CoUina V. Aaron, 162 Pa. St. 539, 29 Atl. 724; Pyles v. Brown, 189 Pa. St. 164, 69 Am. St. Eep. 794, 42 Atl. 11; Frank v. Heidenheimer, 84 Tex. 642, 19 S. W. 855; FuUen wider v. Fergu- son, 30 Tex. Civ. App. 156, 70 S. W. 222; Ward v. League (Tex. Civ. App.), 24 S. W. 986; MeCreary v. Eeliance Lumber Co, 16 Tex. Civ. App. 45, 41 S. W. 485; Williams v. Slaughter (Tex. Civ. App.), 42 S. W. 327; Sayward v. Thompson, 11 Wash. 706, 40 Pac. 379; Hoult v. Donahue, 21 W. Va. 294; Mackey v. Cole, 79 Wis. 426, 24 Am. St. Eep. 728, 48 N. W. 920 (mortgage executed un- der a fictitious name). See, also. Winters v. Powell, 180 Ala. 425, 61 South. 96; Abbott v. Parker, 103 Ark. 425, 147 S. W. 70; Bothin v. California Title Ins. & Trust Co., 153 Cal. 718, Ann. Cas. 1914D, 634, 96 Pac. 500; Mansfield v. Johnson, 51 Fla. 239, 120 Am. St. Eep. 159, 40 South. 196; Harris v. Eeed, 21 Idaho, 364, 121 Pac. 780; Eohde v. Eohn, 232 111. 180, 83 N. E. 465; Sin- clair V. Gunzenhauser, 179 Ind. 78, 98 N. E. 37, 100 N. B. 376; Banister V. Fallis, 85 Kan. 320, 116 Pac. 822; John T. Moore Planting Co. v. Mor- gan's Louisiana & T. E. & S. S. Co., 126 La. 840, 53 South. 22; Meaeham v. Blaess, 141 Mich. 258, 104 N. W. 579; Gross v. Watts, 206 Mo. 373, 1305 CONCEENING NOTICE. § 658 own vendor? If the records show a good title vested in the vendor at a certain date, and nothing done by him after to B, and the deed is not recorded, and B then conveys the land to C, who puts his deed upon record, it is held in many decisions that this registration of the second deed is not a constructive notice to one who subsequently purchases from A; both parties, it is said, do not claim under the same grantor, B, and the records do not furnish any clew to the true chain of title: Roberts v. Bourne, 23 Me. 165, 39 Am. Dec. 614; Harris v. Arnold, 1 E. I. 125; Cook v. Travis, 22 Barb. 338, 20 N. Y. 402; Losey v. Simp- son, 11 N. J. Eq. 246; Lightner v. Mooney, 10 Watts, 407; Calder v. Chap- man, 52 Pa. St. 359, 91 Am. Dec. 163; Fenne v. Sayre, 3 Ala. 478; Chicago V. Witt, 75 111. 211. In this last case A, a grantee in an unrecorded deed, conveyed to B, and B to C ; these two latter deeds were both recorded ; but neither of them referred to A's deed, nor contained any recital of it. . Held, that the record of these two deeds was not notice of the unrecorded deed to A. In like manner, and for a like reason, if A conveys to B by a deed which is not put upon record, and B gives a mortgage on the land, even a purchase-money mortgage, back to his grantor. A, and this mortgage is re- corded, the record, it is held, is not a constructive notice to a subsequent purchaser from A, either of the mortgage itself, or of the conveyance to B:« Veazie v. Parker, 23 Me. 170; Pierce v. Taylor, 23 Me. 246; Felton v. 121 Am. St. Rep. 662, 104 S. W. 30; knowledge that an instrument out Chandley v. Eobinaon (N. J. Eq.), 75 of the chain of title ia on record Atl. 180 (record of deeds to other puts the purchaser on inquiry as to property made by the grantor does the title of the maker of the instru- not impart notice to purchaser); ment: Doran v. Dazey, 5 N. D. 167, Perkins v. Cissell, 32 Okl. 827, 124 57 Am. St. Rep. 550, 64 N. W. 1023. Pac. 7; Attebery v. O'Neil, 42 Wash. By the great weight of authority, 487, 85 Pae. 270. But notice of the the "subsequent purchaser" from a unrecorded instrument may be sup- common grantor, who is entitled to plied by the possession of the per- protection by virtue of his prior rec- son holding thereunder; and the sub- ord, includes a purchaser from the sequent purchaser is bound to search heir or devisee of the grantor who for encumbrances created by such made the prior unrecorded convey- person: Balen v. Mercier, 75 Mich. ance: See Hallett v. Alexander, 50 42, 42 N. W. 666. Also where B Colo. 37, Ann. Cas. 1912B, 1277, 34 has bought from A, the record L. B. A. (N. S.) 328, and note, 114 owner, and in order to protect him- Pae. 490. self also takes a quitclaim deed from § 658, (c) Sternberger v. Bagland, G, A's brother, C is not a stranger 57 Ohio St. 148, 48 N. E. 811; Pyles to B's chain of title, and C is charge- v. Brown, 189 Pa. St. 164, 69 Am. able with constructive notice of a St. Rep. 794, 42 Atl. 11; Frank v. mortgage given by C on the prop- Heidenheimer, 84 Tex. 642, 19 S. W. erty: Brannan v. Marshall, 184 Ala. 8'55 (recorded reconveyance by B to 375, 63 South. 1007. And actual A); Advance Thresher Co. v. Estcb, § 658 EQUITY JURISPRUDENCE. 1306 that time to impair or encumber the title, it would seem that the policy of the registry acts is thereby accomplished ; the purchaser is protected; he is not bound to inquire farther back, and to ascertain whether the vendor has done acts which may impair his title prior to the time at which it was vested in him as indicated by the records. This view is supported by many decisions, — it seems by the weight of authority, — ^which hold that a purchaser need not prosecute a search for deeds or mortgages made by his own vendor, farther back than the time at which the title is shown by the records to have been vested in such vendor ; or in other words, a purchaser is not bound by the registry of deeds or mortgages from his vendor made prior to that time. 3 e The record title is so far a protection Pitman, 14 Ga. 530. It is a well-settled application of the law of estoppel that if A, having no title, conveys or mortgages to B, with covenant of title, and afterwards acquires the title, this title will inure to the benefit of B by operation of the estoppel; and in some states the same effect is produced without any covenant of warranty. If, therefore, A thus con- veys or mortgages to B, and B's deed or mortgage is duly recorded, and if after A acquired the title he gives another deed or mortgage to C, and C's deed or mortgage and the conveyance of title to A are recorded to- gether, it is settled that the estoppel binds A's assignee, C, as well as him- self, and that through the estoppel B obtains the precedence over C : Pike v. Galvin, 29 Me. 183; Wark v. Willard, 13 N. H. 389; Kimball v. Blaisdell, 5 N. H. 533, 22 Am. Dec. 476; Jarvis v. Aikens, 25 Vt. 635; White v. Patten, 24 Pick. 324; Somes v. Skinner, 3 Pick. 52; Tefft v. Munson, 57 N. y. 97; Doyle v. Peerless Pet. Co., 44 Barb. 239; Farmei-s' L. & T. Co. v. Maltby, 8 Paige, 361.* § 658, 3 Farmers' Loan Co. v. Maltby, 8 Paige, 361; Page v. Waring, 76 N. Y. 463, 467-469; Hetzel v. Barber, 69 N. Y. 1; DosweU v. Buchanan, 41 Or. 469, 69 Pac. 447. See, also, see Van Diviere v. Mitchell, 45 S. C. Gay V. Hudson Eiver Electric Power 127 22 S. E. 759. Co., 190 Fed, 773; Abbott v. Parker, §658, (d) See, also, Bernardy v. 103 Aik. 425, 147 S. W. 70; Standard Colonial & XT. S. Mortgage Co. (S. Oil Co. V. Slye, 164 Cal. 435, 129 D.)^ 93 N. W. 166; Philly v. Sanders, Pac. 589; Eowe v. Henderson Naval H Ohio St. 490, 78 Am. Dec. 316. Stores Co., 139 Ga. 318, 77 S. E. 17; See, also, Tilton v. Flormann, 22 S. Board of Education v. Hughes, 118 D. 324, 117 N. W. 377. Minn. 404, 41 L. K. A. (N. S.) 637, §658, (e) I>eeds, etc., by Vendor 136 N. W. 1095; Crowley v. Norton, Before He Keceived Title. — This 131 Minn. 99, 154 N. W. 743. But passage of the text is quoted in Ber- 1307 OONCEENING NOTICE. §658 under the statutes to purchasers relying upon it, that if an instrument appearing on its face to be an absolute con- 3 Leigh, 365, 381, 23 Am. Dec. 280 ; Calder v. Chapman, 52 Pa. St. 359, 91 Am. Dec. 163 ; Buckingham v. Hanna, 2 Qhio St. 551 ; Losey v. Simp- son, 11 N. J. Eq. 246. In rarmers' Loan Co. v. Maltby, 8 Paige, 361, a vendee in a contract for the purchase of land which was unrecorded — the mere equitable owner — -gave a mortgage on the premises to one A, which was immediately put on record. This vendee afterwards obtained the legal titlp by a deed from his vendor, which deed was at once recorded; he then conveyed the land to the defendant, B, for a valuable consideration, and this second deed was also recorded. The court held that the recording of the mortgage to A, being prior to the time when the title, as appeared by the record, was vested in the mortgagor, did not operate as constructive notice to the grantee, B, who took his deed after the legal title was vested in his grantor. Chancellor Walworth said, in substance, that as the mort- gagor had not the legal title when the mortgage to A was given, but only a contract to purchase the land from one S., it followed that the defendant, nardy v. Colonial & U. S. Mortgage Co. (S. D.), 98 N. W. 166, dissent- ing opinion; in Breen v. Morehead, 104 Tex. 254, Ann. Cas. 1914A, 1285, 136 S. W. 1047; in Bichardson v. At- lantic Coast Lumber Corp., 93 S. C. 254, 75 S. E. 371; and cited in Smith & Bicker v. Hill Bros., 17 N. M. 415, 134 Pao. 243 (rule applied to record, of chattel mortgage). See, also, Wheeler v. Young (Conn.), 55 Atl. 670; Elder v. Derby, 98 111. 228; Balen v. Mercier, 75 Mich. 42, 42 N. W. 666; Sehoeh v. Birdsall, 48 Minn. 441, 51 N. W. 382; Ford v. Unity Church Society, 120 Mo. 498, 41 Am. St. Eep. 711, 23 L. R. A. 561, 25 S. W. 394, citing this section of the text; Boyd v. Mundorf, 30 N. J. Eq. 545; Bingham v. Kirldand, 34 N. J. Eq. 229; Protection B. & L. Ass'u v. Chickering, 54 N. J. Eq. 519, 34 Atl. 1083, affirmed, 55 N. J. Eq. 822, 41 Atl. 1116; Daly v. N. Y. & G. L. E. Co. (N. J. Eq.), 38 Atl. 202; Oli- phant V. Burns, 146 N. Y. 218, 40 N. E. 980 (recording a contract to Bfill, when the . vendor has no title. not notice to a mortgagee whose mortgage taken after the vendor ac- quired title); Bichardson v. Atlantic Coast Lumber Corp., 93 S. C. 254, 75 S. E. 371. In Boyd v. Mundorf, sw- pra, it was held that a grantor who takes back a purchase-money mort- gage, which is recorded at the same time as the deed to the grantee, is entitled to priority over a prior re- corded mortgage executed by the grantee on the same land; the gran- tor was not obliged to search for encumbrances created by his gran- tee before title was acquired by the latter. For other cases to, the same effect, see post, § 725, editor's note. It should be noted that in the sit- uation . described in the text it is the subsequent purchaser's duty to search for conveyances by his ven- dor back to the time when, as shown by the record, title vested, in the vendor, not merely to the hour and minute at which the evidence of the title was filed for record; he is, therefore, charged with notice of the vendor's recorded dealings with §658 EQUITY JTJEISPRUDENCE. 1308 veyance is recorded, a subsequent purchaser in good faith and for a valuable consideration from the grantee named B, was not charged with constructive notice by the record of such mort- gage. In taking a conveyaiiee, B would not search for mortgages by his grantor prior to the date of his deed from S. See, however, Digman v. McCoUum, 47 Mo. 372, 375, 376, which appears to be in direct conflict with the rule as stated in the text, and with the foregoing cases cited in this note. It holds that a subsequent purchaser has a constructive notice of a recorded encumbrance, — a mortgage, — although the mortgagor's title was unrecorded and was purely equitable, — e. g., an unregistered agreement to convey the land. For the case where a grantee or mortgagee in good faith, and holding a record title which appears to be perfect, may really have no title because a grantor or mortgagor in the chain of- title had knowledge of a prior unrecorded deed or mortgage, see post, § 760, and cases there cited; Flynt v. Arnold, 2 Met. 619; Mahoney v. Middleton, 41 Cal. 41, 50; Fallas v. Pierce, 30 Wis. 443; Sims v. Hammond, 33 Iowa, 368; Van Rensselaer v. Clark, 17 Wend. 25, 31 Am. Dec. 280; Goelet v. McManus, 1 Hun, 306; Ring v. Richardson, 3 Keyes, 450; Schutt v. Large, 6 Barb. 373.* the property intermediate between the vendor's acquisition and record- ing of title: Higgins v. Dennis, 104 Iowa, 605, 74 N. W. 9; Coleman v. Reynolds, 181 Pa. St. 317, 37 Atl. 543; but see contra, Continental I. & L. Soc. V. Wood, 168 HI. 421, 48 N. E. 221; and it appears from Semon v. Terhune, 40 N. -J. Eq. 364, 2 Atl. 18, that he must take notice of a mortgage recorded by his vendor after the vendor's acquisition and before the vendor's recording of title, although such mortgage was executed before title vested in the vendor; in this ease, A's mortgage to B was dated Sept. 17, and re- corded Oct. 15, while the deed to A was dated Sept. 30 and recorded Nov. 24; a subsequent purchaser from A took with notice from this record of the mortgage to B. In Dickersou v. Bridges, 147 Mo. 235, 48 S. W. 825, it was held that a record of a mortgage made before the issuance of a patent but after the date of the original entry by the homesteader is notice; and in Bernardy v. Colonial & TJ. S. Mort- gage Co. (S. D.), 98 N. W. 166, it was held, by virtue of the statute whereby a, grantor's after-acquired title passes, by operation of law, to his grantee, that the record of a voluntary deed made and recorded before the issuance of a patent to the grantor is notice to his mort- gagee, by mortgage made after the patent issued; that any other rule would practically nullify the statute. See, also, Adam v. McClintock, 21 N. D. 483, 131 N. W. 394; Osceola Land Co. v. Chicago Mill & Lumber Co., S4 Ark. 1, 103 S. W. 609. But see, that record of deed from pur- chaser from the state, made before patent issued, is not notice to a later purchaser: Bozell v. Chicago Mill & Lumber Co., 76 Ark. 525, 89 S. W. 469; Thompson v. Bowen, 87 Ark. 490, 113 S. W. 26. § 658, (f) See, also. Woods v. Gar- nett, 72 Miss. 78, 16 South. 390; Van Aken v. Gloason, 34 Mich. 477; Er- 1309 CONCERNING NOTICJE. § 659 in it obtains a title free from all secret trusts, and from all outstanding equities not appearing on the record, which, if recorded or otherwise disclosed, might have shown the instrument to be in reality a mortgage.* § 659. (6) Effect of Other Kind of Notice, in the Absence of a Registration. — ^May any other kind of notice, actual or constructive, supply the want of a registration? In other words, if a subsequent purchaser for a valuable con- sideration has put his conveyance upon record, but at the time of his purchase was affected with notice that there was a prior outstanding but unregistered conveyance of the same premises fr^m the same grantor, would he be protected by his record notwithstanding the notice? or would the notice operate, like the constructive notice aris- ing from a registry, to postpone his own interest to that conferred by the prior unregistered instrument? This These cases overrule the earlier decisions in Connecticut v. Bradish, 14 Mass. 296, 303; Trull v. Bigelow, 16 Mass. 406, 8 Am. Dec. 144; Gliddon V. Hunt, 24 Pick. 221; Ely v. Wilcox, 20 Wis. 523, 530, 91 Am. Dec. 436. See, also, post, § 761, when a purchaser may be charged with notice of a prior unrecorded conveyance, though there is a break in the chain of record title : Crane v. Turner, 7 Hun, 357, 67 N. Y. 437. § 658, 4 For example, if a deed absolute on its face is accompanied by a written defeasance, and the deed is recorded, but the defeasance is not, this rule applies ; also, if such a deed is accompanied by a verbal agreement or defeasance which, in equity at least, might render it a mortgage. The same is true with a deed absolute on its face, but accompanied with such parol acts as constitute the grantee a constructive trustee or trustee in invitum for the benefit of the grantor, or of some third person : Jaques v. Weeks, 7 Watts, 261, 271; Orvis v. Newell, 17 Conn. 97; Bush v. Golden, 17 Conn. 594; Harrison v. Cachelin, 23 Mo. 117, 126; Mesick v. Sunder- land, 6 Cal. 297; Hart v. Farmers and Merchants' Bank, 33 Vt. 252; Bailey V. Myrick, 50 Me. 171. win V. Lewis, 32 Wis. 276. But aee it does not overrule the earlier cases contra, Day v. Clark, 25 Vt. 397; except by way of dictum. It would Morse v. Curtis, 140 Mass. 112, 54 seem that this settles the Massachu- Am. Eep. 456, 2 N. E. 929. In the setts law in accord with the earlier last case the ease of Flynt v. Ar- authorities. See further, post, § 760, nold, cited in the author's note, was notes, considered, and the court held that § 659 EQ,TriTY JURISPRUDENCE. 1310 question was presented to the English courts of chancery at an early day, and was settled by them in accordance with the general pi'inciples of equity; and their decisions have with great uniformity been adopted and followed by the American courts. It is the established doctrine that a notice of some kind, of an existing, prior, unrecorded conveyance, operates, like the constructive notice arising from a registry, to postpone a subsequent and recorded instrument.- If a subsequent purchaser, even for a valu- able consideration, had received notice of a prior unre- corded instrument, then he cannot acquire or retain the precedence from a registration of his own conveyance; his conveyance, though recorded, is subordinate and post- poned to the prior unrecorded one of which he had re- ceived notice.^ * This conclusion, reached originally by the court of chancery, has, in England, furnished a rule for that tribunal alone, and has not been accepted by the courts of law ; ^ in this country it is recognized and en- § 659, 1 This doctrine, which is nakedly stated in the text without its reasons, was settled by Lord Hardwicke (A. D. 1747), in the celebrated case «f Le Neve v. Le Neve, Amb. 436; 2 Lead. Cas. Eq., 4th Am. ed., 109; Davis V. Earl of Strathmore, 16 Ves. 419, per Lord Eldon; Greaves v. Tofield, L. R. 14 Ch. Div. 563; Credland v. Potter, L. R. 10 Ch. 8; RoUand V. Hart, L. R. 6 Ch. 678; Chadwick v. Turner, L. R. 1 Ch. 310; Hine v. Dodd, 2 Atk. 275; Wyatt v. Barwell, 19 Ves. 435; Benham v. Keane, 3 De Gex, F. & J. 318; Ford v. White, 16 Beav. 120, 123, 124. § 659, 2 Doe v. AUsop, 5 Bam. & Aid. 142. It must be, however, since the provision of the Supreme Court of Judicature Act, giving the rules of equity a binding efficacy wherever they conflict with those of the law con- cerning the same matter, that the doctrine is now enforced in legal as well as in equitable suits by the English courts. §659, (a) In a recent deeision, in- (Tacon v. The Company), []915] 1 tcrpreting the Companies (Consoli- Ch. 643, 667, 671, reversing deci- dation) Act 1908, § 93, the court of sion of Astbury, J. See infra, § 660, appeal takes the position that the notes 6 and (a). The language of doctrine of Le Neve v. Le Neve, and some of the judges exhibits an ex- the subsequent cases which have fol- traordinary hostility to the time- lowed it, ought not to be applied or honored doctrine of equity on this extended to modern acts of parlia- subject: Compare observations of ment: In re Monolithic Building Co. the author, ante, vol. I, § 431, note 2. 1311 OONCEENING NOTICE. § 660 forced alike by the courts of equity and of law, for the reason that both have jurisdiction in matters of fraud.^ The doctrine is, in fact, a mere application of the broader general principle that a person who purchases an estate, although for a valuable consideration, after notice of a prior equitable right, makes himself a mala fide purchaser, and will be held a trustee for the benefit of the person whose right he sought to defeat.* ^ § 660. Fraud the Foundation of the Rule. — In the very earliest cases which first established the rule concerning the effect of notice of a prior unregistered conveyance to a subsequent purchaser who had put his deed or mortgage upon record, the decision was expressly based upon the positively fraudulent character of the purchaser's conduct. It was said in the plainest terms that the act of the pur- chaser in endeavoring to obtain a precedence through the operation of the statute, while he had knowledge or notice of the prior right held by another person, was in itself a fraud, — an attempt to obtain a fraudulent advantage, — and to uphold it would be suffering the statute to be used as a means of accomplishing a fraudulent purpose. The same theory has been reaffirmed by the succeeding deci- sions of the English courts down to the present day.i It § 659, 3 Tuttle v. Jackson, 6 "Wend. 213, 227, 21 Am. Dec. 306; Britton's Appeal, 45 Pa. St. 172. See post, § 759. § 659, 4 Thus a deed which for any defect does not convey the legal title, or a mortgage which is inoperative as a valid legal mortgage, may be good in equity as an agreement to convey or to mortgage, and a subsequent pur- chaser with notice of such an equitable right will take the property subject thereto: See Le Neve v. Le Neve, Amb. 436, per Lord Hardwicke; Davis V. Earl of Strathmore, 16 Ves. 419, 428; Jennings v. Moore, 2 Vern. 609; Mackreth v. Symmons, 15 Ves. 349. § 660, 1 In the leading case of Le Neve v, Le Neve, Amb. 436, Lord Hardwicke used language which has been either quoted or approved in almost every subsequent English case : See quotation ante, § 591. See, also, Davis V. Earl of Strathmore, 16Tes. 419; Wyatt v. Harwell, 19 Ves. 435; § 659, (h) The text is cited to this effect in Mansfield v. Wardlow (Tex. Civ. App.), 91 S. W. 859. § 660 EQUITY JUKISPEUDENCE. 1312 is especially important in its bearing upon the question whether a constructive as well as an actual notice of a prior unregistered conveyance will affect the rights of a subsequent purchaser who has complied with the require- ments of the recording acts. In fact, all of the doubt, confusion, and conflict of opinion with reference to the re- spective effects of constructive and of actual notice in connection with registration has arisen from the adoption of this theory, and the attempt to make it of universal ap- plication.2 The important differences which exist in the various American statutes have already been pointed out.^ In those states whose legislatures have employed substan- tialty the same language which is found in the English registry acts, the courts, while adopting the rule concern- ing the effect of notice laid down by Lord Hardwicke in Le Neve v. Le Neve, have also adopted the reasons which he there gave for it, and have found in the fraud imputed to the subsequent purchaser its sufficient foundation. In several of the states, the precedence over a prior unregis- Hine v Dodd, 2 Atk. 275; Ford v. White, 16 Beav. 120, 123, 124; Benham V. Keaiie, 3 De Gex, F. & J. 318; Chadwiek v Turner, L. K. 1 Ch. 310, 319; Rolland v. Hart, L. R. 6 Ch. 678, 681, 684; Greaves v. Tofield, L. R. 14 Ch. Div. 563, 571, 575, 577. In Rolland v. Hart, L. R. 6 Ch. 678, Lord Hatherley thus sums up the doctrine : "It is not pethaps very easy to see the exact shades of distinction between the cases; but this appears to be decided from the time of Hine v. Dodd, 2 Atk. 275, downwards, that a mere sus- picion of fraud is not enough, and there must be actual notice implying fraud in the person registering the second encumbrance to deprive him of priority thereby gained over the first encumbrance. In all these cases, down to Wyatt v. Barwell, 19 Ves. 435, the expression is, that there must be actual notice amounting to fraud. It has been very well put, that it ' must be actual notice which renders it fraudulent to attempt to obtain pri- erity, or to advance money when knowing -that another person has already advanced money upon the same security, and afterwards unrighteously to attempt to deprive him of the benefit of that security by taking advantage of the registration act." See, also, a passage from the opinion of Bramwell, L. J., in Greaves v. Tofield, L. R. 14 Ch. Div. 563, quoted in vol. 1, in note 3, under § 431. § 660, 2 See post, §§ 662-664. § 660, 3 See ante, § 646, and abstracts of statutes in note thereunder. 1313 CONCEENING NOTICE. § 661 tered conveyance obtained by recording a subsequent in- strument is, given ii\ express terms only to "purchasers in good faith"; in others it is given only to purchasers "without notice," or "without actual notice."* Wher- ever such language has been employed, the rule under consideration is, of course, a necessary and direct conse- quence of the legislative enactment, and is not merely a judicial interpretation demanded by the general principles of equity.^ It should be observed, in concluding this topic, that a legislature may declare that no notice, either actual or constructive, shall supply the want of a registra- tion; that a subsequent purchaser shall acquire absolute precedence by recording his own instrument, even though he had full notice of a prior unregistered, conveyance ; and this effect may be stated in express terms, or it may be a necessary inference from the whole scope of the statute.^ ^ § 661. (7) What Kind of Notice is Sufficient to Produce This Effect. — The doctrine, being thus established in Eng- land and throughout this country, that some notice of a prior unregistered conveyance may supply the want of a registration, the inquiry finally remains. What species or amount of notice will avail to produce this effect? Or, to put the question in its most practical form, whether an actual notice is requisite, or whether a constructive notice may also be sufficient. It is plain, if the theory is accepted § 660, 4 See ante, in note under § 646. § 660, 5 See eases cited ante, in note under § 659. § 660, 6 Such, in fact, appears to be the construction given to the peculiar language of one or two state statutes : See White v. Denman, 1 Ohio St. 110; 16 Ohio, 59; Bloom v. Noggle, 4 Ohio St. 45; Holliday v. Franklin Bank, 16 Ohio, 533; Stansell v. Roberts, 13 Ohio, 148, 42 Am. Dec. 193; Jackson v. Luce, 14 Ohio, 514; Mayham v. Cdoiiibs, 14 Ohio, 428. § 660, (a) Such is the effect given though he had express notice of the to the English Companies (Consoli- prior mortgage at the time when he dation) Act, 1908, § 93, hj a recent took his own security.: In re Mono- decision, holding that it avoids an lithic Building Co, (Tacon v. The unregistered mortgage of the corpo- Company), [1915] 1 Ch. 643, rever- ration's property as^agains,t, a subse- . fciiig decision pf Astbury, J. quent registered encumbrancer, even . v , • ■ ■ . ' .J . , ■/■ 11— 83 § 662 EQUITY JURISPRUDENCE. 1314 in its full and literal sense, that the positive fraud of the subsequent purchaser in endeavoring to obtain a prece- dence by registering his own instrument while he has no- tice of the prior conveyance is the sole foundation of the doctrine, that it is difficult to escape from the conclusion that the notice which shall thus render his conduct fraudu- lent, and destroy the efficacy of his registration, must be an actual one. It is not in accordance with general prin- ciples to pronounce a person guilty of fraud by reason of Tmowledge constructively imputed to him, — ^knowledge which he may in fact never have acquired, but which he is, from considerations of policy, presvm,ed to have acquired, treated as having acquired. § 662, English Rule. — The earlier English decisions, adopting the theory of the second purchaser's fraud in all its features, accepted without hesitation the logical results of this theory with reference to the kind of notice. They not only held affirmatively that the notice must be actual, and proved by clear, positive, and direct evidence, but negatively that a constructive notice was not sufficient. The same rule has even been repeated by way of a dictum in one or two of the very latest decisions.^ In the modem English cases, the judges, while still insisting upon fraud as the sole basis of the doctrine, hold that the same effect may be produced by a constructive notice as by an actual one upon a subsequent purchaser who has registered his conveyance. The inquiry no longer seems to be, whether the notice was actual or constructive, but whether the evi- dence was sufficiently definite, and the circumstances were sufficient to affect the conscience of the purchaser as a fact, and not merely as a possible inference.^ a § 662, 1 Hine v. Dodd, 2 Atk. 275; Jolland v. Stainbridge, 3 Ves. 478; Wyatt V. Harwell, 19 Ves. 435; Chadwick v. Turner, L. R. 1 Ch. 310, 319. § 662, 2 In Rolland v. Hart, L. R. 6 Ch. 678, 681-683, a second mort- gagee was held to he affected with notice of a prior unregistered mortgage, § 662, (a) See, also, Sydney & S. M. B. & L. I. Ass'n, Lim., v. Lyons, [1894] App. Cas. 260 (Privy Council). 1315 CONCERNING NOTICE. § 663 § 663. American Rules. — The same diversity and fluctu- tion of opinion appear among the decisions made by the courts of the various states, and in some instances be- tween the earlier and later decisions of the same court. In one class of cases, an actual notice rendering the second purchaser's conduct positively fraudulent is held to be essential. In another class, no distinction, in respect to the operation of notice, is recognized between the subse- quent purchaser under the recording acts and any other subsequent purchaser- the rights of both are treated as being equally affected by a constructive notice. ^ Two by means of information or knowledge obtained by his attorney in the transaction, although it appeared very clearly that the knowledge had not in fact been communicated by the attorney to his client. It is true, the court called the notice "actual," but to treat such notice imputed to a prin- cipal on account of information acquired by ah agent as actual is to dis- regard the essential distinction between the two species. A subsequent purchaser whose conveyance was registered has been charged with notice of a prior equitable mortgage arising from the non-production of title deeds, and his failure to inquire for them: Wormald v. Maitland, 35 L. J. Ch., N. S., 69 ; In re Allen, 1 I. R. Eq. 455 ; and see Whitehead v. Jordan, 1 Younge & C. 303. When a subsequent purchaser or encumbrancer for a valuable consideration has paid or parted with the consideration without any notice of a prior unregistered deed or mortgage, and then regtsters his own instrument after obtaining such notice, the notice does not defeat the precedence acquired under the statute by his registration : Elsey v. Lutyens, 8 Hare, 159; Essex v. Baugh, 1 Younge & C. Ch. 620. §663, 1 See Dey v. Dunham, 2 Johns. Ch. 182, 190; Dunham v. Dey, 15 Johns. 555, 8 Am. Dec. 282 ; Jackson v. Van Valkenburg, 8 Cow. 2G0 ; Tuttle v. Jackson, 6 Wend. 213, 21 Am. Dec. 306 ; Grimstone v. Carter, 3 Paige 421, 24 Am. Dec. 230; Williamson v. Brown, 15 N. Y. 354; Nor- cross v. Widgery, 2 Mass. 505; McMechan v. Griffing, 3 Pick. 149, 15 Am. Dec. 198; U. S. Ins. Co. v. Shriver, 3 Md. Ch. 381; General Life Ins. Co. v. U. S. Ins. Co., 10 Md. 517, 525, 69 Am, Dec. 174; Fleming v. Purgin, 2 Ired. Eq. 584, Noyes v Hall, 97 U. S. 34, 38; Cabeen v. Breekenridge, 48 III. 91; Truesdale v. Ford, 37 111. 210; Brinkman v. Jones, 44 Wis. 498, 519; White v. Foster, 102 Mass. 375 ; Lamb v. Pierce, 113 Mass. 72 ; Crassen v. Swoveland, 22 Ind. 427, 434; Wilson v. Hunter, 30 Ind. 466, 472; Lawton v. Gordon, 37 Cal. 202, 205; Maupin v. Emmons, 47 Mo. 304, 306; Brown v. VolkeniQg, 64 N. Y. 76, 82. These cases, taken from a large number of similar ones, sufficiently show the diversity and fluctuation of opinion among the American decisions spoken of in the text. § 664 EQUITY JURISPRUDENCE. 1316 causes have operated to produce this conflict. It has re- sulted in part from the different terms which the legisla- tures of various states have employed in the most im- portant clauses of the recording acts.^ It has resulted in greater part, I think, from a lack of unanimity in the mean- ings given by the courts to "actual" and to "construct- ive" notice respectively; from a confusion and miscon- ception with respect to the essential distinctions which exist between the two species. The conflict is therefore more apparent than real. § 664. Actual or Constructive Notice. — ^As this question is one which depends, in great measure, upon the local law, either local statutes or decisions, I have placed in the foot- note cases selected from all the states, and representing both types of legislation and of judicial interpretation, — one class embracing those in which an actual notice is re- quired; the other, those in which a constructive notice is sufficient.! While the rule is settled in all the states com- § 663, 2 As has been shown in a fonner paragraph (§ 646), there are several distinct types of the statute. These changes in the language of the statutes have naturally affected their judicial interpretation: See Williamson v. Brown, 15 N. Y. 354. § 664, 1 For classification and abstract of the state statutes, and some further decisions under them, see note ante, § 646. I have, in the present note, selected and arranged well-considered and authoritative cases from nearly every state. It would be impossible, within any reasonable limits, to make a strict classification of decisions which require actual notice, prop- erly so called, and those which permit constructive notice. There is a great confusion or uncertainty as to what particular kinds are embraced within these genera. In nearly all the states whose statutes in terms demand an "actual" notice, the courts admit the operation of those species which are uniformly regarded as belonging to the genus constructive, viz., notice arising from Ks pendens, recitals in title papers, between principal and agent, and even possession. The courts of the same states hold that the "actual" notice of the statute does not mean knowledge, and may be shown by any kind of circumstances which would put a reasonable man upon an inquiry. Practically, it seems very difficult to distinguish "actual" notice so defined from constructive notice. See, upon this subject, the able opin- ion of Taylor, J., in Brinkman v. Jones, 44 Wis. 498, 519; and Maupin v. 1317 CONCERNING NOTICE. § 664 posing the first class, that in order to postpone a subse- quent purchaser or encumbrancer who has obtained the Emmons, 47 Mo. 304, 306. The courts of a few states have interpreted their statutes more literally, and have established a more, stringent rule re- quiring an actual notice proved by direct evidence. Of this class are Massa- chusetts, Maine, Missouri, and perhaps Maryland and Indiana. I have arranged the cases by states, and have placed together those in each state ■which, treat of notice by possession. From the decisions here collected, taken in connection with the abstract of statutes and further cases in the note under § 646, I hope that the reader will be able to form an accurate notion of the law on this confused subject as it is settled in each com- monwealth." Alabamay' — Lambert v. Newman, 56 Ala. 623, 625; Corbett v. Clenny, 52 Ala. 480, 483; Dudley v. Witter, 46 Ala. 664, 694; Campbell v. Roach, 45 Ala. 667; Ponder v. Scott, 44 Ala. 241, 244; Newsome v. Collins, 43 Ala. 656, 663; Burch v. Carter, 44 Ala. 115, 117; Witter v. Dudley, 42 Ala. 616, 621; Wyatt v. Stewart, 34 Ala. 716; Boyd v. Beck, 29 Ala. 703; John- son V. Thweatt, 18 Ala. 741; Dearing v. Watkins, 16 Ala. 20; Walter v. Rhea, 10 Ala. 451; 12 Ala. 646; Boyd v. Beck, 29 Ala. 703; De Vandal v. Malone's Ex'rs, 25 Ala. 272; Center v. P. & M. Bank, 22 Ala. 743; Hoole v. Att'y Gen., 22 Ala. 190; Smith's Heirs v. Branch Bank, 21 Ala. 125. Possession : Chapman v. Holding, 60 Ala. 522 ; Bernstein v. Humes, 60 Ala. 582, 31 Am. Rep. 52; Lindsey v. Veasy, 62 Ala. 421. Arkansas." — Stidham v. Mathews, 29 Ark. 650, 659; Holman v. Patter- son's Heirs, 29 Ark. 357; Haskell v. State, 31 Ark. 91. Possession: Byers V. Engles, 16 Ark. 543. CaZi/o»-mia.*^Lawton v. Gordon, 37 Cal. 202; Galland v. Jackman, 26 Cal. 79, 87, 85 Am. Dec. 172. Possession: Jones v. Marks, 47 Cal. 242, 248; Fair v. Stevenot, 29 Cal. 486; O'Rourke v. O'Connor, 39 Cal. 442; §664, (a) For the recent cages on knowledge of its contents). To the notice by possession as a substitute effect ttat actual notice will not sup- for recording, see ante, §§ 614-625, ply the place of record of a mort- editor's notes. gage, see Ford v. Burks, 37 Ark. 91; §664, (to) Alabama. — Chadwick v. Dodd v. Parker, 40 Ark. 536; Martin Carson, 78 Ala. 116. See, also, Alex- v. Ogden, 41 Ark. 187. ander v. Fountain, 195 Ala. 3, 70 § 664, (d) California. — Donald v. South. 669. Beals, 57 Cal. 399; Prouty v. Devlin, §664, (c) ArTcansas. — Cumberland 118 Cal. 258, 50 Pac. 380; County B. & I>. Ass'n V. Sparks, 111 Fed. Bank of San Luis Obispo v. Fox, 119 647, 49 0. C. A. 510, citing many Cal. 61, 51 Pac. 11; Robinson v. Muir, Arkansas cases (unacknowledged but 151 Cal. 118, 90 Plae. 521; Sanguin- reeorded mortgage creates no lien as etti y. Eossen, 12 Cal. App. 623, 107 against third parties, although they Pac. 560, citing the text; Parkside have actual notice of its existence and Realty Co. v. MacPonald, 166 Cal. I 664 EQUITY JUEISPETJDENCB. 1318 first record, he must have received an actual notice of a prior unrecorded instrument, it is equally well settled that Smith V. Yule, 31 Cal. 180, 89 Am. Dec. 167; Thompson v. Pioehe, 44 Cal. 508, 516 J Moss v. Atkinson, 44 Cal. 3, 17. e Connecticut.— 'BlateUey v. Oshom, 33 Conn. 226, 233 ; Clark v. Fuller, 39 Conn. 238; Bank of New Milford v. New Milford, 36 Conn. 94; Sig- oumey v. Mann, 7 Conn. 324; Hamilton v. Nutt, 34 Conn. 501; Bush v. Golden, 17 Conn. 594; Wheaton v. Dyer, 15 Conn. 307. Florida* — Possession : Doe v. Eoe, 13 Pla. 602. Georgia.^ — Virgin v. Wingfield, 54 Ga. 451, 454 ; Bryant v. Booze, 55 Ga. 438 ; Poulet v. Johnson, 25 Ga. 403 ; Downs v. Yonge, 17 Ga. 295 ; Seabrook V. Brady, 47 Ga. 650; Brown v. Wells, 44 Ga. 573, 575; Williams v. Adams, 43 Ga. 407; Allen v. Holden, 32 Ga. 418; Allen v. Holding, 29 Ga. 485; Lee V. Cato, 27 Ga. 637, 73 Am. Dec. 748; Doe v. Roe, 25 Ga. 55. Possession: Helms V. May, 29 Ga. 121; Wyatt v. Elam, 19 Ga. 335. Illinois.^— Frye v. Partridge, 82 111. 267, 270 ; Chicago etc. R. R. v. Ken- nedy, 70IU. 350, 361; Redden v. Miller, 95 111. 336; Shepardson v. Ste%-ens, 71 lU. 646; Erickson v. Rafferty, 79 111. 209, 212; Chicago v. Witt, 75 111. 211; Morris v. Hogle, 37 111. 150, 87 Am. Dec. 243; Dunlap v. Wilson, 32 111. 517; Ogden v. Haven, 24 lU. 57. Possession: Noyes v. Hall, 97 U. S. 34, 38; Tunison v. Chamblin, 88 111. 378, 390; Illinois Central R. R. v. McCuUough, 59 111. 166; Warren v. Richmond, 53 111. 52; Bayles v. Young, 51 111. 127; Bogue v. Williams, 43 111. 371; Cabeen v. Breekenridge, 48 lU. 91; Truesdale v. Ford, 37 111. 210; McVey v. MeQuality, 97 111. 93; Part- ridge V. Chapman, 81 111. 137; Lumbard v. Abbey, 73 111. 177. Indiana* — Crassen v. Swoveland, 22 Ind. 427, 432 ; Wiseman v. Hutchin- son. 20 Ind. 40; Croskey v. Chapman, 26 Ind. 333; Wilson v. Hunter, 30 Ind. 466, 472; Paul v. Connersville etc. R. R., 51 Ind. 527, 530; Kirkpat- rick V. Caldwells' Adm'rs, 32 Ind. 299; Brose v. Doe, 2 Ind. 666; Ricks v. 426, 137 Pac. 21. Possession. — Me- § 664, (s) Georgia. — Wise t. Mitch- Noil V. Polk, 57 Cal. 323. But on ell, 100 Ga. 614, 28 S. E. 382. account of a peculiarity of the § 664, (h) Illinois. — Eobertson v. homestead statute, a homestead is Wheeler, 162 111. 566, 44 N. E. 870 superior to a prior unrecorded mort- (proof of notice must he beyond a gage, although there is actual notice: reasonable doubt); Warder v. Cor- Lee V. Murphy, 119 Cal. 364, 51 Pac. "ell, 105 111. 169; Pry v. Pry, 109 111. 549. 466. Possession. — Haworth v. Taylor, § 664, (e) CoZoro^o.— Board of Com- 108 111. 275. missioncrs v. Ingram, 31 Colo. 319, 73 § ^^4, (l) Indiana. — Ellison v. Bran- Pac. 37. sfrator, 153 Ind. 146, 54 N. E. 433. § 664, (*) Florida. — Possession. Possession. — Kirkham v. Moore, 30 Stockton V. National Bank of Jack- Ind. App. 549, 65 N. E. 1042. sonville (Pla.), 34 South. 897. 1319 CONCERNING NOTICE. § 664 this notice need not be established by direct and positive evidence : it may be shown by indirect evidence, — by proof Doe, 2 Blackf. 346. Possession: Clouse v. Elliott, 71 Ind. 302; Campbell V. Brackenridge, 8 Blackf. 471. lowaA — Smith v. Denton, 42 Iowa, 48 ; Watson v. Phelps, 40 Iowa, 482 ; Blanchard v. Ware, 43 Iowa, 530 ; 37 Iowa, 305 ; Jones v. Bamf ord, 21 Iowa; 217; Mitchell v. Peters, 18 Iowa, 119; Wilson v. Miller, 16 Iowa, 111; Hop- ping V. Bumam, 2 Iowa, 39. Possession : Rogers v. Hussey, 36 Iowa, 664 ; Phillips V. Blair, 38 Iowa, 649; Hubbard v. Long, 20 Iowa, 149; Baldwin v. Thompson, 15 Iowa, 504; Moore v. Pierson, 6 Iowa, 279, 71 Am. Dec. 409. Kansas?^ — Jones v. Lapham, 15 Kan. 540, 545; Setter v. Alvey, 15 Kan. 157; Kirkwood v. Koester, 11 Kan. 471. Possession: Johnson v. Clark, 18 Kan. 157, 164; School Dist. v. Taylor, 19 Kan. 287; Greer v. Higgins, 20 Kan. 420 ; Lyons v. Bodenhamer, 7 Kan. 455. Kentucky. — -Mueller v. Engeln, 12 Bush, 441, 444 ; Hardin v. Harrington, II Bush, 367 ; Hopkins v. Garrard, 7 B. Men. 312 ; Forepaugh v. Appold, 17 B. Mon. 631 ; Vanmeter v. McFaddin, 8 B. Mon. 442 ; Honore v. Bakewell, 6 B. Mon. 67, 43 Am. Dec. 147; Thornton v. Knox, 6 B. Mon. 74; Johnston v. Gwathmey, 4 Litt. 317, 14 Am. Dec. 135. Possession: Russell v. Moore, 3 Met. 437; Haekwith v. Damron, 1 T. B. Mon. 235. Louisiana. — Moore v. Jourdan, 14 La. Ann. 414; Smith v. Lambeth, 15 La. Ann. 566; Swan v. Moore, 14 La. Ann. 833; Bell v. Haw, 8 Martin, N. S., 243. Possession: Winston v. Prevost, 6 La. Ann. 164; Splane v. Mitcheltree, 2 La. Ann. 265. Maine.^ — Hull v. Noble, 40 Me. 459, 480 ; Goodwin v. Cloudman, 43 Me. 677; Rich v. Roberts, 48 Me. 548; Porter v. Sevey, 43 Me. 519; Merrill v. Ireland, 40 Me. 569 ; Hanley v. Morse, 32 Me. 287 ; Spofford v. Weston, 29 Me. 140; Butler v. Stevens, 26 Me. 484; Kent v. Plummer, 7 Me. 464; Web- ster V. Maddox, 6 Me. 256. Maryland.— Qmen v. Early, 39 Md. 223, 229; Matter of Leiman, 32 Md. 225, 3 Am. Rep. 132; Gen. Life Ins. Co. v. U. S. Ins. Co., 10 Md. 517, 526, 09 Am. Dec. 174; Mayor etc. v. Williams, 6 Md. 235; Johns v. Scott, 5 Md. 81 ; Winchester v. Bait. etc. R. R., 4 Md. 231 ; Price v. McDonald, 1 Md. 403, 54 Am. Dec. 657; Baynard v. Norris, 5 GUI, 483; U. S. Ins. Co. v. Shriver, 3 Md. Ch. 385. Massachusetts.'^— YiSirnb v. Pierce, 113 Mass. Tl ; Connihan v. Thompson, III Mass. 270; White v. Foster, 102 Mass. 375; Sibley v. LefBngwell, 8 § 664, (i) Iowa. — dark Bros. v. the evidence be direct or circumstan- Wafson (Iowa),' 159 N. W. .761. tial; Hooper v. Leavitt, 109 Me. 70, § 664, (li) iCawscK.— Pope v. Nichols, 82 Atl. 547. €1 Kan. 230, 59 Pae. 257. §664, (m) afossocTitMeits.— Ford v. ! § 664, (1) Maine. — Actual notice is Tieknor, 169 Mass. 276, 46 N. E, 877'. the requirement of the statute, whether Possession does not amount to . "ae- § 664 EQUITY JUKISPETJDENCE. 132Q of circumstances sufficient to put any reasonably prudent man upon an inquiry^ Indeed, in some of the states where AUen, 584; George v. Kent, 7 Allen, 16; Dooley v. Wolcott, 4 Allen, 406; Parker v. Osgood, 3 Allen, 487; Buttrick v. Holden, 13 Met. 355, 357; Curtis V. Mundy, 3 Met. 405; Lawrence v. Stratton, 6 Cush. 163, 166; Hen- nessey V. Andrews, 6 Cush. 170; Mara v. Pierce, 9 Gray, 306; Pingree v. Coffin, 12 Gray, 288. Michigan^' — ^Reynolds v. Ruekman, 35 Mich. 80 ; Munroe v. Eastman, 31 Mich. 283; ShotweU v. Harrison, 30 Mich. 179; Barnard v. Campan, 29 Mich. 162; Baker v. Mather, 25 Mich. 51; Case v. Erwin, 18 Mich. 434; ritzhugh V. Barnard, 12 Mi«h. 105; Waldo v. Richmond, 40 Mich. 380; Stetson V. Cook, 39 Mich. 750; Hosley v. Hohnes, 27 Mich. 416. Posses- sion: Russell V. Sweezey, 22 Mich. 235, 239; Hommel v. Devinney, 39 Mich. 522. Minnesota." — Coy v. Coy, 15 Minn. 119, 126 ; Roberts v. Grace, 16 Minn. 126; Ross v. Worthington, 11 Minn. 438, 88 Am. Dec. 95; Doughaday v. Paine, 6 Minn. 443. Possession : Smith v. Gibson, 15 Minn. 89, 99 ; Morri- son V. March, 4 Minn. 422; Seagar v. Bums, 4 Minn. 141; Minor v. Willoughby, 3 Minn. 225. Mississippi. — Allen v. Poole, 54 Miss. 323; Wasson v. Connor, 54 Miss. 351; Deason v. Taylor, 53 Miss. 697, 701; Loughridge v. Bowland, 52 Miss. 546, 553; Buck v. Paine, 50 Miss. 648, 655; Avent v. McCorkle, 45 Miss. 221; Parker v. Foy, 43 Miss. 260, 55 Am. Rep. 484; McLeod v. First Nat. Bank, 42 Miss. 99, 112. Possession: Strickland v. Kirk, 51 Miss. 795, 797; Perkins v. Swank, 43 Miss. 349, 361. Missouri.^ — ^Maupin v. Emmons, 47 Mo. 304, 306; Real Estate Sav. Inst. V. CoUonious, 63 Mo. 290, 294; Ridgway v. Holliday, 59 Mo. 444; Eek v. Hatcher, 58 Mo. 235; Fellows v. Wise, 55 Mo. 413, 415; Major v. Bukley, 51 Mo. 227, 231; Digman v. McCollum, 47 Mo. 372, 375; Speck v. Riggin, 40 Mo. 405; Muldrow v. Robison, 58 Mo. 331; Rhodes v. Outcalt, 48 Mo. 367; Roberts v. Moseley, 64 Mo. 507; Masterson v. West End etc. R. R.,.5 Mo. App. 64. Possession: Shumate v. Reavis, 49 Mo. 333; Beatie v. Butler, 21 Mo. 313, 64 Am. Dec. 234. Nebraska. — Possession: Uhl v. May, 5 Neb. 157. Nevada. — Grellett v. Heilshom, 4 Nev. 526; Gilson v. Boston, 11 Nev. 413 ; Hardy v. Harbin, 4 Saw. 536 ; Norton v. Meader, 8 Saw. 603. tual" notice: Toupin v. Peabody, 162 §664, (o) Minnesota. — St. Paul Mass. 473, 39 N. E. 280, and cases Title Ins. & T. Co. v. Berkey, 52 cited. Minn. 497, 55 N. W. 60. § 664, (n) Michigan. — Balen v. Mer- § 664, (p) Missouri. — Finley v. eier, 75 Mich. 42, 42 N. W. 666; Den- Babb, 173 Mo. 257, 73 S. W. 180; nis V. Dennis, 119 Mich. 389, 78 N. Gross v. Watts, 206 Mo. 373, 121 W. 333. Am. St. Kep. 662, 104 S. W. 30. 1321 CONCERNING NOTICE. § 664 an actual notice is expressly demanded by statute, it lias been decided that open and notorious possession under a New Hampshire. — ^Warner v. Swett, 31 N. H. 332; Eogers v. Jones, 8 N. H. 264; Colby v. Kenniston, 4 N. H. 26S; Patten v. Moore, 32 N. H. 382, 384; Hoit v. RusseU, 56 N. H. 559; BeD v. Twilight, 22 N. H. 500; Brown v. Manter, 22 N. H. 468. Possession: Bank of Newberry v. East- man, 44 N. H. 431; Hadduek v. Wilmarth, 5 N. H. 181, 20 Am. Dec. 570. New Jersey.'* — Van Keuren v. Cent. R. R., 38 N. J. L. 165, 167 (posses- sion) ; Raritan Water Co. v. Veghte, 21 N. J. Eq. 463, 478; 19 N. J. Eq. 142; Hoy v. Bramhall, 19 N. J. Eq. 563, 97 Am. Dec. 687; Holmes v. Stout, 10 N. J. Eq. 419, 4 N. J. Eq. 492; Van Doren v. Robinson, 16 N. J. Eq. 256; Smith v. Vreeland, 16 N. J. Eq. 199; Smallwood v. Lewin, 15 N. J. Eq. 60. Possession : Losey v. Simpson, 11 N. J. Eq. 246 ; Coleman v. Barklew, 27 N. J. L. 357. New Torft.— Griffith v. Griffith, 1 HofE. Ch. 153; Williamson v. Brown, 15 N. Y. 354; Cambridge Valley Bank v. Delano, 48 N. Y. 326, 336, 339; Acer V. Westcott, 46 N. Y. 384, 7 Am. Rep. 355; Gibert v. Peteler, 38 N. Y. 165, 97 Am. Dec. 785; Howard Ins. Co. v. Halsey, 8 N. Y. 271, 49 Am. Dec. 478; Page v. Waring, 76 N. Y. 463; Acer v. Westcott, 1 Lans. 193, 197. Possession: Brown v. Volkening, 64 N. Y. 76, 82; Westbrook v. Gleason, 79 N. Y. 23. Ohio.* — ^Morris v. Daniels, 35 Ohio St. 406; McKinzie v. PerriU, 15 Ohio St. 162. § 664, (q.) New Jersey. — Essex Co. Cowen v. Withrow, 116 N. C. 771, Bank v. Harrison, 57 N. J. Eq. 91, 21 S. E. 676; Collins v. Davis, 132 40 Atl. 209; Green v. Morgan (N. J. N. C. 106, 43 S. E. 579. See, also, Eq.), 21 Atl. 857. Wood v. Lewey, 153 N. C. 401, 69 § 664, (r) North Carolina.— Aetusi S. E. 268. notice will not take the place of § 664, (») North Dakota. — Doran v. registration; Killebrew v. Hines, 104 Dazey, 5 N. D. 167, 57 Am. St. Eep. N. C. 182, 17 Am. St. .Bep. 672, 10 550, 64 N. W. 1023. S. E. 159, 251; Hinton v. Leigh, 102 Possession not actual notice within N. C. 28, 8 S. E. 890; Duke v. Mark- statute as to recording defeasance: ham, 105 N. C. 131, 18 Am. St. Rep. . Patnode v. Deschenes, 15 N. D. 100, 889, 10 S. E. 1017; Davis v. Inscoe, 106 N. W. 573. 84 N. 0. 396; Madox v. Arp, 114 N. §664, (t) Oftio.— Varwig v. Cleve- ,C. 585, 19 S. E. 665; Quinnerly v. land, C, C. & St. L. E. Co., 54 Ohio , Quinnerly, 114 N. C. 145, 19 S. E. St. 455, 44 N. B. 92 (notice from , 99; Barber v. Wadsworth, 115 N. C. facts putting on inquiry does not .29. 20 S. K 178; McAllister v. Pur- supply the place of record), cell, 124 N. G. 262, 32 S. E. 715; § 664 EQUITY JUEISPRTJDENCE. 1322 prior unrecorded conveyance constitutes a sufficient notice. In the states composing the second class the rule admitting the sufficiency of a constructive notice is well established. To constitute such a notice under the recording acts, it must be shown by evidence clear and reliable that the party has received information of facts and circumstances Oregon.'" — Carter v. City of Portland, 4 Or. 339, 350 ; Stannis v. Nich- olson, 2 Or. 332. Possession: Bohlman v. Coffin, 4 Or. 313. Pennsylvania.— Bntcher v. Yoeum, 61 Pa. St. 168, 171, 100 Am. Dec. 625; Lahr's Appeal, 90 Pa. St. 507; Parke v. Neeley, 90 Pa. St. 52; Maul v. Rider, 59 Pa. St. 167, 171; Nice's Appeal, 54 Pa. St. 200; York Bank's Appeal, 36 Pa. St. 458; Smith's Appeal, 47 Pa. St. 128; Britton's Appeal, 45 Pa. St. 172; Speer v. Evans, 47 Pa. St. 141; Eipple v. Ripple, 1 Rawle, 386. Possession: Krider v. Lafferty, 1 Whart. 303; Randall v. Silverthom, 4 Pa. St. 173; Meehan v. Williams, 48 Pa. St. 238; SaUor v. Hertzog, 4 Whart. 259; Lightner v. Mooney, 10 Watts. 407. Rhode Island. — Tillinghast v. Champlia, 4 R. I. 173, 215, 67 Am. Dec. 510; Harris v. Arnold, 1 R. I. 125. South Carolina.^ — ^Wallace v. Craps, 3 Strob. 266 ; Martin v. Sale, 1 Bail. Eq. 1, 24; City Council v. Page, 1 Speers Eq. 159, 212; Cabiness v. Mahon, 2 McCord, 273. Tennessee.— M.-arreli. v. Watson, 1 Tenn. Ch. 342; Tharpe v. Dunlap, 4 Heisk. 674, 686. Texas.^— Littleton v. Giddings, 47 Tex. 109; Willis v. Gay, 48 Tex. 463, 26 Am. Rep. 328; Allen v. Root, 39 Tex. 589; Rodgers v. Burchard, 34 Tex. 441, 7 Am. Rep. 283. Possession: Watkins v. Edwards, 23 Tex. 443; § 664, (u) Oregon. — Musgrove v. (does not affect the rule that the Bowser, 5 Or. 313, 20 Am. Rep. 737; possession of grantor is notice of Victor Land Co. y. Drake, 63 Or. his rights, since these rights are 210, 127 Pac. 27; First National equitable); Foster v. Bailey, 82 S. Bank of North Bend v. Gage, 71 Or. C. 378, 64 S. E. 423; Folk v. Brooks, 373, 142 Pac. 539. »1 S. C. 7, 74 S. E. 46 (does not § 664, (V) South Carolina. — Mo- apply where the party is in posses- Ghee V. Wells, 57 S. C. 280, 76 Am. sion under a parol contract). St. Rep. 567, 35 S. E. 529; Wingo v. §664, (w) Teias. — Mattfield v. Parker, 19 S. C. 9. Huntington, 17 Tex. Civ. App. 716, Possession. — The statute, Civ. Code 43 S. W. 53; Maulding v. Cofin, 6 1902, § 2457, provides that posses- Tex. Civ. App. 416, 25 S. W. 480; sion shall not be notice of a deed Mansfield v. Wardlow (Tex. Civ. required to be recorded. See this App.), 91 S. W. 859; Hampshire v. statute 'interpreted in Manigault v. Greeves (Tex. Civ. App.), 130 S. W. Lofton, 78 S. C. 499, 59 S. E. 53-t 665. 1323 CONCERNING NOTICE. § 664 which are sufficient, in contemplation of law, to put any reasonably prudent man upon an inquiry, so that the in- quiry, if prosecuted with due diligence, would lead to a discovery of the truth. A constructive notice, under this system, can never be a matter of mere possible inference ; there must be enough brought home to the knowledge of the party to impose a duty upon his conscience according to the theory of equity jurisprudence.'^^ . Subject to this general limitation, the constructive notice, under the re- cording statutes, may arise in any of the modes recognized Ponton V. Ballard, 24 Tex. 619; MuUins v. Wimberly, 50 Tex. 457, 464; Hawley v. Bullock, 29 Tex. 216; Mainwarring v. Templeman, 51 Tex. 205. Fermoji*.''— Blaisdell v. Stevens, 16 Vt. 179; Stafford v. Ballou, 17 Vt. 329 ; Corliss v. Corliss, 8 Vt. 373 ; Brackett v. Wait, 6 Vt. 411. Possession : Griswold V. Smith, 10 Vt. 452; Shaw v. Beebe, 35 Vt. 205; Pinney v. Fel- lows, 15 Vt. 525. Virginia."— Woody. Krebbs, 30 Gratt. 708; Burwell's Ex'rs v. Fauber, 21 Gratt. 446; Long v. Welter's Ex'rs, 29 Gratt. 347; Cordova v. Hood, 17 Wall.1, Brush v. Ware, 15 Pet. 93, 114, Vest v. Michie, 31 Gratt. 149, 31 Am. Rep. 722; Mundy v. Vawter, 3 Gratt. 518; McClure v. Thistle, 2 Gratt. 182; Doswell v. Buchanan's Ex'rs, 3 Leigh, 365, 23 Am. Dec. 280; Newman V. Chapman, 2 Rand. 93. West Virginia."-^ — Cox v. Cox, 5 W. Va. 335. Possession: Western etc. Co. V. Peytona C. Coal Co., 8 W. Va. 406. Wisconsin}'* — ^Brinkman v. Jones, 44 Wis. 498, 5l9; Helms v. Chad- bourne, 45 Wis. 60, 71, 73 ; Pringle v. Dunn, 37 Wis. 449, 460, 19 Am. Rep. 772; Hoppin v. Doty, 25 Wis. 573, 591; Gilbert v. Jess, 31 Wis. 110; Ely V. Wilcox, 20 Wis. 523, 91 Am. Dec. 436; Fallass v. Pierce, 30 Wis. 443; Hoxie V. Price, 31 Wis. 82. Possession: Wickes v. Lake, 25 Wis. 71; Fery v. Pfeiffer, 18 Wis. 510. It will be remembered that in Ohio and North Carolina, under the construction given to the recording acts, no notice can take the place of a record. § 664, (x) Utah. — Possession. — B. & L. Ass'n v. Blair, 98 Va. 490, 36 Stahn V. Hall, 10 Utah, 400, 37 Pae. S. E. 513. 585; Toland v. Corey, 6 Utah, 392, §664, (a.a.) West Virginm.—Cox v. 24 Pae. 190. Wayt, 26 W. Va. 807. § 664, (y) Vermont. — Willis v. § 664, (»>'>) Wisconsin. — Mueller v. Adams, 66 Vt. 223, 28 Atl. 1033. Brigham, 53 Wis. 173, 10 N. W. 336. §664, •(^) Virginia. — Dobyna v. §664, (cc) See Green v. Morgan Waring, 82 Va. 159; National Mut. (N. J. Eq.), 21 Atl. 857. § 665 EQUJTY JUEISPBUDENCB. 1324 by the settled doctrines of equity, — ^from extraneous facts putting one upon an inquiry, from possession, from lis pen- dens, from I'ecitals in title papers, from information com- municated to an agent. § 665. Ration^ie of Notice in Place of a Record. — ^I shall conclude this subject by an attempt to ascertain the true rationale of the rule concerning notice as a substitute for an actual registration. If the fraud of the second pur- chaser is adopted as the only explanation, it seems im- possible to hold with consistency that anything less than actual notice, or even actual knowledge, of the prior con- veyance acquired by him, should avail in place of the record. We have seen, however, that the vast majority of the decisions, even while nominally requiring an actual notice, do not demand actual knowledge, but are satisfied with a notice proved by indirect evidence and inferred from circumstances. Is fraud, then, a necessary or even proper foundation upon which to base the rule in all its applica- tions ? I submit that it is not, and think that there is one other rationale which fully explains the doctrine in all of its phases, and which produces a real harmony among all the decisions. It should be remembered — and the fact is very important in its bearing upon this discussion^ that the English statutes do not speak of the registry as constituting any notice, nor has the rule which makes it a constructive notice ever been adopted in England. The statutory language was peremptory, that every unregis- tered conveyance should be deemed fraudulent and void as against a subsequent purchaser who had complied with the statute. The English judges, in the earliest decision3, were required to find some reason or excuse, ia the settled principles of equity, for evading and disregarding this mandatory language. This reason and excuse they found in the theory of fraud imputed to the second purchaser who attempted to gain a preference by registering, al- though he had notice of the prior right. Bijt in the very 1325 CONCERNING NOTICE. § 665 case of Le Neve v. Le Neve,^ where Lor^ Hardwicke first formulated this theory of~ imputed fraud, the purchaser was charged with notice simply because his agent in the transaction had received information wMc/i was not in fact communicated to the principal. The purchaser's conduct was thus pronounced fraudulent, althougli he had person*- ally no knowledge of the prior conveyance, and had acted in perfect good faith, and the notice to him was in every respect constructive. It seems, therefore, to be using an inconsistent or else unmeaning formula io speak of fraud as the essential foundation of the rule, and at the same time to hold purchasers chargeable with notice of a prior right when they have not received the slightest informa- tion of its existence, — as, for example, when- they have been affected with notice by a lis pendens, by a recital in a title deed, which perhaps they never saw or heard of, or even by the possession of a stranger. Throughout the United States the doctrine is settled that the registration of an instrument in pursuance of the recording acts operates as a constructive notice to all subsequent purchasers. What- ever be the language of any state statute, this result of a registration — that it should be a constructive noticfe — is uniformly regarded as the most important object of the entire legislation — the final purpose for which the whole system of recording was established. By this American doctrine, the constructive notice given by a registration stands on exactly the same footing, produces the same effects, and is of the same nature as any other species of absolute constructive notice recognized by equity, — as, for example, that arising from a lis pendens or from a re- cital, or that operating upon a principal through his agent. In all these instances the notice is a conclusive presump- tion of the law, and it is immaterial whether or not any information of the prior right was actually brought home to the consciousness of the party affected thereby. As, therefore, the one important and. necessary effect of a §665, lAmb. 436. § 666 EQUITY JUBISPBXJDENCE, 1326 registration, in pursuance of the American statutes, is to create and impose upon subsequent purchasers a construct- ive notice of a recorded instrument, it seems to be the natural and inevitable consequence of this view, that any- other species of notice, either constructive or actual, should, in the absence of a record, produce the same effect upon the rights of a subsequent purchaser. The regis- tration of an instrument is a constructive notice; and this result was the main design of the legislation. It is there- fore natural, just, and equitable that if a subsequent pur- chaser has received any other kind of notice, actual or constructive, the same effect upon his rights should be produced as would have followed from the single species of constructive notice occasioned by the statute. In this manner, all kinds of constructive notice are, with respect to their effects upon the rights of subsequent purchasers, harmonized and placed upon the same footing. In my opinion, this view furnishes a complete, adequate, and true rationale of the doctrine under discussion. It dispenses with the notion of fraud as a necessary element, which in very many admitted instances of notice must be a mere figment of judicial logic; it avoids all the inconsistencies which are incidents of that notion; and finally,_it accords with the intent and purpose of the recording acts as recog- nized by the vast majority of American decisions. § 666. 7. That Between Principal and Agent ^ — General Rule. — The general rule is fully established, that notice to an agent in the business or employment which he is carry- ing on for his principal is a constructive notice to thie principal himself, so far as the latter 's rights and liabili- ties are involved in or affected by the transaction. This rule alike includes and applies to the positive information or knowledge obtained or possessed by the agent in the § 666, (a) §§ 666-676 are cited in 71 N. J. Eq. 466, 64 Atl. 478; Miner Akers v. Eowan, 33 "S. C. 451, 10 v. Husted, 191 Mich. 25, 157 N. W. X. R. A. 705, 12 S. E. 165. Section 442. C66 is cited in Turner v. Kuehnle, , 1327 CONCERNING NOTICE. "§ 666 transaction, and to actual or constructive notice communi- cated to him therein. 1 ^ The rationale of the rule has been § 666, 1 Le Neve v. Le Neve, Amb. 436 ; 2 Lead. Cas. Eq., 4th Am. ed., 109, 133 ; Saffron etc. Soc. v. Rayner, L. R. 14 Ch. Div. 406 ; Ex parte Lark- ing, L. R. 4 Ch. Div. 566; Boursot v. Savage, L. R. 2 Eq. 134, 142; Atter- buiy V. Wallis, 8 De Gex, M. & G. 454; Rickards v. Gledstanes, 3 Giff. 298; Dryden v. Frost, 3 Mylne & C. 670; Kennedy v. Green, 3 Mylne & K. 699; Tunstall v. Trappes, 3 Sfm. 301, 305; Sheldon v. Cox, 2 Eden, 224; New- stead v. Searles, 1 Atk. 265 ; Allen v. Poole, 54 Miss. 323 ; Suit v. Woodhall, 113 Mass. 391; Owens v. Roberts, 36 Wis. 258; Distilled Spirits, 11 Wall. 356; Astor v. Wells, 4 Wheat. 466; Griffith v. Griffith, 9 Paige, 315; 1 Hoff. Ch. 153; Westervelt v. Haff, 2 Sand. Ch. 98; Jackson -v. Leek, 19 Wend. 339; Hovey v. Blanchard, 13 N. H. 145; Jones v. Bamford, 2LIowa, 217; Myers v. Ross, 3 Head, 59 ; Holden v. New York and Erie Bank, 72 N. Y. 286; Ames v. New York Union Ins. Co., 14 N. Y. 253; Bierce v. Red Bluff Hotel Co., 31 Cal. 160; Russell v. Sweezey, 22 Mich. 235; National Security Bank v. Cushman, 121 Mass. 490; Smith v. Denton, 42 Iowa, 48; First National B&nk of Milf ord v. Town of Milf ord, 36 Conn. 93 ; Tagg v. Ten- nessee National Bank, 9 Heisk. 479; Farrington v. Woodward, 82 Pa. St. 259 ; Ward v. Warren, 82 N. Y. 265. The very recent case of Saffron ete. Soc. V. Rayner, L. R. 14 Ch. Div. 406, is a very important decision, showing the tendency of the courts not to extend the species of constructive notice, and especially how far the rule applies to solicitors or attorneys at law employed by a client in purely professional legal business. The decision is so important that I shall quote passages from the opinions. The plaintiff had taken a mortgage from the devisees (the cestuis que trustent ultimately entitled) of a certain interest in a testator's estate, and gave no- tice of the mortgage to a firm of solicitors who were acting as attorneys for the executors and trustees under the will in a chancery suit to which the testator had been a party, and who were employed generally by such trustees in all matters relating to the testator's estate in which professional assistance was necessary. The notice to these attorneys was very clear and complete, and was clearly proved. The only question was, whether it oper^ ated as constructive notice to the principals, — that is, the trustees and executors, — so as to bind them. The court of appeal held that it did not, reversing the decision of the court below, which is reported in L. R. 10 Ch. Div. 696. James, L. J., after stating the substance of the decision appealed from, — ^namely, that the notice given by the plaintiff to the solicitors who § 666, (b) For a brief and ad- this case in the American Reports mirably clear resume of the subject contains excerpts from many of the see the opinion of Peters, C. J., in English and American casos. ¥-yi Fairfield Sav. Bank v. Chase, 72 Me. illustrations of the general rule, 226, 39 Am, Bep. 319. ;The note to chietly recentj see, in addition to the §666' EQUITY JUEISPKUDENCE. 1328 differently stated by different judges ; by some it has been rested entirely upon the presumption of an actual corn- were acting as attorneys for the trustees and executors, was in itself a suffi- cient notice to make the trustees liable to the same extent as if it had been given to them personally, — proceeds (p. 409) : "That appears to me a start- ling proposition. I cannot see any principle leading to such a conclusion. I have had occasion several times to express my opinion about the fallacy of supposing that there is such a thing as the office of solicitor, — that is to say, that a man has got a solicitor, not as a person whom he is employing to do some particular business for him, either conveyancing, or conducting an action, but as an official solicitor,— and that because the solicitor has been in the habit of acting for him, or been employed to do something for him, such solicitor is his agent to bind him by anything he says, of to bind him by receiving notices or information. There is no such officer known to the law. A man has no more a solicitor m that sense than he has an accountant, cases in the following notes. Kettle- well V. Watson, L. R. 21 Ch. Div. 685, 705; Smith v. Ayer, 101 U. S. SEO; Kogers v. Palmer, 102 U. S. 263; Stanley v. Schawalby, 162 U. S. 255, 16 Sup. Ct. 754; Arm- etrong v. Ashley, 204 U. S. 272, 51 1.. Ed. 482, 27 Sup. Ct. 270; J. J. McCaskill Co. v. United States, 216 V. S. 504, 54 L. Ed. 590, 30 Sup. Ct. 386; American Nat. Bank of Nash- ville v. Miller, 229 U. S. 517, 57 L. Ed. 1310, 33 Sup. Ct. 883; Chew v. Henrietta M. & I. Co., 2 Fed. -5; Lakin v. Sierra B. G. M. Co., 25 Fed. 337; Satterfield v. Malone, 35 Fed. 445, 1 L. R. A. 45; Howison r. Alabama Coal & Iron Co., 70 Fed. 683, 17 C. C. A. 339, 30 U. S. App. 473; City of Denver v. Sherret, 88 Fed. 226, 31 C. C. A. 499; Union Central L.. I. Co. v. Robinson, 148 Fed. 358, 8 L. R. A. (N. S.) 883, 78 C. C. A. 268; Goerz v. Barstow, 148 Fed. 562, 78 C. C. A. 248; Reed v. Munn, 148 Fed. 737, 80 C. C. A. 215, Washington, A. & Mt. V. Ry. Co. v. Real Estate Trust Co., 177 Fed. 306; Lilly V. Hamilton Bank, 178 Fed. 53; 29 L. E. A. (N. S.) 558, 102 0. C. A. 1; Hilliard v. Lyons, 180 Fed. 685, 103 C. C. A. 651; United States v. Smith, 181 Fed. 545; Melton v. Pensaeola Bank & Trust Co., 190 Fed. 126, 111 C. C. A. 166; Real Es- tate Trust Co. of Philadelphia v. Washington, A. & Mt. V. Ry. Co., 191 Fed. 566, 113 G. C. A. 124; Skud V. Tillinghast, 195 Fed. 1, 115 C. C. A. 83; Sturdivant Bank v. Schade, 195 Fed. 188, 115 C. C. A. 140; Guaranty. Trust Co. v. Koehler, 195 Fed. 669, 115 C. G. A. 475; Mc- Dermott v. Hayes, 197 Fed. 129, 116 C. C. A. 553; Alexander Eccles & Co. V. Louisville & N. R. Co., 198 Fed. 898; In re Buehner, 202 Fed. 979; Robinson v. Pebworth, 71 Ala. 240; Overall v. Taylor, 99 Ala. 12, 11 South. 738; Smith v. Southern Express Co., 104 Ala. 387, 16 South. 62; Russell v. Peavy, 131 Ala. 563, 32 South. 492; Goodbar v. Daniel, 88 Ala. 583, 16 Am. St. Rep. 76, 7 South. 254; Lea v. Iron Belt Mer- cantile Co., 147 Ala. 421, 119 Am. St. Rep. 93, 8 L. R. A. (N. S.) 279, 42 South. 415; Morris v. First Nat. Bank of Samson, 162 Ala. 301, 50 South. 137; Hall & Brown Wood 1329 CONCERNING NOTICE. 666 munication between the agent and his principal ; by others, upon the legal conception that for many purpos-es the agent or a baker, or butcher. A person is a man's accountant, or baker, or butcher, when the man chooses to employ him or deal with him, and in the matter in which he is so employed. Beyond that the solicitorship does not extend. ... I am prepared, therefore, to say that before a notice of this kind can have the slightest validity, it must be given, if given to a solicitor, to a solicitor who is actually, either expressly or impliedly, authorized as agent to receive such notices." Bramwell, L. J., added (p. 415) : "As Lord Justice James has said, there is no such thing as a standing relation of solicitor to a man. A man is solicitor for another only when that other has occasion to employ him. That employment may be either to conduct a suit or to advise him about some matter in which legal advice is required; but there is no such general relationship as that of solicitor and client of a standing and permanent character upon aU occasions and for all purposes." Working Mach. Co. v. Haley Furni- ture & Mfg. Co., 174 Ala. 190, 56 South. 726; ScUoss Bros. & Co. v. Gibson Dry Goods Co., 6 Ala. App. 155, 60 South. 436; Home Ins. Co. V. North Little Eoek lee & Electrio Co., 86 Ark. 538, 23 L. R. A. (N. S.) 1201, 111 S. W. 994; ' Donald v. Beals, 57 Gal. 399; Watson v. Sutro, 86 Cal. 500, 24 Pac. 172, 25 Pac. 64; Blood V. La Serena L. & W. Co., 134 Cal. 361, 66 Pac. 317; Kiefhaber Lumber Co. v. Newport Lumber Co., 15 Cal. App. 37, 113 Pac. 691; Cooke V. Mesmer, 164 Cal. 332, 128 Pao. 917; McKenney v. Ellsworth, 165 Cal. 326, 132 Pac. 75; SchoUay v. Moffit-West Drug Co. (Colo. App.), 67 Pac. 182; Pueblo Savings Bank V. Richardson, 39 Colo. 319, 89 Pao. 799; Merchants' Mut. Fire Ins. Co. of Colorado v. Harris, 51 Colo. 95, 116 Pac. 143; Sweeney v. Pratt, 70 Conn. 274, 66 Am. St. Rep. 101, 39 Atl. 182; Low:nde3 v. City National Bank, 82 Conn. 8, 22 L. R. A. (N. S.) 408, 72 Atl. 150; New York, N. H. & H. E. Co. V. Eussell, 83 Conn. 581, 78 Atl. 324; Aycock 11—84 Bros. Lumber Co. v. First Nat. Bank, 54 Pla. 604, 45 South. 501; Githens v. Murray, 92 Ga. 748, 18 S. E. 975; Strickland v. Vance, 99 Ga. 531, 59 Am. St. Rep. 241, 27 S. E. 152; Collins & Toole v. Crews, 3 Ga. App. 238, 59 S. B. 727; Taylor V. Felder, 3 Ga. App. 287, 59 S. E. 844; Athens Mut. Ins. Co. v. E. H. Ledford & Son, 134 Ga. 500, 68 S. E. 91; Singer Mfg. Co. v. Holdfodt, 86 111. 455, 29 Am. Rep. 43; Haas- v. Sternbaeh, 156 111. 44, 41 N. E. 51; Mullanphy Sav. Bank v. Sehott, 135 111. 655, 25 Am. St. Rep. 401, 26 N. E. 640; Weber v. Clark, 136 Dl. 256, 26 N. E. 360; Marion Mfg. Co. v. Harding, 155 Ind. 648, 58 N. E. 194; Blair v.. Whitaker (Ind. App.), 69 N. E. 182; Eetherford v. Wright, 41 Ind. App. 163, 83 N. E. 520; Dor- rance v. McAlester, 1 Ind. T. 473, 45 S. W. 141; Noyes v. Tootle, 2 Ind. T. 144, 48 S. W. 1031; Allen v. McCalla, 25 Iowa, 464, 96 Am. Dec. 56; Furry v. Ferguson, 105 Iowa, 231, 74 N. W. 903; Pyne v. Knight, 130 Iowa, 113, 106 N. W. 505; Mer- litt V. Huber, 137 Iowa, 135, 114 N. i666 EQUITY JUEISPBTJDENCB. 1330 and principal are regarded as one.^ Whatever explana- tion be adopted as the true one, the rule itself is both un- § 666, 2 See Lord Brougham's remarks in the often-quoted case of Ken- nedy V. Green, 3 Mylne & K. 699. In the case of Boursot v. Savage, L. B. 2 Eq. 134, 142, Kindersley, V. C, said : "It is a moot question upon what principle this doctrine rests. It has been held by some that it rests on this : that the probability is so strong that the solicitor would tell his client what he knows himself, that it amounts to an irresistible presumption that he did tell him; and so you must presume actual knowledge on the part of the client. I confess my own impression is, that the principle on which the doctrine rests is this : that my solicitor is alter ego; he is myself.; I stand iu precisely the same position as he does in the transaction, and therefore his knowledge is my knowledge; and it would be a monstrous injustice that I should have the advantage of what he knows, without the disadvantage. But whatever be the principle upon which the doctrine rests, the doctrine itself is unquestionable." If in this extract "agent" and "principal" are substituted for "solicitor" and "client," we shall have a statement of the rationale in its most general form. W. 027; Caffee v. Berkley, 141 Iowa, 344, 11& N. W. 267; Hawley v. SmeidiBg,.3 Kan. App. 159, 42 Pac. 841; First Nat. Bank v. Northup, 82 Kan. 638, 136 Am. St. Eep. 119, 109 Pac. 672; Hess v. Conway, 92 Kan. 787, 142 Pae. 253; Bramblett v. Henderson, 19 Ky. Law Eep. 692, 41 S. W. 575; Sebald v. Citizens' De- posit Bank (Ky.), 105 S. W. 130; John T. Moore Planting Co. v. Morgan's Louisiana & T. K. & S. S. Co., 123 La. -840, 53 South. 22; Blake v. Clary, 83 Me. 154, 21 Atl. 841; Shartzer v. Mountain Lake Park Ass'n, 86 Md. 335, 37 Atl. 783; Maryland Trust Co. v. National Mo hauics' Bank, 102 Md. 608, 63 Atl. 70; Peninsula Trust Co. v. John- son, 1£8 Md. 535, 97 Atl. 925; Price V. Bessett, 168 Mass. 598, 47- N. E. 243; Low v. Low, 177 Mass. 306, 59 N. E. 57; Foots v. Getting, 195 Mass. 55, SO N. E. 600; Vietor v. Spaulding, 199 Mass. 52, 127 Am. St. Eep. 472, 84 N. E. 1016; Old Dominion Copper Min. & Sm. Co. v. Bigelow, 203 Mass. 159, 40 L. E. A. (N. S.) 314, 89 N. E. 193; Newell v. Hadley, 206 Mass. 335, 29 L. E. A. (N. S.) 908, 92 N. E. 50Y; Taylor v. Young, 56 Mieh. 285, 22 N. W. 799; Morgan v. Michigan A. L. E. Co., 57 Mieh. 430, 25 N. W. 161,- 26 N. W. 865; Ma- comb V. Wilkinson, 83 Mieh. 486, 47 N. W. 336; Sponable v. Hanson, 87 Mieh. 204, 49 N, W. 644; Littauer v. Heuck, 92 Mich. 162, 31 Am. St. Eep. 572, 52 N. W. 464; Geel v. Goulden, 168 Mich. 413, 134 N. W. 484; Brown v. People's Nat. Bank, 170 Mich. 416, 40 L. E. A. (N. S.) 657, 136 N. W. 506; Wilson v. Min- nesota, etc., Jns. Ass'n, 36 Minn. 112, 1 Am. St. Eep. 659, 29 N. W. 887; Jefferson v. Leithauser, 60 Minn. 251, 62 N. W. 277; Bates v. A. E. Johnson Co., 79 Minn. 354, 82 N. W. 649; Eobertson Lumber Co. V. Anderson, 9<3 Minn. 527, 105 N. W. 972; E, S. Woodworth & Co. V. Carroll, 104 Min-j. 65, 112 N. W. 1054, 115 N. W..946; First Nat. Bank v. Persall, 110 Minn. 333, 136 1331 CONCERNING NOTICE. §666 questionable and necessary; tlie ordinary business affairs of life could not b^ safely conducted without it. Am. St. Kep. 499, 125 N. W. 503, 675; Rosa v. Houston, 25 Miss. (3 Cushm.) 591, 59 Am. Dec. 231; Illi- nois Cent. K. Co. v. Bryant, 70 Miss. 665, 12 South. 592; Edwards v. Hil- lier, 70 Miss. 803, 13 South. 692; Bergeman v. Indianapolis & St. Tj. E. Co., 104 Mo. 77, 15 S. W. 992; O'Neill V. Blase, 94 Mo. App. 648, 68 S. W. 764; Babbitt v. Kelly, 96 Mo. App. 529, 70 S. W. 385; Penfield Inv. Co. V. Bruce, 132 Mo. App. 257, 111 S. W. 888;' Gregmoore Orchard Co. V. Gilmour, 159 Mo. App. 204, 140 S. W. 763; Royle Mining Co. v. Fidelity & Casualty Co. of N. Y. 161 Mo. App. 185, 142 S. W. 438; Citizens' Bank v. Douglass, 178 Mo. App. 664, 161 S. W. 601; Eopes v. Mian, 44 Mont. 238, 119 Pae. 479; American B. & L. Ass'n v. Eainbolt, 48 Neb. 434, 67 N. W. 493; Butler V. Morse, 66 N. H. 429, 23 Atl. 90; Foss V. Boston & M. E. Co., 66 N. H. 256, 49 Am. St. Eep. 609, 11 L. E. A. 367, 21 Atl. 222 (knowledge of conductor); Brookhouse v. Union Publishing Co., 73 N. H, 368, 111 Am. St. Bep. 623, 6 Ann. Cas. 675, 2 L. R. A. (N. S.) 993, 62 Atl. 219; Warren v. Hayes, 74 N. H. 355, 68 Atl. 193; Clen 3nt v. Toung-McShea Amusement Co., 70 N. J. Eq. 677, 118 Am. St. Eep. 747, 67 Atl. 82; Lanning v. Johnson, 75 N. J. L. 259, 69 Atl. 490; Grofie v. Stitzer, 75 N. •J. Eq. 452, 72 Atl. 970; Brown v. Columbus (N. j; Eq.), 75 Atl. 917; Thomson v. Central Passenger E. Co., 80 N. J. L. 328, 78 Atl. 152; Lockhart v. Washington Gold & Sil- ver Min. Co., 16 N. M. 223, 117 Pae. 833; Jackson v. Sharp, 9 Johns. -163, 6 Am. Dec. 267; Cragie v. Hadley, 99 N. Y. 131, 52 Am. Eep. 9; Bollard v. Eoberts, 130 N. Y. 269, 14 L. E. A. 238, 29 N. E.,104; Jeffer- son County Nat. Bank v. Dewey, 197 N. Y. 14, 90 N. E. 113; Billings V. Shaw, 209 N. Y. 265, 103 N. E. 142; Jacobus v. Jamestown Mantol Co., 211 N. Y. 154, 105 N. B. 210; Cowan V. Withrow, 111 N. C. 303, 16 S. E. 397; State v. Kittelle, 110 N. C. 560, 28 Am. St. Eep. 698, 15 L. E. A. 694, 15 S. E. 103; Straus, Gunst & Co. V. T. O. Sparrow & Co., 148 N. C. 309, 62 S. E. 308; Jenkins Bros. Shoe Co. v. Eenfrow, 151 N. C. 323, 25 L. E. A. (N. S.) 231 aul note, 66 S. E. 212; Brite v. Penny, 157 N. C. 110, 72 S. E. 964; First Nat. Bank of Nome v. German Ann. Ins. Co., 23 N. D. 139, 38 L. E. A. (N. S.) 213, 134 N. W. 873; Orme v. Baker, 74 Ohio St. 337, 113 Am. Et. Eep. 96.8, 78 N. E. 439; United States Fidelity & Guaranty Co. v. Shirk, 20 Okl. 576, 95 Pae. 218; Ray- l)urn V. Davisson, 22 Or. 242, 29 Pae. 738; Dillard v. Olalla Mining Co., 52 Or. 126, 94 Pae. 966, 96 Pae. '678; Whigham v. Supreme Court I. 0. F., 51 Or. 489, 94 Pae. 968; La Forest v. Downer, 63 Or. 176, 126 Pae. 995; Oliver v. Grande Eonde Grain Co., 72 Or. 46, 142 Pae. 541; In re Heckman's Estate, 172 Pa. St. 185, 33 Atl. 552, 37 Wkly. Notes Cas. 376; Gilkeson v. Thompson, 210 Pa. St. 355, 59 Atl. 1114; In re Pat- terson's Estate, 234 Pa. St. 128, 82 Atl. 1130; Cook v. American Tub- ing & Webbing Co., 28 R. I. 41, 9 L. E. A. (N. S.) 193, 65 Atl. 641; National Bank of North America v. Thomas, 30 E. I. 294, 74 Atl. 1092; Salinas v. Turner, 33 S. G. 231, 11 S. E. 702; Peoples v. Warren, 51 S. C. 560, 29 S. E. 659; Sparkman v. Supreme Council American Legion of Honor, 57 S. C. 16, 35 S. E. 391: §667 EQUITY JUEISPBTJDENCE. 1332 § 667. Scope and Applications. — This general rule ig^f wide application. It embraces in its operation not only ordinary agents and attorneys, but all persons who act for or represent others in business relations and transac- tions. Thus it applies to directors, managers, presidents, cashiers, and other officers, while engaged in the business American Freehold Land Mortg. Co. V. Felder, 44 S. C. 478, 22 S. E. 598; Gibbs Machinery Co. v. Eoper, 77 S. C. 39, 57 S. E. 667; McCormick Har- vesting Mach. Co. v. Yankton Sav. Bank, 15 S. T>. 196, 87 N. W. 974; Beeves & Co. v. Lewis, 25 S. D. 44, 29 L. E. A. (N. S.) 82, 125 N. W. 289; Nashville etc. B. E. Co. v. Elliott, 1 Cold. 611, 78 Am. Dec. 506; Bank of Eome v. Haselton, 83 Tenn. (15 Lea) 216; Major v. Stone's Eiver Nat. Bank (Tenn. Ch. App.), 64 S. W. 352; Sehoolfield V. Gogdell, 120 Tenn. 618, 113 S. W. 375; Kauffman v. Bobey, 60 Tex. 30, 48 Am. Eep. 264; Collins & Arm- strong Co. V. IT. S. Ins. Co., 7 Tex. Civ. App. 579, 27 S. W. 147; TJ. S. V. Sehwalby, 8 Tex. Civ. App. 679, 29 S. W. 90, 87 Tex. 604, 30 S. W. 435; Missouri, K. & T. By. Co. v. Bacon (Tex. Civ. App.), 80 S. W. 572; Baldwin v. Boot (Tex. Civ. App.), 3S S. W. 630; Ferguson v. McCrary, 20 Tex. Civ. App. 529, 50 S. W. 472; Bexar B. & L. Assn. v. Loekwood (Tex. Civ. App.), 54 S. W. 253; Hall v. Jennings (Tex. Civ. App.), 104 S. W. 489; Luling Oil & Mfg. Co. v. Lane & Bodley Co., 49 Tex. Civ. App. 534, 109 S. W. 445; La Brie v. Cartwright, 55 Tex. Civ. App. 144, 118 S. W. 785; E. B. God- ley Lumber Co. v. Teagarden (Tex. Civ. App.), 135 S. W. 1109; Hamp- shire V. Greeves, 104 Tex. 620, 143 S. W. 147; Teagarden v. E. B. God- lay Lumber Co., 105 Tex. 616, 154 S.- W. 973; Mitchell v. Morgan (Tex. Civ. App.), 165 S. W. 883; Eoberts v. W. H. Hughes Co., 86 Vt. 76, 83 Atl. 807; Schreckhise v. Wise- man (Va.), 45 S. E. 745; First Nat. Bank of Eichmond v. Eichmond Elec- tric Co., 106 Va. 347, 117 Am. St. Eep. 1014, 7 L. E. A. (N. S.) 744, 56 S. E. 152; Traders & Truckers' Bank v. Black, 108 Va. 59, 60 S. B. 743; Atlantic Trust & Safe Deposit Co. V. Union Trust & Title Corp., Ill Va. 574, 69 S. E. 975; Baker v. Berry Hill Mineral Springs Co., 112 Va. 280, L. E. A. 1917F, 303, 71 S. E. 626; Lee v. E. H. Elliott & Co., 113 Va. 618, 75 S. E. 146; Moon Bros. Carriage Co. v. Devenish, 42 Wash. 415, 7 Ann, Cas. 649, 85 Pac. 17; Elliott V. Knights of the Modern Maccabees, 46 Wash. 320, 13 L. E. A. (N. S.) 856, 89 Pac. 929; Allen v. Treat, 48 Wash. 552, 94 Pac. 102; Gaskill V. Northern Assurance Co., 73 Wash. 668, 132 Pac. 643; First Nat. Bank of New Martinsville v. Lowther-Kaufman Oil & Coal Co., 66 W. Va. 505, 28 L. E. A. (N. S.) 511, 66 S. E. 713; Cassiday Fork Boom & Lumber Co. v. Terry, 69 W. Va. 572, 73 S. E. 278; Knott v. Tidy- man, 86 Wis. 164, 56 N. W. 632;" Johnson v. First Nat. Bank, 79 Wis. 414, 24 Am. St. Eep. 722, 48 N. W. 712; Dixon v. Winch, [1900] 1 Ch. Div. 736, 69 Law J. Ch. 465, 82 Law T. (N. S.) 437, 48 Wkly. Eep. 612. 1333 eONCEENING NOTICE. §667 affairs of their corporations ; ^ ^ to trustees acting on be- §667, lEx parte Larking, L. R. 4 Ch. Div. 566; Smith v. Water Comm'rs, 38 Conn; 208; Tagg v. Tenn. Nat. Bank, 9 Heisk. 479; Fulton Bank v. Canal, Co,, 4 Paige, 127; Bank of United States v. D^vis, 2 HUl, 451; New Sope Bridge Co. v. Phoenix Bank, 3 N. Y. 156; Washington Bank v. Lewis, 22 Pick. 24; Branch Bank v. Steele, 10 Ala. 915; Holden v. New York and Erie Bank, 72 N. Y. 286; North River Bank v. Aymar, 3 §667, (a) Notice to President. — J. J. MoCaskill Coi v. United States, 216 U. S. 504, 54 L. Ed. 590, 30 Sup. Ct. 386; Niblack y. Cosier (C. C. A.), 80 Fed. 596, affirming 74 Fed. 1000; Curtice v. Crawford County Bank, 118 Fed. 390; Skud v. Til- linghast, 195 Fed. 1, 115 C. C. A. 83; Harris v. American B. & L. Ass'n, 122 Ala. 545, 25 South. 200; Guarantee Co. of N. A. v. E. E. T. Co., 96 Ga. 511, 51 Am. St. Hep. 150, 23 S. E. 503; Brobston v. Penniman, 97 Ga. 527, 25 S. E. 350; Hager v. National German-American Bank, 105 Ga. 116, 31 S. E. 141; Fouche v. Merchants' Nat. Bank, 110 Ga. 827, 36 S. E. 256; Eeagan v. First Nat. Bank, 157 Ind. 623, 61 N. E. 575, 62 N. E. 701; Hughes v. Settle (Tenn. Ch. App.), 36 S. W. 577; Merchants' Nat. Bank v. McAnulty (Tex. Civ. App.), 31 S. "W. 1091; Ottaquechee Sav. Bank v. Holt, 58 Vt. 166, 1 Atl. 485; Rock Springs Nat. Bank v. Lu- man, 6 Wyo. 123, 42 Pac. 874. Notice to Vice-presadent of Bank. National Bank of North America v. Thomas, 30 K. I. 294, 74 Atl. 1092. Notice to Cashier. — BiTmingham Trust & Sav. Bank v. Louisiana Nat. Bank, 99 Ala. 379, 20 L. E. A, 600, 13 South. 112; Citizens' Sav. Bank v. Walden, 21 Ky. Lraw Eep. 739, 52 S. W. 953; GrofE v. Stitzer, 75 N. J. Eq. 452, 72 Atl. 970; Farm- ers' Bank V. Saling, 33 Or. 394, 54 Pac. 190; Stebbing v. Lardner, 2 S. D. 127, 48 N. W. 847; Black Hills Nat. Bank v. Kellogg, 4 S. D. 312, 56 N. W. 1071; Winslow v. Harri- man (Tenn. Ch. App.), 42 S. W. 698; Merchants & Planters' Bank v. Pen- land, 101 Tenn. 445, 47 S. W. 693; First Nat. Bank v. Ledbetter (Tex. Civ. App.), 34 S. W. 1042; Brothers V. Bank of Kaukauna, 84 Wis. 381, 36 Am. St. Eep. 932, 54 N. W. 786. Notice to Secretary or General Manager. — Citizens' Trust & Surety Co. V. Zane, 113 Fed. 596, affirmed, 117 Fed. 814; Love v. Anchor Eaisin Vineyard Co. (Cal.), 45 Pac. 1044; Interstate B. & L. Ass'n v. Ayers, 177 HI. 9, 52 N. E. 342; Anderson v. Kinley, 90 Iowa, 554, 58 N. W. 909; In re Sweet, 20 E. I. 557, 40 Atl. 502. Notice to Teller. — Zeis v. Potter, 105 Fed. 671, 44 C. C. A. 665; City Nat. Bank v. Martin, 70 Tex. 643, 8 Am. St. Eep. 632, 8 S. W. 507. Notice to Directors. — ^Boyd v. Chesapeake & 0. Canal Co., 17 Md. 195, 79 Am. Dec. 646 (notice given to two directors for purpose of hav- ing them give it to the board, though in fact not communicated); Bank of Pittsburgh v. Whitehead, 10 Watts, 397, 36 Am. Dec. 186 (in- formation given to board at reg- ular meeting, although discount com- mittee absent) ; Wolfe v. Citizens' Bank (Tenn. Ch. App.), 42 S. W. 39. But a director is not such an officer or general agent that the corpora- tion should be charged, as matter of law, with his knowledge, without §667 EQUITY JTJKISPKUDENCE. 1334 half of their beneficiaries ; 2 1> to an agent acting on behalf of a married, woman; 3 c to one of two or more joint agents ; ^ * and to all actual agents, whether the agency be Hill, 262; National Security Bank v. Cushman, 121 Mass. 490; First Nat. Bank etc. v. Town of Milford, 36 Conn. 93. § 667, 2 Willes v. Greenhill, 4 De Gex, F. & J. 147, 150; Myers v. Eoss, 3 Head, 59. § 667, 3 As where the agent is her husband : Willes v. Greenhill, 4 De Gex, F. & J. 147, 150; Clark v. Fuller, 39 Conn. 238; Duke v. Blame, 16 Minn. 306; see Pringle v. Dunn, 37 Wis. 449, 19 Am. Eep. 772. § 667, 4 Willes v. GreenhiU, 4 De Gex, F. & J. 147, 150; as where the notice is to one of several directors of a bank : Bank of United States v. Davis, 2 Hill, 451, 464. regard to the nature of the transac- tion, or the connection the board of directors, or the director, having such notice, might have with the transaction: Luling Oil & Mfg. Co. v. Lane & Bodley Co., 49 Tex. Civ. App. 534, 109 S. W. 445. Notice to Promoters. — Zeigler v. Valley Coal Co., 150 Mich. 82, 13 Ann. Cas. 90, 113 N. W. 775. The Individual Stockholders are not agents of the corporation for purposes of notice: Mercantile Nat. Bank v. Parsons, 54 Minn. 56, 40 Am. St. Rep. 299, 55 N. W. 825; but notice to all the stockholders is binding on the corporation: Sim- mons Creek Coal Co. v. Doran, 142 V. S. 4l7, 12 Sup. Ct. 239; Ear son v. Brinkerhoflf (N. J.), 38 Atl. 919; Franklin Min. Co. v. O'Brien, 22 Colo. 129, 55 Am. St. Eep. 118, 43 Pac. 1016. For rules specially applicable to corporation agents and officers, see post, § 670 and notes, § 672, note, § 675, editor's note. § 667, (b) Notice to Trustees. — Batavia v. Wallace, 102 Fed. 240, 42 C. C. A. 310, and cases cited; Schooiaeld v. Cogdell, 120 Tenn. 618, 113 S. W. 375; Chapman v. Chapman, 91 Va. 397, 50 Am. St. Eep. 846, 21 S. E. 813, citing this section of the text; Merchants' Bank v. Ballou, 98 Va. 112, 81 Am. St. Eep. 715, 32 S. E. 481. § 667, (e) Notice to Husband as Agent of Wife. — Chew v. Henrietta M. & S. Co., 2 Fed. 5; Satterfield v. Malone, 35 Fed. 445, 1 L. E. A. 35; Eobinson v. Pebworth, 71 Ala. 240; Goodbar v. Daniel, 88 Ala. 583, 16 Am. St. Eep. 76, 7 South. 252; New York, N. H. & H. B. Co. v. Eussell, 83 Conn. 581, 78 Atl. 324; Miller v. Whelan, 158 HI. 544, 42 N. E. 59; Forsythe v. Brandenburg, 154 Ind. 588, 57 N. E. 247; Eetherford v. Wright, 41 Ind. App. 163, 83 N. E. 520; McMaken v. Niles (Iowa), 60 N. W. 199; Tilleny v. Wolverton, 50 Minn. 419, 52 N. W. 909; C. Ault- man & Co. v. Utsey, 34 S. C. 559, 13 S. E. 848; Mansfield v. Garrison (Tex. Civ. App.), 48 S. W. 554. But it must appear that the husband was the wife's agent: M. A. Cooper' & Co. V. Sawyer (Tex. Civ. App.), 73 S. W. 992. §667, (d) Notice to Joint Agent Chapman v. Chapman, 91 Va. 397, 50 Am. St. Eep. 846, 21 S. E. 813, citing this section of the text (.loint trustees);,, Wittenbrock v. Parker, 102 Cal. 93, 41 Am, St. Eep. 172, 21 1335 OONCEKNING NOTICE. §667 express or implied.^ ^ The general rule also applies where the same agent or attorney in reality acts on behalf of both § 667, 5 Watson v. Wells, 6 Conn. 468; Farrington v. Woodward, 82 Pa. St. 259. The mere fact, however, that a purchase is made by two persons jointly does not constitute them agents for each other, so that notice to one is therefore a notice to the other: Snyder v. Sponable, 1 Hill, 567, 7 Hill, 427; riagg v. Mann, 2 Sum. 486, 534. L. E. A. 197, 36 Pae. 374 (firm of attorneys), and cases cited; Pyne v. Knight, 130 Iowa, 113, 106 N. W. 505 (knowledge of one partner im- puted to other). § 667, (e) Subagents. — Whether a subagent is authorized to receive notice is determined by the same considerations which decide whether he is the agent of the principal or merely of the agent: Waldman v. North British, etc., Ins. Co., 91 Ala. 170, 24 Am. St. Rep. 883, 8 South. 666; Schloss Bros. & Co. v. Gibson Dry Goods Co., 6 Ala. App. 155, 60 South. 436 (where contract of agency carried with it necessary im- plication that a subagent would, be appointed); Merritt v. Huber, 137 Iowa, 135, 114 N. W. 627; Bates v. American Mortgage Co., 37 S. C. 88, 21 L. E. A. 340, and note, 16 S. B. 883; Goode v. Georgia Home Ins. Co., 92 Va. 392, 53 Am. St. Kep. 817, 30 L. E. A. 842,. 23 S. E. 744. In the following cases, notice to clerks of insurance agents was imputed to the companies: Carpenter v. Ger- man-Am. Ins. Co., 135 N. Y. 298, 31 N. E. 1015; Bergeron v. Pamlico Ins. & B. Co., Ill N. C. 45, 15 S. B. 883; Phoenix Ins. Co. v. Ward, 7 Tex. Civ. App. 13, 26 S. W. 763. But a principal is not charged with the knowledge of an intermediate, independent contractor: Hoover v. Wise, 91 U. S. 308. Insurance Agents. — Many ques- tions have arisen as to the author- ity of soliciting agents and other sjeeial agents of insurance com- panies to bind their principals by information received in the dis- charge of their duties; especially as to whether the knowledge ob- tained by such an agent as to the falsity of representations made by the insured is imputed to the in- surer so as to effect a waiver of conditions in the policy. See PhcE- nix Ins. Co. v. Copeland, 90 Ala. 386, 8 South. 48; American- Cent. Ins. Co. V. Donlon (Colo. App.), 66 Pae. 249; Merchants' Mut. Fire Ins. Co. V. Harris, 51 Colo. 95, 116 Pae. 143; McGrurk v. Metropolitan Life Ins. Co., 56 Conn. 528, 32 L. E. A. 530, 16 Atl. 263; Ward v. Metro- politan Life Ins. Co., 66 Conn. 227, 50 Am. St. Eep. 80, 33 Atl. 902; Athens Mut. Ins. Co. v. K. H. Led- ford & Son, 134 Ga. 500, 68 S. E. 91; Commercial Ins. Co. v. Spanknebla, 52 111. 53, 4 Am. Eep. 582; Hartford etc. Ins. Co. v. Walsh, 54 111. 164, 5 Am. Eep. 115; Lumberman's Mut. Ins. Co. V. Bell, 166 111. 400, 57 Am. St. Kep. 140, 45 N. E. 130; Ameri- can Mut. Life Ins. Co. v. Bertram (Ind.), 70 N. E. 258; Miller v. Mut. Ben. Life Ass'n, 31 Iowa, 216, 7 Am. Eep. 122; Frane v. Burlington Ins. Co., 87 Iowa, 288, 54 N. W. 237; Goodwin v. Provident Sav. Life Ass'n, 97 Iowa, 226, 59 Am. St. Rep. 411, 32 L. E. A. 473, 66 N. W. 157; Capitol Ins. Co. v. Bank of Pleasanton, 50 Kan. 449, 31 Pae. §667 EQUITY JUBISPKUDEITCB. 1336 parties to tlie transaction; for both the grantor and the grantee, the vendor and the vendee, the mortgagor and 1069 (knowledge of general agent) ; Germania Ins. Co. v. Ashby, 23 Ky. Law Eep. 1564, 65 S. W. 611; Teu- tonia Ins. Co. v. Howell, 21 Ky. Law Eep. 1245, 54 S. W. 852; Union Nat. Bank v. Manhattan Life Ins. Co., 52 La. Ann. 36, 26 South. 800; Bigelow V. Granite State Fire Ins. Co., 94 Me. 39, 46 Atl. 808; Schaef- fer V. Farmers,' etc., Ins. Co., 80 Md. 563, 45 Am. St. Eep. 361 (notice to general agent) ; Gristoek v. Eoyal Ins. Co., 84 Mich. 161, 47 N. W. 549, 87 Mich. 428, 49 N. W. 634; Ahlberg T. German Ins. Co., 94 Mich. 259, 53 N. W. 1102; Union Cent. Life Ins. Co. V. Smith, 105 Mich. 353, 63 N. W. 438 (notice to state agent); Power. V. Monitor Ins. Co., 112 Mich. 364, 80 N. W. Ill; Wilson v. Minnesota, etc., Ins. Assn., 36 Minn. 112, 1 Am. St. Kep. 659, 30 N. "W. 401; Home Ins. Co. v. Gibson, 72 Miss. 58, 17 South. 13; Millis v. Scottish Union & National Ins. Co., 95 Mo. App. 211, 68 S. W. 1066; De Soto V. American Guaranty Fund Mut. Fire Ins. Co. (Mo. App.), 74 S. W. 1; Eagle Fire Ins. Co. v. Globe L, & T. Co., 44 Neb. 380, 62 N. W. 895; Kochester Loan, etc., Co. V. Liberty Ins. Co., 44 Neb. 537, 48 Am. St. Eep. 745, 62 N. W. 877; Hartford Fire Ins. Co. v. Landfare, 63 Neb. 559, 88 N. W. 779; Camp- bell V. Merchants & Farmers' Mut. Fire Ins. Co., 37 N. H. 35, 72 Am. Dec. 324; Spalding v. New Hamp- shire Fire Ins. Co., 71 N. H. 441, 52 Atl. 858; Bobbins v. Springfield F. & M. Ins. Co., 149 N. T. 477, 44 N. E. 159; McGuire v. Hartford Fire Ins. Co., 40 N. Y. Supp. 300; For- ward V. Continental Ins. Co., 142 N. Y. 382, 25 L. E. A. 637, 37 N. E. 615, affirming 66 Hun, 546, 21 N. Y. Supp. 664; FoUette v. Mutual Acci- dent Assn., 110 N. C. 377, 28 Am. St. Eep. 693, 15 L. E. A. 668, and cases cited in the note, 14 S. E. 923; People's Ins. Co. v. Spencer, 53 Pa. St. (3 P. F. Smith) 353, 91 Am. Dec. 217; Humphreys v. National Ben. Association, 139 Pa. St. 264, 11 L. E. A. 564, 20 Atl. 1047, Bard v. Penn, etc.. Fire Ins. Co., 153 Pa. St. 257, 34 Am. St. Eep. 704, 25 Atl. 1124; Eeed v. Equitable F. & M. Ins. Co., 17 E. I. 785, 18 L. E. A. 496, 24 Atl. 833, reviewing many cases (notice to mere soliciting agent not notice to the company) ; Norris v. Hartford Fire Ins. Co., 57 S. C. 358, 35 S. E. 572; Enos v. St. Paul, etc., Ins. Co., 4 S. D. 639, 46 Am. St. Eep. 796, 57 N. W. 919; Continental Fire Assn. v. Norris, 30 Tex. Civ. App. 299, 70 S. W. 769; West V. Norwich Union Fire Ins. Co., 10 Utah, 442, 37 Pac. 685; Tar- bell V. Vermont Mut. Fire Ins. Co., 63 Vt. 53, 22 Atl. 533; Manhattan Fire Ins. Co. v. Weill, 28 Gratt. 389, 26 Am. Eep. 364 (knowledge of gen- eral agent); GaskiU v. Northern Assur. Co., 73 Wash. 668, 132 Pac. 643; Dick v. Equitable Fire & Marine Ins. Co., 92 Wis. 46, 65 N. W. 742; Kahn v. Traders' Ins. Co., 4 Wyo. 419, 62 Am. St. Eep. 47, 34 Pac. 1059. Municipal Officers. — Notice of de- fects in a street : Bradford v. Mayor of Anniston, 92 Ala. 349, 25 Am. St. Eep. 60, 8 South. 683 (to a street overseer) ; Logansport v. Justice, 74 Ind. 378, 39 Am. Eep. 79 (to a coun- cilman) ; Dundas v. City of Lansing, 75 Mich. 499, 13 Am. St. Eep. 457, 42 N. W. 1011; Frazier v. Butler 1337 CONCERNING NOTICE. § 667 the mortgagee. Sf This special application of the rule is carefully guarded by the courts, so that it shall uot work injustitje, and is not, therefore, enforced unless the same agent is in fact acting for both parties.'^ § 667, 6 In fact, the most striking illustrations of the rule have arisen nnder these circumstances : Le Neve v. Le Neve, Amb. 436; 2 Lead. Cas. Eq., 4th Am. ed., 109 ; Kennedy v. Green, 3 Mylne & K. 699 ; Dryden v. Frost, 3 Mylne & C. 670, 673; Sheldon v. Cox, 2 Eden, 224; Tweedale v. Tweedale, 23 Beav. 341; Fuller v. Bennett, 2 Hare, 394, 402; Holden v. New York etc. Bank, 72 N. Y. 286; First Nat. Bank etc. v. Town of Milford, 36 Conn. 93 ; Losey v. Simpson, 11 N. J. Eq. 246.® Also where the grantor or vendor himself acts on behalf or as attorney for the grantee or vendee : Robinson v. Briggs, 1 Smale & G. 188 ; Spencer v. Topham, 2 Jur., N. S., 865 ; Majori- banks v. Hovenden, Dru. 11; 6 I. R. Eq. 238; Atkyns v. Delmege, 12 I. R. Eq. 1; Twycross v. Moore, 13 I. R. Eq. 250; Tucker v. Henzill, 4 Ir. Ch. 613 ; In re Rorke, 13 Ir. Ch. 273 ; 14 Ir. Ch. 442. § 667, 7 Thus the mere fact that only one attorney is employed or engaged in a transaction, a sale or purchase, or a mortgaging, does not necessarily make him the attorney for both parties, so that one party shall thereby be charged with constructive notice of fabts known by the other: Espin v. Pemberton, 3 De Gex & J. 547, 554, 555 ; Wythes v. Labouchere, 3 De Gex & J. 593; Perry v. Holl, 2 De Gex, F. & J. 38, 53, per Campbell, L. C: "It does not follow that if there is not an attorney on each side, the attor- Borough, 172 Pa. St. 407, 51 Am. St. knowledge in a proper ease carries Eep. 739, 23 Atl. 691 (officer's with it its own burden of liability; knowledge not obtained in Ms offi- but it cannot be used to establisli cial capacity, not imputed to the implied acquiescence or ratification 'municipality). Notice to one of by the principal: Thomson v. Cen- the financial agents of a municipal- tral Pass. By. Co., 80 N. J. L. 328, ity of a matter affecting its liabil- 78 Atl. 152. ity: Burditt v. Porter, 63 Vt. 296, §667, (f) The text is quoted in 25 Am. St. Eep. 763, 21 Atl. 955. Turner v. Kuehnle, 71 N. J. Eq. 466, Rule as to Imputed Knowledge 64 Atl, 478. Does not Act as Kule of Evidence to § 667, (s) Where the principal Show Actual Knowledge Where sought to be affected by the notice That is Necessary. — The rule that has consented to his agent's acting knowledge of an agent will be im- for the party adversely interested: pnted to a principal deals only with Pine Mt. Iron & Coal Co. v. Bailey, a fiction of knowledge, and is never 94 Fed. 258, 36 C. C. A. 229. Com- a rule of evidence by which the pare post, §§ 674, 675, and notes, actual possession of knowledge by And see Witter v. McCarthy Co. the principal can, in point of (Cal.), 43 Pac. 969; Berry v. Rood, fact, be established. The fiction of 168 Mo. 316, 67 S. W. 644. 668 EQUITY JUBISPBUDENCE. 1338 § 668. Limitations — ^Within the Scope of the Agent's Authority. — There are, on the other hand, certain im- portant limitations upon the operation of the general rule. The employment of an g-gent or attorney to do a merely ministerial act for his principal does not constitute him such an agent that the rule as to constructive notice will apply.i ^ Also, in pursuance of the fundamental doctrine ney who does act is the attorney of both."*' Also the. mere fact that two corporations have the same attorney, or_the same directors, does not render each chargeable with notice of whatever is known or done by the other: Banco de Lima v. Anglo-Peruvian Bank, L. R. 8 Ch. Div. 160, 175; In re Marseilles etc. Co., L. R. 7 Ch. 161; In re European Bank, L. R. 5 Ch. 358; Fulton Bank v. New York etc. Canal Co., 4 Paige, 127.* § 668, 1 As to where he is employed simply to procure the execution of a deed : Wyllie v. Pollen, 3 De Gex, J. & S. 596, 601. Or to record a mort- gage : Anketel v. Converse, 17 Ohio St. 11, 91 Am. Dec. 115 ; Hoppoek v. Johnson, 14 Wis. 303. But notice to an officer employed to execute an attachment is notice to the plaintiff in the suit : Tucker v. Tilton, 55 N. H. 223. § 667, {i) That one who prepares an abstract of title on behalf of a vendor of land does not thereby be- come the agent of the vendee, see Davis V. Steeps, 87 Wis. 472, 41 Am. St. Kep. 51, 23 L. E. A. 818, 58 N. W. 769. § 667, (1) The test is laid down in In re Hampshire Land Co., [1896] 2 Ch. 743, as follows: "The knowledge which has been "ftcquired by the offi- cer of one company will not be im- puted to the other company, unless the common oflieer had some duty imposed on him to communicate that knowledge to the other com- pany, and had some duty imposed upon him by the company which is alleged to be affected by the notice to receive the notice; and if the common officer has been guilty of fraud, or even irregularity, the coujt will not draw the inference that he has fulfilled these duties." See, also, In re David Payne & Co., Ltd., [1904] 2 Ch. 608; People's Sav. Bank v. Hine, 131 Mich. 181, 9 Detroit Leg. N. 283, 91 N. W. 130. Where the agent of an insurance company is also an officer and stock- holder of a bank, his knowledge that the bank has additional insur- ance will not be imputed to the in- surance company. The interest of- the agent is such that it will not be presumed that he communicated knowledge detrimental to the bank: Krst Nat. Bank of Nome v. German- American Ins. Co., 23 N. D. 139, 38 L. R. A. (N. S.) 213, 134 N. W. 873. § 668, (a) See, also, Columbia Paper Stock Co. v. Fidelity & Cas- ualty Co. (Mo. App.), 78 S. W. 321; Gregmoore Orchard Co. v. Gilmour, 159 Mo. App. 204, 140 S. W. 763; Eoyle Mining Co. v. Fidelity & Cas- ualty Co. of N. Y., 161 Mo. App. 185, 142 S. W. 438; In re Buehner, 205 Fed. 454, 123 C. C. A. 522. As to subagents, see ante, note (e) to 1339 CONCERNING NOTICE. §668 of agency concerning the powers of agents, the notice given to or information acquired by the agent, in order to be operative upon the principal, must be within the scope of the agent's authority, to bind the principal. If an agent cannot bind his principal by acts beyond the limits of his authority, a notice beyond those limits is equally nuga- tory.2b Finally,, in order that the rule may apply, the § 668, 2 Spadone v. Manvel, 2 Daly,. 263 ; Weisser v. Denison, 10 N. Y. 68, 61 Am. Dec. 731; Brown v. Bankers' etc. Tel. Co., 30 Md. 39; Roach v. Karr, 18 Kan. 529, 26 Am. Eep. 788; Wilson v. Conway Fire Ins. Co., 4 R. I. 141, 152; Grant v. Cole, 8 Ala. 519. last section; Waldman v. Nortli British, etc., Ins. Co., 91 Ala. 170, 24 Am. St. Eep. 883, 8 South. 666. § 668, (b) Neal v. M. E. Smith & Co., 116 Fed. 20 (traveling sales- man) ; Indiana Bicycle Co. v. Tuttle, 74 Conn. 489, 51 Atl. 538; Marsh v. Wheeler (Conn.), 59 Atl. 410, and cases cited; Camp v. Southern Bkg. & Tr. Co., 97 Ga. 582, 25 S. E. 362 (bank messenger) ; Collins & Toole v. Crews, 3 Ga. App. 238, 59 S. E. 727; Booker v. Booker (111.), 70 N. E. 709 (messenger); Harrison v. City Fire Ins. Co., 91 Mass. (9 Allen) 231, 85 Am. Dec. 751; Sandberg v. Palm, 53 Minn. 252, 54 N. W. 1109; Strauch v. May, 80 Minn. 343, 83 N. W. 156; Hickman v. Green, 123 Mo. 165, 29 L. E. A. 39, 22 S. W. 455, 27 S. W. 4:40 (special agent em- ployed to effect exchange of prop- erty, but without any authority to pass upon title); Donham v. Hahn, 127 Mo. 439, 30 S. W. 134; Nehawka Bank v. Ingersoll (Neb.), 89 N. W. 618; Hargadine, McKittrick Dry Goods Co. V. Krug (Neb.), 96 N. W. 286; Warren v. Hayes, 74 N. H. 355,' 68 Atl. 193; Clement Y. Touiig-Mc- Shea Amusement Co., 70 N. J. Eq. 677, 118 Am. St. Eep.. 747, .67 Atl. 82; Pennoyer v. Willis, 26 Or. 1, 46 Am. St. Rep. 594, 36 Pae. 568; Eeed V. Equitable P. & M. Ins. Co., 17 E. I. 785, 18 L. R. A. 496, 24 Atl. 833 (insurance soliciting agent); Reeves & Co. v. Lewis, 25 S. D. 44, 29 L. E. A. (N. S.) 82, 125 N. W, 289; Chicago Sugar Eef. Co. v. Jackson Brewing Co. (Tenn. Ch. App.), 48 S. W. 275; Missouri, K. & T. Ey. Co. V. Belcher, 88 Tex. 549, 32 S. W. 518; Pughe v. Coleman (Tex. Civ. App.), 44 S. W. 576; Moon Bros. Carriage Co. v. Deven- ish, 42 Wash. 415, 7 Ann. Cas. 619, 85 Pae. 17 (traveling salesman) ; Congar v. Chicago & N. W. K. Co., 24 Wis. 157, 1 Am. Eep. 164. One who employs an attorney merely to examine an abstract of title to real property and give an opinion thereon is not affected by his knowl- edge of the pendency of a suit which may affect such title: Tren- ton ^v. Pothen, 46 Minn. 298, 24 Am. St. Eep. 225, and note, 49 N. W. 129 ; nor by his information as to the size of the tract of land involved: Kelley v. Peeples, 192 Mo. App. 435, 182 S. W. 809. See, also, Weil v. Eeiss, 167 Mo. 125, 66 S. W. 943. Traveling Salesman.— Notice to a traveling salesman, authorized to sell on credit, make collections, and § 669 EQUITY JUBISPBUDENCE. 1340 agent must be an attorney in fact, rather than a mere at- torney at law. Wherever a solicitor or attorney at law is brought within the operation of the rule, he must be employed in some other capacity than as a mere profes- sional and legal adviser ; he must be employed to represent his client in a transaction whereby the principal is to ac- quire some rights or is to be subjected to some liabili- ties.3 § 669. Notice to Agent, Actual or Constructive. — ^If the agency exists, and the foregoing requisites are complied with so as to admit the application of the general rule, then it will operate with equal force and effect, whether the notice to the agent be actual or constructive. Actual knowledge may be brought home to the agent by the most direct evidence, or he may be chargeable with constructive notice by a lis pendens, by a registration, by recitals in title deeds, by possession of a stranger, or by circum- stances suiBSicient to put a prudent man upon an inquiry; in all such cases the effect upon the principal is the same.^ The notice with which the principal is charged is, however, § 668, 3 AH the decisions implicitly, at least, sustain this conclusion. Wherever the agent has been a solicitor or attorney at law, it wiU be seen that he has been employed in some such transaction, — ^the negotiation of a lease and giving a mortgage, the transfer of property, and the like: See Saffron etc. Soc. v. Rayner, L. R. 14 Ch. Div. 406, 409, 415, and the quotas tion therefrom ante, under § 666. § 669, 1 See Kennedy v. Green, 3 Mylne & K. 699, 719, per Lord Brougham ; Bank of United States v. Davis, 2 HiU, 451, 461. represent his principal in matters Moon Bros. Carriage Co. v. Deven- relating thereto, that there has been ish, 42 Wash. 415, 7 Ann. Cas. 649, a change in a firm, is imputed to 85 Pae. 17. the principal: Jenkins Bros. Shoe -§668, (e) In Victor v. Spaulding, Co. V. G. V. Eenfro & Co., 151 N. C. 199 Mass. 52, 127 Am. St. Eep. 472, 323, 25 L. B. A. 231, 66 S. E. 212; 84 N. E. 1016, it was held that no- Stra'ia, Gunst & Co. v. Sparrow & tice to an attorney, employed under Co., 148 N. C. 309, 62 S. E. 308. But general retainer, as to retirement of where he is not authorized to collect, a member of a firm, is not imputed and his only authority is to solicit to the principal, orders, such notice is not imputed: 1341 CONCERNING NOTICE. § 670 •| 4. constructive, since it is a presumption, and generally a conclusive presumption, of the law, and takes effect even when the principal in fact received no communication of information from his agent.^ ^ § 670. Essential Requisites — (1) When the Notice must be Received by the Agent — ^During His Actual Employ- ment. — ^Having thus stated the general rule, I shall now proceed to describe with more fullness its essential ele- ments, — the requisites which must exist in order that it may operate. In the first place, as to the time when the information constituting notice must be acquired by or given to the agent. In order that the principal may be affected with a constructive notice under this rule, the in- formation- constituting the notice must be obtained by or imparted to the agent while he is in fact acting as agent, — , while he is actually engaged in doing his principal's busi- ness, in pursuance of his authority, and in his character as agent.ia. This special requisite finds a frequent applica- § 669, 2 There can be no greater misconception of its legal meaning, and no more complete confusion of the distinctions between the two kinds of notice, than to call the notice imputed to a principal through his agent an "actual" notice : See Espin v. Pemberton, 3 De Gex & J. 547, 554. § 670, 1 SafEron etc. Soc. v. Kayner, L. R. 14 Ch. Div. 406; In re Peruvian E'y Co., L. R. 2 Ch. 617, 626; Dryden v. Frost, 3 Mylne & C. 670; Wilde V. Gibson, 1 H. L. Cas. 605, 624; Pepper v. George, 51 Ala. 190; Roach v. ■ §669, (a) That the notice to the Fed. 445, 1 L. R. A. 35; Pearce v. agent is conclusive on the principal Smith, 126 Ala. 116, 28 South. 37; and irrebuttable was directly held Vietor v. Spaulding, 199 Mass. 52, in Watson v. Sutro, 86 Cal. 500, 24 127 Am. St. Eep. 472, 84 N. E. 1016; Pac. 172, 25 Pae. 64. Taylor v. Evans, 16 Tex. Civ. App. §670, (a) This passage is quoted 409, 41 S. W. 877; Kaufifrxan v. in Wittenbrock v. Parker, 102 Cal. Eobey, 60 Tex. 30, 48 Am. Rep. 264. 93, 41 Am. St. Hep. 172, 24 L. E. A. In Whigham v. Supreme Court 197, 36 Pac. 374; cited, in Goodbar I. O. F., 51 Or. 489, 94 Pac. 968, a T. Daniel, 88 Ala. 583, 16 Am. St. medical examiner, after making his Eep. 76, 7 South. 254; Schmidt v. report and while treating the appli- Olympia Light & Power Co., 46 cant as a private patient, learned Wash. 360, 90 Pae. 212. See, also, that statements made in the appli- Chew V. Henrietta M. & S. Co., 2 cation were false. Upon the prin- Fed. 5; Satterfield v. Malone, 35 ciple stated in the text it was held § 671 EQUITY JUEISPETJDENCB. • 1342 tion in the relations subsisting between directors and offi- cers and the corporations to which they belong.^ § 671. (2) In the Same Transaction. — In the second place, in order that a principal may thus be charged with Karr, 18 Kan. 529, 26 Am. Rep. 788; Houseman v. Girard etc. Ass'n, 81 Pa. St. 256; G. W. R'y Co. v. Wheeler, 20 Mich. 419; Pringle v. Dunn,. -ST Wis. 449, 19 Am. Rep. 772; Distilled Spirits, 11 Wall. 356; Bieree v. Red Bluff Hotel Co., 31 Cal. 160; May v. Borel, 12 Cal. 91; Russell v. Sweezey, 22 Mich. 235; Hodgkins v. Montgomery Co. Ins. Co., 34 Barb. 213; Weisser V. Denison, 10 N. Y. 68, 61 Am. Dec. 731; Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478; Smith v. Denton, 42 Iowa, 48; Jones v. Bam- ford, 21 Iowa, 217; Clark v. Fuller, 39 Conn. 238; Spadone v. Manvel, 2 Daly, 263 ; N. Y. Cent. Ins. Co. v. National Protee. Ins. Co., 20 Barb. 468, 14 N. Y. 85 ; Fry v. Shehee, 55 Ga. 208. If, then, an agent has obtained information whUe acting for himself, or for a third person, or, in general, previously to the commencement of his agency, the principal is not charged with constructive notice thereof: McCormick v. Wheeler, 36 111. 114, 85 Am. Dec. 388.'» § 670, 2 It has been held in numerous American decisions that notice given to, or information acquired by, a corporation director, manager, or officer wUl not affect the corporation itself with a constructive notice, unless he w'as at the time of the giving or acquiring acting on behalf of his' corpo- ration. It is not enough that he was, at that time, clothed with the official character; he must also, in pursuance of his official functions, have been actually engaged in transacting the business of his corporation." There that the knowledge thus acquired principal, see post, § 675, note; was not imputed to the principal. Frenkel v. Hudson, 82 Ala. 158, 60 In Sturdivant Bank v. Schade, Am. Eep. 736, 2 South. 758. 195 Fed. 188, 115 C. C. A. 140, a §670, (c) Notice to Corporation bank intrusted the president of a Agent or OflScer; he must be -en- corporation pledgor with a deed of gaged in transacting the corpora- trust for purposes of record. The tion's business at the time of reeeiv- president, after consulting his coun- ing the notice. See Union Nat. Ecl, decided not to record it, and Bank v. German Ins. Co., 71 Fed. did not notify the bank. It was 473, 18 C. C. A. 203, 34 U. S. App. held that when he decided to with- 397; Curtice v. Crawford Co. Bank, hold it from record he ceased to be 110 Fed. 830, and cases cited; Mc- agent for the bank, and therefore Dermott v. Hayes, 197 Fed. 129, 116 his acts and knowledge were not C. C. A. 553; Morris v. First Nat. chargeable to it. Bank, 162 Ala. 301, 50 South. 137 § 670, (to) For the cases where (knowledge of bookkeeper of firm the agent acts in his own interest of its dissolution is not imputed ti> and against the interest of the bank of which he was assistant 1343 CONCERNING NOTICE. § 671 constructive notice, not only must the person first receiv- ing it be in fact an agent, and be actually engaged in the business of his representative employment, but the notice must be given to, or the information acquired by, the agent are two exceptions or limitations. If the information received by him is of such a nature or is acquired under such circumstances that it is a part of his express official duty to communicate what he knows or has learned to the managing body or board, then the corporation will be affected with a constructive notice. Also, if the transaction in which the information was obtained was so recent, or the information itself was so positive, direct, and strong, that it must be regarded as certainly remaining present in the mind or memory of the official, then the case may fall under the operation of a rule stated in a sujjsequent paragraph {post, § 672), and a constructive no- tice to ths corporation may follow : Fulton Bank v. N. Y. & Sharon C. Co., 4 Paige, 127; Seneca Co. Bank v. Neass, 5 Denio, 329, 337; Miller v. 111. Cent. R. E., 24 Barb. 312; North River Bank v. Aymar, 3 Hill, 262; Farm- ers' Bank v. Payne, 25 Conn. 444; U. S. Ins. Co. v. Shriver, 3 Md. Ch. 381; Gen. Ins. Co. v. U. S. Ins. Co., 10 Md. 517, 69 Am. Dec. 174; Win- chester V. B. & S. R. R., 4 Md. 231; Brown v. Bankers' etc. Tel. Co., 30 Md. 39; G. W. R'y Co. v. Wheeler, 20 Mich. 419; President etc. v. Cornen, 37 N. Y. 320; Bank of U. S. v. Davis, 2 Hill, 451; National Bank v. Norton, 1 Hill, 572; Atlantic etc. Bank v. Savery, 82 N. Y. 291, 307; La Farge Fire Ins. Co. v. Bell, 22 Barb. 54, 61. cashier); Home Ins. Co. v. North Home Sav. & State Bank v. Peoria Little Keck lee & Electric Co., 86 Agricultural & Trotting Soe., 203 Ark. 538, 23 L. E. A. (N. S.) 1201, 111. 9, 99 Am. St. Rep. 132, 69 N. E. Ill S. W. 994; Reid v. Bank of Mo- 17; Craig School Tp. v. Scott, 12i bile, 70 Ala. 199; Lothian v. Wood, Ind. 72, 24 N. E. 585 (knowledge of 55 Cal. 159 (director); Ayers v. member of masonic lodge is not Green Gold Min. Co., 116 Cal. 333, knowledge of lodge); Fairfield Sav. 48 Pac. 221 (director); Murphy v. Bank v. Chase, 72 Me. 226, 39 Am. Gumaer, 12 Colo. App. 472, 55 Pae. Eep. 319; Baltimore & 0. R. Co. v. 951 (director); Pueblo Sav. Bank v. Canton Co., 70 Md. 405, 17 Atl. 391; Richardson, 39 Colo. 319, 89 Pac. Dickinson v. Central Nat. Bank, 129 799; Arlington Brewing Co. v. Blue- Mass. 279, 37 Am. Eep. 351; Kear- thenthal & Beckart, 36 App. D. C. ney Bank v. Froman, 129 Mo. 427, 209, Ann. Cas. 1912C, 294; Ayeock 50 Am. St. Rep. 456, 31 S. W. 769; Bros. Lumber Co. v. First Nat. Canda Mfg. Co. v. Inhabitants of Bank, 54 Fla. 604, 45 South. 501; Woodbridge Tp., 58 N. J. Law (29 Taylor v. Felder, 3 Ga. App. 287, Vroom) 134, 32 Atl. 66 (superin- 59 S. E. 844; People's Bank v. Ex- .tendent of corporation acquired change Bank, 116 Ga. 820, 94 Am. knowledge as school trustee); Mer- St. Rep. 144, 43 S. E. 269; Burton v. chanty' Nat. Bank v. Clark, 139 Perry, 146 111. 71, 34 N. E. 60; N. Y. 314, 36 Am. St. Eep. 710, 34 §671 EQUITY JTTEISPRUDENCB. 1344 or attorney in tjie course of the sanie transaction which is sought to be affected by the constructive notice ; that is, in the same transaction from which the principal's rights and liabilities arise, which, it is claimed, depend upon or are modified by the constructive notice imputed to him. This is, in general, a well-settled requisite; and the grounds for it, depending upon motives of expediency, N. E. 910; BUlings v. Shaw, 209 N. T. 265, 103 N. E. 142; Jacobus v. Jamestown Mantel Co., 211 N. T. 154, 105 N. B. 210; GUkeson v. Thompson, 210 Pa. 355, 59 Atl. 1114; Frazier v. Butler Borough, 172 Pa. St. 407, 51 Am. St. Eep. 739, 23 Atl. 691 (municipal ofacer'a knowledge not obtained in his offi- cial capacity); Mathia v. Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1015; E. B. Godley Lumber Co. v. Tea- garden (Tex. Civ. App.), 135 S. W. 1109; Teagarden v. E. B. Godley Lumber Co., 105 Tex. 616, 154 S. W. 973; Eoberts v. W. H. Hughes Co., 87 Vt. 76, 83 Atl. 807; Lee v. E. F Elliott & Co., 113 Va. 618, 75 S. E. 146; Washington Nat. Bank v. Pierce, 6 Wash. 491, 36 Am. St. Eep. 174, 33 Pac. 972; First Nat. Bank of New Martinsville v. Lowther-Kaufman O. & C. Co., 66 W. Va. 505, 28 L. E. A. (N. S.) 511, 66 S. E. 713; Continental Nat. Bank V. McGeoeh, 92 Wis. 286, 66 N. W. 606. Notice acquired by the officer before his assumption of office: Brennan v. Emery-Bird-Thayer Dry Goods Co., 99 Fed. 971; Dorr v. Life Ins. Clearing Co., 71 Minn. 38, 70 Am. St. Eep. 309, 73 N. W. 635; Taylor v. Callaway, 7 Tex. Civ. App. 461, 27 S. W. 934 (acquired be- fore corporation was organized). Many cases make the distinction that private information is not no- tice to the corporation when the of- ficer who has it takes no part in the transaction which is sought to be affected with the constructive no- tice: Hatch V. Ferguson, 66 Fed. 668, 14 C. C. A. 41, 29 U. S. App. 540, and cases cited; Caseo Nat. Bank v. Clark, 139 N. Y. 307, 36 Am. St. Eep. 705, 34 N. E. 908; Bank v. Sneed, 97 Tenn. 120, 56 Am. St. Eep. 788, 34 L. E. A. 274, 36 S. W. 716; National Bank of Com- merce V. Feeney (S. D.), 70 N. W. 874; Smith v. Carmack (Tenn. Ch. App.), 64 S. W. 372; Mathis v. Prid- ham, 1 Tex., Civ. App. 58, 20 S. W. 1015; Tate v. Security Trust Co., 63 N. J. Eq. 559, 52 Atl. 313; First Nat. Bank v. Babbidge, 160 Mass. 563, 36 N. E. 462; but that if the officer, having pertinent informa- tion, personally participates on be- half of his corporation in such sub- sequent transaction, the corporation may be charged with his knowl- edge, under the principle of § 672, ■post: Louisville Tr. Co. v. Louis- ville, N. A. & C. E. Co., 75 Fed. 433, 22 C. C. A. 378; Willard v. Denise, 50 N. J. Eq. 482, 35 Am. St. Eep. 788, 26 Atl. 29. Thus, in Taylor v. FeJder, 3 Ga. App. 287, 59 S. E. 844, an officer of a bank was also a mem- ber of a, partnership. A loan was made by the bank to the firm. The question arose whether the knowl- edge of the officer was the knowl- edge of the bank. The court said: "If partner Mathews dealt in the 1345 CONCEKNINQ NOTICE. §671 were thus stated by Lord Hardwicke in an early case. A different rule, lie said, "would make purchasers' and mortgagees' titles depend altogether on the memory of their counselors and agents, and oblige them to apply to transaction with cashier Mathews, the bank would be imputable with such knowledge as the common agent possessed; but if partner Mathews, though also the agent of the bank, did not in this' transac- tion deal with himself, but with some other officer of the bank, he is to be treated as if he were an ad- verse party and no agent of the bank at all." See, also, First Nat. Bank v. Northup, 82 Kan. 638, 136 Am. St. Kep. 119, 109 Pac. 672. The above distinction is clearly illus- trated and explained in the case of Casco National Bank v. Clark, 139 N. Y. 307, 36 Am. St. Rep. 705, 34 N. E. 908. In that case a corpora- tion and a bank had a common director, W. A note was executed which appeared to be the note of cer- tain officers of the corporation, but was in fact intended to be the note of the corporation, and which was discounted by the bank. It was held that W's knowledge of the true character of the note was not im- putable to the bank, since he in no sense represented or acted for the bank in the transaction. "He was but one of the plaintiff's directors, who could only act as a board: Na- tional Bank v. Norton, 1 Hill, 572. If he knew the fact that these were not individual but corporate notes, we cannot presume that he com- municated that knowledge to the board. An officer's knowledge, de- rived as an individual, and not while acting officially for the bank, cannot operate to the prejudice of 11—85 the latter: Bank of United States v. Davis, 2 Hill, 451. [See, also, John T. Moore Planting Co. v. Morgan's Louisiana & T. E. & S. S. Co., 126 La. 840, 53 South. 22; Penfield Iny. Co. V. Bruce, 132 Mo. App. 257, 111 S. W. 888; Gregmoore Orchard Co. V. Gilmour, 159 Mo. App. 204, 140 S. W. 763.] The knowledge with which the bank as his principal would be deemed chargeable, so as to affect it, would be where, as one of the board of directors and parti- cipating in the discount of the paper, he had acted affirmatively, or fraudulently, with respect to it; as in the case of Bank v. Davis, 2 Hill, 451, by a fraudulent perversion of the bills from the object for which drawn; or as in Hoi den v. New York & Erie Bank, 72 N. Y. 286, where the president of the bank, ^ who represented it in all the trans- actions, was engaged in a fraud- ulent scheme of conversion. It was said in the latter case that the knowledge of the president, as an individual or as an executor, was not imputable to the bank merely because he was the president, but because, when it acted through him as president, in any transaction where that knowledge was material and applicable, it acted through an agent." For the cases where the officer acts in the transaction in his own interest and adversely to that . of the corporation, see post, § 675 and notes. § 671 EQUITY JUEISPBUDENCE. 1346 persons of less eminence as counsel, as not being so likely to have notice of former transactions. " ^ ^ § 671, 1 Banco de Lima v. Anglo-Peruvian Bank, L. R. 8 Ch. Div. 160, 175; Wyllie v. Pollen, 3 De Gex, J. & S. 596, 601; Lloyd v. Attwood, 3 De Gex & J. 614, 657; Finch v. Shaw, 19 Beav. 500; 5 H. L. Gas. 905; Tylee V. Webb, 6 Beav. 552; 14 Beav. 14; Fuller v. Bennett, 2 Hare, 394; War- rick V. Warrick, 3 Atk. 294; Worsley v. Earl of Scarborough, 3 Atk. 392; Hine v. Dodd, 2 Atk. 275; Lowther v. Carlton, 2 Atk. 242; Ashley v. Baillie, 2 Ves. Sr. 368; WUde v. Gibson, 1 H. L. Cas. 605, 624; Houseman v. Girard etc. Ass'n, 81 Pa. St. 256, 261; Holden v. New York and Erie Bank, 72 N. Y. 286; Howard Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am. Dec. 478; Weisser v. Denison, 10 N. Y. 68, 61 Am. Dec. 731; Bierce v. Red Bluff Hotel Co., 31 Cal. 160; North River Bank v. Aymar, 3 Hill, 262; RusseU v. Sweezey, 22 Mich. 235; Smith v. Denton, 42 Iowa, 48; Blumenthal v. Brainerd, 38 Vt. 402, 410, 91 Am. Dec. 349; Roach v. Karr, 18 Kan. 529, 26 Am. Rep. 788; Allen v. Poole, 54 Miss. 323; Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772; McCormick v. Wheeler, 36 111. 114, 85 Am. Dec. 388; Bracken v. Miller, 4 Watts & S. 102; Hood v. Fahnestock, 8 Watts, 489 ; Lawrence v. Tucker, 7 Greenl. 195 ; but see, per contra, Hart v. Farm- ers' etc. Bank, 33 Vt. 252; Abell v. Howe, 43 Vt. 403. The same requisite applies, as has been shown in a previous paragraph, when the notice is sought to be charged upon a party personally, and not through an agent: See Hamilton v. Royse, 2 Schoales & L. 315, 327, per Lord Redesdale. § 671, (a) The text is quoted in corporation not present in mind of Day V. Exchange Bank (Ky.), 78 director at time of transaction); S. W. 132. This paragraph is cited Cooke v. Mesmer, 164 Cal. 332, 128 in Schmidt v. Olympia Light & Pae. 917; Otis v. Zeiss (Cal.), 165 Power Co., 46 Wash. 360, 90 Pae. Pac. 524; St. Paul Fire & M. Ins. _ 212. See, also, Chew v. Henrietta Co. v. Parsons, 47 Minn. 352, 50 M. & S. Co., 2 Fed. 5; Satterfield v. N. W. 240; Penfield Inv. Co. v. Malone, 35 Fed. 445, 1 L. E. A. 35; Bruce, 132 Mo. App.'257, 111 S. W. Guaranty Trust Co. v. Koehler, 195 888; Spielman v. Kliest, 36 N. J. Fed. 669, 115 C. C. A. 475; Cassimus Eq. 199; Slattery v. Sehwannecke, V. Scottish Union & Nat'l Ins. Co., 118 N. Y. 548, 23 N. E. 922; Con- 135 Ala. 256, 33 South. 163; Good- stant v. University of Eochester, bar V. Daniel, 88 Ala. 583, 16 Am. Ill N, T. 604, 7 Am. St. Kep. 769, St. Eep. 76, 7 South. 254, citing 2 L. R. A. 734, 19 N. E. 631 (a lead- this section of the text; McCormick ing case); Denton v. Ontario Co. V. Joseph, 83 Ala. 401, 3 South. 796; Nat. Bank, 150 N. T. 126, 44 N. E. Chapman v. Hughes (Cal.), 58 Pac. 781; Steinmeyer v. Steinmeyer, 5> 298, 60 Pac. 974; Kiefhaber Lumber S. C. 9, 33 S. E. 15; Wittenbrock v. Co. V. Newport Lumber Co., 15 Cal. Parker, 102 Cal. 93, 102, 41 Am. St. App. 37, 113 Pac. 691 (knowledge Bep. 172, 24 L. R. A. 197, 36 Pae. '• previously acquired as promoter of 374 (knowledge acquired by one of a 1347 CONCERNING NOTICE. 672 §672. Limitation — Prior Transaction. — The foregoing requisite, general as it is in its application, is subject to an important and well-settled limitation, equally depending upon motives of expediency. Where the transaction in question closely follows and is intimately connected with a prior transaction in which the agent was also engaged, and in which he acquired material information, or where it is clear from the evidence that the information obtained by the agent in a former transaction was so precise and defi- nite that it is or must be present to his mind and memory while engaged in the second transaction, then the fore- going requisite becomes inapplicable; the notice given to or information acquired by the agent in the former trans- a firm of attorneys acting for client A does not bind client B, for whom another member of the firm acted in a subsequent transaction, without having shared the knowledge ac- quired hj his partner) ; Kirklin v. Atlas S. & L. Assn. (Tenn. Ch. App.), 60 S. W. 149-; Neilson v. Weber, 107 Tenn. 161, 64 S. W. 161; Irvine v. Grady, 85 Tex. 120, 19 S. W. 1028; Taylor v. Taylor, 88 Tex. 47, 29 S. W. 1057; Queen Ins. Co. v. May (Tex. Civ. App.), 35 S. W. 829; Cooper V. Ford, 29 Tex. Civ. App. 253, 69 S. W. 487; Kaufeman v. Eobey, 60 Tex. 30, 48 Am. Eep. 264; Lane v. De Bode, 29 Tex. Civ. App. 602, 69 S. W. 437; Johnson v. Valido Marble Co., 64 Vt. 337, 25 Atl. 441; Pacific Mfg. Co. V. Brown, 8 Wash. 347, 36 Pac. 273. A person taking a mortgage is not charged with no- tice of prior unrecorded mortgage on the same property which, as at- torney, he had drawn up nine years before in the regular course of his business, and there is no presump- tion that he had the prior mortgage in mind: Goodwin v. Bean, 50 Conn. 517. It has been said that "the knowl- edge of the agent is chargeable upon his principal whenever the principal, if acting for himself, would have received notice of the matters known to the agent": Geyer V. Geyer, 75 N. J. Eq. 124, 78 Atl. 449. The English Conveyancing Act, 1882, "introduced very considerable modifications" in the law of notice to agent: Taylor v. London and County Banking Co., [1901] 2 Ch. 231, 259. By sec. 3, subs. 1, . . . "a purchaser shall not be prejudici- ally affected by notice of any in- strument, fact, or thing, unless . . . (II) In the same transaction in respect to which a question of no- tice to the purchaser arises, it has come to the knowledge of his coun- sel, as such, or of his solicitor, or other agent, as such, or would have come to the knowledge of his soli- citor, or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent." §672 EQUITY JUEISPEUDENCE. 1348 action operates as constructive notice to the principal in the second transaction, although that principal was a com- plete stranger to and wholly unconnected with the prior proceeding or business.^ * The explanation of this special § 672, 1 Several of the ablest English judges have, in recent cases, ex- pressed a decided opinion against the rule itself, and while considering themselves bound by it, so far as it is settled, have wished that it should § 672, (a) The text is quoted in Lea v. Iron Belt Mercantile Co., 147 Ala. 421, 119 Am. St. Rep. 93, 8 L. B. a; (N. S.) 279, 42 South. 415; Schmidt v. Olympia Light & Power Co., 46 Wash. 360, 90 Pac. 212; Gas- kill V. Northern Assurance Co., 73 Wash. 668, 132 Pac. 643; cited in- Goodbar v. Daniel, 88 Ala. 583, 16 Am. St. Bep. 76, 7 South. 254; Hall & Brown Wood Working Mach. Co. V. Haley Furniture & Mfg. Co., 174 Ala. 190, 56 South. 726; Otis v Zeiss (Cal.), 165 Jfac. 524; Snyder v. Partridge, 138 111. 173, 32 Am. St. Hep. 130, 29 N. E. 851. See, also. Brown v. Cranberry Iron & Coal M. Co., 72 Fed. 96, 18 C. C. A. 444, 25 XT. S. App. 679; Campbell v. First Nat. Bank, 22 Colo. 177, 43 Pac. 1007; Christie v. Sherwood, 113 Ga. 526, 45 Pac. 820; McClelland v. Saul, 113 Iowa, 208, 86 Am. St. Kep. 370, 84 N. W. 1034 (knowledge acquired a reasonable time before the agency began) ; Westerman v. Evans, 1 Kan. App. 1, 41 Pae. 675; Hess v. Conway, 92 Kan. 787, 142 Pac. 253; Fairfield. Sav. Bank v. Chase, 72 Me. 226, 39 Am. Rep. 319; Sehwind v. Boyce, 94 Md. 510, 51 Atl. 45; Wilson v. Min- nesota, etc., Ins. Assn., 36 Minn. 112, 1 Am. St. Rep. 659, 30 N. W. 401; Lebanon Sav. Bank v. Hollen- beck, 29 Minn. 322, 13 N. W. 145; Equitable Sureties Co. v. Sheppard, 78 Miss. 217, 28 South. 842 (citing this section of the text. Courts will presume forgetfulness unless occurrence was so recent as to make it incredible); Spielman v. Kliest, 36 N. J. Eq. 199; Slattery v. Schwanneeke, 118 N. T. 548, 23 N. E. 922 (dictum); Cragie v. Hadley, 99 N. Y. 131, 52 Am. Rep. 9 (knowl- edge of bank president) ; Constant V. University of Rochester, 111 N. Y. 604, 7 Am. St. Rep. 769, 19 N. E. 631 (a leading case); Red River Val. Land & Inv. Co. v. Smith, 7 N. D. 236, 74 N. W. 194; Gregg v. Baldwin, 9 N. D. 515, 84 N. W. 373 ; Pennoyer v. Willis, 26 Or. 1, 46 Am. St. Rep. 594, 36 Pac. 568; Oliver v. Grande Ronde Grain Co., 72 Or. 46, 142 Pac. 541 (dictum); Taylor v. Evans (Tex. Civ. App.), 29 S. W. 172; Foots v. Utah Commercial & Sav. Bank, 17 Utah, 85, 54 Pae. 104; Deering v. Holcomb, 26 Wash. 588-, 67 Pac. 240 (citing this section of the text) ; McDonald v. Fire Assn. of Philadelphia, 93 Wis. 348, 67 N. W. 719; Brothers v. Bank of Kau- kauna, 84 Wis. 381, 36 Am. St. Itep. 932, 54 N. W. 786 (knowledge which the agent had acquired so recently that it is incredible that he shouM have forgotten it); in this case the cashier of a bank had been present at the execution of a mortgage and promissory note by one whose visible condition at the time was such as to put a reasonably' observ- ant person upon inquiry as td his 1349 CONCERSriNG NOTICE. § 672 rule is plainly to be found in the notion that the informa- tion obtained by the agent in his former employment was of such a nature, so definite and certain, that it amounted to actual knowledge; and as knowledge it is retained by be abrogated by the legislature :* Fuller v. Bennett, 2 Hare, 394 ; Atterbury V. Wallis, 8 De Gex, M. & G. 454; Hargreaves v. Eothwell, 1 Keen, 154, 159; Mountford v. Scott, Turn. & R. 274; Nixon v. Hamilton, 2 Dru. & War. 364; Winter v. Lord Anson, 3 Russ. 488, 493; Perkins v. Bradley, 1 Hare,, 219; Lenehan v. MeCabe, 2 Ir. Eq. 342; Majoribanks v. Hovenden, 6 Ir. Eq. 238; The Distilled Spirits, 11 Wall. 356; Patten v. Ins. Co., 40 N. H. 375; Hovey v. Blanchard, 13 N. H. 145; Dunlap v. Wilson, 32 111. 517; Williams V. Tatnall, 29 111. 553; Pritchett v. Sessions, 10 Rich. L. 293; Wiley v. Knight, 27 Ala. 336; Abell v. Howe, 43 Vt. 403; Hart v. Farmers' & M. Bank, 33 Vt. 252; Murray v. Ballou, 1 Johns. Ch. 566, 574; Ames v. N. Y. Union Ins. Co., 14 N. Y. 253; Holden v. N. Y. & Erie Bank, 72 N. Y. 286, 292; Tagg v. Tenn. Nat. Bank, 9 Heisk. 479. In Fuller v. Bennett, 2 Hare, 394, Wigram, V. C, gives a very full and instructive discussion of this spe- cial rule, explaining its grounds, and exhibiting its necessary limitations. In the case of Distilled Spirits, 11 Wall. 356, the rule is approved and adopted by the supreme court of the United States, and it is stated by capacity to contract, and imme- tice is never sufficient to charge the diately after the execution of the principal with constructive notice, instruments the bank acquired pos- A distinction is made, however, be- session of them as collateral seeur- tween actual and .constructive no- ity for the debt of a third party: tice. "It is the duty of an agent to held, that the bank was not a hona inform his principal of every mate- ■fide purchaser of those instruments. rial fact within his knowledge, no Where the agent is the general matter when acquired, bearing upon manager and principal stockholder the subject matter of his agency, of the corporation — its alter ego — which may affect the interests of knowledge acquired by such man- his principal with respect thereto; ager prior to the organizatipn of and it will be presumed that he has the corporation is imputed to it: discharged this duty . . . But this Lea V. Iron Belt Mercantile Co., 147 presumption like others of a similar Ala. 421, 119 Am. St. Kep. 93, 8 nature, is disputable and not con- L. E. A. (N. S.) 279, 42 South. 415. elusive ... If the jury find that §672, (b) This sentence of the the knowledge was present in the note is quoted in Hall & Brown agent's mind during the execution Wood Working Maeh. Co. v. Haley of the agency, then they must find Furniture & Mfg. Co., 174 Ala. 190, as matter of law that the principal 56 South. 726. It was held that in was duly informed, unless they are Alabama the notice, must be re- reasonably satisfied to the contrary ceived by the agent during his em- from pther evidence before them." ployment; and that antecedent no- § 672 EQUITY JUEISPEUDENCB. 1350 him and carried with. him. into the subsequent business which he transacts on behalf of his new principal. While this particular rule is settled by a strong array of authori- ties, the courts show a plain determination not to extend it, but to keep it confined within narrow and necessary Bradley, J., in the following summary: "In England, the doctrine seems now to he estahlished, that if the agent, at the time of effecting a purchase, has knowledge of any prior lien, trust, or fraud affecting the property, no matter when he acquired such knowledge, his principal is affected thereby. If he acquire the knowledge when he effects the purchase, no question can arise as to his having it at the time; if he acquired previous to the pur- chase, the presumption that he still retains it, and has it present to his mind, will depend on the lapse of time and other circumstances. Knowledge com- municated to the principal himself he is bound to recollect; but he is not bound by knowledge communicated to his agent, unless it is present to the agent's mind at the time of effecting the purchase. Clear and satisfactory proof that it was so present seems to be the only restriction required by the English rule as now understood. With the qualification that the agent is at liberty to communicate his knowledge to his principal, it appears to us to be a sound view of the subject. The general rule that the principal is bound by the agent's knowledge is based on the principle of law that it is the agent's duty to communicate to his principal the knowledge which he has respecting the subject-matter of negotiation, and the presumption that he will perform that duty. When it is not the agent's duty to communicate such knowledge, but it would be unlawful for him to do so, — as, for ex- ample, when it has been acquired confidentially, as attorney for a former client, in a prior transaction, — the reason of the rule ceases; and in such a case an agent would not be expected to do that which would involve the betrayal of professional confidence, and his principal ought not to be bound by the agent's secret and confidential information." A very important modification or addition to the rule, which has a special application to agents of corporations, was laid down by Folger, J.j in Holden v. New York and Erie Bank, 72 N. Y. 286, 292. The view which he takes cannot be better explained than by quoting his own language : "Notice must have come to the agent, it is said, in the course of the very transaction, or so near before it that the agent must be presvimed to recollect it. This limitation, however, applies more particularly to the case of an agent whose employment is short-lived, so that the principal shall not be affected by knowledge that came to the agent before his employment began, nor after it was terminated. But where the agency is continuous, and concerned with a business made up of a long series of transactions of a like nature, of the same general character, it wUl be held that knowledge acquired as agent in that business. 1351 CONCEBNIKG NOTICE. § 672 limits.^' The two essential requisites of the general rule, together with the foregoing limitation, are the results or phases of one legal conception. In order that the informa- tion obtained by an agent may be a constructive notice to his principal in any given transaction, it must be present to the agent's mind and memory while he is engaged in the transaction which is sought to be affected. This is uni- versally true. If the agent acquired the information while acting for his principal, and while engaged in that very in any one or more of the transactions making up from time to time the whole business of the principal, is notice to the agent and to the principal, which will affect the latter in any other of those transactions in which that agent is engaged, in which that knowledge is material. If the principal in this case, the New York and Erie Bank, had been insolvent, say on the first day of January in a given year, and that fact had then been known to its president, Ganson, and the fact and knowledge of it were material in a transaction of the bank, taking place through him on the first day of the succeeding April, the knowledge acquired by him on- the first-named day was knowledge with which the bank was chargeable on the last-named day ; and so it would have been with knowledge of any fact not so intimately con- nected with the condition of the bank, — the principal, — but relating to the character and position of dealers with it: Porter v. Bank of Rutland, 19 Vt. 410. We doubt not that the knowledge of its president, Ganson, was chargeable to the bank, so far as that knowledge was material in the trans- action now under consideration. It mattered not when, during the course of his prior ofiGlcial management of the affairs of the bank, he acquired the knowledge; it was knowledge acquired in its business, and applicable to any subsequent transaction in which it was material. ... In Bank of United States v. Davis, 2 Hill, 451, the director of the plaintiff carried into the meeting of the board of directors knowledge which he had before acquired as an individual, yet the bank was charged with that knowledge. So in Fulton Bank v. New York and Sharon C. Co., 4 Paige, 127, though it was held that the plaintiff was not chargeable with notice of facts which came to the knowledge of its president while not acting as its agent, yet it was also said that if afterwards it became his duty to act upon that knowl- edge in the business of the bank, his principal would be chai-geable with notice of the facts of which he had acquired the knowledge while acting in another capacity than as agent of the bank." The decision in Tagg v. Tenn. Nat. Bank, 9 Heisk. 479, is to the same effect. §672, (e) Quoted in Wittenbroek Eep. 172, 24 L. E. A. 197, 36 Pae. V. Parker, 102 Cal. 93, 41 Am. St. 374. § 673 EQUITY JURISPRUDENCE. 1352 same trcmsaction, then it is conclusively presumed that he retains the information present to his mind and in his memory ; a failure of memory on his part cannot be shown, and the principal is charged with the constructive notice."^ If the agent acquired the information in a former and independent transaction, then it is prima fade presumed that he does not retain it present to his mind and memory while engaged in the subsequent transaction in behalf of a principal whom it is sought to charge with notice ; « but this presumption may be overcome by evidence. If, there- fore, it be clearly shown by the evidence that the agent did in fact retain the previously acquired information present to his mind and memory while engaged in the sub- sequent transaction on behalf of his principal, then all the essential elements of the general rule are existing, and the principal is thereby charged with constructive notice. This is, as it seems to me, the true rationale of the doctrine in all its phases and applications, and is fairly deducible from the decided cases. § 673. (3) The Information Material, and Such as the Agent is Bound to Communicate. — ^A third requisite is, that the information acquired by the agent must be material to the transaction in which the principal's rights are to be affected by a notice, and it must be something which it is the duty of the agent, by virtue of his fiduciary and repre- sentative relation, to communicate to his principal, i It § 673, 1 Wyllie v. Pollen, 3 De Gex, J. & S. 596, 601; Rolland v. Hart, L. R. 6 Ch. 678, 681, 682; The Distilled Spirits, 11 Wall. 356, per Brad- § 672, (d) See Watson v. Sutro, emphatically that the burden of 86 Cal. 500, 24 Pae. 172, 25 Pae. 64. proof rests on the party alleging § 672, (e) The text is cited to this notice to show "clearly and beyond effect in Equitable Sureties Co. v. question" that the information was Sheppard, 78 Miss. 217, 28 South. present in the agent's mind while 842. See, especially, Constant v. engaged in the subsequent trans- University of Rochester, 111 N. Y. action: Wittenbrock v. Parker, 102 604, 7 Am. St. Rep. 769, 2 L. K. A. Cal. 93, 41 Am. St. Eep. 172, 29 Ii. 734, 19 N. E. 631, holding very R. A. 197, 36 Pae. 374. 1353 CONCERNING NOTICE. § 673 is not essential, however, that the agent should in-fact have communicated the information to his principal ; on the con- trary, the general rule of constructive notice between agent and principal depends upon a legal presumption — abso- lutely conclusive except in two special instances — ^that the information received by the agent was communicated to his principal. The powerful motives of policy inhere in ley, J.; Roach v. Karr, 18 Kan. 529, 26 Am. Rep. 788; Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772; Jones v. Bamford, 21 Iowa, 217; May v. Borel, 12 Cal. 91; Fry v. Shehee, 55 Ga. 208. In Wyllie v. Pollen, 3 De Gex, J. & S. 596, Lord Westbury said: "The agent's knowledge must have been of something material to the particular transaction, and some- thing which it was the agent's duty to communicate to his principal; the whole doctrine of constructive notice resting on the ground of the existence of such a duty on the part of the agent." In EoUand v. Hart, L. R. 6 Ch. 678, Lord Hatherley tersely sums up both branches of the doctrine stated in the text : "It has been held over and over again that notice to a solicitor of a transaction, and about a matter as to which it is part of his duty to in- form himself, is notice to his client. ... It cannot be left to the possibility or impossibility of the man who seeks to affect you with notice being able to prove that your solicitor did his duty in communicating to you that which, according to the terms of your employment of him, was the very thing which you employed him to ascertain." The duty of the agent to communi- cate the information to his principal is a most essential element of the doc- trine.' If the information of the agent was acquired in a previous emplo3rment as attorney for another person, and was private and confi- dential in its nature, a moral and legal obligation would rest upon him not to disclose it ; he would be under no duty to communicate the knowledge to a subsequent client, and consequently such client could not be charged with constructive notice. See the remarks of Bradley, J., in The, Distilled Spirits, 11 Wall. 356, quoted in the note under the last preceding para- graph."' § 673, (a) Where communication Wis. 153, 57 Am. St. Kep. 899, 66 of the information to the .prineipal N. W. 518, and cases cited (vendee ■would be a breach of confidence: employed vendor's attorney; not See Downer v. Porter (Ky.), 76 S. charged with knowledge, previously W. 135; Akers v. Rowan, 33 S. C. acquired by the attorney in the 451, 10 L. B. A. 705, 12 S. E. 165; vendor's employment, of a defect in Melms V. Pabst Brewing Co., 93 the latter's title). § 674 EQUITY JTJEISPKTJDENCE. 1354 this very presumption.^ b Even when an agent's failure to communicate is fraudulent, provided the fraud consists merely in such concealment and failure, the conclusive pre- sumption still arises, as will be more fully shown in the following paragraphs. § 674. Exceptions — Presumption, When not Conclusive. There are, however, two special exceptions to the foregoing doctrine, two special conditions in which the presumption may be rebutted, in which it may be shown that the in- formation was not communicated by the agent to his prin- cipal, and in which, as a consequence, the principal is not charged with a constructive notice. Both of these excep- tions rest upon a foundation of fraud. In the first place, when an attorney or agent acting for both the parties to a transaction, , A and B, — ^for both the vendor and vendee, mortgagor and mortgagee, — has or receives information of a-ny material fact, such as the existence of a document, and with the consent of one party, A, conceals his knowl- edge from the other 'party, B, then B will not be charged with constructive notice of such fact. The conduct of A in consenting to the agent's concealment is clearly a fraud § 673, 2 Bradley v. Riches, L. R. 9 Ch. Div. 189, 196; Rolland v. Hart, L. R. 6 Ch. 678, 681, 682; Boursot v. Savage, L. R. 2 Eq. 134, 142; Hewitt V. Loosemore, 9 Hare, 449, 455; Williamson v. Brown, 15 N. Y. 354; Suit V. Woodhall, 113 Mass. 391; Owens v. Roberts, 36 Wis. 258. lu the recent case of Bradley v. Riches, L. R. 9 Ch. Div. 189, the rule is stated in the following clear and decided language: "The solicitor must he assumed to have communicated the facts [i. e., facts of which he had received informa- tion] to his client, and the knowledge of the agent is, to use the language of Lord Chelmsford in Espin v. Pemberton, 3 De Gex & J. 547, the im- ported knowledge of the client. It appears to me to be clear that that pre- sumption or imputation is a thing which the client cannot be allowed to rebut. If it could be rebutted, it was amply rebutted in Le Neve v. Le Neve, Amb. 436; 2 Lead. Cas. Eq., 4th Am. ed., 109. If it could be rebutted, the language of Lord Hatherley in Rolland v. Hart, L. R. 6 Ch. 678, could not he upheld." (See this language quoted in last preceding note.) § 673, (b) Wittcnbrock v. Parker, 102 Cal. 93, 101, 41 Am. St. Kep. 172, 24 I.. S. A. 197, 36 Pac. 374. 1355 CONCERNING NOTICE. § 675 upon B; lie is estopped from afterwards insisting that B received notice, and thereby taking advantage of his own wrong.i § 675. Agent's Fraud. — The second exception is much more important and of far wider application. It is now settled by a series of decisions possessing the highest au- thority, that when an agent or attorney has, in the course of his employment, been guilty of an actual fraud con- trived and carried out for his own benefit, by which he intended to defraud and did defraud his own principal or client, as well as perhaps the other party, and the very perpetration of- such fraud involved the necessity of his concealing the facts from his own client, then, under such circumstances, the principal is not charged with construc- tive notice of facts known by the attorney and thus fraudu- lently concealed.* In other words, if in the course of the same transaction in which he is employed the agent com- mits an independent fraud for his own benefit, and design- edly against his principal, and it is essential to the very existence or possibility of such fraud that he should con- ceal the real facts from his principal, then the ordinary presumption of a communication from the agent to his principal fails ; on the contrary, a presumption arises that no communication was made, and consequently the prin- cipal is not affected with constructive notice.i^ The § 674, 1 Sharpe v. Foy, L. R. 4 Ch. 35, 40, 41; Hewitt v. Loosemore, 9 Hare, 449, 455, per Turner, V. C. § 675, 1 Cave v. Cave, L. R. 15 Ch. Div. 639, 643; In re European Bank, L. R. 5 Ch. 358, 361, 362; Rolland v. Hart, L. R. 6 Ch. 678, 682; Waldy V. Gray, L. R. 20 Eq. 238, 251; Thompson v. Cartwright, 2 De Gex, J. & S, ].0; 33 Beav. 178; Frail v. Ellis, 16 Beav. 350; Hiorns v. Holtom, 16 Beav. § 675, (a) This portion of the text 72 Fed. 470, 38 U. S. App. 254, 18 is quoted with approval in Lilly v. C. G. A. 644; in Henry v. Allen, 151 Hamilton Bank, 178 Fed. 53, 29 N. Y. 1, 36 L. R. A. 658, 45 N. E. L. R. A. (N. S.) 558, 102 C. C. A. 1. 335, citing many cases; in Benedict § 675, (b) The text is quoted in v. Arnoux, 154 N. Y. 715, 49 N. E. American Surety Co. v. Pauly, 170 326: in Alexander Eceles & Co. v. TJ. S. 133, 18 Sup, Ct. 552, affirming Louisville & N. E. Co., 198 Fed. 898: §675 EQUITY JTJBISPKUDBNCE. 1356 courts have carefully confined the operation of this excep- tion to the condition described where a presumption neces- 259; Greenslade v. Dare, 20 Beav. 284, 291; Neesom v. Clarksou, 2 Hare, 163; Hewitt V. Loosemore, 9 Hare, 449, 455; Ogilvie v. Jeaffreson, 2 Giff. 353; Eobinson v. Briggs, 1 Smale & G. 188; Spencer v. Topham, 2 Jur., N. S., 865; Jones v. Smith, 1 Phil. Ch.- 244, 256; Kennedy v. Green, 3 Mylne & K. 699; Fulton Bank v. N. Y. & Sharon C. Co., 4 Paige, 127; Barnes v. Trenton Gas Co., 27 N. J. Eq. 33; McCormick v. Wheeler, 36 Thomson-Houston Electric Co. v. Capitol Electric Co., 56 Fed. 849; Baker v. Berry Hill Mineral Springs Co., 112 Va. 280, L. B. A. 1917F, 303, 71 S. E. 626; and cited in Ger- mania Safety Vault & Tr. Co. v. Driskell, 23 Ky. Law Kep. 2050, 66 S. W. 610; Brookhouse v. Union Publishing Co., 73 N. H. 368, 111 Am. St. Bep. 623, 6 Ann. Cas. 675, 2 L. R. A. (N. S.) 993, 62 Atl. 219; Campbell v. Perth Amboy Mut. L. H. & B. Ass'n, 76 N. J. Eq. 347, 74 Atl. 144; Lockhart v. Washington Gold & Silver Mining Co., 16 N. M. 223, 117 Pac. 838. See, also, Gun- ster V. Scranton Ilium., H. & P. Co., 181 Pa. St. 327, 59 Am. St. Rep. 650, 37 Atl. 550, a valuable case, review- ing a great number of authorities: Thompson-Houston Elect. Co. v. Capitol Elect. Co., 65 Fed. 341, 12 C. C. A. 643; Hart v. Beer, 74 Fed. 592; Findley v. Cowles, 93 Iowa, 389, 61 N. W. 998; Caffee v. Berk- ley, 141 Iowa, 344, 118 N. W. 267; Wyeth V. Eenz-Bowles Co., 23 Ky. Law Eep. 2338, 66 S. W. 825; Davis V. Boone Co. Deposit Bank (Ky.), 80 S. W, 161; Innerarity v. Merchants' Nat. Bank, 139 Mass. 332, 52 Am. Eep. 710, 1 N. E. 282 (a leading and frequently cited case); Allen v. South Boston R. E. Co., 150 Mass.. 200, 15 Am. St. Bep. 185, 5 L. E. A. 716, 22 N. E. 917; Produce Exeh. Tr. Co. v. Bieberbach, 176 Mass. 577, 58 N. E. 162; Shep- ard & Morse Lumber Co. v. Eldridge, 171 Mass. 516, 68 Am. St. Eep. 446, 51 N. E. 9; Ft. Dearborn Nat. Bank V. Seymour, 71 Minn. 81, 73 N. W. 724; Benton v. Minneapolis Tailor- ing & Mfg. Co., 73 Minn. 498, 76 N. W. 265; Smith v. Boyd, 162 Mo. 146, 62 S. W. 439; Southern Comm. Sav. Bank v. Slattery's Adm'r, 166 Mo. 620, 66 S. W. 1066; Houghton v. Todd, 58 Neb. 360, 78 N. W. 634; Graham v. Orange Co. Nat. Bank, 59 N. J. L. 225, 35 Atl. 1053; Sproul V. Standard Plate Glass Co., 201 Pa. St. 103, 50 Atl. 1003; United Secur- ity Life Ins. & Tr. Co. v. Central Nat. Bank, 185 Pa. St. 586, 40 Atl. 97, 42 Wkly. Notes Cas. 145; Knob- eloch v. Germania Sav. Bank, 50 S. C. 259, 27 S. E. 962; Smith v. Mer- cantile Bank, 132 Tenn. 147, 177 S. W. 72 (no room for the presumption against disclosure in case where the agent is the sole representative of the principal in the transaction; principal in such ease chargeable with notice); People's Bldg., L. & S. Ass'n v. Dailey (Tex. Civ. App.), 42 S. W. 364; Scripture v. Scottish-Am. Mtg. Co. (Tex. Civ. App.), 49 S. W. 644; Campbell v. Crowley (Tex. Civ. App.), 56 S. W. 373; Cooper v. Ford, 29 Tex. Civ. App. 253, 69 S. W. 487; Jungk V. Eeed, 12 Utah, 196, 42 Pac. 292; First Nat. Bank v. Briggs' Assignee, 70 Vt. 594, 41 Atl. 580; Cole V. Getzinger, 96 Wis. 559, 71 N. W. 75; Speiser v. Phoenix Mut. 1357 CONCERNING NOTICE. §675 sarily arises that the agent did not disclose the real facts to his principal, because he was committing such an inde- Hl. 114, 85 Am. Dec. 388; Winchester v. Susquehanna E. R., 4 Md. 231 j Hope Tire Ins. Co. v. Cambreling, 1 Hun, 493. In several of these cases the attorney was employed for both parties to the transaction, but this fact does not seem to be essential., Kennedy v. Green, 3 Mylne & K. 699, is the leading ease in which this doctrine was first regularly formulated, by Lord Brougham. In RoUand v. Hart, L. R. 6 Ch. 678, Lord Hatherley Life Ins. Co. (Wis.), 97 N. W. 207. Certain expressions in First Na- tional Bank v. Allen, 100 Ala. 476, 46 Am. St. Eep. 80, 27 L. R. A. 426, 14 South. 335, appear to ignore the rule. It was there held that a bank depositor who intrusts the duty of examining vouchers to a clerk who has forged his employer's name on cheeks is charged with the clerk's knowledge of the forgery. See, also, Dana v. National Bank of the Republic, 132 Mass. 156. Contra, that the depositor in such ease is not charged with notice, see cases collected in note, 27 L. B. A. 429, 430; Slipman v. Bank of the State, 126 N. Y. 318, 12 L. R. A. 791, 27 N. E. 371; Weisser v. Denison, 10 N. Y. 68, 61 Am. Bee. 731; Welsh v. German-American Bank, 73 N. Y. 424, 29 Am. Rep. 175; Hardy v. Chesapeake Bank, 51 Md. 562, 34 Am. Rep. 325; Kenneth Inv. Co. v. National Bank of the Eepublie (Mo.), 70 S. W. 173. In First National Bank of Rich- mond v. Richmond Electric Co., 106 Va. 347, 117 Am. St. Rep. 1014, 7 L. R. A. (N. S.) 744, 56 S. E. 152, an employee, who had forged cheeks, was given the duty of checking up the returned vouchers. The court said: "In the commission of a for- gery the employee is not the agent of his principal, and his knowledge cannot be imputed to the principal. But after the forged checks have been paid and returned to the de- positor as vouchers, with the bank account written up and balanced according to the usual business methods, if the depositor assigns the duty of examining such vouch- ers and account to this same clerk, who has had an opportunity of com- mitting a fraud and has done so, then such employee in the discharge of this duty is the agent of the de- positor, and such depositor is charged with his agent's knowledge of the fraud." Cases where the .agent's fraud was committed on behalf of a third party: Western Mortg. & Inv. Co. v. Ganzer, 63 Fed. 647, 11 C. C. A. 371, 23 IT. 8. App. 608, and cases cited: Hudson V. Randolph, 66 Fed. 216, 13 C. C. A. 402, 23 U. S. App. 681; Waite V. City of Santa Cruz, 89 Fed. 619 (purchaser's agent receives a share of the seller's profits; his knowledge of defects in the thing sold not imputed to the purchaser) ; Hadden v. Dooley, 92 Fed. 274, 34 C. C. A. 338," reversing 84 Fed. 80; School Dist. of City of Sedalia v. De Weese, 100 Fed. 705; Scotch Lumber Co. v. Sage, 132 Ala. 598, 90 Am. St. Rep. 932, 32 South. 607 (purchaser's agent secretly acting for seller) ; Hickman v. Green, 123 Mo. 165, 29 L. R. A. 39, 22 S. W. 455, 27 S. W. 440, and cases cited. Persons Colluding With Agents cannot Claim TIia,t Agent's Knowl- §675 EQUITY JUKISPBtrDENCB. 1358 pendent fraud that concealment was essential to its per- petration; it has never been extended beyond these cir- said : "It must be made out that distinct fraud was intended in the very trans- action, so as to make it necessary for the solicitor to conceal the facts from his client, in order to defraud him." In the very recent ease of Cave v. Cave, L. R. 15 Ch. Div. 639, the court, having all the decisions before it, thus sums up the doctrine : "There is undoubtedly an exception to the construc- tion or imputation of notice from the agent to the principal, that excep- edge is Imputed to Principal. — "If a person colludes with an agent to cheat the principal, the latter is not responsible for the acts or knowledge of the agent. The rule which charges the principal with what the agent knows is for the protection of innocent third persons, and not those who use the agent to further their own frauds on the principal": National Life Ins. Co. v. Minch, 53 N. Y. 144. See, also, Elliott v. Knights of the Modern Maccabees, 46 Wash. 320, 13 L. B. A. (N. S.) 856, 89 Pac. 929 (conspiracy to mis- state age of applicant for life insur- ance). "The doctrine of construc- tive notice, when properly limited, is a useful one, but to apply it to a case where the parties relying upon the doctrine are the agents them- selves and others who had expressly agreed that the facts in possession of the agents should not be com- municated to the principal would make it an instrument of fraud": Traders & Truckers' Bank v. Black, 108 Va. 59, 60 S. E. 743. Agent Acting tn His Own Interest, In General. — The same presumption that the agent's information is not communicated to his principal has been held in very many cases to arise, independently of any question of fraud, whenever the agent is dealing with the principal in his own interest, and adversely to the interest of the principal. The ap- plication of this special rule to offi- cers and agents of corporations is .very frequent. See First Nat. Bank V. Tompkins, 57 Fed. 20, 6 C. C. A. 237 (bank acquiring title from its president) ; Hatch v. Ferguson, 66 Fed. 668, 14 C. C. A. 41, 29 U. S. App. 540; Louisville Tr. Co. v. Louisville, N. A. & C. E. Co., 75 Fed. 433, 22 C. C. A. 378; Niblack v. Cosier, 80 Fed. 596 (C. C. A.), af- firming 74 Fed. 1000 (officer not shown to have been acting ad- versely) ; Whittle v. Vanderbilt M. & M. Co., 83 iPed. 48, and cases cited; Holm v. Atlas Nat. Bank, 84 Fed. 119, 28 C. C. A. 297; Pine Mt. Iron & Coal Co. v. Bailey, 94 Fed. 258, 36 C. C. A. 229, and cases cited; Levy & Cohn Mule Co. v. KaufEman, 114 Fed. 170, 52 C. C. A. 126, and cases cited; Bank of Overton v. Thompson, 118 Fed. 798, reviewing many cases; Central Coal & Coke Co. V. Geo. S. Good & Co., 120 Fed. 793, and eases cited; Frenkel v. Hudson, 82 Ala. 158, 60 Am. Rep. 736, 2 South. 758; Home Ins. Co. v. North Little Eock Ice & Electric Co., 86 Ark. 538, 23 L. E. A (N. S.) 1201, 111 S. W. 994; Pueblo Savings Bank v. Eiehardson, 39 Colo. 319, 89 'Pac. 799; Arlington Brewing Co. V. Bluethenthal & Biekart, 36 App. D. C. 209, Ann. Cas. 1912C, 294; English-Am. L. & T. Co. v. Hiers, 112 Ga. 823, 38 S. E. 103 (director sold note to corporation); Seaveius 1359 CONCEENING NOTICE. §675 cumstanees. It follows, therefore, that every fraud of an agent in the course of his employment, and in the very tion arising in the case of such conduct by the agent as raises a conclusive presumption that he would not communicate the fact in controversy. This exception has been put in two ways. In the very well known case of Rolland V. Hart, L. R. 6 Ch. 678, Lord Hatherley put it substantially this way : that you must look at the circumstances of the case, and inquire whether the court can see that the solicitor intended a fraud, which would require the V. Presbyterian Hospital, 173 111. 414, 64 Am. St. Eep. 125, 50 N. E. 1079; Higgina v. Lansingh, 154 111. 301, 40 TSr. E. 362 (president sold property to corporation) ; Hart Pioneer Nurseries v. Coryell, 8 Kan. App. 496, 55 Pac. 514; First Nat. Bank v. Skinner, 10 Kan. App. 517, 62 Pac. 705; First Nat. Bank V. Northup, 82 Kan. 638, 136 Am. £t. Eep. 119, 109 Pac. 672; Commer- cial Bank v. Cunningham, 24 Pick. 270, 35 Am. Dec. 322; State Sav. Bank v. Montgomery, 126 Mich. 327, 85 N. W. 879; Dorr v. Life Ins. Clearing Co., 71 Minn. 38, 70' Am. Et. Bep. 309, 73 N. W. 635; Bang v. Brett, 62 Minn. 4, 63 N. W. 1067; E. S. Woodworth & Co. v. Carroll, 104 Minn. 65, 112 N. W. 1054, 115 N. W. 946; First Nat. Bank v. Per- Eall, 110 Minn. 333, 136 Am. St. Eep. 499, 125 N. W. 506, 675; Merchants' Nat. Bank v. Levitt, 114 Mo. 519, 35 Am. St. Eep. 770, and note, 21 S. W. 825; Eopes v. Nilan, 44 Mont. 238, 119 Pac. 479 (knowledge of promoters selling property to corpo- ration not imputed to corporation); Koehler v. Dodge, 31 Neb. 328, 28 Am. St. Eep. 518, 47 N. W. 91^; State Bank v. Mathews, 45 Neb. 6u9, 50 Am. St. Eep. 565, 63 N. W. 930 ; First Nat. Bank v. Christopher, 40 N. J. L. 435, 29 Am. Eep. 262 (a leading case; bank director obtain- ing from the, bank discount of a note for a firm of which he was a member) ; Lanning v. Johnson, 75 N. J. L. 259, 69 Atl. 490; Billings v. Shaw, 209 N. T. 265, J03 N. E. 142; Jacobus V. Jamestown Mantel Co., 211 N. Y. 154, 105 N. E. 210; West- field Bank v. Cornen, 37 N." Y. 320, 93 Am. Dec. 573; Commercial Bank V. Burgwyn, 110 N. C. 267, 17 L. E. A. 326, 14 S. E. 623; First Nat. Bank of Nome v. German-American Ins. Co., 23 N. D. 139, 38 L. E. A. (N. S.) 213, 134 N. W. 873; R. B. Godley Lumber Co. v. Teagarden (Tex. Civ. App.), 135 S. W. 1109; Teagarden v. E. B. Godley Lumber Co., 105 Tex. 616, 154 S. W. 973; Victor G. & S. Min. Co. v. National Bank of the Republic, 15 Utah, 391, 49 Pac. 826; Roberts v. W. H. Hughes Co., 86 Vt. 76, 83 Atl. 807; Lee V. B. H. Elliott & Co., 113 Va. 618, 75 S. B. 146; Martin v. South Salem Land Co., 94 Va. 28, 26 S. E. 591; First Nat. Bank of New Martinsville v. Lowther-Kaufman Oil & C. Co., 66 W. Va. 505, 28 L. E. A. (N. S.) 511, 66 S. E 713; In re Plankington Bank, 87 Wis. 378, 58 N. W. 784. Miscella neous Illustrations. — Knowledge by agent of a railroad company of a custom to issue bills of lading before goods were re- ceived will not be imputed to the company when the agent was act- ing fraudulently: Alexander Eccles & Co. V. Louisville & N. R. Co., 198 Fed. 898. Knowledge of an agent §675 EQUITY JUEISPBUDENCE. 1360 same transaction, does not fall within this exception; and, suppression of the knowledge of the encumbrance from the person upon whom he was committing the fraud. In Thompson v. Cartwright, 33 Beav. 178, the late master of rolls put it rather differently, and it would appear that, in his view, you must inquire whether there are such circumstances in the case, independently of the fact under inquiry, as to raise an inevitable conclusion that the notice had not been communicated. In the one view notice is not imputed, because the circumstances are such as not to raise the conclusion of law, which does ordinarily arise from the mere existence of notice to the agent; in the other view — that of Lord Hatherley — the act done by the agent is such as cannot be said to be done by him in his char- acter of agent, but is done by him in the character of a party to an inde- pendent fraud on his principal, and that is not to be imputed to the prin- cipal as an act done by his agent." Whether this exception can apply to directors, presidents, and other such managing officers of a corporation, through whom alone the corporation can of a life insurance company, acting in collusion with one applying for a policy, is not imputable to the company: Union Central Life Ina. Co. V. Eohinson, 148 Fed. 358, 8 L. E. A. (N. S.) 883, 78 C. C. A. 268. Knowledge of an agent as to title to land purchased by the principal is not imputed to the principal when the agent has . a secret interest by reason of an agreement to share in the purchase price: La Brie v Cart- wright, 55 Tex. Civ. App. 144, 118 S. W. 785. Exception as to Eights of Third Persons. — It has been held that the fact that agents committed a fraud "cannot alter the legal effect of their acts or of their knowledge with respect to the company in re- gard to third parties who had no connection whatever with them in relation to tha perpetration of the fraud, and no knowledge that any such fraud had been perpetrated": Armstrong v. Ashley, 204 U. S. 272, 51 L. Ed. 482, 27 Sup. Ct. 270. In McKenney v. Ellsworth, 165 Cal. 326, 132 Pac. 75, after stating the general rule as to agents acting in their own interest, the court said: "But the rule is not without excep- tions. If the agent is in fact act- ing for his principal in the trans- action, even though he may have an opposing personal interest, it is his duty, notwithstanding his interest, to communicate to his company (principal) any facts in his posses- sion, material to the transaction, and the law will therefore presume, in favor of third persons, that he made such communication." (Citing Bank of Pittsburg v. Whitehead, 36 Am. Dec. 186, note; Le Due v. Moore, 111 N. C. 516, 15 S. E. 888.) Agent Perpetrating Fraud on Third Person. — Where an agent per- petrates a fraud on a. third person and is attempting to give the prin- cipal the benefit of it, and the agent takes no position adverse to the principal, the principal is charged with notice of the facts: Lockhart V. Washington Gold & Silver Min. Co., 16 N. M. 223, 117 Pac. 833. 1361 CONCEKNING NOTICE. §675 most emphatically, it does not apply when the agent's act, may, I think, be doubted : See Holden v. N. Y. & Erie Bank, 72 N. Y. 286, and First Nat. Bank etc. v. Town of New Milford, 36 Conn. 93; but see Barnes v. Trenton Gas Co., 27 N. J. Eq. 33.« §675, (c) Fraud of Oorporation Agents. — In Brookhouse v. Xlnion Publishing Co., 73 N. H. 368, 111 Am. St. Kep. 623, 6 Ann. Cas. 675, 2 L. E. "A. (N. S.) 993, 62 Atl. 219, the court, after referring to this statement, says: " He [the author] gives no reason for the doubt, and the eases which seem to have raised it were decided upon an application of the general rule to the facts, without any allusion to the excep- tion, and, of course, without any allusion to a distinction in the ap- plication of the exception when the principal is a corporation instead of a natural person. . . . The knowl- edge of a corporation, whether ac- tual or imputed, must necessarily be that of its officers; but this cir- cumstance does not transform the officers into principals." But in Cook v. American Tubing & Webbing Co., 28 E. I. 41, 9 L. E. A. (N. S.) 193, 65 Atl. 641, the court held "that a corporation shall be held responsible for the knowledge which is possessed by those whom it appoints to represent it. From the nature of its constitution it can have no other knowledge than that of its officers, and, in dealing with such officers, as witi the . corpora- tion itself,- third parties have a right to consider that what they know it knows. Indeed, when the presiding officer of a corporation is intrusted with the transaction of its business, with full power to bind the eorporation in respect to such business, it seems more proper to call the knowledge which he has 11—86 actual knowledge of the corporation rather than to say it is imputed." (Citing cases.) Cases Where Notice was not Imputed. — Where a trustee of a corporation, who is also president of a bank, pledges to the bank ■ bonds held by him as trustee, for his own benefit, the bank is not charged with notice: Heal Estate Trust Co. V. Washington, A. & Mt. V. Ey. do., 191 Fed. 566, 118 C. C. A. 124. Where the president of a bank conceals his insolvency and has the bank take his commercial paper, his knowledge is not imputed to the bank: American Nat. Bank v. MiUer, 229 V. S. 517, 57 L, Ed. 1310, 33 Sup. Ct. 883. Where direc- tors of a bank discount with it notes fraudulently obtained, the bank is not charged with notice: Lilly V. Hamilton Bank, 178 Fed. 53, 29 L. K. A. (N. S.) 558, 102 C. C. A. 1. Knowledge of a cashier, pledging notes to hia bank, in re- ^gard thereto, is not imputed to the bank: Melton v. Pensacola Bank & Trust Co., 190 Fed. 126, 111 C. C. A. 166. See, also, First Nat. Bank v. Martin, 27 Colo. App. 524, 150 Pac. 320. . Knowledge of a president, who is also agent of a borrower, of his own fraud in misappropriating money borrowed on a note delivered by him to the bank is not charge- able to the bank: First Nat. Bank V. Bailey, 127 Minn. 296, 149 N. W. 469. Notice Imputed. — Where officers of a bank, left in full control, em- bezzle the funds so that the bank §675 EQUITY JURISPRUDENCE. 1362 fraud consists merely in his concealment of material facts within his own knowledge from his principal.^ ^ § 675, 2 It is sometimes very difficult to determine -whether a case does or does not fall under this exception. Many of the decisions confessedly rest upon very narrow distinctions : RoUand v. Hart, L. R. 6 Ch. 678, 682 ; Boursot V. Savage, L. R. 2 Eq. 134, 142; Atterbury v. Wallis, 8 De Gex, M. & G. 454, 466; Davis v. Bank of United States, 2 Hill, 451; Holden v. New York and Erie Bank, 72 N. Y. 236; Bank of New Milford v. Town of New Milford, 36 Conn. 93; Tagg v. Tenn. Nat. Bank, 9 Heisk. 479. In Boursot V. Savage, L. R. 2 Eq. 134, the attorney committed a fraudulent breach of a trust existing in reference to the property which was the sub- ject of negotiation. Kindersley, V. C, said (p. 142) : "It is insisted that the doctrine of constructive notice cannot apply, because the agent. Holmes, was committing a fraud, and the client is not to be afEected with constructive notice of a fraud committed by his solicitor. But if the client would be afEected with constructive notice of a trust, the existence of which is known to his solicitor, in the case where there is fraud, the fact that the solicitor is committing a fraud in relation to that trust cannot afford any reason why the cUent should not be affected with constructive notice of the existence of the trust. It is the existence of the trust, and not the fraud, of which he is is insolvent, the directors are charged with notice in favor of a depositor who makes a deposit shortly before the bank fails: Orme V. Baker, 74 Ohio 337, 113 Am. St. Eep. 962, 78 N. E. 439. And a bank is charged with notice of facts known to its teller as to the fraud- ulent use of estate funds by the cashier in making payments to the bank: Lowndes v. City Nat. Bank, 82 Conn. 8, 22 L. E. A. (N. S.) 408, 72 Atl. 150. Notice to Oflcer Who Holds Majority of Stock. — Where the offi- cers having notice own a large ma- jority of the stock, and have entire management and control, the inter- ests of the corporation and the offi- cers are identical, and the corpora- tion cannot escape liability on the ground that the interests are ad- verse. Eeferring to the principle stated in the text, Mr. Justice Me- Kenna, in McCaskill Co. v. United States, 216 U. S. 504, 54 L. Ed. 590, 30 Sup. Ct. 386, said: ""But while this presumption should be enforced to protect the corporation, it should not be carried so far as to enable the corporation to become a means of fraud or a means to evade its re- sponsibilities. A growing tendency is therefore exhibited in the courts to look beyond the corporate form to the purpose of it and to the offi- cers who are identified with that purpose." See, also, Lea v. Iron Belt Mercantile Co., 147 Ala. 421, 119 Am. St. Eep. 93, 8 L. E. A. (N. S.) 279,- 42 South. 415. § 675, (d) The text is quoted in Alexander Ecejes & Co. v. Louisville & N. B. K. Co., 198 Fed. 898; Thom- son-Houston Electric Co. v. Capitol Electric Co., 56 Fed. 849; Baker v. Berry Hill Mireral Sprinsfs Co., 112 Va. 280, L. E. A. 1917F, 303, 71 S. E. 626. 1363 CONCBENING NOTICE. § 676 § 676. True Rationale of the Rule— Based Wholly upon Policy and Expediency. — The rule of constructive notice held to have constructive notice ; and the constructive notice of the existence of the trust must be imputed to him, whether there is a fraud relating to it or not." In RoUand v. Hart, L. R. 6 Ch. 678, Lord Hatherley, in meeting the defense based upon the case of Kennedy v. Green, 3 Mylne & K. 699, said (p. 682) : "I think with Turner, L. J., that the question how far you are justified in assuming that the agent does not communicate to his client information which he has received, and ought to have communicated, may be affected by very delicate shades of difference. It might be said that the very fact of the solicitor not having comniunicated an important circum- stance is of itself evidence of the fraud. But Turner, L. J., in the case of Atterbury v. Wallis, 8 De Gex, M. & G. 454, exactly meets that difficulty, and says that such a rule cannot prevail. . . . Robinson [the attorney] was not raising money for himself, but for Hall ; and though he grievously neg- lected his duty, he does not appear to have been concerned in any fraud which would render concealment necessary, so as to bring the case within Kennedy v. Green, 3 Mylne & K. 699." In the well-considered case of Atterbury v. Wallis, 8 De Gex, M. & G. 454, Turner, L. J., said (p. 466) : "The case of Kennedy v. Green, 3 Mylne & K. 699, was much relied upon by the defendant ; but I thought, in Hewitt v. Loosemore, 9 Hare, 449, and I continue to think, that that case does not govern cases like the present. In that case there was fraud, independently of the question whether the act which had been done was made known or not. In such cases as the present the question of fraud wholly depends upon whether the act which has been done has been made known or not." The decision in Holden v. New York and Erie Bank, 72 N. Y. 286, was the same, in principle, as Boursot V. Savage, L. R. 2 Eq. 134. The same person was trustee under a will for certain minors, and president and chief managing officer of the bank. He had seventeen thousand dollars of trust money in his hands, which were deposited in the bank to his credit as such trusteg^ He was at the same time personally indebted to the bank to a very large amount, and his private account was heavily overdrawn. The bank was utterly in- solvent, and this fact was known to him, although not yet published to "the world. In this condition he committed a fraudulent breach of his trust by transferring the said trust moneys to the bank in part payment of his private indebtedness. This was done in reality for the benefit of the bank, and the fraud was against the beneficiaries entitled under the trust. The court of appeals held that the bank had constructive notice of all these facts which were known to its president, viz., that the money transferred was subject to the trust, and that the transfer was a fraud upon the cestuis que trustent, and a violation of the trustees' fiduciary duties. The case, therefore, came under the general rule, and not under the exception. First § 676 EQUITY JTJEISPBUDENCE. 1364 through, agent to principal, like the doctrine of construct- ive notice in general, must find its ultimate foundation and only support in motives of policy and expediency. It will not aid us in the least to inquire ■^hether it should be de- rived from the notion that the agent is identical with his principal, — is the principal's alter ego, — or from the no- tion that the principal cannot be allowed to acquire and retain a benefit through means of an act or proceeding which his agent knew to be wrong. The true rationale is, as I have already shown, that the agent's knowledge of material facts, — not necessarily of the ultimate facts, — or what the law assumes to be his knowledge, must always, from considerations of expediency, be regarded and treated as the principal's knowledge; otherwise the business af- fairs of society could not be safely transacted. Whenever Nat. Bank of Milford v. Totth of Milford, 36 Conn. 93, is similar in its essential features.* It has also been said that information given to or known by an attorney is not notice to his client, when the attorney himself is the borrower. This would seem to fall under the same reason, viz., that it is presumed the iaf ormation would not be communicated : See Hope Fire Ins. Co. V. Cambreling, 1 Hun, 493; Winchester v. Susquehanna R. K., 4 Md. 231; McCormick v. Wheeler, 36 lU. 114, 85 Am. Dec. 388. § 675, (e) Similar, also, is the cheeks, as having received them in- often cited case of Atlantic Cotton nocently in payment of Gray's in- Mills V. Indian Orchard Mills, 147 debtedness to it through his defaloa- Masa. 268, 9 Am. St. Eep. 698, 17 tions. The court, in holding that N. E. 496. One Gray was the treas- the plaintiff was charged with no- urer of both the plaintifE and de- tice of the fraudulent character of fendant companies, and for some the cheeks, lay stress on the fact time had been embezzling largely that the agent's fraud was eom- from the plaintiff. To cover his mitted for the plaintiff's benefit, and defalcations at an expected periodi- state that the question is one of a cal examination, he had placed with principal's availing himself of the its funds fraudulent checks of the result of his agent's fraud without defendant company, which he had responsibility for the fraud. See drawn payable to the order of plain- the comment on this case in Bank tiff company, to the amount of more of Overton v. Thompson, 118 Fed. than $200,000, and these were in pos- 798, 802, 803 (C. C. A.) ; and in Gun- session of plaintiff company when ster v. Scranton Ilium., H. & P. Co., the defalcations were discovered. 181 F^. St. 327, 59 Am. St. Rep. 650, Plaintiff sought to recover on the 37 Atl, 550. 1365 CONCERNING NOTICE. §676 the knowledge of the agent is actual, — ^that is, whenever he has obtained actual information of certain facts, and has therefore received actual notice, — this imputation of his knowledge to; the principal is evident and reasonable. Whenever the agent's knowledge of certain facts exists only in contemplation of law, — that is, when he has re- ceived a constructive notice, — the imputation thereof to the principal is no less reasonable and clear. If, under any circumstances, a party, while dealing for himself, must be treated, in contemplation of law, as one who has ac- quired certain information, and must be charged with con- structive notice thereby, the same result must follow when, under like circumstances, the party is dealing by means of an agent. If that assumed information called construct- ive notice should affect a party acting for himself, it should equally affect him acting through an attorney. As the doctrine is thus based entirely on motives of_ policy, it should never in its application transcend the scope and limits of those motives. Whenever its operation in a given state of facts would produce manifest injustice, the courts should, if not absolutely compelled by express authority, withhold such operation. A tendency to restrict the doc- trine — to confine it within the limits already established — is clearly exhibited by many of the recent decisions. Some of the ablest judges now on the English bench have even expressed a strong dissent from the doctrine itself, in some of its phases and applications, especially where a principal is charged with notice of information acquired by his agent in a former transaction, and which such agent is assumed to have remembered. The English cases in which this branch of the rule commonly arises are more frequent, in- volve a different condition of circumstances, and are con- sequently much more harsh in their effects, than the analo- gous class of cases which come before the American courts. EQUITY JUEISPBUDENCB, 1366 SECTION VI. CONCERNING PRIORITIES. ANALYSIS. § 677. Questions stated. §§ 678-692. First. The fundamental principles. §§ 679-681. I. Estates and interests to which the doctrine appliea. § 682. II. Equitable doctrine of priority, in general. §§683-692. III. Superior and equal equities. § 683. When equities are equal. §§ 684-692. Superior equities defined and described. § 685. 1. From their intrinsic nature. §§ 686, 687. 2. From the effects of fraud and negligence, §§ 688-692. 3. From the effects of notice. § 688. General rules and illustrations. § 689. Notice of a prior Covenant. . §§ 690-692. Time of giving notice, and of what it consists. §§ 693-734. Second. Applications of these principles. §§ 693-715. Assignments of things in action. § 693. Dearie v. Hall. §§ 694-696. I. Notice by the assignee. § 694. Notice to debtor not necessary as between assignor and assignee. §§ 695-697. English rule, notice to debtor necessary to determine the priority among successive assignees. §§ 698-702. II. Diligence of the assignee. § 698. General rules : Judson v. Corcoran. §§ 699-701. Assignment of stock as between assignee and assignor and the company, judgment creditors of assignor, and subsequent pur- chasers. § 702. Notice to the debtor necessary to prevent his subsequent acts. §§ 703-715. HI. Assignments of things in action subject to equities. §§ 704-706. 1. Equities in favor of the debtor. § 704. General rule: assignments of mortgages; kinds of defense's. §§ 705, 706. Provisions in codes of procedure. §§ 707-713. 2. Equities between successive assignors and assignees. § 707. Conflicting decisions ; mode of reconciling. §§708,709. General rule: assignment subject to latent equities; illustrations. §§ 710,711. When the rule does not apply; effect of estoppel; true limits of the estoppel as applied to such assignments. § 712. Subsequent assignee obtaining the legal title protected as a bona fide purchaser. § 713. Successive assignments by same assignor to different assignees. §§ 714, 715. 3. Equities in favor of third persons. § 714. General rule: assignments subject to such equities. § 715. Contrary rule: assignments free from all latent equities. 1367 CONCERNING PRIORITIES. § 677 §§ 716-732; Equitable estates, mortgages, liens, and other interests. § 717. Doctrine of priorities modified by recording acts. §§ 718, 719. I. Priority of time among equal equities. § 719. Illustrations: simultaneous mortgages, substituted liens, ete. §1 720-726. II. One equity intrinsically the superior. § 720. Prior general and subsequent specific lien. §§ 721, 722. Prior unrecorded mortgage and subsequent docketed judgment. § 723. Same, where judgment creditor had notice. § 724. Prior unrecorded mortgage and purchase at execution sale under a subsequent judgment. § 725. Ptirchase-money mortgages. § 726. Other illustrations. §§ 727-729. III. A subsequent equity protected by obtaining the legal title. § 728. Legal estate obtained from a trustee. § 729. Legal estate obtained after notice of prior equity. § 730. IV. Notice of existing equities. §§ 731, 732. v. Effect of fraud or negligence upon priorities. §§733,734. Assignments of mortgages, rights of priority depending upon them. § 677. Questions Stated — Divisions.*^ — ^Having thus as- certained, in the preceding section, what notice is, we are naturally led to inquire, in the next place, what are its effects? In discussing the affirmative aspect of this ques- tion, — what effects are produced by the presence of notice? — it is almost impossible to avoid considering also the nega- tive aspect, — what effects are produced by the absence of notice? In other words, a full treatment of the question, What are the effects of notice? involves the entire subject of priorities, including the particular doctrine of purchase in good faith for a valuable consideration and without no- tice. The present section will therefore be devoted to a discussion of the rules concerning priorities, both as they are the immediate effects of notice, and as they exist in the absence of notice. Since the doctrine of bona fide pur- chase for a valuable consideration and without notice is so important, and gives rise to so many particular rules, its full treatment is reserved for the next succeeding sec- tion. The whole subject of priorities in all its phases is the development of two simple and fundamental equitable principles. I have thought it expedient, therefore, to pre- § 677, (a) § 677 is cited in Gilchrist v. Helena Co., 58 Fed. 708. § 678 EQUITY JUKISPEUDENOB. 1368 sent the doctrine, in the present section, in its entirety, in all its applications to various departments of the equity jurisprudence, and not to treat it in a partial and broken manner, under the separate heads of assignments, estates, mortgages, liens, and the like. The doctrine itself is one of great practical importance, and is distinctively equi- table ; it has no connection with or existence in the com- mon law, except as certain classes of statutes have par- tially introduced it into that legal system. The subject will be considered in the following order: 1. A statement and exposition of the general principles upon which the doctrine of priorities rests, and from which it has been de- veloped; 2. The application of these principles to the im- portant classes of cases which are governed by the doc- trine, namely, assignments of things in action, equitable estates, mortgages, equitable liens, charges and encum- brances, and "equities"; and 3-. Purchase in good faith for a valuable consideration and without notice. § 678. First. The Fundamental Principles — Equitable Maxims.* — ^As was stated in a former chapter, the doctrine of priorities in equity is entirely a development of two maxims : Where there are equal equities, the first in order of time shall prevail, and Where there is equal equity, the law must prevail.! It was there shown, in the language of an eminent judge, that the first of these maxims means : "As between persons having only equitable interests, if their interests are in ail other respects equal, priority in time gives the better equity, or qui prior est tempore, potior est jure."^ The meaning of the second maxim is: "If two persons have equal equitable claims upon or interests in § 678, 1 Ante, §§ 413-417. § 678, 2 Ante, § 414; Rice v. Rice, 2 Drew. 73; see the paragraph re- ferred to for the entire quotation. § 678, (a) Sections 678 et seq. are paragraph is cited in Pugh v. Whit- cited in United States v. Detroit sitt & Guerry (Tex. Civ. App.), 161 Timber & Lumber Co., 200 U. S. 321, S. W. 953. ,50 L. Ed. 499, 26 Sup. Ct. 282. This 1369 CONCERNING PBIOKITIES. § 679 the same subject-matter, or in other words, if each is equally entitled to the protection and aid of a court of equity, with respect of his equitable interest, and one of them, in addition to his equity, also obtains the legal estate in the subject-matter, then he who thus has the legal estate will prevail. This precedence of the legal estate might be worked out by the court of equity simply refusing to inter- fere at all, and thereby leaving the parties to conduct their controversy in a court of law, or in a purely legal action, where, of course, the legal estate alone would be recog- nized. "3 It follows from these definitions that the entire discussion upon which we are entering involves the three following inquiries : 1. To what estates and interests does the equitable doctrine of priorities not apply, so that they are left completely controlled by the order of time? 2. Under what circumstances are equities "equal," so that they are left controlled by the order of time? and under what circumstances is one of two or more equities superior to the others, so that the order of time may be broken in upon, and the equitable doctrine of priorities may control? 3. Under what circumstances, two or more equities being otherwise "equal" can the holder of one of them obtain, and does he obtain, the legal title, so that the order of time may be disregarded, and the equitable doctrine of priori- ties may prevail? The full answers to these three ques- tions, in their combination and mutual effects, plainly con- stitute the entire discussion of the subject. § 679. I. Estates and Interests to Which the Equitable Doctrine Applies. 1. Not to LegaJ Estates. — ^Among purely legal titles to the same subject-matter, successive legal con- veyances of and legal estates in the same tract of land, the equitable doctrine of priorities growing out of the presence or absence of notice, or of a valuable consideration, or of any other incident, has absolutely no application nor ef- § 678, 3 Ante, § 417; Thomdike v. Hunt, 3 De Gex & J. 563, 570, 571; Caldwell v. Ball, 1 Term Kep. 205, 214; ritzsimmons v. Ogden, 7 Cranch, 2, 18; Newton v. McLean, 41 Barb. 285, § 679 EQUITY JUBISPKUDENCB. 1370 feet; sucli legal titles, estates, and interests are, in the ab- sence of any statutory modification, completely controlled, with respect to their priority, by the order of time.i ^ Even the mere want of a valuable consideration in the • § 679, 1 Gaines v. New Orleans, 6 "Wall. 642, 716, per Davis, J. ; Ruck- man V. Decker, 23 N. J. Eq. 283; Van Amringe v. Morton, 4 Whart. 382, 34 Am. Dec. 517; Wade v. Withington, 1 Allen, 561; Waring v. Smyth, 2 Barb. Ch. 119, 133, 47 Am. Dec. 299 ; Arrison v. Harmstead, 2 Pa. St. 191, 197; Jones v. Jones, 8 Sim. 633. The truth of this proposition is clearly seen from a consideration of the legal conception of estates at law and of conveyances and charges operating at law; and it will plainly appear that between two claimants of legal estates in the same land, the second one in order of time cannot, in the absence of the statutes concerning registration, avail himself even of the position of bona fide purchaser for a valuable consideration and without notice. If A, being owner of a piece of land in fee, conveys it in fee to B, and afterwards executes a deed in fee of the same land to C, at law C can acquire nothing. In contemplation of law, the entire estate passed by the deed to B, and there was no interest left which could be transferred to C, and it could make no possible difference with this result whether C was wholly ignorant of the prior conveyance or was informed of it. Again, if A has no estate at all, or only a defective one, he cannot by a deed convey any more or better estate than he holds himself to B, and it can make no difference whether the defect is open or hidden, or whether B buys with knowledge or in ignorance of it : Arrison V. Harmstead, 2 Pa. St. 191; Ruckman v. Decker, 23 N. J. Eq. 283. These propositions are constantly illustrated in ejectment suits, where the parties are claiming under conflicting legal titles, and both of them are purchasers for value and without notice. In Arrison v. Harmstead, 2 Pa. St. 191, Rogers, J., said : "Where the vendor has nothing to convey, nothing can be acquired by the vendee. One who bought from the grantee in a voidable deed might be in a better position than a vendor. But the principle did not apply to a sale by a vendor who had no title, or, what came to the same thing, who had avoided the title by his own wrong. A deed acquired sur- reptitiously without delivery, or altered after delivery, was invalid even in the hands of a bona fide purchaser." Again, in an action of ejectment between one who claims under deed or other paper title, and one who claims by adverse possession, the latter's notice of the outstanding paper title § 679, (a) The text is quoted in 694. See, also, McGregor v. Putney, MacGregor v. Thompson, 7 Tex. Civ. 75 N. H. 113, 71 Atl. 226 (between App. 32, 26 S. W. 649; cited, in Cole holders of unrecorded conveyances, V. Mette, 65 Ark. 503, 67 Am. St. rights are determined by order of Eep. 945; Gordon v. Eixey, 76 Va. time). 1371 ' CONCERNING PBIOEITIES. § 680 earlier conveyance would not, at the common law, affect the priority of legal right given by the priority of time.2 § 680, Modifications by Statutes Concerning Fraudulent Conveyances and Recording. — This rule, otherwise univer- sal, that among successive legal estates or interests in the same subject-matter the order of time controls, has been broken in upon by two classes of statutes, which are, within the scope of their operation, very important. The first of these classes includes that of 27 Eliz., c. 4, by which grants of lands made for the purpose of defrauding subsequent purchasers are declared to be void as against such subse- quent purchasers for a valuable consideration, and their representatives ; and the statute of 13 Eliz., c. 5, by which conveyances of lands or chattels made for the purpose of delaying or defrauding creditors are declared to be void as against such creditors and their representatives; pro- vided that the act shall not extend to any conveyance made in good faith and for a valuable consideration to a person not having notice of the fraud.i The second class em- would not affect his right injuriously ; the titles being legal, the controversy would he decided upon the completeness of the adverse possession, or the validity of the paper title.** § 679, 2 If A, owning the land, should convey it as a mere gift to B, by means of a conveyance sufiScient in kind and form to transfer the legal estate, and so that no trust should result to himself, and should afterwards execute a deed in fee of the same land to C, who should pay a valuable con- sideration therefor, C would obtain no interest whatever at the common law. . The prior conveyance to B would exhaust and transfer the entire fee, as fully as though a money price had been paid, and no interest would be left upon which C's deed could operate. The fact that C paid value, and was ignorant of the former conveyance, could not destroy the legal effect of the prior deed, and create an estate which would pass to C by Ms conveyance. It is entirely the result of statute that C's conveyance may under such circumstances obtain the precedence at law. § 680, 1 Similar statutes have been enacted in the American states. For the force and effect of these statutes, both English and American, see § 679, (b) That the registration verse possession, see MacGregor v. laws do not apply to protect a re- Thompson, 7 Tex. Civ. App. 32, 26 corded title against a title by ad- S. W. 649, quoting § 679 of the text. § 681 EQUITY JTJKISPKUDENOB. 1372 braces the recording acts of the various states, by which it is generally provided that every conveyance of land which is not recorded shall be deemed void as against a subsequent conveyance of the same land, made for a valu- able consideration, which shall have been first put on record; 2 and also the similar statutes which postpone the lien of a prior undocketed judgment to that of a subsequent one which has been duly docketed.'' §681. 2. To Equitable Estates and Interests Alone. — The equitable doctrine concerning priorities resulting from the presence or absence of notice, or of a valuable consid- eration or other incident, by which a precedence may be given contrary to the mere order of time, applies to con- • Twyne's Case, 3 Coke, 80 ; 1 Smith's Lead. Cas., 7th Am. ed., 33 ; Sexton V. Wheaton, 8 Wheat. 229; 1 Am. Lead. Cas., 4th Am. ed., 17; Doe v. Man- ning, 9 East, 59; Pulvertoft v. Pulvertoft, 18 Ves. 84.»- To these may be added the bankruptcy and insolvency acts in some of the states, which de- clare certain conveyances and transfers of the bankrupt or"insolvent to be void as against his assignee. § 680, 2 See ante, § 646, and note. It is evident that all questions con- cerning legal conveyances arising under the recording acts — questions de- pending upon the fact of recording or not recording, upon the record as notice, and upon the effect of an actual or constructive notice of a prior unrecorded deed given to a subsequent grantee — belong to the law, and do not constitute any part of equity jurisprudence. The estates are legal ; the conflicting titles based upon recorded and unrecorded deeds, or involving the presence of notice in place of a record, are constantly settled by means of the legal action of ejectment.'' The effect of the recording acts upon "mortgages, on the other hand, belongs to equity jurisprudence, since, in any theory of the mortgage, it creates an equitable estate or interest. § 680, (a) See also post, §§ 968-974. lation the right created by a prior § 680, (•») It should be observed, unrecorded instrument is generally however, that while the recording regarded as tantamount to an equi- aets, so far as they deal with le- table interest," and the rule which gal conveyances, have not enlarged restricts the operation of the doo- the equitable jurisdiction, they have trine to competing estates or inter- greatly enlarged the field for the esta of which one at least is equi- application, by courts of law, of the table, is thus evaded. See post, doctrine of iona fide purchase. "In § 758. the practical operation of this legis- §680, (c) See ante, §§642, 643. 1373 CONCERNING PRIORITIES. § 682 flicting legal and equitable estates or interests in the same snbject-matter, and to successive equitable estates, equi- table interests such as liens and charges, and mere "equi- ties," meaning thereby purely remedial rights, such as that of cancellation, reformation, and the like; and it ap- plies to no other kind of estates, interests, or rights. ^ ^ § 682. II. Equitable Doctrine of Priority. — Having thus stated the kind of interests to which alone the equi- table doctrine applies, ,we shall next consider the nature, scope, and operation of the doctrine itself. In all of its phases, in all the instances where it may be invoked, the equitable doctrine concerning priorities is embodied in three most general and fundamental rules: 1. Among suc- cessive equitable estates or interests, where there exists no special claim, advantage, or superiority in any one over the others, the order of time controls. Under these cir- cumstances, the maxim, Among equal equities the first in order of time prevails, furnishes the rule of decision. i ^ 2. Between a legal and equitable title to the same subject- matter, the legal title in general prevails, in pursuance of the maxim, Where there is equal equity the law must pre- § 681, 1 Basset V. Nosworthy, Cas. t. Finch, 102; 2 Lead. Cas. Eq. 1, 31, 46; Le Neve v. Le Neve, Amb: 436; 2 Lead. Cas. Eq. 109, 117; Rice v. Rice, 2 Drew. 73; Thomdike vi. Hunt, 3 De Gex & J. 563; Coiy v. Eyre, 1 De Gex, J. & S. 149, 167; Newton v. Newton, L. R. 6 Eq. 135. § 682, 1 Rice v. Rice, 2 Drew. 73; Phillips v. Phillips, 4 De Gex, F. & J. 208, 215, per Lord Westbury; Cory v. Eyre, 1 De Gex, J. & S. 149, 167; Newton v. Newton, L. R. 6 Eq. 135, 140; 4 Ch. 143, 146; Shirras v. Caig, 7 Cranch, 34, 48; Boone v. Chiles, 10 Pet. 177; Watson v. Le Row, 6 Barb. 481, 485; Berry v. Mutual Ins. Co., 2 Johns. Ch. 603, 608; Lynch v. Utica Ins. Co., 18 Wend. 236; 253; Grosvenor v. Allen, 9 Paige, 74, 76; Downer V. Bank, 39 Vt. 25; Bellas v. McCarty, 10 Watts, 13; Kramer v. Arthurs, 7 Pa. St. 165; Sumner v. Waugh, 56 111. 531; Pensonneau v. Bleakley, 14 111. 15. § 681, (a) Cited in Cole ▼. Mette, § 682, (a) This paragraph is cited 65 Arlt. 50S', 61 Aliii St'. Eep. 945, 47 in Pugh v. Whitsitt & Guerry (Tex. S. W. 407; Wales v. Sammis, 12.0 Civ. App.), 161 S. W. 953. See, also, Iowa, 293, 94 N. W. 840. post, § 718. § 683 EQUITY JITEISPBUDENCE. 1374 vail.2 1> 3. The legal title being outstanding, and not in- volved in the controversy, where there are successive un- eqital equities in the same subject-matter, as where there is a complete or perfect equitable estate and an incomplete or imperfect one, or a mere "equity," or where, among equitable interests of a like intrinsic nature, one is affected by some incident or quality which renders it inferior to another, then the precedence resulting from order of time is defeated, and the superior equitable estate or interest prevails over the others, as is manifestly implied in the " maxim. Where there are equai equities the first in order of time must prevail.^ § 683. III. Superior aad Equal Equities. — In deter- mining the scope and operation of the foregoing rules, the discussion must largely consist in ascertaining when equi- ties are equal, and when one is superior to another. It is impossible to define ',' equal equities" affirmatively by any exact formula. It is certainly not enough that two suc- cessive equitable interests in the same thing should be of precisely the same nature, for even then one might be ac- companied by some collateral incident which gave it a pre- cedence over the other without reference to their order of time. When we say that A has a better equity than B, this means that according to those principles of right and justice which a court of equity recognizes and acts upon, it will prefer A to B, and will interfere to enforce the rights of A as against B; and therefore it is impossible that two persons should have equal equities, except in a § 682, 2 Thomdike v. Hunt, 3 De Gex & J. 563, 570, 571; Fitzsimmons V. Ogden, 7 Cranch, 2, 18 j Newton v. McLean, 41 Barb. 285; and see ante § 417, cases cited in note. § 682, 3 Basset v. Nosworthy, 2 Lead. Cas. Eq. 1; Le Neve v. Le Neve, 2 Lead Cas. Eq. 109, 117, 144. § 682, (b) See, also, Forman v. Lawrence, 11 Gratt. Ill, 62 Am. Brewer, 62 N. J. Eq. 748, 90 Am. Dec. 640. St. Eep. 475, 48 Atl. 1012; Hunter v. 1375 CONOEBNING PBIOKITIES. § 683 case in wMcli a court of equity would altogether refuse to lend its assistance to either party as against the other. ^ Two persons have equal equitable interests in the same subject-matter, when each is equally entitled, with respect of his equitable interest, to the protection and aid of a court of equity. "When the court is dealing with, such suc- cessive equitable interests in the same subject-matter, and they are all thus equal, the priority in time determines the priority in right; and the fact that the holder of the sub- sequent interest, under these circumstances, acquired it without notice of the prior one does not, in general, give him any right to be preferred.^ The foregoing description § 683, 1 See Rice v. Rice, 2 Drew. 73. § 683, 2 See ante, § 414, note 1, quotation from the opinion of Lord Westbury in Phillips v. Phillips, 4 De Gex, F. & J. 208, 215, which states this rule with great force and clearness. In Cory v. Eyre, 1 De Gex, J. & S. 149, 167, Turner, L. J., said : "Questions of priority between equitable en- cumbrancers are, in general, governed by the rule, Qui prior est tempore, potior est jure; and in determining cases depending on the rule, we must, of course, look at the principle on which the rule is founded. It is founded, as I conceive, on this principle, that the creation or declaration of a trust vests an estate and interest in the subject-matter of the trust in the person in whose favor the trust is created or declared. Where, therefore, it is sought to postpone an equitable title created by declaration of trust, thei-e is an estate or interest to be displaced. No doubt there may be cases so strong as to justify this being done, but there can be as little doubt that a strong case must be required to justify it. A vested estate or interest ought not to be disturbed on any light grounds." In Newton v. Newton, L. R. 6 Eq. 135, 140, Lord Romilly said: "These are simply equitable interests, and in such eases the prior interest must prevail over the subsequent. The fact that the owner of the subsequent equitable interest had no notice of the prior interest when he advanced his money and took his security does not affect the question. He could not take from the person who gave the charge on his interest more than his interest, and he could not give a charge on the interest of another person." This judgment was reversed, on the evidence only, by the court of appeal, but the law as thus laid down by the master of rolls was expressly affirmed: See Cory v. Eyre, L. R. 4 Ch. 143, 146. In Jones v. Jones, 8 Sim. 633, which has been frequently cited with approval, A mortgaged an estate, first to B (who by the English law of course acquired the legal title and received possession of the title deeds), secondly to C, and thirdly to D. C bad no notice of the first mortgage. § 683 EQUITY JUEISPEUDENCE. 1376 of equal equities is not of much, practical value, since it states the effects rather than the nature of equality. We D had notice of the first, but not of the second ; and he caused notice of his mortgage to be given to B, who had the legal estate and possession of the title deeds. Held, that he did not thereby acquire priority over C. Shad- well, V. C, stated the rule as follows: "At law, the rule clearly is, that different conveyances of the same tenement take effect according to their priority in time. The effect of different conveyances is the same as if dif- ferent successive estates were granted by the same conveyance, first in pos- session and then in remainder. Equity follows the law ; and where the legal estate is outstanding, conveyances of the equitable interest are construed and treated, in a court of equity, in the same manner as conveyances of the legal estate are construed and treated at law. In Beckett v. Cordley, 1 Brown Ch. 353 (which Lord Eldon notices in Martinez v. Cooper, 2 Russ. 214), Lord Thurlow twice decided that, where the legal estate was outstand- ing in a first mortgagee, of two subsequent equitable encumbrancers, he who is prior in time must be prior in equity. His words are: 'The second equitable encumbrancer had the security he trusted to. He knew he had not the legal estate. He trusted to the honor of the borrower !' " These deci- sions, and the reasoning upon which they are based, show that one who pur- chases an equitable estate, or acquires an equitable interest, obtains only the right of his own vendor ; the facts of his paying value and of not hav- ing notice do not of themselves entitle him to take precedence over a prior vendee or encumbrancer; some quality imparting to his estate or interest an intrinsic superiority would be necessary to give him a preference: See Boone v. Chiles, 10 Pet. 177; Shirras v. Caig, 7 Cranch,' 34, 48; Watson v. Le Row, 6 Barb. 481, 485; Bellas v. McCarty, 10 Watts, 13; Kramer v. Arthurs, 7 Pa. St. 165 ; Sumner v. Waugh, 56 lU. 531 ; Pensonneau v. Bleak- ley, 14 lU. IS.* The recording acts may modify the operation of the equi- §683, (a) Purchaser of EquitaWe United States v. Laam, 149 Fed. 581 Estate or Interest not Protected as (purchaser prior to patent does not a Bona Fide Purchaser. — Thus, the obtain legal title and henee is not assignee of a contract for the pur- protected) ; Overall v. Taylor (Ala.), chase of lands, the legal title of 11 South. 738; Johnson v. Hayward, wliich is outstanding, takes it sub- 74 Neb. 157, 12 Ann. Cas. 800, 5 L. ject to equities: Taylor v. Weston, E. A. (N. S.) 112, 103 N. W. 1058, 77 Cal. 534, 20 Pae. 62 (certificate 107 N. W. 384 (constructive trust en- of purchase of public lands) ; Jasper forced against contract purchaser County V. Tavis, 76 Mo. 13 (same) ; from trustee) ; Polk v. Gallant, 2 York V. MeNutt, 16 Tex. 13, 67 Am. Dev. & B. Eq. (N. C.) 395, 34 Am. Dec. 607 (assignment of bond for Dec. 410; Bonelli v. Burton, 61 Or. title, the consideration of which was 429, 123 Pac. 37; Craig v. Leiper, illegal); Mbrehead v. Horner, 30 W. 2 Yerg. (Tenn.) 193, 24 Am. Dec. Va. 548, 4 S. B. 448. See, also, 479; Natipnal OU & Pipe Line Co. 1377 CONCEENING PRIORITIES. § 684 shall, in fact, determine when equities are equal by ascer- taining when they are unequal, by learning what qualities or incidents render one equity superior, to another equity in the same subject-matter.^ § 684. Superior Equities Defined. — It may be stated that, so far as their intrinsic nature is concerned, a court of equity recognizes no inequality, based upon tbeir form and mode of creation, among all perfected equitable in- terests based upon a valuable consideration and arising in any manner by which, in contemplation of equity, an in- terest in the very thing itself — the land, the chattels, or the fund — is created. If there is a valuable consideration, and an equitable interest in the very subject-matter itself has been perfected, it does not seem to atfect their equali- ties, whether such interest arose from a declaration of trust, from an assignment, from a contract express or im- plied, or from acts such as the deposit of title deeds. A valuable consideration is, however, a most important ele- table rule in this country, because they give to a recorded mortgage or other equitable encumbrance the very quality which imparts to it an intrinsic superiority, under the statute, over one which is not recorded. V. Teel, 95 Tex. 586, 68 S. W. 979 Warren, 18 Wash. 434, 444, 63 Am. (Tex. Civ. App.), 67 S. W. 545; St. Rep. 896, 51 Pac. 1066; Brusehke Shoufe V. Griffiths, 4 Wash. 161, 31 v. Wright, .166 111. 183, 57 Am. St. Am. St. Eep. 910, 30 Pac. 93; Wil- Eep. 125, 46 N. E. 813; others, that son v. Morrell, 5 Wash. 654, 32 Pae. it is not merely an equitable, but 733; Lowther Oil Co. v. Miller-Sib- an' "inchoate legal" title, to which ley Oil Co., 53 W. Va. 501, 97 Am. the principle of bona fide purchase St. Eep. 1027, 44 S. E. 433. As to should apply: Halley v. Oldham, 5 whether this principle applies to the B. Mon. (Ky.) 233, 41 Am'. Dec. 262; purchaser at execution sale, or his Buff v. Eandall, 116 Cal. 226, 58 assignee, who has received the sher- Am. St. Eep. 158, 48 Pae. 66. See, iff's certificate of purchase but has also, iJaroney v. Boyle, 141 N. Y. not completed the purchase by ob- 462, 38 Am. St. Eep. 821, 36 N. E. taining the deed, the cases are in 511. conflict; some holding that his inter- §683, (b) This paragraph is cited est under the certificate is an equi- in Brickey v. Linnertz, 241 111. 187, table one, and not entitled to pro- 89 N. E. 342; Jenkinson v. New teetion: Eeynolds v. Harris, 14 Cal. .York Finance Co., ,79 N. J. Eq. 247, 667, 76 Am. Dec. 459; Singley v. 82 Atl, 36. TT— 87 § 685 EQUITY JUBISPEUDENCB. 1378 ment. The whole history and scope of equity jurispru- dence show that a valuable consideration is always re- garded as a most essential requisite to the existence of complete equitable estates and interests of all kinds.. As- suming this conclusion as generally, if not even univer- sally, true, the various causes which will render one equity superior to another may be formulated in three general rules. It will be seen that the first of these rules relates to the intrinsic nature of the two interests which ate com- pared ;» the second relates, not to their nature, but to a quality inseparably connected with them, and constituting the occasion for their existence; the third relates neither to their nature nor qualities, but to a mere external or col- lateral incident affectins: them at their origin. These three rules are as follows: § 685. 1. Nature of the Equities. — The equitable interest created by a trust, or by a contract in rem, made upon a valuable consideration, is superior to the equity arising from a mere voluntary transfer, a mere gift, or from a mere judgment lien. In contemplation of equity, the in- terest created by a trust, or by a valid executory contract of sale, or by a valid contract giving rise to a lien, or by an act in connection with such a contract constituting a lien, —as, for example, a deposit of title deeds, — ^is a real, beneficial interest in the specific thing itself, — an interest which is property, or analogous to property ; i and al- though such interest is not recognized by the law, it is treated by courts of equity as actually subsisting, and as binding upon the conscience of the original party who held the thing and who created the interest.^ On the other § 685, 1 This is the fundamental distinction between the legal and the equitable view of executory contracts concerning some specific subject- matter: See ante, §§ 146-149, 161. § 685, 2 See the quotation from Cory v. Eyre, 1 De Gex, J. & S. 149, 167, ante, under § 683. § 684, (a) This paragraph is cited ity of judgment liens: See post, in Martin v. Bowen, 51 N. J. Eq. 452, §§ 685, 721. 26 Atl. 823, concerning the inferior- 1379 CONCEENING PRIORITIES. § 685 hand, while the interest acquired by a transfer without consideration, by a voluntary gift, may be protected if it does not interfere with third persons, yet the voluntary transferee or donee can only receive whatever interest the donor was actually entitled in Conscience and good faith to bestow; he never obtains, even as against the donor, and much less as against third persons dealing with the donor in respect to the same thing, any paramount right of his own. The consideration on the one side, and the absence of it on the other, lie at the very bottom of the equitabte theory concerning actual rights. ^ » The lien of a judgment is analogous to the claim of a donee ; it is gen- eral, not specific. The beneficiary under a trust, the ven- dee under an agreement, the holder of a lien created by a contract in rem, deals concerning a specific thing ; he> parts with the consideration upon the security of that specific thing; he obtains an equitable interest in that specific thing. The judgment creditor has not dealt with that specific thing; he has not parted with value in contem- plation of it; his lien is general, and not confined to it. It is just, therefore, that, so far as their intrinsic natures are concerned, his claim should be c'onsidered as inferior to the interest arising from a trust or from a contract in rem. His lien only extends to what his debtor really has, — that is, to the thing subject tc( all the equities in it exist- ing at the date of the judgmen|;.'^ ^ § 685, 3 Green v. Givan, 33 N. Y. 343. § 685, 4 It is settled in England, in accordance with this rule, that the interest of a cestui que trust, of the vendee under an executory contract, and of an equitable mortgagee by contract or by deposit of title deeds, is supe- rior to that of a subsequent judgment against the trustee, vendor, or mort- gagor, even though the legal estate may have been acquired under the judg- §685, (a) See, aJso, posi, § 691. 29 Atl. 221; cited, in McAdow v. Sections 685-713 are cited in Jenk- Wlachob (Fla.), 33 South. 702; both inson v. New York Finance Co., 79 cases concerning the inferiority of N. J. Eq. 247, 82 Atl. 36. judgment liens; Gates Iron Works §685, (b) This paragraph of the v. Cohen, 7 Colo. App. 341, 43 Pac. text is quoted in ioto in Harney v. 667. First Nat. Bank, 52 N. J. Eq. 697, § 686 EQUITY JURISPRUDENCE. 1380 § 686. 2. Effects of Fraud.=^ — The equity acquired by a party who has been misled is superior to the interest in the same subject-matter of the one who willfully procured or suffered him to be thus misled. The following example illustrates the operation of this rule, and the principle underlying it may be generalized and applied to all analo- gous cases. A, being about to part with value to B upon the security of B's estate, informs C of his intention, and asks C whether he has any encumbrance on the estate; C denies that he has any, and A, relying upon this denial, parts with money or other value to B; in fact, C had at the time a mortgage or other encumbrance upon the estate; this mortgage or lien, although prior in time, would, by reason of C's fraud, be postponed to the subsequent in- terest acquired by A. The basis of this rule is the con- duct which equity regards as constituting fraud, either an actual intention to mislead, or that gross negligence which produces all the effects and merits all the blame of inten- tional deception.! ^ It is not, however, necessary that the ment by means of an elegit: Newlands v. Paynter, 4 Mylne & C 408; Lodge V. Lyseley, 4 Sim. 70 ; Langton v. Horton, 1 Hare, 549, 560 ; Whitworth v. Gaugain, 3 Hare, 416; 1 Phill. Ch. 728. This particular rule has been modified or altered by statute in several of the states. See post, §§ 721- 724, where thissubjeet is more fully examined. § 686, 1 The rule is thus stated in 1 Fonblanque's Equity, 64 : "If a man, by the suppression of the truth which he was bound to communicate, or by the suggestion of a falsehood, be the cause of prejudice to another who had a right to a full and correct representation of the fact, it is certainly agree- able to the dictates of good conscience that his claim should be postponed to that of the person whose confidence was induced by his representation'' : Berrisford v. Milward, 2 Atk. 49; Beckett v. Cordley, 1 Brown Ch. 353, § 686, (a) See, also, post, §§ 731, former was established on aeeouut 732. of the fraud. See, also, Miller v. §686, (b) The text is cited in Merine, 43 Fed. 261; Wilson v. Hooper v. Central Trust Co., 81 Md. Hieks, 40 Ohio St. 419; Brown y. 559, 29 L. E. A. 262, 32 Atl. 505, Kuhn, 40 Ohio St. 468; Heidenheimer where, by means of fraudulent rep- v. Stewart, 65 Tex. 321; Roberts v. resentations, the holder of one lien W. H. Hughes Co., 86 Vt. 76, 83 Atl. had been induced to postpone it to 807. another, and the priority of the 1381^ CaNCEENING PRIORITIES. § 687 party having an interest or title, under such circumstances; when applied to, should use positive misrepresentations or expressly deny the existence of his right; it is sufficient if he refrain from disclosing his claim, and suffer a third person to deal with the property as his own, or to acquire an interest in or lien upon it ; he will, not be permitted to set up or enforce his interest in preference to that obtained by the person whom he has suffered to be misled by his silence.2 § 687. And of Negligence.^ — The rule extends to gross, negligence, which is tantamount in its effects to fraud.^ An equity otherwise equal, or even prior in point of time, may, through the gross laches of its holder, be postponed to a subsequent interest which another person was enabled to acquire by means of such negligence. ^ « To admit the 357 j^ Pearson v. Morgan, 2 Brown Ch. 384, 388; Mocatta v. Murgatroyd, 1 P. Wms. 393, 394; Evans v. Bicknell, 6 Ves. 174, 182, 183; Plumb v. Fluitt, 2 Anstr. 432; Lee v. Munroe, 7 Cranoh, 366; Wendell v. Van Rensselaer, 1 Johns. Ch. 344, 354; Storrs v. Barker, 6 Johns. Ch. 166, 168,' 10 Am. Dec. 316; Otis v. Sill, 8 Barb. 102; Lesley v. Johnson, 41 Barb.' 359; Crockery. Crocker, 31 N.Y. 500; Lee v. Kirkpatrick, 14 N. J. Eq. 264 ; McKelvey v. Truby, 4 Watts & S. 323 ; Polk v, Beidelman, 6 Watts, 339 ; Schmitheimer v. Eiseman, 7 Bush, 298 ; Chapman v. Hamilton, 19 Ala. 121. §686, 2 Nicholson v. Hooper, 4 Mylne & C. 179; Wendell v. Van Eensselaer, 1 Johns. Ch. 344, 354; Storrs v. Barker, 6 Johns. Ch. 166, 168, 169-172, 10 Am. Dec. 316; Bright v. Boyd, 1 Story, 478. The same rule applies when, under like circumstances, a party having a prior claim know- ingly permits another person to expend money on an estate or to make improvements upon it, without disclosing his own interest : Pilling v. Armi- tage, 12 Ves. 78, 84, 85; Cawdor v. Lewis, 1 Younge & C. 427; Williams v. , Earl of Jersey, Craig & P. 91 ; Chautauque Co. Bank v. White, 6 Barb. 589- Bright v. Boyd, 1 Story, 478; Carr v. Wallace, 7 Watts, 394, 400. § 687, 1 For example. A, a mortgagee of a leasehold estate, having the' lease in his possession, loaned it to the mortgagor for the purpose of en- § 687, , (a) See, also, post, §§ 731 § 687, (b) The text is quoted in 732. This paragraph of the text is Hobart v. Town of Miller, 54 Ind. quoted in full in Wasserman v. Metz- Ap{). 151, 102 N. E. R47. ger, 105 Va. 744, 7 L. R. A. (N. S.) § 687, (c) The text is quoted in- 1019, 54 S. E. 898, and cited in Dun- Wasserman v. Metzger, 105 Va. 744, man v. Coleman, 59 Tex. 199, 67 Tex. 7 L. R. A. (N. S.) 1019, 54 S. B. 893:i 390, 3 S. W. 319\ See Frost v. Wolf, 77 Tex. 455, IP §687 EQUITY JUEISPKUDENCE. 1382 operation of this rule in either of its phases, and to dis- place the otherwise natural order of priority, -there must be intentional deceit, — that is, intentional misrepresenta- tion or suppression of the truth,^ — or else gross negligencje. abling hitn to obtain a further loan upon its security, but told the mort- gagor to inform the person of whom he should borrow the money that he, A, had a prior lien. The mortgagor borrowed a sum from his bankers and deposited the lease with them as security, without informing them of A's mortgage. It was held that as A's gross negligence had enabled the mort- gagor to perpetrate the fraud, his mortgage must be postponed to the lien of the bankers :* Briggs v. Jones, L. R. 10 Eq. 92 ; Perry Herrick v. Att- wood, 2 De Gex & J. 21; Lloyd v. Attwood, 3 De Gex & J. 614; Waldron V. Sloper, 1 Drew. 193. See Fisher v. Knox, 13 Pa. St. 622, 53 Am. Dec. 503; Campbell's Appeal, 29 Pa, St. 401; Garland v. Harrison, 17 Mo. 282. Am. St. Eep. 761, 14 S. W. 440, where the holder of an earlier equi- table title was postponed by reason of his failure to assert it for many years. § 687, (d) So, where prior equi- table mortgagees (debenture hold- ers) had left the title deeds with the company so as to enable it to deal with its property as if it had not been encumbered, they could not set up their prior charge against a subsequent equitable mortgage to a bank, which had not been guilty of negligence: In re Castell & Brown, [1898] 1 Ch. 315, 67 Law J. Ch. 16'9, 78 Law T. (N. S.) 109, 46 Wkly. Eep. 248; followed in In re Valletort Sanitary Steam Laundry Co., [1903] 2 Ch. 654. See, also, the analogous case of Heyder v. Excelsior B. & L. Assn., 42 N. J. Eq. 403, 59 Am. Bep. 49, 8 Atl. 310, where a mortgage was canceled of record by reason of the mortgagee's negligence in per- mitting it to remain in the custody aiid control of the mortgagor. In Mills V. Kossiter etc. Mfg. Co., 156 Cal. 167, 103 Pac. 896, M., who was in possession of land under a con- tract, assigned his rights to defend- ant, who did not record the assign- ment. M. was left in possession to manage the laud, and kept the origi- nal contract. M. then assigned the contract to the plaintiff, who took possession and made payments on the land. Held, that defendant's prior equity was inferior to plaiu- tifE's because of the former's negli- gence. In support of the general princi- ple of the text, see, also, this im- portant series of English cases: Clarke v. Palmer, L. E. 21 Ch. Div. 124; Northern Counties, etc., Co. v. "Whipp, L. E. 26 Ch. Div. 482 (a very leading case); Lloyd's Bank Co. V. Jones, L. E. 29 Ch. Div. 221, 227; Manners v. Mew, L. E. 29 Ch. Div. 725; National Provincial Bank V. Jackson, L. E. 33 Ch. Div. 1; Far- rand V. Yorkshire Banking Co., L. E. 40 Ch. Div. 182; In re Ingham, [1893] 1 Ch. 352; Broeklesby v. Tem- perance Permanent Building Society, [189-5] A. C. 173, affirming [1893] 3 Ch. 130; Taylor v. London and County Banking Co., [1901] 2 Ch. 231, 260fE. 1383 CONCEENING PBIORITIES. § 688 In the one case, the party possessing the claim which it is sought to postpone must both know of his own right and also of the other person's intention to acquire, or of his acts in acquiring, an interest in the same subject-matter. In the other case there must be gross laches, for mere care- lessness or ordinary negligence will not suffice according to the weight of modern authority.^ e §688. 3. Effects of Notice— Illustrations.— The third, and in its practical effects by far the most important, rule is, that a party taking with notice of an equity takes sub- ject to that equity. The full meaning of this most just rule is, that the purchaser of an estate or interest, legal or equitable, even for a valuable consideration, with no- tice of any existing equitable estate, interest, claim, or right, in or to the same subject-matter, held by a third person, is liable in equity to the same extent and in the same manner as the person from whom he made the pur- chase; his conscience is equally bound with that of his vendor, and he acquires only what his vendor can honestly transfer.^ ^ The applications of this rule are as numerous § 687, 2 Hewitt v. Loosemore, 9 Hare, 449, 458 ; Colyer v. Fincli, 5 H. L. Cas. 905 ; and see cases on the subject of constructive notice from a neglect to make sufficient inquiry, ante, § § 606, 612. § 688, 1 Le Neve v. Le Neve, Amb. 436 (see extract from opinion of Lord Hardwicke, ante, § 591). For American cases, see preceding section on notice. § 687, (e) The text is quoted in deeds, so that the mortgagor was Wasserman v. Metzger, 105 Va. 744, able to make a second mortgage by 7 L. E. A. (N. S.) 1019, 54 S. E. deposit of the deeds. 893. In Farrand V. Yorkshire Bank- §688, (a) This paragraph of the ing Co., L. K. 40 Oh. Div. 182, the text is quoted in People's Natural rule was settled that in order to Gas Co. v. American Natural Gas postpone an equitable mortgagee to Co., 233 Pa. 569, 82 Atl. 935; Eohde another equitable mortgagee, whose v. Eohn, 232 HI. ISO, 83 N. E. 465; security is of a later date, it is not Liquid Carbonic Co. v. Whitehead, necessary to show that the first 115 Va. 586, 80 S. E. 104; Dunman mortgagee has been guilty of negli- v. Coleman, 59 Tex. 199, 67 Tex. gence amounting to fraud. In this 390, 3 S. W. 319; cited in Tate v. case the first mortgagee neglected Pensaeola Gulf, L. & D. Co., 37 Pla. for many years to call for the title 439, 53 Am. St. Rep. 251, 20 South. §688 EQUITY JURISPRUDENCE. 1384 as are the various kinds of equitaBle interests. The fol- lowing are some of the most important: A purchaser with notice of a trust, either express or implied, becomes him- self a trustee for the beneficiary with respect of the prop- erty, and is bound in the same manner as the original trustee from whom he purchased.^ b A purchaser or § 688, 2 Burgess v. Wheate, 1 Eden, 177, 195; Bovey v. Smith, 1 Vern. 144; Saunders v. Dehew, 2 Vern. 271; Wigg v. Wigg, 1 Atk. 382; Mead v. Lord Orrery, 3 Atk., 235, 238; Mansell v. Mansell, 2 P. Wms. 672, 681; Maekreth v. Symmons, 15 Ves. 329, 350; Phayre v. Peree, 3 Dow, 116, 129; Adair v. Shaw, 1 Schoales & L. 248, 262; Dunbar v. Tredennick, 2 Ball & B. 304, 319; Pindall v. Trevor, 30 Ark. 249. 542; Indiana, I. & I. E. Co. v, Swan- nell, 157 111. 616, 30 L. E. A. 290, 41 N. E. 989; Malone's Committee V. Lebus (Ky.), 77 S. W. 180; Peay V. Seigler, 48 S. C. 496, 59 Am. St. Eep. 731, 26 S. E. 885'. Cited also in Sanguinetti v. Bossen, 12 Cal. App. 623, 107 Pac. 560; Third Nat. Bank of Springfield, Mass., v. Na- tional Bank of Commerce (Tex. Civ. App.), 139 S. W. 665; Forde v. Libby, 22 Wyo. 464, 143 Pae. 1190 (purchaser with notice of easement). Cited but held not applicable in Turner v. Kuehnle,,71 N. J. Eq. 466, 64 Atl. 478. See, also, MeCone v. Courser, 64 N. H. 506, 15 Atl. 129. The patentee of government land with notice of the equitable right of a prior locator in whose applica- tion for the land it was by mistake misdescribed, takes the legal title in trust for the equitable owner: Wid- dicombe v. Childers, 84 Mo. 382; Sensenderfer v. Kemp, 83 Mo. 581. For relief against purchasers with notice of mistalce, see Simpson v. Montgomery, 25 Ark. 365, 99 Am. Dec. 228; Snyder v. Partridge, 138 111. 173, 32 Am. St. Rep. 130, 29 N. E. 851; Smith v. Sweigerer, 129 Ind. 363, 28 N. E. 696 (mistake of omis- sion in description of land reformed against purchaser with notice) ; Fer- guson V. Glassford, 68 Mich. 36, 35 N. W. 820 (purchaser with notice of mistake in discharge of mort- gage) ; Eemm v. Landon, 43 Ind. App. 91, 86 N. E. 973. Purchaser with notice of deed of trust canceled without authority; Connecticut Gen. Life Ins. Co. v. Eldridge, 102 U. S. 545. §688, (b) The text is quoted in Liquid Carbonic Co. v. Whitehead, 115 Va. 586, 80 S. E. 104 (personal liability). The text is cited in In- diana, I. & I. E. Co. V. Swannell, 157 111. 616, 30 L. E. A. 290, 41 N. E. 989; First Nat. Bank v. Leech, 207 111. 215, 69 N. E. 890. Cited in Swick V. Eease, 62 W. Va. 557, 59 S. E. 510. See, also, post, § 1048; Eandolph v. East Birmingham L. Co., 104 Ala. 355, 53 Am. St. Kep. 64, 16 South. 126; Drake v. Thyng, 37 Ark. 228 (constructive trust from sale of partnership property by partner without authority) ; Cavagnaro v. Don, 63 Cal. 227; Gilbert v. Sleeper, 71 Cal. 290, 12 Pac. 172; Carmichael V. Poster, 69 Ga. 372; Shuey v. Latta, 90 Ind. 136; Sleeper v. Iselin, 1385 CONCBKNINQ PBIOBITIES, §688 mortgagee with notice of the equitable lien of a vendor for unpaid purchase price takes the land Subject to that lien.^ "^ A purchaser or mortgagee of the legal estate, with notice of an equitable lien created by a deposit of title deeds, or by a prior defective mortgage, or by any other means from which an equitable lien can arise, is bound by the lien.* ^ A purchaser with notice of a prior contract to sell or to •lease takes subject to such contract, and is bound in the same manner as his vendor to carry it into execution.^ e These examples are of ordinary occurrence. § 688, 3 Mackreth v. Symmons, T5 Ves. 329, 350; Grant v. Mills, 2 Ves. & B. 306. § 688, 4 Birch v. EUames, 2 Anstr. 427 ; Jennings v. Moore, 2 Vem. 609. § 688, 5 Merry v. Abney, 1 Cas. Ch. 38; Ferrars v. Cherry, 2 Vem. 383; Daniels v. Davison, 16 Ves. 249 ; Crof ton Vj Ormsby, 2 Schoales & L. 583 ; Kennedy v. Daly, 1 Schoales & L. 355 ; Field v. Boland, 1 Dru. & Walsh, 37; Potter v. Sanders, 6 Hare, 1; Greaves v. Tofleld, L. E. 14 Ch. Div. 563, 677, per Bramwell, L. J. 62 Iowa 583, 17 N. W. 922; Priest V. Chouteau, 85 Mo. 398, 55 Am. Bep. 373 (one taking mortgage of partnership property, with notice, to secure individual debt of partner) ; Tankard v. Tankard, 84 N. C. 286; Wetmore v. Porter, 92 N. Y. 77 {purchaser from trustee, with no- tice, takes subject to right not only of cestui que trust, but of trustee, to recover the trust property) ; Dodge V. Stevens, 94 N. Y. 209 (mortgagee with notice) ; Hobson v. Whitlaw, 80 Va. 784; Mansfield v. Wardlow (Tex. Civ. App.), 91 S. W. 859. In general, as to the rights of purchas- ers from a trustee with power of sale, see note to Day v. Brenton, 102 Iowa, 482, 63 Am. St. Kep. 460, 71 N. W. 538. §688, (c) The text is cited m Malone's Committee v. Lebus, 29 Ky. Law Rep. 800, 96 S. W. 519. See, also, post, § 1253; Poe v. Paxton, 26 W. Va. 607. § 688, (d) See, also, Malone's Com- mittee V. Lebus, 25 Ky. Law Eep. 1146, 77 S. W. 180 (equitable lien reserved in a recorded deed) ; Dun- man V. Coleman, 59 Tex. 199, 67 Tex. 390, 3 S. W. 319. § 688, (e) See, also, Union Pac. B'y V. McAlpine, 129 U. S. 309, 314, 9 Sup. Ct. 286; Gore v. Condon, 82 Md. 649, 33 Atl. 261; Thompson v. Henry, 85 Mo. 451; Whitehom v. Cranz, 20 Neb. 392, 30 N. W. 406; Veitte V. MeMurtry, 26 Neb. 341, 42 N. W. 6; Borough of Woodbridge v. Borough of Carlstadt, 60 N. J. Eq. 1, 46 Atl. 540; Hunter v. McDevitt (N. D.), 97 N. W. 869; Drake v. Brady, 57 Fla. 393, 17 Ann. Cas. 1035, 48 South. 978; King v. Kaiser (King v. Prospect Point Pishing Club), 126 Md. 213, 94 Atl. 780 (purchaser with notice of a lease bound by les- see's option to purchase) ; Barney v. Chamberlain, 85 Neb. 785, 124 N. W. 482; Jasper- V. Wilson, 14 N. M. 482, § 689 EQUITY JtTEISPRUDENCE. 1386 § 689. Notice of a Prior Covenant. — On the same prin- ciple, if the owner of land enters into a covenant concern- ing the land, concerning its use, subjecting it to easements or personal servitudes, and the like, and the land is after- wards conveyed, or sold to one who has notice of the cove- nant, the grantee or purchaser will take the premises bound by the covenant, and will be compelled in equity either to specifically execute it, or will be restrained from violating it; and it makes no difference whatever, with respect to this liability in equity, whether the covenant is or is not one which in law ' ' runs with the land. " ^ ^ Notice, although a § 689, 1 Whatman v. Gibson, 9 Sim. 196 ; Schreiber v. Creed, 10 Sim. 9; Tulk V. Moxhay, 11 Beav. 571; 2 Phill. Ch. 774, 777, per Lord Cotten- ham, holding that a covenant between a vendor and purchaser that the latter and his assigns shall use or abstain from using the land in a particular way will be enforced in equity against purchasers with notice, without regard to the question whether it runs with the land ; also explaining and correcting language used in Keppell v. Bailey, 2 Mylne & K. 517 ; Duke of Bedford v. Trustees etc., 2 Mylne & K. 552; Coles v. Sims, 5 De Gex, M. & G. 1, 8 (covenant prohibiting building except in a specified manner) ; Moxhay v. Inderwick, 1 De Gex & S. 708 ; Western v. McDermot, L. R. 1 Eq. 499 ; 2 Ch. 72 (covenant by owners of adjoining houses to use their gardens in a cer- tain manner) ; Clements v. Welles, L. R. 1 Eq. 200 (covenant by a lessee-not to carry on a particular trade is binding on his under-lessee and on assignee of the under-lessee) ; Morland v. Cook, L. R. 6 Eq. 252 (purchaser bound by constructive notice of a covenant to keep up a sea-wall made between vendor and adjoining owners of lands on the seashore) , Davies v. Sear, L. R. 7 Eq. 427 (purchaser bound by constructive notice of a right of way by implication) ; Feilden v. Slater, L. R. 7 Eq. 523 (a conveyance contained a covenant by the grantee not to use the premises "as an inn, public-house 23 L. E. A. (N. S.) 982, 94 Pae. 951; "Equitable Kemedies," chap. "Spe- People's Natural Gas Co. v. Ameri- cifio Performance." can Natural Gas Co., 233 Pa. 569, §689, (a) The text is quoted in 82 Atl. 935 (purchaser of business Willoughby. v. Lawrence, 116 111. 11, of a gas company with notice of its 56 Am. Rep. 758, 4 N. E. 356; quoted contracts with consumers); Wilkins in Guilford County v. Porter, 167 N. V. Somerville, 80 Vt. 48, 130 Am. C. 366, 83 S. E. 564; Leek v. Meeks St. Rep. 906, 11 L. R. A. (N. S.) (Ala.), 74 South. 31; cited in Sharp 1183, 66 Atl. 893, and cases cited; v. Cheatham, 88 Mo. 498, 57 Am. Crowley v. Byrne, 71 Wash. 444, Rep. 433; cited in Boyden v. Eob- 129 Pae. 113 (notice of prior option erts, 131 Wis. 659, 111 N. W. 701; to purchase). See, also, Pomeroy's Hartz v. Kales Realty Co., 178 Mich. 1387 CONCERNING PRIORITIES. § 689 collateral incident, is thus perhaps the most powerful ele- ment in creating a superiority, and in disturbing an order of priority which would otherwise have existed. It may destroy the precedence which a legal estate ordinarily has over an equitable one ; it may operate as well between legal and equitable estates in the same thing as between succes- sive estates or interests which are purely equitable. or for the sale of spirituous liquors" ; a lessee from the grantee was held bound by such covenant) ; "Wilson v. Hart, 2 Hem. & M. 551; 11 Jur., N. S., 735; L. R. 1 Ch. 463 (a grantee covenanted that "no building erected or to be erected on the" premises should be used as a beer-shop, etc., the cove- nantor's assigns not being named; this covenant held binding on an assignee of the grantee) ; Keates v. Lyon, L. R. 4 Ch. 218, 224 (expressly recognizes all these decisions, but holds that the assignee was not bound, because the covenant was personal, not running with the land, and he had no notice of it, either actual or constructive) ; Cooke v. Chilcott, L. R. 3 Ch. Div. 694 (a grantee of land, on which was a spring, covenanted to erect a pump and reservoir on said land, and to supply water to houses to be erected on the grantor's adjoining land; held, that whether this covenant ran with the land or not, a purchaser from the grantee with notice of it was bound by it, and his violation would be restrained by a mandatory injunction) ; Richards V. Revitt, L. R. 7 Ch. D;v. 224 (covenant not to carry on cert-ain trades) ; Luker v. Dennis, L. R. 7 Ch. Div. 227 (covenant by the lessee of a public house that he would buy all the beer consumed in that house, and also in another house rented from a different person, from the lessor, who was a brewer; held binding in equity upon the assignee of the second-named pub- lic house, who had notice of the covenant) ; Keppell v. Bailey, 2 Mylne & K. 517 (declared to have been repeatedly overruled) ; Parker v. Nightingale, 6 Allen, 341, 344, 83 Am. Dec. 632; Whitney v. Union Railway, 11 Gray, 359, 364, 71 Am. Dec. 715, per Bigelow, J. : "The precise form or nature of the covenant or agreement is quite immaterial. It is not essential that it should run with the land. A personal covenant or agreement will be held valid and binding in equity on a purchaser taking the estate with notice. It is not binding on him merely because he stands as an assignee of the party who made the agreement, but because he has taken the estate with notice of a valid agreement concerning it, which he cannot equitably refuse to per- 560, 146 N. W. 160. See, also, Gil- Shields v. Titus, 46 Ohio St. 528, 22 mer v. Mobile, etc., E'y Co., 79 Ala. N. E. 717. For further treatment 569, 58 Am. Bep. 623; Halle v. New- of this subject, see §§ 1295, 1342, bold, 69 Md. 265, 14 Atl. 662; New- and Pomeroy's Equitable Remedies, bold v. Peabody Heights Co., 70 Md. "Injunction against Breach of Con- 498, 3 Ii. R. A. 579, 17 Atl. 372; tract." § § 690, 691 EQUITY JUEISPRUDENCB. 1388 § 690. 1. What is Notice. — In the further discussion of this rule in its general form, three questions are to be con- sidered : What is notice ? at what time must it be received ? and of what must it notify the party receiving it? The first of these questions. What is notice? has been fully ex- amined in the preceding section. It is important to re- member that actual notice, and constructive notice in any one of its varieties, produce exactly the same effects upon the equitable rights and liabilities of the party charged thereby; the general rule under consideration equally in- cludes both kinds within its operation. ^ * § 691. 2. Time of the Notice. — ^At what time must notice be given to a party so that his right may be subordinate to the equity of which he is actually or constructively in- formed? In answering this question, the two following rules, already stated, must constantly be borne in mind: that among purely equitable interests which are equal, the order of time controls, so that the absence of notice cannot give a subsequent equity any precedence over a prior one of equal standing ; and that a trust or equity created by a contract in rem is superior to the interest acquired under a voluntary conveyance or transfer. It is plain, then, that the facts of the subsequent estate, being legal rather than form": Barrow v. Richard, 8 Paige, 351, 35 Am. Dec. 713; Hills v. Miller, 3 Paige, 254, 24 Am. Dec. 218; Trustees etc. v. Cowen, 4 Paige, 510, 27 Am. Dec. 80 ; Wolfe v. Frost, 4 Sand. Ch. 72 ; Brouwer v. Jones, 23 Barb. 153 ; Tallmadge v. East River Bank, 26 N. Y. 105 ; Gibert v. Peteler, 38 N. Y. 165, 97 Am. Dec. 785; 38 Barb. 488; Phoenix Ins. Co. v. Continental Ins. Co., 14 Abb. Pr., N. S., 266; Trustees etc. v. Lynch, 70 N. Y. 440, 449- 452, 26 Am. Rep. 615 (in this case the question is elaborately discussed, and many of the authorities are examined by Allen, J.) ; Lattimer v. Livei-more, 72 N. Y. 174; Greene v. Creighton, 7 R. I. 1; Kirkpatrick v. Peshine, 24 N. J. Eq. 206; Winfleld v. Henning, 21 N. J. Eq. 188; St. Andrew's Church's Appeal, 67 Pa. St. 512; Norfleet v. Cromwell, 70 N. C. 634, 16 Am. Rep. 787. § 690, 1 See ante, sec. V., §§ 591-676. § 690, (a) The text is quoted in Liquid Carbonic Co. v. Whitehead, 115 Va. 586, 80 S. E. 104. 1389 CONCERNING PBIOEITIBS. § 691 equitable, and of a valuable consideration having been actually paid, nrast play a most important part in deter- mining the proper time of giving the notice. In the first place, therefore, the decisions, both English and American, are all agreed that the notice received before the party has actually paid the money or parted with the other valuable consideration is a valid and binding notice, and subjects his interest to the prior equity of which he is thereby notified ; and this is true even though he has already taken a con- veyance of the legal title and has given security for the purchase price even by an instrument under seal.^ The reason is, that the conveyance of the legal estate is, under such circumstances, a voluntary one, because the agreement to pay the price, and the security given therefor, are in reality mere nullities.^ Although, originally, the party might have had no defense at law against a recovery of the amount agreed to be paid, he always had ample relief in a court of equity, which would decree the surrender and cancellation of the security, and perpetually enjoin any action at law for the price. In most of the American states the defense of a total failure of the consideration, under such circumstances, would now be available at law.2 The rule as settled in England goes farther than this. It makes § 691, 1 More v. Mahow, 1 Cas. Ch. 34; Jones v. Stanley, 2 Eq. Cas. Abr. 685, pi. 9; Story v. Lord Windsor, 2 Atk. 630; Tourville v. Naish, 3 P. Wms. 306; GoUinson v. Lister, 7 De Gex, M. & G. 634; 20 Beav. 356; Wigg v. Wigg, 1 Atk. 382, 384; Tildesley v. Lodge, 3 Smale & G. 543; Rayne v. Baker, 1 Giff. 241; Jlagg v. Mann, 2 Sum. 486; Murray v. Ballou, 1 Johns. Ch. 566; Penfleld v. Dunbar, 64 Barb. 239; Farmers' Loan Co. v. Maltby, 8 Paige, 361; Haughwout v. Murphy, 21 N. J. Eq. 118 ; Union Canal Co. v. Young, 1 Whart. 410, 432, 30 Am. Dec. 212, Patten , Moore, 32 N. H. 382; Palmer v. Williams, 24 Mich. 328, 333; Blanohard v. Tyler, 12 Mich. 339, 86 Am. Dec. 57; Wilson v. Hunter, 30 Ind. 466; Keys v. Test, 33 III. 316; Brown v. Welch, 18 111. 343,' 68 Am. Dec. 549 ; Bennett v. Titherington, 6 Bush, 192; Wells v. Morrow, 38 Ala. 125. See post, §§ 750, 755. § 691, 2 Ihid. § 691, (a) This passage of the text 232. The text is cited in Halloran is quoted in Hayden v. Charter Oak v. Holmes (N. D.), 101 N. W. 310, Driving Park, 63 Conn. 142, 27 Atl. § 692 EQUITY JUEISPBUDBNOB. 1390 the notice binding upon the party if he receives it prior to his obtaining the title by conveyance, although he may have parted with a valuable consideration before such no- tice. In other words, in order to be free from the effects of the notice, the party must have both paid the consid- eration and obtained the estate, before it was communi- eated.3 In the United States a different, and as it seems to me more just, rule has generally been established, that where the estate subsequently purchased is the legal estate, a notice, in order to be binding, must be received before the purchaser pays the price or parts with the other valu- able consideration. In other words, if he actually pays the valuable consideration without any notice, a notice afterwards given does not preclude him from completing the transaction, obtaining a conveyance of the legal title, and thereby securing the precedence due to a bona fide purchaser for a valuable consideration and without no- tice.'* It should be carefully observed, however, that, not- withstanding this latter rule, upon the well-settled doc- trines of equity, independently of modifying statutes, if the subsequent purchase is of an equitable interest merely, without the legal title, a payment of valuable consideration without notice cannot of itself give the purchaser the pre- cedence over a prior equity of an equal standing ; the part- ing of value without notice does not alone constitute a su- periority among successive equities so as to disturb the priority determined by order of time.^ § 692. 3. Of What the Notice Must Consist.— It is not true that a notice of any and every species of right or claim will thus affect and subordinate the estate of the party receiving it. The notice required by the general rule under consideration must be of an actual equity, of § 691, 3 Wigg V. Wigg, 1 Atk. 382, 384; Sharpe v. Toy, L. R. 4 Ch. 35, 40; Tildesley v. Lodge, 3 Smale & G. 543; Kayne v. Baker, 1 GifE. 241; see post, § 755. § 691, 4 See post, §§ 750, 755, and eases cited. § 691, (b) See ante, § 683, notes, and cases cited. 1391 CONCEKNING PBIOKITIES. § 692 Something which equity regards as an interest in the sub- ject-matter itself, although such may not be its nature in contemplation of the law.^* Furthermore, this interest must be of such a character, that if it were clothed, in the hands of its holder, with a legal title, it would be indefeasi- ble. The fact that an interest is equitable shall not render it liable to be defeated by a party with notice of it, pro- vided it would be indefeasible if legal. . On the other hand, notice of a legal interest which is defeasible, or of an equi- table interest which, if legal, would be defeasible, does not bind the party receiving it, nor subordinate the estate in his hands.2 The general rule as to the effect of notice must therefore include all trust estates express or im- plied, the equitable estate of the vendee in a contract for the sale of land, the equitable estate arising from the doc- trine of conversion, equitable mortgages, liens, and charges, covenants creating equitable easements and servi- tudes,i> and the like. Notice, however, of a prior convey- ance made with intent to defraud subsequent purchasers, and declared void by the statute, will not affect the rights of a subsequent purchaser for value,^ nor of a prior con- § 692, 1 For equity in many cases recognizes a real interest in the specific subject-matter, — ^land or chattels, — where the law only admits a mere per- sonal right or liability. This difference of conceptions is vital throughout the whole domain of equity jurisprudence. § 692, 2 See Adam's Equity, 152 (323). § 692, 3 Pulvertoft v. Pulvertoft, 18 Ves. 84; Buckle v. Mitchell, 18 Ves. 100. § 692, (a) Notice of a contract 130 S. W. 1111 (purchaser with no- void under the statute of frauds tiee of void oral contract). (Van Cloostere v. Logan, 149 111. § 6G2, (b) The 'text is cited in Gil- 588, 36 N. E. 946), or void as against mer v. Mobile, etc., Ey. Co., 79 Ala. public policy (Everett v. Todd, 19 569, 58 Am. Kep. 623; Willoughby Colo. 322, 35 Pac. 544) does not bind v. Lawrence, 116 111. 11, 56 Am. Eep. the purchaser. This paragraph is 758, 4 N. B. 356; both instances of cited in Sanguinetti v. Eossen, 12 covenants creating equitable ease- Cal. App. 623, 107 Pac. 560. See, monts. See ante, § 689. also, Wright v. Yates, 140 Ky. 283, § 693 EQUITY JUEISPRUDENCE. 1392 tract which the purchaser had ab initio a right to nullify.* "^ Prior unrecorded conveyances and mortgages may appear to be exceptions to this rule, but are not in reality. ^ Hav- ing thus explained the fundamental principles upon which the equitable doctrine of priorities is based, I shall now describe some of the most important classes of cases in which these principles are applied. § 693. Second. Applications of These Principles — As- signments of Things in Action. — Where the creditor party in a thing in action assigns the debt to successive assignees, where a fund being held under a trust the cestui que trust assigns his interest therein to successive assignees, and where a person entitled thereto makes successive equitable assignments of a fund to different parties, the interests ac- quired by the assignees in each instance are equitable.^ It might therefore appear, at first blush, that, as the legal estate is outstanding, and as the interests of all the succes- § 692, 4 Lufkin v. Nunn, 11 Ves. 170. § 692, 5 They are apparent exceptions, because the prior unrecorded con- veyances and mortgages are declared by the statute to be void as against subsequent purchasers whose deeds or mortgages are recorded, and the es- tates created by them appear therefore to be defeasible. They are not real exceptions, because by the judicial interpretation, which has even been in- corporated into most of the modem American statutes, the chief object of the registry is to give a constructive notice, and a notice of any other kind merely supplies the place of that prescribed by the statute: See ante, §§659, 660, 665. § 693, 1 This is unquestionably so in every case of an assignment by a eedlui que trust, and of an equitable assignment of a fund. It was also true of all assignments of ordinary choses in action, debts, etc., until recent statutes in England and in this country have had- the effect to clothe the assignee of debts, money demands, and other ordinary things in action with a legal right : See vol. 1, § 168. This legislation, however, has not affected the doctrines discussed in the text. These doctrines were settled while the interests were purely equitable, and have not been abrogated by the new jurisdiction at law. § 692, (e) This paragraph of tlie S. E. 558 (notice of a mere naked text is cited in Graybill v. Brugh, option not binding). 89 Va. 895, 37 Am. St. Eep. 894, 17 1393 CONCBENING PRIORITIES. § 693 sive assignees are similar in their essential nature, tlie general rule, where there are equal equities the first in or- der of time must prevail, should govern them, without re- gard to any notice which might or might not have been given to subsequent assignees ; in other words, that, under these circumstances, the' maxim, Qui prior est tempore, potior est jure, should control. There are, however, cer- tain important elements which plainly distinguish these assignments from other kinds of successive equities, and remove them from the operation of the general rule. When an equitable interest in land is created, the holder thereof can often protect himself by a possession of the title deeds in England, or by a registration in this country. When chattels are sold and transferred, the title of the purchaser is secured against all the world by a delivery. No such safeguards inhere in the assignments above mentioned.^ The legal title or right analogous to possession remains § 693, 2 The peculiar nature of such assignments, which distinguishes them from other equitable interests, was admirably described by Sir Thomas Plumer, M. R., in the leading ease of Dearie v. Hall, 3 Russ. 1, 12 : "Where a contract respecting property in the hands of other persons who have a legal right to the possession is made behind the back of those in whom the legal interest is thus vested, it is necessary, if the security is intended to- attach on the thing itself, to lay hold of that thing in the manner in which its nature permits it to be laid hold of, — that is, by giving notice of the con- tract to those in whom the legal interest is. By such jiotice the legal holders are converted into trustees for the new purchaser, and are charged with re- sponsibility towards him; and the cestui que trust is deprived of the power of carrying the same security repeatedly into the market, and of inducing third, persons to advance money upon it, under the erroneous belief that it continues to belong to him absolutely, free from encumbrance, and that- the trustees are still trustees for him, and for no one else. That precaution is always taken by diligent purchasers and encumbrancers; if it is not taken, there is neglect. The consequence of such neglect is, that the trustee of the fund remains ignorant of any alteration having taken place in the equitable rights affecting it ; he considers himself to be a trustee , for the same individual as before, and no other person is known to him as the cestui que trust. The original cestui que trust, though he has in fact parted with his interest, appears to the world to be the complete equitable owner, and remains in the order, management, and disposition of the property as 'absolutely as ever, so that he has it in his power to' obtain, by means of it, 11—88 § 694 EQUITY JUBISPEXJDENCE. 1394 vested in the debtor, trustee, or holder of the fund. The assignor — the creditor or the cestui que trust — continues to he clothed with all the apparent right and power to deal with the claim, and to dispose of it to third persons, which he held prior to the assignment. Courts of the highest ability have therefore regarded such assignments as oc- cupying a very special position, and have applied to them a special rule in determining their order of priority.^ § 694. I. Notice by the Assignee. — The reasons which prevail between the assignee and the debtor or the holder of the fund on the one hand, or subsequent assignees on the other, do not prevail between him and the assignor. It is therefore settled that, to render the assignment valid and perfect as against the assignor himself, — that is, to give the assignee a complete claim upon the fund and right of action as against the assignor, — no notice of the assign- ment need be given to the debtor, trustee, or other holder a false and delusive credit. He may come into the market to dispose of that which he has previously sold; and how can those who may chance to deal with him protect themselves from his fraud ? "Whatever diligence may be used by a subsequent encumbrancer or purchaser, — ^whatever inquiries he may make in order to investigate the title, and to ascertain the exact state of the original right of the vendor, and his continuing right, — the trustees, who are the persons to whom application for information would naturally be made, will truly and unhesitatingly represent to all who put questions to them that the fund remains the sole absolute property of the proposed vendor.* These inconveniences and mischiefs are the natural consequences of omitting to give notice to trustees. To give notice is a matter of no difficulty; and whenever persons, treating for achose in action, do not give notice to the trustee or executor, who is the legal holder of the fund, they do not perfect their title; they do not do all that is necessary in order to make the thing belong to them in preference to all other persons ; and they become responsible, in some respects, for the easily foreseen con- sequences of their negligence." §693, (a) It has been decided, §693, (b) This paragraph of the however, that a trustee is under no text is cited in Methven v. Staten obligation to answer the inquiries of Island L., H. & P. Co., 66 Pcd. 113, a stranger who is about to deal with 13 C. C. A. 362, 35 TJ. S. App. 67; the cestui que trust: liow v. Bou- in Jack v. National Bank, 17 Okl. yerie, [1891] 3 Ch. 82. 430, 89 Pae. 219. 1395 CONCERNING PRIOKITIES. §694 .of the fund.l The same is true, according to many de- cisions, with respect to those who * ' stand in the shoes of ' ' the assignor, namely, his judgment creditors, and mere vol- unteers under him.^ a § 694, 1 Eodick v. Gandell, 1 De Gex, M. & G. 703, 780, per Lord Truro; In re Way's Trusts, 2 De Gex, J. & S. 365; Donaldson v. Donald- son, Kay, 711. § 694, 2 Beavan v. Lord Oxford, 6 De Gex, M. & G. 492; Eyre v. Mc- Dowell, 9 H. L. Gas. 619, 642, 652; Kinderley v. Jervis, 22 Beav. 1; Scott V. Lord Hastings, 4 Kay & J. 633; Pickering' v. Ilfracombe R'y, L. E. 3 Com. P. 235; Crow v. Robinson, L. B. 3 Com. P. 264. § 694, (a) Assignee Protected Against Subsequent Judgment and Garnisluueut Creditors of Assignor. The rule of the text is supported by the great preponderance of author- ity in this country both as to sub- sequent judgment creditors and sub- sequent garnishing creditors of the assignor. See the following recent eases, among a multitude of others: Farmers & Merchants' Bank v. Far- well, 58 Fed. 633, 7 C. C. A. 391, 19 U. S. App. 256; Young v. TJpson, 115 Fed. 192; Kapes v. McPherson (N. J. Eq.), 32 Atl. 710 (judgment credi- tor); D. M. Koehler & Son Co. v. Flobbe, 47 N. Y. Supp. 369, 21 App. Div. 210. See, also. Cope v. C. B. Walton Co., 77 N. J. Eq. 512, 76 Atl. 1044 (notice not necessary as against the receiver of the assignor). Assignee protected against subse- quent attaching or garnishing credi- tors of assignor; Third Nat. Bank f. Atlantic City, 126 Fed. 413; Jones V. Lowery Bkg. Co., 104 Ala. 352, 16 South. 11; Canterbury & Gilder V. Morengo Abstract Co., 166 Ala. 231, 139 Am. St. Eep. 30, 52 South. 388; Morgan v. Lowe, 5 Cal. 325, 63 Am. Dec. 132; Brown v. Ayres, 33 Cal. 525, 91 Am. Dec. 655; Savage v. Gregg, 150 111. 161, 37 N. E. 312 (the assignee's right protected by a court of law) ; Knight v. Griffey, 161 111. 85, 43 N. E. 727, afarming 57 111. App. 583; Schoolfield v. Hirsh, 71 Miss. 55, 42 Am. St. Kep. 450, 14 South. 528; Macrae v. Goodbar, 80 Miss. 315, 31 South. 812 (assign- ment of title-bond) ; Pollard v. Pol- lard, 68 N. H. 356, 39 Atl. 329; Marsh v. Garney, 69 N. H. 236, 45 Atl. 745; Board of Education v. Du- parquet, 50 N. J. Eq. 234, 24 Atl. 922 (notice to debtor is of value merely to prevent the debtor from dealing with the assignor as still the owner) ; Williams v. Ingersoll, 89 N. Y. 508; Market National Bank V. Raspberry, 34 Okl. 243, 124 Pac. 758 (since the garnishing creditor is not a purchaser for value) ; Noble V. Thompson Oil Co., 79 Pa. St. (29 P. F. Smith) 354, 21 Am. Eep. 66; Abbott V. Davidson, 18 E. I. 91, 25 Atl. 839; Bellingham Bay Boom Co. V. Brisbois, 14 Wash. 173, 44 Pac. 153; but it seems that the garnished debtor must receive notice of the assignment in time for him to state it in his answer as garnishee, other- wise the assignee will not be pro- tected: Walters v. Washington Ins. Co., 1 Iowa, 404, 63 Am. Dec. 451; Knight v. Griffey, 161 111. 85, 43 N. E. 727, affirming 57 111. App. 583; Eodes v. Haynes, 95 Tenn. 673, 33 § 695 EQUITY JUBISPEUDBNCE. 1396 § 695. English Rule — Priority Determined by Notice to the Debtor Party. — The rule is firmly established in Eng- land that, as against subsequent assignees for a valuable consideration, a notice to the debtor, trustee, or holder of the fund is necessary, in order to perfect the assignment and render it valid and effectual. ^ Among successive as- § 695, 1 This rule and the reasons for it were most forcibly stated by Sir Thomas Plumer, M. R., in the leading case of Dearie v. Hall, 3 Russ. 1, from which a quotation has already been made. He said (pp. 20-23): "The ground of this claim is priority of time. They rely upon the known maxim, which in many cases regulates equities, Qui prior est tempore, potior est jure. If by the first contract all the thing is given, there remains nothing to be the subject of the second contract, and priority must decide. But it cannot be contended that priority in time must decide, where the legal estate is outstanding. For the maxim, as an equitable rule, admits of exception, and gives way when the question does not lie between bare and equal equities. If there appears to be, in respect of any circumstance independent of priority of time, a better title in the subsequent purchaser to call for the legal estate, than in the purchaser who precedes him in date, the case ceases to be a balance of equal equities, and the preference which priority of date might otherwise have given is done away with and counter- acted. The question here is, not which assignment is first in date, but whether there is not, on the part of Hall, a better title to call for the legaj estate than Dearie or Sheering can set up. Or rather, the question is, Shall these plaintiffs now have equitable relief, to the injury of Hall?" He shows that the failure of D. or S. to give notice was negligence; from this negligence all the doubt and difficulty have arisen ; and it is not equitable that they should take advantage of their own negligence, — should obtain a S. W. 564; Abbott v. Davidson, 18 Bev. St., c. Ill, § 6; Peabody v. City E. I. 91, 25 Atl. 839; Bellingham of Lewiston, 83 Me. 286, 22 Atl. Bay Boom Co. v. Brisbois, 14 Wash. 171 (recorded assignment of wages 173, 44 Pae. 153. In a few states, has priority over unrecorded assign- notice is essential, by statute, to ment) ; Abbott v. Davidson, 18 B. I. render the assignment valid against 91, 25 Atl. 839. creditors attaching the debt by As to priorities between assignees "trustee" process: Burditt v. Porter, of shares of stock and creditors of 63 Vt. 296, 25 Am. St. Rep. 763, 21 the assignor, see post, § 700. Atl. 955, E. L. Vt., § 1134; Fuller v. Assignee Protected Against Subse- Parmenter, 72 Vt. 362, 47 Atl. 1079. quent Receiver of Assignor, since In a number of states, the assign- the receiver stands in assignor's ment of future wages must be re- shoes: Cogan v. Conover Mfg. Co., corded: see, for example, Pullen v. 69 N. J. Eq. 809, 115 Am. St. Rep. Monk, 82 Me. 412, 19 Atl. 909; Me. 629, 64 Atl. 973. 1397 GOKCEENING PKIOKITIES. § 695 signees-of tlie same thing in action whohaVe paid a valu- able consideration, the mere order of time does not neces- beneflt as the result of their neglect. He then adds (p. 22) : "They say that they were not bound to give notice to the trustees ; for that notice does not form part of the necessary conveyance of an equitable interest. I ad- mit that if you mean to rely on contract with the individual, you do not need to give notice; from the moment of the contract he with whom you are dealing is personally bound. But if you mean to go further, and to make your right attach upon the thing which is the subject of the contract, it is necessary to give notice ; and unless notice is given, you do not do that which is essential in all cases of transfer of personal property. The law of England has always been, that personal property passes by delivery of possession; and it is possession which determines the apparent ownership. If you, having the right of, possession, do not exercise that right, but leave another in actual possession, you enable that person to gain a false and delusive credit, and put it in his power to obtain money from innocent par- ties on the hypothesis of his being the owner of that which in fact belongs to you. Possession must follow right; and if you, who have the right, do not take possession, you do not follow up the title, and are responsible for the consequences. It is true that a chose in action does not admit of tan- gible, actual possession. But in Ryall v. Rowles, 1 Ves. Sr. 348, 1 Atk. 165, the judges held that in the case of a chose in action you must do every- thing towards having possession which the subject admits; you must do that which is tantamount to obtaining possession, by placing every person who has an equitable or legal interest in the matter under an obligation to treat it as your property. For this purpose you must give notice to the legal 'holder of the fund; in the case of a debt, for instance, notice to the debtor is, for many purposes, tantamount to possession. If you omit to give that notice, you are guilty of the same degree and species of neglect as he who leaves a personal chattel to which he has acquired a title in the actual possession and under the absolute control of another person." This course of reasoning is, as it seems to me, completely unanswerable ; the spe- cial rule concerning notice results from it as an irresistible conclusion. No other rule within the entire range of equity jurisprudence rests upon a more solid foundation of argument, or is more intrinsically just and reason- able." § 695, (a) In the recent ease of In phatic language (per Brown, J.) : re Phillip's Estate, 205 Pa. St. 515, "Business transactions constantly 97 Am. St. Kep. 746, 55 Atl. 213, require the assignments of choses in the supreme court of Pennsylvania, action. In many instances personal in adopting the' rule of Dearie v, credit cannot be maintained in any Hall, cited the above paragraph of other way, and for assignees who the text and used the following em- purchase in good faith there ought § 695 EQUITY JUHISPEXTDENCB. 1398 sarily determine the priority; the assignee in good faith and for value who first gives a notice obtains a precedence over the others, even though they may be earlier in time. The equities of the successive assignments being otherwise equal, the priority among them is determined by the order of the notices, rather than by the order of their dates. Giving notice is regarded as equivalent, or at least analo- gous, to the act of taking possession.!' The rule thus for- mulated is applied to assignments of ordinary things in action by the creditor party, including shares of stock in a company, insurance policies, and the like, to assignments of a fund held under a trust by the cestui que trust, and to equitable assignments of a fund by the person entitled thereto, and the notice should be given, in the first class to the debtor, in the second to the trustee, and in the third to the holder of the fund.2 c It should be carefully ob- §695, 2 Dearie v. Hall, 3 Euss. 1; Loveridge v. Cooper, 3 Russ. 31; affirmed on appeal, by Lord Lyndhurst, 3 Kuss. 48-60; Eyall v. Eowles, to be protection. None is found in purchase or assignment, if notice of the recording act, but a measure of it was given him. If it be under- it ought not on that account to be stood that each assignee of a fund, withheld, if it can be extended by or a portion of it, can protect him- courts of equity on equitable prin- self against subsequent assignees ciples. . . . Protection can hardly only by giving immediate notice to be expected from an assignor who the debtor, such notice will be will sell twice what he knows he given, and, when given, the in- has a right to sell but once, for, if stances will be very rare when conscienceless enough to make a sec- subsequent assignees are imposed ond sale, he will conceal the first in upon." his scheme to cheat one or the other § 695, (b) This statement of the of his assignees. Protection can text is quoted in Third Nat. Bank come only from him who owes the of Philadelphia v. Atlantic City, 126 money, and who, by notice to him, Fed. 413. may be able to give protection. He §695, (c) See, also, the following is a mere stakeholder, and it is im- English cases, illustrating various material to him whom he pays. phases of the rule:, Johnstone v. There is no reason why he should Cox, L. B. 16 Ch. Div. 571; Mutual not be frank with a prospective Life Ins. Co. v. Langley, L. E. 26 purchaser of the whole or a portion Ch. Div. 686; In re Wyatt, [1892] of what he owes, or that, upon in- 1 Ch. 188, affirmed in Ward v. quiiy from such a one, he should Dunscombe, [1893] App. Gas. 369; conceal notice of any other prior Wigram v. Buckley, [1894] 3 Ch. 1399 CONCERNING PEIOBITIES. § 695 served, however, that to enable a subsequent assignee to obtain a priority in this manner, by giving the first notice 1 Ves. Sr. 348; 1 Atk. 165; 2 Lead. Cas. Eq., 4th Am. ed., 1533, 1579; Foster v. Blackstone, 1 Mylne & K. 297; 9 Bligh, N. S., 332, 376; Meux v. Bell, 1 Hare, 73, 84, 85 ; Saffron etc. Soe. v. Rayner, L. R. 14 Ch. Div. 406 (what is a sufficient notice to trustees) ; In re rreshfleld's Trusts, L. R. 11 Ch. Div. 198, 200, 202, per Jessel, M. R. (rule applied when the second assignee of a trust fund, who gave the first notice to the trustee, took his assignment from the executors of the cestui que trust, the first assignee having taken directly from the cestui que trust himself) ; * Ex parte Gar- rard, L. R. 5 Ch. Div. 61; L. R. 4 Ch. Div. 101 (the trustee himself the assignee) ; Addison v. Cox, L. R. 8 Ch. 76, 79, per Lord Selborne (a creditor assigned the money due to two different persons successively; these two assignees gave simultaneous notices to the debtor; held, that the first assignee had priority over the second) ; Lloyd v. Banks, L. R. 3 Ch. 488, 490, per Lord Cairns, reversing Lloyd v. Banks, L. R. 4 Eq. 222 (actual knowledge by the trustee of a first assignment by the cestui que trust oper- ates as a notice, and gives the first assignee a priority over a second assignee, who afterwards served a formal notice) ;* see, per contra, Edwards v. Mar- tin, L. R. 1 Eq. 121, and in Re Brown's Trusts, L. R. 5 Eq. 88, which must be regarded as overruled, so far as they differ from Lloyd v. Banks, L. R. 3 Ch. 488; Bridge v. Beadon, L. R. 3 Eq. 664, 667; In re Atkinson, 2 De Gex, M. & G. 140; In re Barr's Trusts, 4 Kay & J. 219; Thompson v. Speirs, 13 Sim. 469 ; Martin v. Sedgwick, 9 Beav. 333. The time of giving the notice may be material.' If it is given to a trustee before the fund comes into his possession, or before the trust relation exists, it will be wholly nugatory, while a subsequent notice given after the trust relation com- mences, or after the fund comes into the trustee's hands, will be operative :S Somerset v. Cox, 33 Beav. 634; Webster v. Webster, 31 Beav. 393; Addison 483; Stephens v. Green, [1895] 2 tion, see Third Nat. Bank v. Atlau- Ch. 148; In re Wasdale, [1899] 1 tic City, 126 Fed. 413. Gh. 163; Montefiore v. Guedalla, §695, (e) See, also, Johnstone v. [1903] 2 Ch. 26. Cox, L. E. 16 Ch. Div. 571. This § 695, (d) To the same effect with group of cases is carefully reviewed In re Freshfield's Trusts, see Monte- in the recent case of In re Dallas, fiore v. Guedalla, [1903] 2 Ch. 26. [1904] 2 Ch. 385, holding the fact § 695, (e) See, also, In re Wyatt, to be immaterial that when the [1892] 1 Ch. 188, affirmed in Ward fund came into existence there was V. Dunscombe, [1893] App. Cas. 369. no person having legal dominion of §695, (*) Time of Giving the the fund to whom effective notice Notice. — That notice of an intended could be given; thus, where there assignment, given by the assignor were several assignments of an ex- hefore the assignment is made, is pectaney, priority among them was ineffectual for the assignee's protec- determined by the order of giving § 695 EQUITY JURISPBUDBNOB. 1400 .'to the debtor or legal holder, he must be an assignee in good faith and for a valuable consideration. If he parted with no considei^tion, he is a mere volunteer, and stands in the same position as his assignor. If he had notice ,of the earlier assignment, then he took subject thereto.^ The rule thus established by the uniform course of decision in England has been adopted in a portion of the American states.^J It has been rejected by the courts of other V. Cax, L. R. 8 Ch. 76; BuUer v. Plunkett, 1 Johns. & H. 441. If simul- taneous notices are given by two assignees, the one who is earlier in date will have precedence:'' Calisher v. Forbes, L. R. 7 Ch. 109; Addison v. Cox, L. R. 8 Ch. 76, 79. Wherever an assignee earlier in time has done all in his power towards talking possession or perfecting his title, he will retain his priority: Peltham v. Clark, 1 De Gex & S. 307; Langton v. Hor- ton, 1 Hare, 549. § 695, 3 Spain v. Hamilton's Bx'r, 1 Wall. 604, 624; Campbell v. Day, 16 Vt. 558; Barney v. Douglas, 19 Vt. 98; Ward v. Morrison, 25 Vt. 593; Loomis V. Loomis, 26 Vt. 198, 204; Dale v. Kimpton, 46 Vt. 76; Barron v. Porter, 44 Vt. 587; Bishop v. Holcomb, 10 Conn. 444; Adams v. Leavens, 20 Conn. 72; Foster v. Mix, 20 Conn. 395; Van Buskirk v. Hartford etc. Ins. Co., 14 Conn. 141, 144, 36 Am. Dec. 473 ; Harrop v. Landers etc. Co., 45 Conn. 561; Judah v. Judd, 5 Day, 534; Woodbridge v. Perkins, 3 Day, 364; Dews v. Olwill, 3 Baxt. 432; Flickey v. Loney, 4 Baxt. 169; Hobson V. Stevenson, 1 Tenn. Ch. 203; Gayoso Sav. Inst. v. Fellows, 6 Cold. 467; Clodfelter v. Cox, 1 Sneed, 330; McWilliams v. Webb, 32 Iowa, 577; Mur- doch V. Finney, 21 Mo. 138. notices to the administrator of the signment, and subsequent assign- testator, although none was ap- ment for the benefit of creditors) ; pointed until a considerable time Methven v. Staten Island L., H. & after the fund came into existence P. Co., 66 Fed. 113, 13 C. C. A. 362, by the testator's death. 35 U. S. App. 67; The Elmbank, 72 § 695, (li) See, also, Johnstone v. Fed. 610 (rule only applies where Cox, L. E. 16 Ch. Div. 571. subsequent assignee giving first no- § 695, (i) The text is quoted and tice is a purchaser for value) ; Third followed in The Elmbank, 72 Fed. Nat. Bank v. Atlantic City, 126 Fed. 610; Market National Bank v. Rasp- 413. It has recently been adopted berry, 34 Okl. 243, 124 Pac. 758 (for in California: Graham Paper Co. v, this reason a garnishing creditor of Pembroke, 124 Cal. 117, 71 Am. St. the assignor is not protected). Eep. 26, 44 L. R. A. 632, 56 Pac. §695, (j) English Rule Adopted.— 627, citing the text; Widenmann v. It is the rule of the Federal courts: Weniger, 164 Cal. 667, 130 Pac. 421; Laclede Bank v. Sehuler, 120 U. S. and in Pennsylvania: In re Phillips' 511, 7 Sup. Ct. 644 (equitable as- Estate, 205 Pa. St. 515, 97 Am. St. 1-401 CONCBENING PBIOKITIES. §695 states, which hold that among suceessive assignments of things in action the order of time controls.^ ^ § 695, 4 Thayer v. Daniels, 13 Mass. 129; Bohlen v. Cleveland, 5 Mason, 174; M''arren v. Copelin, 4 Met. 594; Dix v. Cobb, 4 Mass. 508, 511; Wood V. Partridge, 11 Mass. 488, 491; Littlefleld v. Smith, 17 Me. 327; Stevens V. Stevens, 1 Ashm. 190 ; United States v. Vaughan, 3 Binn. 394 ; Muir v. Schenck, 3 Hill, 228; Beckwith v. Union Bank, 9 N. Y. 211; Kennedy v, Parke, 17 N. J. Eq. 415. Kep. 746, 55 Atl. 213, citing the text. Also, in Maryland: Lambert V. Morgan, 110 Md. 1, 132 Am. St. Kep. 412, 17 Ann. Cas. 439, 72 Atl. 407, citing this paragraph of the text, and holding that recording the instrument of assignment as a mort- gage is not notice to the trustee; In New Jersey: Jenkinson v. New York Finance Co., 79 N. J. Eq. 247, 82 Atl. 36 (a valuable opinion, re- viewing the cases). In Oklahoma: .Tack V. National Bank, 17 Okl. 430, 89 Pac. 219; Citizens' National Bank of Chickasha v. Mitchell, 24 Okl. 488, 20 Ann. Cas. 371, 103 Pac. 720 (between assignees of a judgment, the one who first gives notice to the debtor is protected) ; Market Na- tional Bank v. Easpberry, 34 Okl. 243, 124 Pac. 758. In Tennessee; Peters v. Goetz, 136 Tenn. 257, 188 S. W. 1144. And see Enochs-Harris Lumber Co. v. Newcomb, 79 Miss. 462, 30 South. 608; Nelson v. Trigg, 75 Tenn. (7 Lea) 69; also, 66 L. E. A. 760, note; 19 Yale L. Jonrn, 258, Feb. 1910, by E. Q. Keasbey. § 695, (k) English Eule Bejeeted. Fairbanks v. Sargent, 104 N. Y. 108, 58 Am. Eep. 490; s. c, 117 N. Y. 320, 6 L. E. A. 475, 22 N. E. 1039; Fortunate v. Patten, 147 N. Y. 277, 41 N. E. 572; York v. Conde, 147 N. Y. 486, 42 N. E. 193, 61 Hun, 26, 15 N. Y. Supp. 380; Niles v. Ma- thusa, 162 N. Y. 546, 57 N. E. 184; Central Trust Co. v. West Indies Imp. Co., 169 N. Y. 314, 62 N. E. 387; Farmers' Bank v. Diebold Safe & Lock Co., 66 Ohio St. 367, 90 Am. St. Eep. 586, 58 L. E. A. 620, 64 N. E. 518; Mitchell v. Hockett, 25 Cal. 538, 85 Am. Dec. 151; Gillette v. Murphy, 7 Okl. 91, 54 Pac. 413; Harris County v. Donaldson, 20 Tex. Civ. App. 9, 48 S. W. 791; Clarke V. Hogeman, 13 W. Va. 718; Colum- bia Finance & Trust Co. v. First Nat. Bank, 25 Ky. Law Eep. 561, 76 8. W. 156 (citing the text); Henke & Pillot v. ]Eeller, 50 Tex. Civ. App. 533, 110 S. W. 783. In England, also, the order of time controls among successive equi- table assignments of shares of stock, to which, by charter or statutory provision, the rule of Dearie v. Hall does not apply: Soeiete Generate de Paris V. Walker, L. B. 11 App. Cas. 20, affirming 14 Q. B. D. 424. A good discussion of the reasons for the rule is contained in Meier v. Hess, 23^ Or. 599, 32 Pac. 755. After citing this section of the text the court said, referring to the English rule: "It is explained by the courts adopting it as but an application, to the case of an assignment of a chose in action, of the principle which ren- ders void, as to bona fide purchas- ers, sales and transfers of chattels, unless accompanied by a delivery and continuous change of posses- sion. It is said that the act of giv- ing the debtor notice is, in a certain §696 EQUITY JUEISPKUDENCB. 1402 § 696. To Whom the Notice Should be Given.— Notice maf be given to the debtor, trustee, or holder of the fund, either in writing or verbally, if the latter 'form is explicit, definite, and certain.^ Notice to one of two or more co- trustees or joint debtors is, in general, notice to all, but it ceases to be operative when such trustee or debtor dies, or such trustee gives up his position.^ a Where shares of § 696, 1 In re Tichener, 35 Beav. 317; Browne v. Savage, 4 Drew. 635, 640. Notice cannot be given by a mere conversation : Saffron etc. Sec. v. Rayner, L. R. 14 Ch. Div. 406; In re Tichener, 35 Beav. 317. How far a notice to attorneys of a trustee is operative : See Saffron etc. Soc. v. Ray- ner, L. R. 14 Ch. Div. 406; Willes v. Greenhill, 29 Beav. 376, 387, 392; Rickards v. Gledstanes, 3 Giff. 298. § 696, 2 Meux v. BeU, 1 Hare, 73; Ex parte Rogers, 8 De Gex, M. & G. 271 ; Timson v. Ramsbottom, 2 Keen, 35 ; Willes v. Greenhill, 29 Beav. 376, 387; Wise v. Wise, 2 Jones & L. 403. Where the trustee is himself the assignee from his cestui que trust, no further notice is necessary to gain priority over a subsequent assignee : Ex parte Garrard, L. R. 5 Ch. Div. 61 ; L. R. 4 Ch. Div. 101; Elder v. Maclean, 3 Jur., N. S., 284. If one of degree, taking possession of the fund, and is going as far towards an actual change of possession as is possible; and, if this notice is omitted, the assignee is guilty of the same degree and species of neglect, and must suffer the same consequences, as one who leaves a chattel, purchased by him, in the possession of his vendor. In juris- dictions where the rule prevails that the sale of personal property, capa- ble of immediate delivery to the pur- chaser, is fraudulent and void as to subsequent bona fide purchasers unless accompanied by immediate delivery, and followed by an actual change of possession, the reasoning of the authorities cited seems un- answerable, and to rest upon a solid foundation of argument. But where, as in this state, the sale of chattels, unaccompanied by a change of possession, only creates a presumption of fraud as against a bona fide purchaser, which may be rebutted by showing that the sale was made in good faith, for a suffi- cient consideration, and without in- tent to defraud, the foundation for the rule fails." § 696, (a) In Timson v. Eams- bottom, 2 Keen, 35, and In re Hall, 7 L. E. Ir. 180, the subsequent as- signee took his assignment and gave notice after the death of the only trustee who had received notice of the earlier assignment; since in- quiry by the second assignee would not have yielded information of the first assignment, the second assignee was held to be protected; followed in In re Phillips' Trusts, [1903] 1 Ch. 183. If, however, the first as- signee gives notice to all the exist- ing trustees, he has done his full duty, and the priority so acquired cannot be lost by their death or re- tirement, and notice of a subse- quent assignment received by their 1403 CONCERNING PEIOEITIBS. 697 stock in a business corporation, or policy of insurance, are assigned, the notice :|:equired by the general rule should be given to a managing officer of the company. 3 If a fund is subject to successive trusts, the notice should be given to the trustee who has it under his actual control.* « § 697. The Rule Does not Apply to Assignments of Equi- table Interests in Land. — ^Where a debt has been assigned, several eo-trustees is also a beneficiary, and assigns his interest to a third person, a notice to the other trustee is requisite ; but if he assigns to one of his fellow-trustees, no notice is necessary as long as that trustee lives •'• Browne v. Savage, 4 Drew. 635; In re Selby, 8 De Gex, M. & Q. 271; Willes V. Greenhill, 29 Beav. 376, 387, 391; Comm'rs v. Harby, 23 Beav. 508. These decisions seem to be based upon mere verbal logic. § 696, 3 Thompson v. Speirs, 13 Sim. 469; Edwards v. Martin, L. R. 1 Eq. 121; Martin v. Sedgwick, 9 Beav. 333. Notice of the assignment of a future cargo of a ship given to the master has been held sufficient, when followed by other steps, to perfect the title of the assignee : Langton v. Ilor- ton, 1 Hare, 549; 3 Beav. 464. § 696, 4 Bridge v. Beadon, L. R. 3 Eq. 6G4. successors: In re Wasdale, [1899] 1 Ch. I63. If tlie first assignee gives notice to one and the second as- signee gives notice subsequently to both of the trustees, the priority ac- quired by the earlier notice is not lost by the death of the trustee who received it; for in such a case, as distinguished from Timson v. Eams- bottom, full inquiry by the second assignee would have elicited in- formation of the first assignment: Ward V. Dunseombe, [1893] App. Gas. 369, affirming In re Wyatt, [1892] 1 Ch. 188. "Why," inquires Hersehell, Lord Ch., "should an ac cident of this description [death of a trustee] entitle the second encum- brancer to a priority to which he had no title at the time when he made the advance, and gave notice of it to the trustees?" See the speech of Lord Maenaghten in this case for an elaborate review of the cases, and some unfavorable criti- cism of the rule of Dearie v. Hall. See Bank of Spring City v. Ehea County (Tenn. Ch. App.), 59 S. W. 442 (citing the text). § 696, (>>) Notice given to the as- signor, who afterwards becomes trustee of the fund, is, it seems, not effectual: Browne v. Savage, supra; In re Dallas, [1904] 2 Ch. 385 (assignments of expectancy; as- signor was appointed executor but never acted as such and renounced. Priority determined by order of no- tices given to the administrator ap- pointed in his place). § 696, (c) See, however, Stephens V. Green, [1895] 2 Ch. 148, holding that the assignee of a cestui que trust should give notice to the imme- diate trustee of his assignor, not to the trustee in the original settle- ment. § 697 EQUITY JURISPRUDENCE. 1404 and tlie debtor refuses or fails to pay it, no notice of such non-payment is required to be given to the assignor, in order that he may be made liable ; the rules concerning no- tices to indorsers of negotiable paper do not apply.i Finally, the special rule requiring a notice to the trustee or other holder of the legal title, in order to settle the priority among successive assignees, is confined to trans- fers of personal property, debts, money claims arising from contracts, funds, and the like ; it does not extend to nor embrace assignments of any equitable estates or in- terests in land. These latter are governed by the more general rules concerning priority, already stated.^ a § 697, 1 Glyn v. Hood, 1 De Gex, T. & J. 334. § 697, 2 See ante, §§ 682, 683; Jones v. Jones, 8 Sim. 633; Wiltshire v. Babbitts, 14 Sim. 76; Wilmot v. Pike, 5 Hare, 14; Lee v. Hewlett, 2 Kay & J. 531; McCreight v. Foster, L. E. 5 Ch. 604, 610, 611. In this case the vendee in a contract for the sale of land had agreed to assign the contract to A, and A gave notice of such agreement to the vendor. It was held by Lord Hatherley that the vendor might, notwithstanding such notice, receive payment of the balance of the price and convey the land to the original' vendee ; the notice did not affect the rights of the original contracting par- ties. An agreement to assign would be treated in equity as an assignment. §697, (a) This section is cited in London and County Banking Co., Stillson v. Stevens (Tex.), 23 S. W. [1901] 2 Ch. 231, 254, citing Jones 322. V. Gibbons, 9 Ves. 407, 410, 7 E. E. See, also, In re Wyatt, [1892] 1 247, 250. See, also, in support of Ch. 188; Hopkins v. Hemsworth, the text, Jenkinson v. New York [1898]. 2 Ch. 347, 67 Law J. Ch. 526, Finance do., 79 N. J. Eq. 247, 82 78 Law T. [N. S.] 832, 47 Wkly. Atl. 36 (successive assignments of Eep. 26 (the rule does not apply to mortgage). Leaseholds are real es- successive equitable sub-mortgages tate for the purposes of this rule: by deposit of the title deeds by the TTnion Bank of London v. Kent, 39 legal mortgagee) . ' Although a mort- Ch. Div. 238. That priority among gage debt is a chose in action, yet, Successive assignments of an interest where the subject of the security is in land which has been affected by land, the mortgagee is treated as the doctrine of equitable conversion having 'an interest in land,' and in accordance with the terms of a priorities are governed by the rules will is determined by the rules relat- applicable to interests in land, and img to the assignment of choses in not by the rules which apply to in- action, seei'Snover v. Squire (N. J. terests in personalty": Taylor v. Eq.), 24 Atl. 365. 1405 CONOBENING PKIOBITIES, ' § 698 § 698. II. Diligence of the Assignee. — Irrespective of any requirement to give notice in order to obtain a priority, the duty rests upon all assignees of things in action to use reasonable diligence in perfecting their titles or enforcing their rights. Even where the rule concerning notice to the debtor or trustee has not been adopted, an assignee who had otherwise the priority may lose it through his laches, as against a subsequent purchaser in good faith and for value who has been injured by the negligence.^ ^ It may § 698, 1 Spain v. Hamilton, 1 Wall. 604. See, as illustrations of such neglect and of its consequences, Judson v. Corcoran, 17 How. 612; Mer- cantile Ins. Co. V. Corcoran, 1 Gray, 75 ; Eiehards v. Griggs, 16 Mo. 416, 57 Am. Dec. 240 ; Fraley's Appeal, 76 Pa. St. 42 ; Fisher v. Knox, 13 Pa. St. 622, 53 Am. Dec. 503 ; Maybin v. Kirby, 4 Rich. Eq. 105. The rule that a subsequent assignee of a pure thing in action will be protected by a coiart of equity in any advantage which he, has gained by his own diligence, or by tlie neglect of a prior assignee, is well illustrated by the case of Judson v. Corcoran, 17 How. 612. One W. had a claim against Mexico, which be- came the subject of adjustment and award by commissioners acting under a treaty. lu 1845, W. assigned this claim to Judson, who kept the transfer ,se"ret, gave no notice of it to any one, and took no steps whatever- until .1851, when he brought this suit. After the assignment to Judson, W. as- signed the claim to Corcoran, who had no knowledge or notice whatever of the prior transfer. He at once communicated a formal notice of his assign- ment to the United States Secretary of State, which notice was filed with other papers in the case ; he appeared and prosecuted the claim before the treaty commissioners, and obtained an award in his favor as the assignee of W. During all these proceedings Judson did not interpose any claim nor appear before the commissioners. After the award in 1851 he brought this suit against Corcoran to establish his own prior right, and to recover the amount awarded from Corcoran. The opinion of the court, per Catron, J., said : "Assuming that both sets of assignments are alike fair, and originally stood on the same bona fide footing, the rule of necessity is, that the as- signor having parted with his interest by the first assignment, the second assignee could take nothing ; and as he represents the assi-gnor, is bound by the equities imposed on the latter; and hence has arisen themaxim in such cases, that he who is first in time is best in right. But this general rule has exceptions." He then states the facts as given above, and proceeds: § 698, (a) The text is quoted in graph is cited in Lambert v. Mot- Graham Paper Co. v. Pembrt^ke, 124 ' gan, 110 Md. 1, 7, 132 Am. St. Hep. • Gal. 117, 71 Am. St. Eep. 26, 44 L. 412, 17 Ann. Cas. 439, 72 Atl. 407. R. A. 632, 56 Pac. 627. This para- ^ 698 EQUITY JURISPBtTDENCE. 1406 be said, in general, that, in order to protect himself against subsequent transfer by the assignor, where a notice is not given to the debtor or the holder of the legal interest, the assignee should obtain a delivery and possession of the "Corcoran's assignment was fair, and without knojvledge of Judson's. And assuming Judson's to be fair also, and that no negligence could be imputed to him, then the ease is one where an equity was successively assigned in a chose in action to two innocent persons whose equities are equal. Here Corcoran has drawn to his equity a legal title to the fund, which legal title Judson seeks to set aside. Now, nothing is better settled than that this cannot be done. The equities being equal, the law must prevail. There are other objections to the case made by Judson, growing out of the negligence on his part in not presenting his assignment and claim of property to the state department, so as to notify others of the fact. The assignment was held up, and operated as a latent and lurking transaction, calculated to cir- cumvent subsequent assignees, and such would be its effect on Corcoran, were priority accorded to it by our decree. It is certainly true, as a general rule, as above stated, that a purchaser of a chose in action, or of an equi- table title, must abide by the case of the person from whom he buys, and will only be entitled to the remedies of the seller; and yet there may be cases in which a purchaser, by sustaining the character of a hona fide as- signee, will be in a better situation than the person was from whom he bought." He then gives as an illustration the case of a subsequent assignee who has given notice to the debtor, while the first assignee has omitted to do so, according to the settled English rule, citing Dearie v. HaU, 3 Russ. 1, and other decisions, and adds : "And the same principle of protecting subse- quent bona fide purchasers of choses in action, against latent outstanding equities of which they had no notice, was maintained in this court in the case of Bayley v. Greenleaf, 7 Wheat. 46. That was an outstanding ven- dor's lien, set up to defeat a deed made to trustees for the benefit of the vendee's creditors. The court held it to be a secret trust ; and although to be preferred to any other subsequent equity unconnected with a legal ad- vantage, or equitable advantage which gives a superior claim to the legal title, still, it must be postponed to a subsequent equal equity connectedwith such advantage." The exact force of this decision should be carefully ap- prehended. It certainly is not an authority, as has sometimes been claimed, for the theory that assignments of things in action are never subject to out- standing equities in favor of third persons, but only to those in favor of the debtor. On the contrary, it asserts in clear and express terms the general doctrine that assignments of choses in action are subject to such equities, even though latent. To this general doctrine it announces certain exceptions, and carefully distinguishes the extent of these exceptions. They are as follows: 1. Where the second assignee, in good faith, and without 1407 CONCERNING PEIOEITIES. § 698 written instrument, whicli, in ordinary language, consti- tutes the thing in action, which embodies and is the highest evidence of the existing demand ; or when such delivery and possession are impossible from the very nature of the sub- ject-matter, that he should take all the steps permitted by the law which are equivalent to actual possession.^ The notice of the prior outstanding equity, protects or supports his own interest by obtaining a legal title or legal position ; 2. Where the second assignee, although holding only an equitable interest, took without notice of the prior outstanding secret equity, and through the laches of the third person in delaying, or other similar conduct, or through his own diligence, the second assignee has acquired a position of advantage, so that it would be inequi- table to deprive him of such advantage. In these cases, the general doc- trine that an assignment is subject to outstanding equities of third persons does not apply. These considerations would go far to reconcile the conflict of decision described in subsequent paragraphs and notes. § 698, 2 Ryall V. Rowles, 1 Ves. Sr. 348, 352; Pinkerton v. Manchester etc. E. K., 42 N. H. 424. Thus between two successive assignees of a written thing in action, such as a policy of insurance, a bond, etc., both in good faith and otherwise equal, the one to whom possession of the instru- ment has been actually delivered will obtain the precedence : Ancher v. Bank of England, Doug. 637, 639; Wells v. Archer, 10 Serg. & R. 412, 13 Am. Dec. 682; Ellis v. Kreutzinger, 27 Mo. 311, 72 Am. Dec. 270." On the same principle, if between two successive assignees of an equitable interest, otherwise equal, the subsequent one acquires the legal title or § 698, (l») The text is quoted in S. E. 392, a later assignment of an Washington Township v. First Nat. insurance policy, in the manner pre- Bank, 147 Mieh. 571, 11 L. B. A. scribed by the policy, was preferred (ST. S.) 471, 111 N. W. 349; the text to a former assignment of part of and note are cited in Coffman v. Lig- the policy, without delivery, of gett's Adm'rs, 107 Va. 418, 59 S. E. which the earlier assignee was igno- 392. To the same effect. In re rant until after the death of the Weniger's Policy, [1910] 2 Ch. 291. assignor. The first assignee of ae- So, in Bridge v. Wheeler, 152 Mass. counts and choses in action, having 343, 25 N. E. 612, the first assignee left the papers in the liands and of a life insurance policy, who re- under the Control of the assignor assigned a part to the insured and as ' agent, for collection, was post- delivered the policy to the insured, poned to a second assignee who was postponed to a iona fide as- took actual possession of them, in signee of a paid-up policy issued by Graham Paper Co. v. Pembroke, 124 the company without notice of the Cal. 117, 71 Am. St. Rep. 26, 44 L. first assignment. And in Coffnian R. A. 632, 56 Pac. 627. In Wash- V. Liggett's Adm'rs, 107 Va. 418, 59 ington Township v. Wabash B. & I. §699 EQUITY JUKISPBUDENCB. 1408 questions as to priority of right may arise between the as- signee and a judgment creditor of the assignor or a subse- quent purchaser from the assignor. There is a clear dis- tinction between these two claimants, since a judgment creditor only succeeds to the rights of his debtor, while a purchaser may acquire' higher rights.^ § 699. Assignment of Shares of Stock — Between As- signee and Assignor. — The question has very frequently arisen in this country in connection with transfers of shares of stock in business corporations. The by-laws of legal advantage, he thereby obtains the superiority; Ogden v. Fitzsimmons, 7 Craneh, 1, 18 ; Judson v. Corcoran, 17 How. 612 ; Downer v. Bank, 39 Vt. 25, 29. This rule has been applied to subsequent transferees of shares of stock who have perfected their titles by a record in the transfer-book, and by the issue of a new certificate, as against prior assignees who have not taken these steps : Morris etc. Co. v. Fisher, 9 N. J. Eq. 667; Craig v. Vicks- burg, 31 Miss. 216; and see infra, §§ 712, 715.« Works, supra, A, a contractor^ for public work, made, a written assign- ment for value to B, who permitted A to retain possession of the con- tract; A thereupon obtained non- negotiable "time orders" for the amount due under the contract, and sold them to C. Held, since B was negligent in leaving the indicia of ownership with A, he loses his pri- ority. A well-reasoned dissfenting ojiinion holds that C was not in lait misled by any indicia of owner- ili.p. The mere fact that the see- on I a^siJnment is in writing and the fiist oral does not give priority to (he second: Lexington Brewing Co. V. Hamon, 155 Ky. 711, 160 S. W. 26i. In England, between com- ,|n''iiig equitable assignments of Snares of stock, the possession of till' certificates makes the equity of flu' possessor better: Societe Gen- t.ide de Paris v. Walker, L. E. 11 App. Cas. 20, afSrming 14 Q. B. D. 424. §698 (c) In Dueber Wateh-Case Mfg. Co. v. Daugherty, 62 Ohio St. 589, 57 N. E. 455, the rule was ap- plied to the protection of the sec- ond of two parties to each of whom the legal owner of stock had agreed to assign, it, where such second equi- table assignee, after notice of the prior equity, procured an assign- ment of the stock, thus clothing him- self with what, for most purposes, was the legal title: see the facts of this case, post, in editor's note to § 710. See, also, Fairbanks v. Sar- gent, 117 N. Y. 320, 6 L. K. A. 475, 32 N. E. 1039. § 698, (d) As to judgment credi- tors of the assignor, see ante, § 694, and notes, and post, § 700, and notes. The text is quoted in Graham Paper Co. V. Pembroke, 124 Cal. 117, 71 Am. St. Eep. 26, 44 L. K. A. 632, 56 Pac. 627. 1409 OONCEENING PRIOEITIES. § 699 such companies generally, and even in some states the statutes, provide that an assignment of shares shall be con- summated and perfected by the assignee's surrendering the original certificate to»the proper officers of the cor- poration, and receiving a new one issued to himself, and by a record of the transaction entered in the company's transfer-books. It is the common practice, however, to effect an assignment by delivering the certificate to the assignee, with a power of attorney indorsed thereon exe- cuted by the assignor, authorizing the surrender to be made and- all the other steps to be taken as prescribed by the by-laws. This method of transfer, according to the over- whelming weight of authority, clothes the assignee with a full legal ownership as against the assignor, and with an equitable title and ownership valid at least as against the corporation.! ^ The only important questions, there- § 609, 1 N. Y. & N. H. R. R. v. Schuyler, 34 N. Y. 30, 80, per Davis, J.; Comm. Bank v. Kortright, 22 Wend. 348, 34 Am. Dec. 317; Cushman v. Thayer Mfi?. Co., 76 N. Y. 365, 371, 32 Am. Rep. 315; Dunn v. Commercial Bank, 11 Barb. 580; McCready v. Rninfey, 6 Duer, 574; People v. Elmore, 35 Cal. 653; Parrott v. Byers, 40 Cal. 614; People v. Crockett, 9 Cal. 112; Mt. Holly Co. V. Terree, 17 N. J. Eq. 117. The rule is concisely stated by Davis, J., in the Schuyler case, supra, as follows : "Where the stock "Of a corporation is, by the terms of its charter or by-laws, transferable only on its books, the purchaser who receives a certificate with power of attorney gets the entire title, legal and equitable, as between himself and the seller, with all the rights the latter possessed ; but as -between himself and the cor- poration he acquires only an equitable title, which they are bound to recog- nize and permit to be ripened into a legal title, when he presents himself, before any effective transfer on the books has been made, to do the acts required by the charter or by-laws. . . . Until those acts be done, he is not a stockholder, and has no claim to act as such ; but possesses, as between himself and the corporation, by virtue of the certificate and power, the . right to make himself or whomsoever he chooses a stockholder, by the pre- scribed transfer." §699, (a) See, also, Hubbard v. G. L. Co., 89 Ala. 544, 7 South. 773; Manhattan Trust Co., 87 Ted. 51; Eeed v. Copeland, 50 Conn. 472, 47 Masury v. Arkansas Nat. Bank, 93 Am. Eep. 668 (mere delivery of cer- Fed. 603, 35 C. C. A. 476, reversing tificate, with intent to pass title, 87 Fed. 381; Winter v. Montgomery sufficient to vest an equitable title 11—89 700 EQUITY JURISPRUDENCE. 1410 fore, relate to the right and priority of such an assignee as against judgment creditors of the assignor and subse- quent purchasers. §700. The Same — Between' Assignee and Judgment Creditors of Assignor. — It has been held by some courts that such a transfer of shares by a mere delivery of the certificate and power of attorney, without the further steps for completing the transaction on the transfer-books, and without any notice thereof given to the company, is pre- sumptively fraudulent, and therefore invalid as against judgment creditors of the assignor.^ A different rule, § 700, 1 Pinkerton v. Manchester etc. R. E., 42 N. H. 424 ; Shipman v. ^tna Insurance Co., 29 Conn. 245; but see Colt v. Ives, 31 Conn. 25, 81 Am. Dec. IGl." These cases, it will be seen, arose in states which have adopted the English rule concerning notice of an assignment. Similar de- cisions have been made in Massachusetts, but based entirely upon the ex- press language of a statute : Fisher v. Essex Bank, 5 Gray, 373 ; Blanchard v. Dedham Gas Co., 12 Gray, 213.* The same rule has been laid down by as against the assignor and Hs rep- resentatives) ; Victor G. Bloede Co. V. Bloede, 84 Md. 129, 57 Am. St. Eep. 373, 33 L. B. A. 107, 34 Atl. 1127; Andrews v. Worcester, N. & E. B. Co., 159 Mass. 64, 33 N. B. 1109; Walker v. Detroit Transit Co., 47 Mich. 338, 11 N. W. 187; Nicol- let Nat. Bank v. City Bank, 38 ■ Minn. 85, 8 Am. St. Eep. 643, 35 N. W. 577; Joslyn v. St. Paul D. Co., 44 Minn. 183, 46 N. W. 337; Wilson V. St. Louis & S. F. Ky. Co., 108 Mo. 588, 32 Am. St. Rep. 624, 18 S. W. 286 (such transfer cannot be invalidated by by-law of the coip- pany) ; Meredith Village Sav. Bank v. Marshall, 68 N. H. 417, 44 Atl. 526; Curtis v. Crossley, 59 N. J. Eq. 358, 45 Atl. 905 (assignment by deed); Wood's Appeal, 92 Pa. St. 379, 37 Am. Eep. 694; Boone v. Van Gorder, 164 Ind. 499, 108 Am. St. Rep. 314, 74 N. E. i; Hill v. Kerstet- ter, 43 Ind. App. 7, 86 N. E. 858; Baker v. Davie, 211 Mass. 429, 97 N. E. 1094. See, also, the cases cited post, to |§ 700, 710, etc. §700, (a) In New York Commer- cial Co. V. Francis, 83 Fed. 769, 28 C. C. A. 199, it was held, on a re- view of tfie Connecticut cases, that ' the beneficial owner of stock is not precluded, by allowing it to stand on the books in the name of an- other, from asserting title as against the creditors of the nominal owner. Contra, see White v. Eankin, 90 Ala. 541, 8 South. 118. §700, (b) The law of Massachu- setts was changed by statute in 1884; see note d, infra. By the stat- utes of a number of other states, unregistered transfers are invalid against attaching creditors: Abels V. Mobile Eeal Estate Co., 92 Ala. 382, 9 South. 423; White v. Eankin, 90 Ala. 541, 8 South. 118 (attach- 1411 CONCBENING PKIOKITIES. §700 however, must be regarded as settled by the great majority of decisions, which hold 'that this mode of assignment is valid as against creditors of the assignor, and gives the assignee a precedence over their subsequent judgments, executions, and attachments.^ the courts in California, and is rested upon the statutes ; these do not, how- ever, materially differ from the provisions of statutes, charters, and by- laws in other states : Weston v. Bear River etc. Co., 5 Cal. 186, 63 Am. Dec. 117, 6 Cal. 425, 429; Naglee v. Pacific Wharf Co., 20 Cal. 530, 533 j People v. Ehnore, 35 Cal. 653, 655.« § 700, 2 This conclusion is in complete harmony with the doctrine of those recent English cases, cited, supra, § 694, which hold that an assign- ment, although without notice to the debtor, or4rustee, has priority over judgment creditors of the assignor. The rule given in the text is sustained ment is superior not only to an un- recorded transfer, but to the equi- table title of one in whose behalf the debtor, in his own name, made the subscription) ; Masury v. Arkan- sas Nat. Bank, 93 Fed. 603, 35 G. C. A. 476, reversing 87 Fed. 381 (transfer by way of pledge is not within the terms of a statute of Arkansas requiring-the recording of stock transfers with the county clerk); Batesville, etc., Co. v. Myer, etc., Co., 68 Ark. 115, 56 S. W. 784 (same); and cases infra in this note; Ft. Madison Lumber Co. v. Batavian Bank, 71 Iowa, 270, 60 Am. Rep. 789, 32 N. W. 336; Lyndonville Nat. Bank v. Folsom, 7 N. M. 611, 38 Paij. 253. But such transfers are gener- ally protected against attaching creditors who have notice: Bridge- water Iron Co. v. Lissberger, 116 IT. S. 8, 6 Sup. Ct. 241 (under the earlier Massachusetts statute) ; Sel- ma, etc., Co. v. Harris, 132 Ala. 179, 31 South. 508; Hotchkiss & Upson Co. V. Union Nat. Bank, 68 Fed. 76 (Connecticut); corutra, see Fahrney V. Kelley, 102. Fed. 403 (Arkansas) ; Perkins v. Lyons, 111 Iowa, 192, 82 N. W. 486; Ottumwa Screen Co. v. StodghiU, 103 Iowa, 437, 72 N. W. 669; Hair v. Burnell, 106 Fed. 280 (Iowa). Under the Colorado stat- ute an attaching creditor has pri- ority over an earlier assignment of the stock unless the assignment is registered on the books of the cor- poration within sixty days of its date: First Nat. Bank v. Hastings, 7 Colo. App. 129, 42 Pac. 691; but where the corporation refuses to make the transfer although demand is made in time, the assignment is prior: Weber v. Bullock, 19 Colo. 214, 35 Pac. 183; First Nat. Bank V. Dickson (Colo.), 36 Pac. 618. " §700, (c) In California, "in order that an assignee or pledgee of a cer- tificate may protect his rights as against a purchaser at execution sale, he must cause a re-issue to him of a certificate, or he must serve no- tice on the corporation that he holds the certificate as such assignee or pledgee": West Coast Safety Faucet Co. V. Wulfe, 133 Cal. 315, 85 Am. St. Rep. 171, 65 Pac. 622. §701 EQUITY JUEISPKTJDENCE. 1412 § 701, The Same — Between Assignee and Subsequent Purchasers. — ^As between such an assignee and subsequent purchasers, the question is more complicated. I think that by the following among other decisions:* Mt. Holly Co. v. Ferree, 17 N. J. Eq. 117 ; Rogers v. N. J. Ins. Co., 8 N. J. Eq. 167 ; Broadway Bank v. McElrath, 13 N. J. Eq. 24; Commercial Bank v. Kortright, 22 Wend. 348, 34 Am. Dec. 317; McNeil v. Tenth National Bank, 46 N. Y. 325, 7 Am. Eep. 341; Grymes v. Hone, 49 N. Y. 17, 22, 10 Am, Rep. 313; Comm. V. Watmough, 6 Whart. 117; United States v. Vaughan, 3 Binn. 394, 5 Am. Dec. 375; People v. Elmore, 35 Cal. 653; Dale v. Kimpton, 46 Vt. 76 (what is sufficient notice to the debtor to protect an assignee against at- tachments and executions by creditors of the assignor; casual information or knowledge may be sufficient) ; see, also. United States v. Vaughan, 3 Binn. 394, 5 Am. Dec. 375; Stevens v. Stevens, 1 A'shm. 190; Dix v. Cobb, 4 Mass. 508. §700, (d) See, also. Continental Nat. Bank v. Eliot Nat. Bank, 7 Fed. 369; Allen v. Stewart, 7 Del. Ch. 287, 44 Atl. 786; Mapleton Bank V. Standrod, 8 Iowa, 740, 71 Pae. 119; Kice V. Gilbert, 173 111. 348, 50 N. E. 1087, affirming 72 111. App. 649; Revised Stats. Illinois, e. 77, § 52, amend, of 1883; Kern v. Day, 45 La. Ann. 71, 12 South. 6; Noble v. Turner, 69 Md. 519, 16 Atl. 124 (assignee's priority lost by laches); Boston Music Hall Ass'n v. Cory, 129 Mass. 435; Massachusetts stat- ute of 1884, e. 229; Andrews v. Wor- cester, N. & B. E. Go., 159 Mass. 64, 33 N. E. 1109; Clews v. Friedman, l82 Mass. 555, 66 N. E. 201; May v. Clelaud, 117 Mich. 45, 44 L. E. A. 163, 75 N. W. 129; Nicollet Nat. Bank v. City Bank, 38 Minn. 85, 8 Am. St. Eep. 643, 35 "N. W. 577; Lund V. Wheaton Roller-Mill Co., 50 Minn. 36, 36 Am. St. Eep. 623, 52 N. W. 268; Goyer Cold-Storage Co. V. Wildberger, 71 Miss. 438, 15 South. 235; Clark v. German Sav. Bank, 61 Miss. 611; McClintook v. Central Bank, 120 Mo. 127, 24 S. W. 1052; Wilson v. St. Louis & S. F. Ey. Co., 108 Mo. 588, 32 Am. St. Eep. 624, 18 S. W. 286; Doty v. First Nat. Bank, 3 N. D. 9, 17 L. E. A. 259, 53 N. W. 77; Cornick v. Rich- ards, 3 Lea (Tenn.), 1; Tombler v. Palestine lee Co., 17 Tex. Civ. App. 596, 43 S. W. 896; Donnally v. Heamdon, 41 W. Va. 519, 23 S. E. 646; Eeilly v. Absecon Land Co., 75 N. J. Eq. 71, 71 Atl. 24^8; but it is held, in Tennessee, that the attach- ment is superior to a sale of the stock not consummated by an actual transfer and delivery of the stock certificate until after the attachment was levied: Young v. South Tredegar Iron Co., 85 Tenn. 189, 4 Am. St. Eep. 752; Cates v. Baxter, 97 Tenn. 443, 37 S. W. 219 (attachment made before certificate was issued). To the effect that an unregistered as- signment gives the holder priority over a subsequent purchaser at exe- cution sale against the former owner, see Geo. E. Barse Live-Stock Com. Co. V. Range Valley Cattle Co., 16 Utah, 59, 50 Pac. 630; Port Town- send Nat. Bank v. Port Townsend Gas & Fuel Co., 6 Wash. 597, 34 Pac. 155. 1413 CONCERNING PEIOHITIES. § 701 general language has sometimes been used by judges, whicli indicates a confusion of mind with reference to the real situation of the parties, and the possible circumstances which might arise in the transaction. If the holder of shares should deliver the certificate with a power of attor- ney executed by himself, it would be impossible for him to clothe a subsequent assignee with the same indicia of ownership, so that the latter should have a title apparently equal to the former. On the other hand, if the holder of shares should assign them verbally or by a written instru- inent to A, but without delivering the certificate and power of attorney," and should afterwards assign them in the ordinary manner, by delivering the certificate with a power of attorney to B, the apparent title of the latter, would certainly be superior to that of the former.^ It does not seem possible, therefore, that a question of priority, on the assumption that their equitable interests are intrinsically equal, can arise between two successive assignees of the same shares from the same owner, where the assignment to one of them has been by a delivery of the certificate with a power of attorney. The questions of precedence among successive transfers executed in such a manner must arise in cases where the earlier assignment, appar- ently made by and in the name of the owner, is procured through fraud, breach of trust, or even forgery.^ The dis- cussion of this particular topic properly belongs, and will be found, in the next subdivision, which treats of the equi- ties to which assignments of things in action are subject.^ § 701, 1 Mt. Holly Co. v. Ferree, 17 N". J. Eq. 117; Bank of Commerce's Appeal, 73 Pa. St. 59, 64; Sabin v. Bank of Woodstock, 21 Vt. 353; Mc- Neil V. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341. §701, 2 See iV«,§§ 707-715. * § 701, (a) See Dueber Watch-Case competing equitable assignees, the Mfg. Co. V. Daugherty, 62 Ohio St. equity of the possessor of the cer- 589, 57 N. E. 455, in editor's note to tifieates is the better one). As to § 710, post; Societfi Generale de Paris equitable assignments by a trustee of V. Walker, L. E. 11 App. Gas. 20, shares of stock, in England, see post, affirming 14 Q. B. D. 424 (between § 714, note. § 702 EQUITY JUEISPBUDENCB. 1414 § 702. Notice to the Debtor Necessary to Prevent Subse- quent Acts by Him, — Diligence is also necessary on the part of the assignee, in order to protect his right, by giv- ing prompt notice of the transfer to the debtor, trustee, or other holder of the fund. Until notice, actual or con- structive, is received by the debtor or trustee, payment by him to the assignor would be a valid payment of the claim, and binding upon the assignee. The same would be true of a release from the assignor to the debtor or trustee, or any other transaction between them which would operate as a legal discharge; it would also be a discharge as against the assignee, if done before notice.^ * It is ex- pressly provided in many of the states that a demand in favor of the debtor, which might be a set-off against the § 702, 1 Bishop V. Garcia, 14 Abb. Pr., N. S., 69 ; Loomis v. Loomis, 26 Vt. 198; Campbell v. Day, 16 Vt. 558; Rider v. Johnson, 20 Pa. St. 190; Louden v. Tiffany, 5 Watts & S. 367; Stocks v. Dobson, 4 De Gex, M. & G. 11; Norrish v. Marshall, 5 Madd. 475; Van Keuren v. Corkins, 66 N. Y. 77, 79, 80; Kellogg v. Smith, 26 N. Y. 18; Reed v. Marble, 10 Paige, 409; N. Y. Life Ins. etc. Co. v. Smith, 2 Barb. Ch. 82; James v. Morey, 2 Cow. 246, 14 Am. Dec. 475 ; Atkinson v. Runnells, 60 Me. 440 ; Upton v. Moore, 44 Vt. 552; Cook v. Mut. Ins. Co., 53 Ala. 37; Brashear v. West, 7 Pet. 608; Muir v. Schenck, 3 Hill. 228, 38 Am. Dec. 633. § 702, (a) Merchants', etc., Bank Miller, 141 N. T. 495, 36 N. E. 394; V. Hewitt, 3 Iowa, 93, 66 Am. Dec. Strobis v. I'erge (Wis.), 78 N. W. 49; Chapman V. Steiner, 5 Kan. App. 426; Benee v. Shearman, [1898] 2 326, 48 Pac. 607; Lockrow v. Cline, Ch. 582, 67 Law J. Ch. 513, 78 Law 4 Kan. App. 716, 46 Pac. 720; Com. T. (N. S.) 804. It seems that pay- V. Burnett, 19 Ky. Law Eep. 1836, ment to a party who has never had 44 S. W. 966; Dodd v. Brett, 1 Minn. the legal title will not protect the 270, 66 Am. Dec. 541; Nielsen v. debtor who has not received notice City of Albert Lea (Minn.), 98 N. of the assignment; as where the W. 195; Faber v. Wagner (N. D.), original holder of a judgment as 86 N. W. 963; Gaullagher v. Cald- trustee assigned the same to a bona wefl, 22 Pa. St. (10 Harris) 300, 60 fide purchaser, who becomes the legal Am. Dec. 85; Cantrell v. Ford (Tenn. and equitable owner, and the debtor, Ch. App.), 46 S. W. 581; Clark v. without notice of the assignment, Hogeman, 13 W. Va. 718. As to made a subsequent payment, not to what is sufficient notice to the the original trustee, but to the origi- debtor, within this rule, see Eose v. nal cestwi que trust: Seymour v. Fritz, 109 Fed. 810; May v. Hill, 14 Smith, 114 N. Y. 481, 11 Am. St. Mont. 338, 36 Pac. 877; Crouch v. Eep. 683, 21 N. B. 1042. 1415 CONCERNING PBIORITIES. §§ 703, 704 assignor, not existing at the date of the assignment, but arising subsequently, and before notice to the debtor, shall be a valid set-off against the assignee.^ § 703. III. Assignments of Things in Action Subject to Equities.^ — The doctrine, stated in its most compre- hensive form, is, that an assignment of every non-negoti- able thing in action, even when made without notice of the defect to the assignee, is subject, in general, to all equities existing against the assignor. This broad doctrine has three different applications: 1. Where the equities are in favor of the debtor or trustee; 2. Where they arise be- tween successive assignors and assignees, — that is, in favor of some prior assignor; 3. Where they arise, entirely in favor of third persons, — the two latter cases including what are often called latent equities. As these three ap- plications depend upon somewhat different groimds, and as there is not a perfect harmony of decision concerning them, it will be expedient to discuss them separately, and thus to avoid all unnecessary doubt with respect to the settled rules. § 704. I, Equities in Favor of the Debtor Party.— The rule is settled, by an unbroken series of authorities, that the assignee of a thing in action not negotiable takes the interest assigned subject to all the defenses, legal and equitable, of the debtor who issued the obligation, or of the trustee or other party upon whom the obligation originally rested; that is, when the original debtor or trustee, in whatever form his promise or obligation is made, if it is not negotiable, is sued by the assignee, the defenses, legal and equitable, which he had at the time of the assignment, or at the time when notice of it was given, against the original creditor, avail to him against the substituted cred- §702, 2 See infra, §705. §703, (a) This and the foilowing N. E. 130; Western Nat. Bank v. paragraphs of the text are cited in Maverick Nat. Bank, 90 Ga. 339, 35 Sutherland v. Eeeve, 151 I11.-584, 38 Am. St. Rep. 210, 16 8. E. 942. § 704 EQUITY JUKISPRUDENCE. 1416 itor.i ^ This rule applies to all forms of contract not ne- gotiable, and to all defenses wMch would have been valid §704, 1 See Pomeroy on Remedies, sec. 157; Callanan v. Edwards, 32 N. Y. 483, 486, per Wright, J. : "An assignee of a chose in action, not nego- tiable, takes the thing assigned subject to all the rights which the debtor had acquired in respect thereto prior to the assignment, or to the time no- tice was given of it, when there is an interval between the execution of the transfer and the notice." See, also, Ingraham v. Disborough, 47 N. Y. 421; Wanzer v. Gary, 76 N. Y. 526; Andrews v. Gillespie, 47 N. Y. 487; B.ush V. Lathrop, 22 N. Y. 535, 538, per Denio, J.; Reeves v. Kimball, 40 N. Y. 299; Commercial Bank v. Colt, 15 Barb. 506; Western Bank v. Sher- wood, 29 Barb. 383 ; Barney v. Grover, 28 Vt. 391 ; Kamena v. Huelbig, 23 N. J. Eq. 78; Bank v. Tordyce, 9 Pa. St. 275; Ragsdale v. Hagy, 9 Gratt. 409'; Martin v. Richardson, 68 N. C. 255; Andrews v. McCoy, 8 Ala. 920, 42 Am. Dec. 669; Jeffries v. Evans, 6 B. Mon. 119, 43 Am. Dec. 158; Kleeman v. Frisbie, 63 111. 482 ; Boardman v. Hayne, 29 Iowa, 339 ; Norton V. Rose, 2 Wash. (Ya.) 233; Brashear v. West, 7 Pet. 608; Wood v. Perry, 1 Barb. 114, 131; Ainslie v. Boynton, 2 Barb. 258, 263; Frants v. Brown, 17 Serg. & R. 287; Jordan v. Black, 2 Murph. 30; McKinnie v. Rutherford, 1 Dev. & B. Eq. 14; Moody v. Sitton, 2 Ired. Eq. 382; Lackay v. Curtiss, 6 Ired. Eq. 199; Turton v. Benson, 1 P. Wms. 497; 2 Vem. 764; Coles v. Jones, 2 Vem. 692; Priddy v. Rose, 3 Mer. 86; Athenaeum etc. Soe. v. Pooley, 3 De Gex & J. 294; Stocks v. Dobson, 4 De Gex, M. & G. 11; Aber- aman Iron Works v. Wickens, L. R. 5 Eq. 485, 516, 517; 4 Ch. 101; Graham V. Johnson, L. R. 8 Eq. 36; Ex parte Chorley, L. R. 11 Eq. 157; In re §704, (a) The text is quoted in v. Poy, 56 Iowa, 539, 9 N. W. 897; Haydon v. Nieoletti, 18 Nev. 290, 3 Jolinson v. Boiee, 40 La. Ann. 273, Pae. 473; cited in Sutherland v. 8 Am. St. Eep. 528, 4 South. 163; Eeeve, 151 111. 384, 38 N. E. 130; Spinning v. Sullivan, 48 Mich. 5, 11 Preston v. Eussell, 71 Vt. 115, 44 N. W. 758; Cox v. Palmer, 60 Miss. Atl. 115; San Jose Eanch Co. v. 793; Lewis v. Holdrege, 56 Neb. 379, San Jose L. & W. Co., 132 Cal. 76 N. W. 890; Decker v. Adams, 28 582, 64 Pac. 1097. See, also, Pol- N. J. L. 511, 78 Am. Dec. 65; Clem- lard V. Vinton, 105 U. S. 7; Fried- ent v. City of Philadelphia, 137 Pa. lander v. T. & P. By., 130 U. S. 416, St. 328, 21 Am. St. Kep. 876, 20 Atl. 9 Sup. Ct. 570; Withers v. Greene, 1000; Eomig v. Erdman, 5 Whart. 50 U. S. (9 How.) 213; Eauer v. Fay, 112, 34 Am. Dec. 533; Westbury v. 110 Cal. 361, 42 Pac. 902; McJilton Simmons, 57 S. C. 477, 35 S. E. 764; v. Love, 13 111. ( 3 Peck) 486, 54 Am. Goldwaite v. National Bank, 67 Ala. Dec. 449; Bobeson v. Eoberts, 20 549; and eases cited infra, in notes Ind. 155, 83 Am. Dec. 308; Eobert- to this paragraph. As to assign- son V. Cooper, 1 Ind. App. 78, 27 ments of mortgages, see post, § 733, N. E. 104; Anthony v. Masters, 28 and notes. Ind. App. 239, 62 N. E. 505; Tabor 1417 CONCERNING PEIOBITIES. §704 between the debtor party and the original creditor. These defenses may arise out of or be inherent in the very terms China etc. Co., L. R. 7 Eq. 240; In re Natal etc. Co., L. R. 3 Ch. 355; Ex parte New Zealand Bank, L. R. 3 Ch. 154; Houlditch v. Wallace, 5 Clark & F. 629; Rolt v. White, 31 Beav. 520; Smith v. Parkes, 16 Beav. 115; Cockell V. Taylor, 15 Beav. 103; Dibbs v. Goren, 11 Beav. 483. Upon the question whether the doctrine stated in the text applies to mortgages given to secure negotiable promissory notes — a fprm of security very common in some states — the authorities are in direct conflict. In one class of decisions it has been held that where a mortgage is given to secure a negotiable promis- sory note and before inaturity of the note it and the mortgage are assigned to a iona fide purchaser for value, the assignment of the mortgage as well as of the note is free from all equities subsisting between the original par- ties in favor of the mortgagor -.^ Carpenter v. Longan, 16 Wall. 271, 273 ; §704, (b) Negotiate Note Makes Negotiable Mortgage. — See, also, Beals V. Neddo, 2 Fed. 43; O'Kourke v. WaM, 109 Fed. 276, 48 C. C. A. 360; Cudahy Packing Co. v. State National Bank, 134 Fed. 538, 67 C. C. A. 662, affirming 126 Fed. 543; Peninsula Bank v. Wolcott, 232 Fed. 68, 146 C. C. A. 260; Hawley v. Bibb, 69 Ala. 52; Spence v. Mobile, etc., Ey. Co., 79 Ala. 576 (citing the author's note); Thompson v. Mad- dux, 117 Ala. 468, 23 South. 157; Cowing V. Cloud (Colo. App.), 65 Pac. 417; Scott v. Taylor, 63 Fla. 612, 58 South. 30; Baumgartner v. Peterson, 93 Iowa, 572, 62 N. W. 27; Jenks V. Shaw, 99 Iowa, 604, 61 Am. St. Eep. 256, 68 N. W. 900 (but the assignment of the note is not free from equities as respects a bona fide purchaser of the premises from the mortgagor and mortgagee) ; Lewis v. Kirk, 28 Kan. 497, 42 Am. Eep. 173 (a clear statement of the rules re- lating to the subject of the nego- tiability of mortgages) ; Fisher v. Cowles, 41 Kan. 418, 22 Pac. 228; Harrison Nat. Bank v. Pease, 8 Kan. App. 573, 54 Pac. 1038; Duncan v. Louisville, 13 Bush (76 Ky.), 378, 26 Am. Eep. 201 (observations on the policy of the rule); Murphy v. Barnard, 162 Mass. 72, 44 Am. St. Eep. 340, 38 N. E. 29; Biggerstaff v. Marston, 161 Mass. 101, 36 N. E. 785; Barnum v. Phenix, 60 Mich. 388, 27 N. W. 577; Williams v. Keyes, 90 Mich. 290, 30 Am. St. Eep. 438, 51 N. W. 520; Wilson v. Campbell, 110 Mich. 580, 35 L. E. A. 544, 68 N. W. 278; Cox v. Cayau, 117 Mich. 599, 72 Am. St. Eep. 585, 76 N. W. 96; Crawford v. C. Aultman & Co., 139 Mo. 262, 40 S. W. 952; Borgess Investment Co. v. Vette, 142 Mo. 560, 64 Am. St. Eep. 567, 44 S. W. 754; Black v. Eeno, 59 Fed. 917 (Missouri) ; Eggert v. Beyer, 43 Neb. 711, 62 N. W. 57; Stark v. Olsen, 44 Neb. 646, 63 N. W. 37; Bull v. Mitchell, 47 Neb. 647, 66 N. W. 632; Eiehards v. Waller, 49 Neb. 639, 68 N. W. 1053; Porter v. Ourada, 51 Neb. 510, 71 N. W. 52; Herbage v. Moodie, 51 Neb. 837, 71 N. W. 778; Assets Eealization Co. v. Clarke, 205 N. T. 105, 41 L. E. A. (N. S.) 462, and note 98 N. E. 457 (payment by mortgagor to record owner no pro- tection from suit by assignee), First Nat. Bank v. Flath, 10 N. D. 281, §704 EQUITY JUEISfRTTDENCB. 1418 or nature of tlie obligation itself, as that it was condi- tional and the condition has not been performed by the Kenieott v. Supervisors, 16 Wall. 452, 469; Taylor v. Paige, 6 Allen, 86; Reeves v. ScuUy, Walk. Ch. 248; Croft v. Bunster, 9 Wis. 503, 509; Cor- nell V. Hichens, 11 Wis. 353 ; Fisher v. Otis, 3 Chand. 83 ; Martineau v. McCollum, 4 Chand. 153; Potts v. Blackwell, 4 Jones Eq. 58; Bloomer v. Henderson, 8 Mich. 395, 77 Am. Dec. 453; Cicotte v. Gagnier, 2 Mieh. 381; Pierce v. Faunce, 47 Me. 507. Other cases reach exactly the opposite con- clusion, and hold that the assignment of such a mortgage is governed by the general rule:" Kleeman v. Frisbie, 63 111. 482; Bryant v. Vis, 83 111. 86 N. W. 867; Smith v. First Nat. Bank, 23 Okl. 411, 29 L. K. A. (If. S.) 576, and note, 104 Pac. 1080; Bamberger v. Geiser, 24 Or. 203, 33 Pae. 609; Talbert v. Talbert, 97 S. C. 136, 81 S. E. 644; Nashville Trust Co. V. Smythe, 94 Tenn. 513, 45 Am. St. Kep. 748, 29 S. W. 903 (an instruc- tive case) ; Heidenheimer v. Stewart, 65 Tex. 321; Solinsky v. Bank, 82 Tex. 246, 17 S. W. 1050; Boone v. Miller, 86 Tex. 80, 81, 23 S. W. 574; Van Burkleo v. Southwestern Mfg. Co. (Tex. Civ. App.), 39 S. "W. 1085; American Savings Bank & Trust Co. V. Helgesen, 64 Wash. 54, Ann. Cas, 1913A, 390, 116 Pao. 837; Crosby v. Eoub, 16 Wis. 616, 84 Am. Dec. 720; Kelley v. Whitney, 45 Wis. 110, 30 Am. Eep. 697; Miller Brewing Co. v. Manasse, 99 Wis. 99, 67 Am. St. Eep. 854, 74 N. W. 535; Bautz v. Adams, 131 Wis. 152, 120 Am. St. Eep. 1030, 111 N. W. 69 (mortgagor not pro- tected by payment to mortgagee). Where the mortgage secured a forged note, the mortgage itself is, of course, subject to equities: Tabor V. Foy, 56 Iowa, 539, 9 N. W. 897. §704, (c) Negotiable Note Does not Make Mortgage Negotiable. — See, also, Olds v. Cummings, 31 111. 188 (a leading case) ; Towner v. Mc- Clelland, 110 111. 542; Shippenv. Whittier, 117 111. 282, 7 N. E. 642; Scott V. MaglougWin, 133 HI. 33, 24 N. E. 1030; McAuliffe v. Eeuter, 166 m. 491, 46 N. E. 1087; Buehler v. MeCormick, 169 111. 269, 48 N. E. 287 (stating considerations as to the pol- icy of the rule) ; Bouton v. Cameron, 205 111. 50, 68 N. E. 800; Johnson V. Carpenter, 7 Minn. 120; Hostetter V. Alexander, 22 Minn. 559; Blumen- thal V. Tassey, 29 Minn. 177, 12 N. W. 517; Oster v. Mickley, 35 Minn. 245, 28 N. W. 710; Olson v. North- western Guaranty Loan Co., 65 Minn. 475, 68 N. W. 100; Paulsen V. Koon, 85 Minn. 240, 88 N. W. 760; Woodruff v. Morristown Inst., 34 N. J. Eq. 174; Foster v. McGuire, 96 Ga. 447, 23 S. E. 398; First Na- tional Bank v. Brotherton, 78 Ohio St. 162, 84 N. E. 794. A similar rule prevails under the Louisiana system: See Doll v. Eigotti, 20 La. Ann. 265, 96 Am. Dec. 399; Butler V. Sloeomb, 33 La. Ann. 170, 39 Am. Eep. 265; State National Bank v. Flathers, 45 La. Ann. 75, 40 Am. St. Eep. 216, 12 South. 243 (stating the Louisiana rule with exactness) ; Layman v. Vicknair, 47 La. Ann. 679, 17 South. 265; Equitable Se- curities Co. V. Talbert, 49 La. Ann. 1393, 22 South. 762; Pertuit v. Da- mare, 50 La. Ann. 893, 24 South. 681. For further discussion of these competing rules, see post, § 1210, notes. 1419 CONCERNING PBIOKITIES. § 704 assignor, failure or illegality of the consideration, and the like ; or they may exist outside of the contract, as set-off, payment, release, the condition of accounts between the original parties, and the like. Some examples are given in the foot-note, by way of illustration.^ d It is essential, 11; Baily v. Smith, 14 Ohio St. 396, 84 Am. Dec. 385. The reasoning of these Illinois decisions is, in my opinion," most in accordance with the settled doctrines of equity jurisprudence, namely, that the assignment of the mort- gage, whether it he an incident of the transfer of the note, or be direct, is wholly equitable, and gives only an equitable title to the assignee, and must therefore be subject to all subsisting equities; the doctrine of bona fide purchase for a valuable consideration not applying to transfers of mere equitable interests. § 704, 2 Of the Kinds of Contract. — Shares and obligations of corpora/- tions :« In re China etc. Co., L. R. 7 Eq. 240 ; In re Natal etc. Co., L. R. 3 Ch. 355. Bonds, or bonds and mortgages: Turton v. Benson, 1 P. Wms. 497; Western Bank v. Sherwood, 29 Barb. 383.' A warehouseman's re- ceipt : Commercial Bank v. Colt, 15 Barb. 506. Assignment for benefit of creditors:*^ Marine Bank v. Jauncey, 1 Barb. 486; Maas v. Goodman, 2 Hilt. 275. Contract for the sale of land in an action for a specific per- formance by an assignee of the vendee : Reeves v. Kimball, 40 N. Y. 299.'' Of Defenses. — In an action on a bond and mortgage by the assignee, the defense that they were given on consideration that the mortgagee should per. §704, (d) The text is quoted in 238; Eeese v. Bank of Commerce, 14 Selden v. Williams, 108 Va. 542, 62 Md. 271, 74 Am. Dec. 536. S. E. 380 (failure of consideration). §704, (t) As to assignment of The text is cited in De Laval Sep- mortgages, see post, § 733, and notes, arator Co. v. Sharpless, 134 Iowa, §704, (s) That an assignee for 28, 111 N. W. 438 (assignee of judg- the benefit of creditors is not a pur- ment takes subject to equities, in- chaser for a valuable consideration, eluding right of set-oS). seo post, § 749. §704, (e) Corporation Shares. — §704, (h) No^negotidble Note: See, also, Hammond v. Hastings, Spinning v. Sullivan, 48 Mich. 5, 11 134 IT. S. 401, 10 Sup. Ct. 727; Jen- N. W. 758; Robertson v. Cooper, 1 nings .V. Bank of California, 79 Cal. Ind. App. 78, 27 N. E. 104; Taylor' 323, 12 Am. St. Rep. 145, 5 L. R. A. v. Jones, 165 Cal. 108, 131 Pac. 114 233, 21 Pae. 852; Craig v. Hesppia (notes secured by mortgage); Mar- L. & W. Co., 113 Cal. 7, 54 Am. St. shall v. Porter, 71 W. Va. 330, 76 Rep. 316, 35 L. R. A. 306, 45 Pac. S. E. 653 (equitable counterclaim 10; Perkins v. Cowles, 157 Cal. 625, against an assignee may be set up 137 Am. St. Rep. 158, 30 L. R. A. against a subsequent assignee). (N. S.) 283, 108 Pac. 711; Hampton Bill of Lading, fraudulently issued & Branchville R. & L. Co. v. Bank by the agent of the carrier, without of Charleston, 48 S. C. 120', 26 S. E. receiving the goods named therein: § 704 EQUITY JUEISPETJDEUCB. 1420 however, that the equity in favor of the debtor should exist at the time of the assignment or before notice thereof; form certain covenants contained in a collateral agreement between himself and the mortgagor, and that he had wholly failed to perform them, was sus- tained : Western Bank v. Sherwood, 29 Barb. 383. Failure or illegality of the consideration, or that the assigned obligation was given as collateral security for a debt which has been paid:* Ellis v. Messervie, 11 Paige, 467; Weaver v. McCorkle, 14 Serg. & R. 304; McMullen v. Wenner, 16 Serg. & R. 18 ; 16 Am. Dec. 543. That the bond or other obligation assigned had been wholly or partially satisfied: Simson v. Brown, 68 N. Y. 355, 361; Kelly V. Roberts, 40 N. Y. 432; Turton v. Benson, 1 P. Wms. 497; Rolt v. White, 31 Beav. 520; Smith v. Parkes, 16 Beav. 115; Ord v. White, 3 Beav. 357. A set-off existing in favor of the debtor at the time of the assignment or notice thereof :* Loomis v. Loomis, 26 Vt. 198 ; Campbell v. Day, 16 Vt. 558; Rider v. Johnson, 20 Pa. St. 190; Louden v. Tiffany, 5 Watts & S. 367; Moore v. Jervis, 2 Coll. C. C. 60; Stephens v. Venables, 30 Beav. 625; Willes V. Greenhill, 29 Beav. 376; Cavendish v. Geaves, 24 Beav. 163, 173. Where money coming due on a contract is assigned, the assignee's claim is subject to all the conditions and terms of the contract: Tooth v. Hallett, L. R. 4 Ch. 242; Myers v. United etc. Assn. Co., 7 De Gex, M. & G. 112; Bristow V. Whitmore, 9 H. L. Cas. 391. An assignment by a stockholder of his shares or of corporation obligations is subject to all equities and Pollard V. Vinton, 105 XT. S. 7; Ind. App. 78, 27 N. B. 104 (iUegal- Friedlander v. T. & P. Ey. Co., 130 ity); McFarland v. Lyon, 4 Tex. U. S. 416, 9 Sup. Ct. 570. Civ. App. 586, 23 S. W. 554 (faU- County Warrants: Wall v. County ure); York v. McNutt, 16 Tex. 13, of Monroe, 103 U. S. 77. 67 Am. Dec. 607 (illegality) ; Selden Bequisition drawn on school funds V. Williams, 108 Va. 542, 62 S. E. of a public school district: Shake- 380, quoting the text; Buckeye Ee- spear v. Smith, 77 Cal. 638, 11 Am. fining Co. v. Kelly, 163 Cal. 8, St. Rep. 327, 20 Pac. 294. Ann. Cas. 1913E, 840, 124 Pae. 536. Certificate of Sale of School Lands §704, (J) Set-off: Porter v. Lis- obtained by fraud: Dd Laittre v. com, 22 Cal. 430, 83 Am. Dec. 76; Board of Comm'rs, 149 Fed. 800. Third Nat. Bank v. Western & A. E. Judgment: Anthony v. Masters, 28 Co., 114 Ga. 890, 40 S. E. 816; Ind. App. 239, 62 N. E. 505; John- Northwestern & P. Hyp otheek -Bank son V. Boice, 40 La. Ann. 273, 8 v. Eaueh (Idaho), 66 Pac. 807; Col- Am. St. Eep. 528, 4 South. 163; De lins .v. Campbell, 97 Me. 23, 28, 94 Laval Separator Co. v. Sharpless Am. St. Rep. 458, 463, 53 Atl. 837; (Iowa), 111 N. W. 438, citing this Eayburn v. Hurd, 20 Or. 229, 25 paragraph of the text (set-off Pae. 635; Clement v. City of Phila- against judgment); State v. Holt delphia, 137 Pa. St. 328, 21 Am. St. County, 89 Neb. 445, 131 N. W. 960. Hep. 876, 20 Atl. 1000; Ketchem v. §704, (1) Eobertson v. Cooper, 1 Foot, 15 Vt. 258, 40 Am. Dec. 678. 1421 CONCERNING PBIOEITIES. § 704 after receiving notice, he cannot, by a payment, release, obtaining a set-off, or any other act, defeat or prejudice claims with respect thereto existing against him in favor of the company at the date of the transfer :>' In re Natal etc. Co., L. R. 3 Ch. 355 ; In re China Steamship Co., L. R. 7 Eq. 240. Kleeman v. Frisbie, 63 111. 482 (assignment of a mortgage or deed of trust given to secure a negotiable promissory note is subject to all equities) ; Parmalee v. Wheeler, 32 "Wis. 429 (assignment of a judgment, ditto) ; Broadman v. Hayne, 29 Iowa, 339 (of an order made by a board of school trustees) ; Downey v. Tharp, 63 Pa. St. 322 (what is not such an equity or defense. Where a demand has been twice assigned, the debtor cannot set off as against the seeoi;d assignee a claim against the first). It is held in Massachusetts, under the General Statutes (o. 161, sec. 64), that when the creditor assigns a note and mort- gage given as collateral security for a debt, after the debt so secured had been paid, to an assignee for a valuable consideration and without notice, the title of such innocent assignee is not affected by the fraud of his as- signor, and is therefore good as against the mortgagor: Draper v. Saxton, 118 Mass. 427. Also iii McMasters v. Wilhelm, 85 Pa. St. 218, it is held that the assignee of a mortgage is not affected by a collateral agreement between the mortgagor and mortgagee, made at the time of executing the mortgage, and of which he had no notice. See, as further illustrations of the doctrine stated in the textj Allen v. Watt, 79 111. 284 ; Hall v. Hickman, 2 Del. Ch. 318.» §704, (k) Assignment of Stock is Pac. 383; Independent Scliool Dist. Suhject to Corporation's Equities: v. Hardia, 106 Iowa, 295, 76 N. W. Hammond v. Hastings, 134 V. S. 794; Shuttleworth v. Kentucky Coal, 401, 10 Sup. Ct. 727; Jennings v. I. & D. Co., 22 Ky. Law Eep. 1341, Bank of California, 79 Cal. 323, 12 60 S. W. 534; Fisken v. Milwaukee Am. St. Eep. 145, 5 Ji. R. A. 233, 21 Bridge & Iron Works, 87 Mieh. 591, Pae. 852; Craig v. Hesperia L. & W. 49 N. W. 873 (afp. 86 Mick. 199, 49 Co., 118 Cal. 7, 54 Am. St. Kep. 316, N. W. 133); Van Akin v. Dunn, 117 35 L. R. A. 306, 45 Pac. 10; Perkins Mich. 421, 75 N. W. 938; Hoover v. V. Cowles, 157 Cal. 625, 137 Am. St. Columbia Nat. Bank, 58 Neb. 420, Rep. 158, 30 L. R. A. (N. S.) 283, 78 N. W. 717; Jones v. Savage, 53 108 Pac. 711; Keese v. Bank of Com- N. Y. Qupp. 308, 24 Misc. Rep. 158; meroe, 14 Md. 271, 74 Am. Dec. 536; Murray v. Governeur, 2 Johns. Cas. Hampton & Branchville E. & L. Co. 438, 1 Am. Dec. 177. The debtor V. Bank of Charleston, 48 S. C. 120, may set up res adjudicata: Porter v. 26 S. E. 238. Bagby, 50 Kan. 412, 31 Pac. 1058. §704, (1) The debtor can set up A iudg-ment in the lands of an as- that his contract with the assignor signee may be vacated or set aside hag not been performed. The as- for the same cause that would signee takes subject to all the terms justify such vacation in the hands of the contract: Pacific Eolling- of the original plaintiff: Weber v. Mill Co. V. Engli-sh, 118 Cal. 123, 50 Tschetter, 1 S. D. 205, 46 N. W. 201. §704 EQUITY JUEISPB.UDENCB. 1422 the right of the assignee.™ The debtor who would have been entitled to equities under this rule may, by a writing, or by actual misrepresentations, or by conduct, or even by silence towards the assignee, estop himself from setting them up, and he may release them.^ " §704, 3 As -where the maker of an accommodation note represents, to one who is about to discount it at more than the legal rate of interest, that it is business paper, and thereby estops himself from setting up the defense of usury in its inception. Representation under similar circumstances, that the obligation about to be assigned was given upon a valuable consideration, would estop the debtor from relying upon the actual want of consideration And see Magin v. Lamb, 43 Minn. 80, 19 Am. St. Rep. 216, 44 N. W. 675. The debtor may set up that lumber delivered had been paid for by prior advances: Tyler Car & Lumber Co. v. Wettermark, 12 Tex. Civ. App. 399, 34 S. W. 807. The assignee cannot be affected, how- ever, by collateral transactions, secret trusts, or acts unconnected with the subject of the contract: Kountz v. Kirkpatrick, 72 Pa. St. 376, 13 Am. Sep. 687. If the as- signee claims under an assignment valid as against the assignor, the debtor cannot question its validity: Van Dyke v. Gardner, 49 N. T. Supp. 328, 22 Misc. Eep. 113 (aff. 47 N. Y. Supp. 710, 21 Misc. Eep. 542); Adair v. Adair, 5 Mich. 204, 71 Am. Dec. 779; Johnson v. Beard, 93 Ala. 96, 9 South. 535. The mere fact that the assignor could not sue does not preclude a recovery by the assignee. Thus, where statute dis- abled partnerships doing business under fictitious names from suing unless a certificate had been filed, the assignee of a partnership under the disability has been allowed to recover: Quan Wye v. Chin Lin Hee, 123 Cal. 185, 55 Pac. 783. §704, (m) Equity Arising After Notice of Assignment: Bank of Har- lem V. City of Bayonne, 48 N. J. Eq. 246, 21 Atl. 478, citing the text; affirmed, 48 N. J. Eq. 646, 25 Atl. 20; Todd V. Meding (N. J. Eq.), 38 Atl. 349 (assignment of part of claim) ; Lampson v. Fletcher, l Vt. 168, 18 Am. Dec. 676; Sanders v. Soutter, 136 N. Y. 97, 32 N. E. 638; McCarthy v. Mt. Tecarte etc.. Water Co., 110 Cal. 687, 43 Pac. 391; Kitzinger v. Beck, 4 Colo. App. 206, 35 Pac. 278; Schelling v. Mul- len, 55 Minn. 122, 43 Am. St. Rep. 475, 56 N. W. 586; Oldham v. Led- ibetter, 1 How. (Miss.) 43, 26 Ain. Lrcj. b90; Ferguson v. Davidson, 147 Mo. 664, 49 S. W. 859; Field v. City of New York, 6 N. Y. (2 Seld.) 179, 57 Am. Dec. 435; Ernst v. Estey Wire Works Co., 45 N. Y. Supp. 932, 20 Misc. Bep. 365; Anniston Nat. Bank v. School Committee, 118 N. C. 383, 24 S. E. 792; Bank of Spring City V. Eea County (Tenn. Ch. App.), 59 S. W. 442; Texas & P. Ey. Co. V. Vaughn, 16 Tex. Civ. App. 403, 40 S. W. 1065; Powell v. Gal veston, H. & S. A. Ry. Co. (Tex. Civ. App.), 78 S. W. 975. §704, (n) Estoppel to Assert Equities: Woodruff v. Morristown Inst., 34 N. J. Eq. 174 (mortgagor es- topped to set up defenses); Mor- rison V. Beckwith, 20 Ky. (4 T. B. 1423 CONCERNING PBIOBITIBS. § 705 § 705. Statutory Provision — Codes of Procedure. — Since the general doctrine concerning the rights of the debtor parties as against assignees has been expressly recognized and preserved in all the codes and practice acts of the states and territories which have adopted the reformed procedure, it will be proper to exhibit, in a very brief man- ner, . the results of the judicial interpretation put upon these statutory provisions, although they apply to legal as well as to equitable actions. The pro'Vision found in the various codes is substantially as follows: "In the case of an assignment of a thing in action, the action of the as- signee shall be without any prejudice to any set-off or other defense existing at the time of or before notice of the assignment; but this section shall not apply to nego- as a defense: In re Northern etc. Co., L. R. 10 Eq. 458, 463; In re Agra etc. Bank, L. R. 2 Ch: 391; In re General Estates Co., L. R. 3 Ch. 758; In re Blakeley Ordnance Co., L. R. 3 Ch. 154; Higgs v. Northern etc. Co., L. R. 4 Ex. 387; Watson's Ex'rs v. McLaren, 19 Wend. 557; Sargeant v. Sargeant, 18 Vt. 371 ; Bank v. Jerome, 18 Conn. 443 ; Jones v. Hardesty, 10 Gill. & J. 404." Where A executed a bond and mortgage purporting to be for twenty thousand dollars to B, but which was actually without any consideration, and C bought the seciirity at a large discount (for sixteen thousand dollars) upon the faith of a written statement by M. that the amount expressed in the instrument was the true consideration; held, that M. was estopped from asserting a want of consideration to the full extent of the face of the bond and mortgage : Grissler v. Powers, 81 N. Y. 57, 37 Am. Rep. 475. See, also, as illustrations of such estoppel, Ashton's Ap- peal, 73 Pa. St. 153, 161, 162; Twitchell v. McMurtrie, 77 Pa. St. 383; Scott V. Sadler, 52 Pa. St. 211 ; Weaver v. Lynch, 25 Pa. St. 449, 64 Am. Dec. 713 ; McMuUen v. Wenner, 16 Serg. & R. 18, 6 Am. Dec. 543 ; Kellogg v. Ames, 41 N. Y. 259; Holbrook v. N. J. Zinc Co., 57 N. Y. 616, 622, 623; Petrie V. Eeeter, 21 Wend. 172; Hall v. Purnell, 2 Md. Ch. 137; Foot v. Ketchum, 15 Vt. 258, 40 Am. Dec. 678; King v. Lindsay, 3 Ired. Eq. 77. Monroe) 73, 16 Am. Dec. 136; Fol- (when mortgage is assigned, es- lett V. Eeese, 20 Ohio, 546, 55 Am. toppel rule of § 710 does not apply Dec. 472; Cincinnati, N. O. & T. P. to equities between the original Ky. Co. V. Citizens' Nat! Bank, 56 parties). Ohio St. 351, 43 L. E. A. 777, 47 -N. §704, (o) Robinson v. Montgom- E. 249; but see Bapps v. Gottlieb, eryshire Brewery Co., [1896] 2 Ch. 142 N. Y. 164, 36 N. E. 1052, affirm- 841, ing -67 Hun, 115, 22 N. Y. Supp. 52 § 706 EQUITY JUEISPRTJDENCB. 1424 tiable promissory notes and bills of exchange [and negoti- able bonds : Ohio, Kansas, Nebraska] , transferred in good faith and upon good consideration before due." ^ In Ohio, Kansas, Nebraska, and Washington the language is, "The action of the assignee shall be without prejudice to any set-off or other defense now allowed. ' ' ^ § 706. Same Continued. — The defenses which this clause admits should be earefully distinguished from counter- claims subsequently provided for by the codes. This sec- tion speaks of defenses which simply prevent the plaintiff from succeeding, and may be available against an assignee, as well as against the original creditor. The counterclaim assumes a right of action against, and demands affirmative relief from, the plaintiff, and is therefore impossible, as against an assignee suing, if it existed against the as- signor. It was not intended by the codes to alter the sub- stantial rights of parties, but only to introduce such modifications into the modes of protecting them as were rendered necessary by the preceding section requiring the real party in interest in most cases to be the plaintiff. Taking the two sections together, the plain interpretation of them is : the assignee of a thing in action must sue upon it in his own name, but this change in the practice at law shall not work any alteration of the actual rights of the parties ; the defendants are still entitled to the same de- fenses against the assignee who sues which they would have had H the former legal rule had continued to prevail, and the action had been brought in the name of the as- signor, but to no other or different defenses. This con- § 705, 1 New York (old code), see. 112; (new code, sec. ) ; Minne- sota, sec. 27; California, sec. 368; Wisconsin, e. 122, see. 13; Indiana, sec. 6 ; Kentucky, sec. 31 ; South Carolina, see. 135 ; North Carolina, sec. 55 ; Oregon, sees. 28, 382; Nevada, sec. 5; Iowa, sec. 2546; Dakota, see. 65; Idaho, sec. 5 ; Montana, sec. 5 ; Washington, sec. 3 ; Wyoming, see. 33 ; Ari- zona, sec. 5. §705, 2 Ohio, sec. 26; Kansas, sec. 27; Nebraska, see. 29; Washington, sec. 3, slightly varied. 1425 CONCERNING PBIOKITIES, § 706 struction is now firmly and universally established. ^ I have placed in the foot-note a number of decisions involv- ing the meaning and effect of this statutory provision, and relating especially to the time at which the set-off or other defense must exist, in order that it may be available against the assignee.^ § 706, 1 Beckwith v. Union Bank, 9 N. Y. 211, 212, per Johnson, J.; Myers v. Davis, 22 N. Y. 489, 490, per Denio, J. § 706, 2 Set-off. — There is a difference among these decisions. In some it is held that the assigned claim, and the claim in favor of the defendant, must both be existing demands, due and payable at the date of the assign- ment, and that it is not sufficient for the latter to become a demand due and payable after the assignment, but before notice thereof. In others it is held that a debt existing in favor of the defendant, and becoming due. and payable against the assignor at any time before notice of the assign- ment, constitutes a valid set-off. The rule concerning equitable set-off, when the assignor is insolvent, is also admitted in several of these cases : Beck- with V. Union Bank, 9 N. Y. 211; Myers v. Davis, 22 N. Y. 489, 490; Martin v. Kuntzmuller, 37 N. Y. 396; Barlow v. Myers, 64 N. Y. 41, 21 Am. Rep. 582; reversing 6 N. Y. Sup. Ct. 183; Roberts v. Carter, 38 N. Y. 107; Robinson v. Howes, 20 N. Y. 84; Merrill v. Green, 55 N. Y. 270, 274; Frick V. White, 57 N. Y. 103; Blydenburgh v. Thayer, 3 Keyes, 293; Will- iams V. Brown, 2 Keyes, 486; Watt v. Mayor etc., 1 Sand. 23; Wells v. Stewart, 3 Barb. 40; Ogden v. Prentice, 33 Barb. 160; Maas v. Goodman, 2 Hilt. 275; Lathrop v. Godfrey, 6 Thomp. & C. 96; Adams v. Rodarmel, 19 Ind. 339; Morrow's Assignees v. Bright, 20 Mo. 298; Walker v. McKay, 2 Met. (Ky.) 294; Gildersleeve v. Burrows, 24 Ohio St. 204; Norton v. Foster, 12 Kan. 44, 47, 48; Leavenson v. Lafontaine, 3 Kan. 523, 526 > Harris v. Burwell, 65 N. C. 584; Richards v. Daily, 34 Iowa, 427, 429; Smith v. Fox, 48 N. Y. 674; Smith v. Felton, 43 N. Y. 419; Bradley v. Angell, 3 N. Y. 475, 478 ; Chance v. Isaacs, 5 Paige, 592 ; Martin v. Richard- son, 68 N. C. 255, and eases cited ; McCabe v. Grey, 20 Cal. 509 ; Herrick V. Woolverton, 41 N. Y. 581, 1 Am. Rep. 461; Miller & Co. v. Florer, 15 Ohio St. 148, 151; Loomis v. Eagle Bank, 10 Ohio St. 327; Casad v. Hughes, 27 Ind. 141 ; Lawrence v. Nelson, 21 N. Y. 158 ; Osgood v. De Groot, 36 N. Y. 348; Merritt v. Seaman, 6 N. Y. 168; Field v. Mayor etc.,- 6 N. Y. 179, 57 Am. Dec. 435.» And see Pomeroy on Remedies, sees. 163-170. §706, (a) MeKenna v. Kirkwood, Eep. 312; Goldthwaite v. National 50 Mich. 544, 15 N. W. 898; Fuller Bank, 67 Ala. 549. V. Steiglitz, 27 Ohio St. 355, 22 Am. 11—90 § 707 EQUITY JURISPRUDENCE. 1426 §707. 2. Equities Between Successive Assignors and Assignees.^ — The doctrine is not confined to the case of the debtor party setting up a defense against an assignee; it also applies, when the same non-negotiable thing in action has gone through successive assignments, to the second and subsequent assignees, if there were equities subsist- ing between the original assignor — or cmy prior assignor — and his immediate assignee in favor of the former. The instances of this application include the following, among other circumstances: When the owner transfers the thing in action upon condition, or subject to any reservations, and this immediate assignee transfers it absolutely; when the first assignment is accomplished by a forgery . of the ' owner 's name, and this assignee afterwards transfers to an innocent purchaser for value; when the original assign- ment is procured by fraud, duress, or undue influence, and a second assignment is then made to a purchaser for value and without notice; when the original assignment is regu- lar on its face, executed in the name of the owner and by means of his signature voluntarily written, but the transfer is consummated through, a breach of fiduciary duty by an agent or bailee contrary to the owner's intention, and this immediate assignee transfers to an innocent holder; and finally, when the original owner assigns the same thing in action for value and without notice, first to A and after- wards to B, and the controversy is between these two claimants, or between subsequent assignees from and de- riving title through them. The decisions involving the doctrine, in its application to these various circumstances, are directly conflicting. While a complete reconciliation of this conflict is impossible, there are considerations which will bring the authorities into a partial harmony. The rule which makes the right of a subsequent assignee sub- ject to the equities subsisting in favor of the original or § 707, (a) |§ 707-711 are cited in Graham Paper Co. v. Pembroke, Sutherland v. Eeeve, 151 111. 384, 124 Gal. 117, 71 Am. St. Eep. 26, 38 N. E. 130. § 707 is cited in 44 L. B. A. 312, 56 Pac. 627. 1427 CONCERNING PBIOBITIBS. § 708 any prior assignor is plainly a mere expression of the general principle, that among successive equitable inter- ests in the samei thing, the order of time prevails. The decisions which uphold the equities of the prior assignor are either expressly or impliedly based upon this prin- ciple. But the principle itself is not absolute ; it prevails only where the successive equitable interests are equal; indeed, the equity resulting merely from priority in time has been said to be the feeblest of any, and to be resorted to only when there is no other feature or incident of su- periority.i Whatever creates a superior equity in one of the successive holders will disturb the order of time, and many different features or incidents will have this effect. The laches of one having an interest prior in time may con- fer a superior equity upon a subsequent holder; notice may destroy a precedence otherwise existing ; absence of a valu- able consideration is always a badge of inferiority; and finally, the doctrine of estoppel may be properly invoked to prevent a prior party from asserting his right. In many of the cases which appear to deny the doctrine that a sub- sequent assignee takes subject to the equities of a prior assignor or of a third person, the decision is in fact rested upon one or the other of these well-settled exceptions to the general principle of priority in order of time among suc- cessive equitable interests, although the opiuion may not perhaps state such a ground as the ratio decidendi. It is possible, in this manner, to affect a partial reconcilement among the authorities; some conflict of opinion, however, still remains. § 708. General Rule — Assignment Subject to Latent Equities. — ^The equities of a prior assignor, or of a third person, hav^ sometimes been called "latent." The theory that such: ';' latent equities" cannot prevail against the title § 707, 1 See swpffls, vol. 1, § 414, and the opinion in Rice v. Rice, 2 Drew. .73, there quoted, 1 This (Jescription of the right resulting from a priority in time is, in my opinion, much too strong; it can hardly be reconciled with the imposing line of authorities cited in i the following paragraphs. § 708 EQUITY JUEISPRUDENCE. 1428 of a second or other subsequent assignee, and that an as- signee only takes subject to the equities in favor of the debtor party, has received some judicial support.^ It is, however, unsound; it is, in effect, an extension of the peculiar qualities of negotiablf' instruments to things in action not negotiable.* The doctrine is sustained by the weight of authority, I think, and by principle, that the right of the second or other subsequent assignee is sub- ject to all equities subsisting in favor of the original or other prior assignor, unless in some settled mode recog- nized by equity jurisprudence such assignee has obtained a superiority which gives him the precedence. This doc- trine must be regarded as correct, as based upon principle, as long as the distinction between negotiable and non- negotiable obligations is preserved in our jurisprudence. ^ •> I shall describe, — 1. Those classes of cases in which the § 708, 1 See cases infra, under § 715. § 708, 2 Bush V. Lathrop, 22 N. Y. 535; Anderson v. Nicholas, 28 N. T. 600; approved by Woodruff, J., in Reeves v. Kimball,' 40 N. Y. 299, 311; Mason v. Lord, 40 N. Y. 476, 487, per Daniels, J. ; Schafer v. Reilly, 50 N. Y. 61, 67; McNeil v. Tenth Nat. Bank, 55 Barb. 59, 68; Williams v. Thorn, 11 Paige, 459 ; Mangles v. Dixon, 3 H. L. Cas. 702 ; Marvin v. Inglis, 39 How. Pr. 329; Bradley v. Root, 5 Paige, 632; Poillon v. Martin, 1 Sand. Ch. 569 ; Maybin v. Kirby, 4 Rich. Eq. 105 ; Judson v. Corcoran, 17 How. 612. Some of these decisions deal with the broad doctrine that the assign- ment is subject to equities in favor of all third persons. See, also, the numerous cases cited under the next following paragraph. « §708, (a) The text is quoted in text, see Commercial Nat. Bank v. Western Nat. Bank v. Maverick Buret, 141 111. 519, 33 Am. St. Eep. Nat. Bank, 90 Ga. 339, 35 Am. St. 331, 31 N. E. 420; Sutherland v. Rep. 210, 16 S. E. 942, holding, how- Eeeve, 151 111. 384, 38 N. E. 130; ever, that judgments are quasi ne- Pearson's Ex'rs v. Lueeht, 199 III. gotiable under the Georgia statutes. 475, 65 N. E. 363; Combs v. Hodge, §708, (b) This paragraph is cited 62 U. S. (21 How.) 397; Patterson in Washington Township v. First y. Eabb, 38 S. C. 138, 19 L. E. A. Nat. Bank, 147 Mich. 571, 11 L. R. 831, 17 S. E. 463 (assignment of A. (N. S.) 471, 111 N. W. 349; mortgage subject to a latent equity Third Nat. Bank of Springfield, of third person in the mortgaged Mass., V. National Bank of Com- premises); and cases cited under merce (Tex. Civ. App.), 139 S. W. § 709. 665. In further support of the 1429 CONCEENING PRIORITIES. § 709 doctrine has been applied ; and 2. Those in which it is not applicable. §709. Illustrations af This Rule.— If the owner and holder of a thing in action not negotiable transfers it to an assignee upon condition, or subject to any reservations or claims in favor of the assignor, although the instrument of assignment be absolute on its face, this immediate as- signee, holding a qualified and limited interest, cannot con- vey a greater property than he himself holds; and if he assumes to convey it to a second assignee by a transfer absolute in form, and for a full consideration, and without any notice to such purchaser of a defect in the title, this second assignee takes it, nevertheless, subject to all the equities, claims, and rights of the original holder and first assignor.! In the second place, where the" original assign- § 709, 1 Bush V. Lathrop, 22 N. Y. 535. This is altogether a leading and most instructive ease, and squarely presents the question under discussion. The holder of a bond and mortgage for $1,400, assigned and delivered them, by an instrument absolute on its face, to secure an indebtedness of $270, the assignee giving back a written undertaking to return the same upon being paid the debt of $270. This assignee afterwards transferred the secu- rities to a second, and he to a third, assignee, the latter paying full value, and having no notice of any outstanding claims or defects in the title. The original owner tendered to this assignee the $270 and interest, and de- manded a return of the securities ; and upon a refusal, brought an action to compel such return. It weis held that the action could be maintained. The opinion of the court, by Denio, J., is a most exhaustive discussion and able review of all the authorities which seem to sustain the doctrine that so- called "latent equities" are not protected against an assignment. He shows that the expressions of judicial opinion to that effect are obiter dicta, while a large number of direct decisions are necessarily opposed to that view. I would add that the course of authoritative decisions in reference to the sale of chattels by conditional vendees who have been put in possession, and who have been held unable to transfer an absolute title to bona fide pur- chasers for value, fully supports the reasoning and conclusions of Judge Denio. There can be no possible ground of a valid distinction between the transfer of a thing in action when the transferrer appears to be clothed wiih the complete ownership, but is actually not, and the transfer of a chattel by a person similarly situated and having all the outward indicia of perfect title : See Ballard v. Burgett, 40 N. Y. 314,. and eases cited. § 709 EQUITY JUEISPETJDElirCB. 1430 ment is accomplished by a forgery of the holder's name, or where it is effected by a wrongful conversion of the security, together with a written instrument of transfer Davis V. Bechstein, 69 N. Y. 440, 442, 25 Am. Rep. 218, is a recent case, and important as explaining and limiting the effect of certain other deci- sions mentioned in a following paragraph. Plaintiff had executed a bond and mortgage to R., simply as an accommodation, and to be used as col- lateral security for a loan which R. expected to make. R. did not procure the loan, but assigned the securities, in form absolutely, to defendant who was a purchaser for value and without notice. Plaintiff brings this action to have the bond and mortgage canceled. The court sustained the action upon the general doctrine of the text, that a purchaser of a thing in action not negotiable takes it subject to all equities subsisting in favor of an origi- nal owner or assignor, and the immediate assignor can give no better title than he has himself. The defendant claimed that the plaintiff was es- topped, according to a rule supposed to have been laid down in two former decisions of the same court. In disposing of this claim, the court said, per Church, C. J. (p. 442) : "Neither the decision in McNeil v. Tenth Na- tional Bank, 46 N. Y. 325, 7 Am. Rep. 341, nor in Moore v. Metropolitan -Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173, affect the question involved in this case." He quotes a passage from the opinion of Grover, J., in the last case, re-afQrming the general doctrine, and adds : "It is only where the owner, hy his own affirmative act, has conferred the apparent title and absolute ownership upon another, upon the faith of which the chose in action has been purchased for value, that he is precluded from asserting his real title, and this conclusion was arrived at by the application of the doc- trine of estoppel." »■ See, also, Matthews v. Sheehan, 69 N. Y. 585 (action §709, (a) The case of Smith v. tion, the court said: "The rightful Clews, 114 N. Y. 194, 11 Am. St. owner may be estopped by his own Rep. 627, 4 L. R. A. 392, 21 N. B. acts from asserting his title. If he 160, though relating to the sale of has invested another with the usual chattels, is instructive in this con- evidence of title, or an apparent au- neetion. A diamond merchant de- thority to dispose of it, he will not livered some diamonds to a broker, be allowed to make claim against with authority merely to show them an innocent purchaser dealing on to a customer and report to the the faith of such apparent owner- owner. The broker sold them to ship. But mere possession has never a purchaser for value, who had no been held to confer a power to sell, notice of the want of authority to and an unauthorized sale, although sell. It was contended, in an ae- for a valuable consideration, and to tion brought by the owner against one having no notice that another the purchaser, that the owner was is the true owner, vests no higher estopped to question the validity of title in the vendee than was pos- the sale. In overruling this eonten- sessed by his vendor." 1431 CONCERNING PEIOEITIES. § 709 which has been signed by the owner, or where it is made upon an illegal consideration between the owner and his immediate assignee, or where it is procured by fraud, between the assignor and his immediate assignee). The following cases fully sustain the position of the text; and most of them are particularly important in their bearing upon the question suggested in some of the authorities, whether the original owner or assignor having the equities is not estopped from asserting them against the subsequent and innocent as- signee : Reeves v. Kimball, 40 N. Y. 299, 304, per Lott, J. ; 311, per Wood- ruff, J.; Ingraham v. Disborough, 47 N. Y. 421; Schafer v. Reilly, 50 N. Y. 61, 67, 68, per Allen, J. (equities in favor of a third person; Ledwich v. McKim, 53 N. Y. 307; Cutts v. Guild, 57 N. Y. 229, 232, 233, per Dwight, J. (the doctrine pronounced to be "well settled," and applied to the assignment of a judgment) ; Barry v. Equitable Life Ins, Co., 59 N. Y. 587, 591; Trustees etc. v. Wheeler, 61 N. Y. 88, 104-106, 113, 114 (an elaborate dis- cussion and review of authorities, carefully limiting the effect of decisions which have invoked the doctrine of estoppel, and applying the rule to equities subsisting in favor of third persons) ; Greene v. Warnick, 64 N. Y. 220, 224, 225 (restricting and limiting the doctrine of estoppel as suggested in Moore v. Metropolitan Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173, and sustaining the equities subsisting in favor of third persons) ; Marvin v. Inglis, 39 How. Pr. 329.'» In Sherwood v. Meadow Valley M. Co., 50 Cal. 412, an owner of a stock certificate, which he had indorsed in blank, lost it, and it fell into the hands of a bona fide purchaser for value, and held that the original owner's title was superior to that of this purchaser. This deci- sion agrees completely with the positions of the text; but in Winter v. §709, (b) Knox v. Eden Musee street work done) indorsed in blank Americain Co., 148 N. Y. 441, 51 Am. takes it subject to the pledgor's St. Eep. 700, 31 L. R. A. 779, 42 N. equity: Combs v. Hodge, 62 U. S. E. 988, per Andrews, C. J.: "The (21 How.) 397, and the very instrue- case of McNeil v. Bank, 46 N. Y. tive ease of Osborn v. McClelland, 325, 7 Am. Eep. 341, . . . marks the 43 Ohio St. 284, 299-307, 1 N. E. 644 limit to which the court has hitherto (post, in editor's notes to §§ 710, gone in subordinating the rights of 711), which expressly adopts the au- the true owner of a stock certificate thor's conclusions relating to the to the title of a transferee derived operation of the principle of estop- under one who, being in possession pel in cases of this class, and ap- of 'the certificate by the consent of plies them to the case of negotiable the true owner, has transferred it in paper transferred by a bailee when fraud of his right." See, also, Cow- overdue. See, also, ' People's Trust drey v. Vandenburgh, 101 TJ. S. 575, Co. v. Smith, 215 N. Y. 488, Ann. where it was held that the purchaser Cas. 1917A, 560, L. E. A. i916B, 840, from the pledgee of a non-negotiable 109 N. E. 561 (forged assignment demand (a municipal certificate for by bailee), post, in note (d). §709 EQUITY JUEISPKXJDENCE. 1432 duress, or undue influence upon the owner, and in either of these cases the thing in action is afterwards transferred from the first to a second or other subsequent assignee, Belmont M. Co., 53 Cal. 428, 432, W., being owner of shaxes, caused them to be entered on the transfer-books in the name of M., and a certificate thereof in due form to be issued to M., which certificate M. indorsed in blank and delivered to W. Afterwards, and while the same condition of facts existed, M. stole this certificate from W., and sold it in the market to a bona fide purchaser. Held, that the latter's title was good as against W. The court strongly intimated an opinion that the preceding case in 50 California was incorrectly decided." §t09, (c) Lost or Stolen Stock Certificates and Other Quasi-nego- tiable Instruments. — In the subse- quent case of Barstow v. Savage Mining Co., 64 Cal. 388, 49 Am. Kep. 705, 1 Pac. 349, certificates of stock Btanding on the books of the com- pany in the name of a person not the true owner, but which were properly indorsed by the person in whose name they stood, were stolen from the owner and sold to a pur- chaser for value and without no- tice. The court held that the own- er's title was superior to that of the purchaser, and that he was not es- topped. The decision in Sherwood V. Meadow Valley M. Co., 50 Cal. 412, was followed and approved, and the decision in Winter v. Belmont M. Co., 53 Cal. 428, so far as it de- parted therefrom, was disapproved. The court said that the doctrine of estoppel should not be applied, "un- less the facts presented by a case should bring it within the law as stated in McNeil v. Tenth National Bank, 46 N. Y. 325, 7 Am. Eep. 341." The court further said: "If the pur- chaser from one who has not the title, and has no authority to sell, relies for his protection on the neg- ligence of the true owner, he must show that such negligence was the proximate cause of the deceit." In France v. Clark, L. K. 26 Ch. Div. 256, it was held that a person who without inquiry takes from another an instrument signed in blank by a third party, and fills up the blanks, cannot, even in the case of a nego- tiable instrument, claim the benefit of being a purchaser for value with- out notice, so as to acquire a greater right than the person from whom he himself received the instrument. For further cases where the true owner of stock certificates indorsed in blank and lost or stolen without his fault or negligence was held to have an equity superior to that of a subsequent hona fide assignee, see Knox V. Eden Musee Americain Co., 148 N. T. 441, 51 Am. St. Bep. 700, 31 L. R. A. 779, 42 N. E. 988; Ban gor Electric Lt. & Power Co. v. Eob inson, 52 Fed. 520; East Birming- ham Land Co. v. Denison, 85 Ala, 565, 7 Am. St. Eep. 73, 2 L. E. A, 836, 5 South. 317; O'Herron v. Gray, 168 Mass. 573, 60 Am. St. Eep. 411, 40 L. E. A. 498, 47 N. E. 429; Fatm ers' Bank v. Diebold Safe & Lock Co., 66 Ohio St. 367, 90 Am. St. Eep. 586, 58 L. E. A. 620, 64' N. E. 518. In ScoUans v. Kollins, 173 Mass. 279, 73 Am. St. Eep. 284, 53 N. E. 863; S. C, 179 Mass. 346, 88 Am. St Eep. 1433 .CONCBENING PRIOKITIES. § 709 who takes it for value and without notice, the same rule naust control : the equities of the original owner must pre- vail over the claims of the subsequent though innocent assignee.2 § 709, 2 Anderson v. Nicholas, 28 N. Y. 600. Certificates of stock, with a power of attorney indorsed upon them, and signed so that they were transferable in the market, were wrongfully converted from the owner, and were sold to the defendant, and it was held that the latter acquired no higher title than that held by his immediate transferrer, — the one who wrongfully converted the stock, — and the original owner could recover the securities or their value. This case cannot, perhaps, be regarded as a direct authority for the doctrine contained in the text; because there were certain facts which prevented the defendant from relying upon the position of a hona fide purchaser, and these circumstances may have influenced the deci- sion. Three opinions were delivered. Davies, J., based his judgment en- tirely upon the ground that an assignee of a non-negotiable thing in action could under no circumstances acquire a better title than that possessed by his assignor, and he made no allusion to the defendant's want of good faith. Denio, J., dwelt upon the facts which showed bad faith; but was very- careful to protest against any inference from his course of argument to the effect that, if the purchase had been in good faith, the assignee would have been protected. Hogeboom, J., seems to have adopted the view taken by Mr. Justice Davies. On the whole, although the fact of bad faith was an element in the ease, it was not made the ratio decidendi, and the doctrine laid d'ovrai applies to all transfers, those in good faith as well as those in bad faith. Other decisions are directly in point. Mason v. Lord, 40 N. Y. 386, 60 N. E. 983, the instrument in posit Sav. & T. Co. v. Hibbs, 229 U. question was a municipal certificate S. 391, 57 L. Ed. 1241, 33 Sup. Ct. of indebtedness, with blank indorse- 818, the agent of the bank — a book- ment, which, by custom, was consid- keeper and assistant note teller — in ered. negotiable to the same extent the apparent course of his duties ob- as stock certificates, and to which tained from the secretary certain the principle of estoppel would simi- securities deposited by a borrower, larly apply if it were intrusted to stating that the loan was paid and another and negotiated by him to a he wished to return them. Instead hona fide purchaser. It was held, he transferred them to defendant, however, that delivery for safekeep- witnessing the signature of the bor- ing to a broker, in a sealed envelope, rower to the blank assignment, ob- was not evidence that the instru- tained the proceeds and made away ment was so intrusted, and its sub- with them. Held, in a suit by the sequent transfer by the broker was bank, that the plaintiff must lose, equivalent to a theft from the for it enabled the agent to commit owner, so far as his title was there- the wrongful act. by affected. In National Safe De- § 710 EQUITY JUEISPKUDENCE. 1434 § 710. When the Rule Does not Apply— Effect of Es- toppel. — ^I proceed next to consider the third case, where the original assignment is regular on its face, executed in the name of the original owner and by his signature vol- untarily written, but the transfer is consummated through a breach of fiduciary duty by an agent or bailee contrary to the owner's intention, and this immediate assignee may afterwards transfer to an innocent holder. In relation to this particular condition of facts, a rule has been adopted by most able courts, and may be regarded, I think, as 476, 487, is a very strong case. The lessee of premises assigned the lease by an instrument valid on its face, but in fact as a security for a usurious loan made to him by the assignee. (The statute at that time declared all securities given upon usurious loans to be void, and liable to be canceled at the suit of the borrower, even without paying or tendering the money actu- ally borrowed.) This lease was afterwards transferred by the assignee, passed through divers hands, and was finally purchased by the defendant, who paid full value and had no notice of any defect in the first transfer. Subsequent to the original assignment by the lessee, but before the transfer to the defendant, the plaintiffs recovered a judgment against such lessee, and the lessee's interest in the leased premises and in the lease itself, was sold on execution, bought in by the plaintiffs, and a sheriff's deed of such interest was delivered to them, which deed, however, was executed after the a|psign- ment to the defendant. The plaintiffs then commencd an action to recover possession of the leased premises, and to set aside the transfer of the lease to the defendants on account of the usury which affected and, nullified the first assignment made by the lessee to his immediate assignee. The court, adopting to its full extent the doctrine as laid down "in the text, held that the action could be sustained ; that the lessee might have set aside the trans- fer from himself on account of the usury which tainted it; that the subse- quent assignees, including the defendant, succeeded to all the rights, and were subject to all the liabilities possessed by and imposed upon the first assignee, and finally, that the judgment creditors of the lessee were clothed with his rights and powers in the matter : Reid v. Sprague, 72 N. Y. 457, 462. A trustee, holding a bond and mortgage as part of the trust fund, sold and assigned it, in violation of the trust, to the defendant, who was a purchaser for value and without any notice. A suit on behalf of the cestui que trust to set aside the assig-nment and regain the securities was sus- tained, the court holding that the defendant took them subject to all the claims of the cestui que trust. See, also, Davis v. Bechstein, 69 N. Y. 440, 25 Am. Rep. 218 {supra, under § 700) ; Ingraham v Disborough, 47 N, Y. 421 (failure of consideration); Schafer v. Reilly, 50 N. Y. 61, 67, 68; 1435 COJS^eBENING PRIORITIES. § 710 settled, which is entirely consistent with that stated in the preceding pajragraphs. It is based upon the doctrine of estoppel. This special rule may be formulated as follows : The owner of certain kinds of things in action not techni- cally negotiable, but which, in the course of business cus- toms, have acquired a . semi-negotiable character in fact, may assign or part with them for a special purpose, and at the same time may clothe the assignee or person to whom they have been delivered with such apparent indicia of title, and instruments of complete ownership over them, and power to dispose of them, as to estop himself from setting up against a second assignee, to whom the seculi- ties have been transferred without notice and for value, the fact that the title of the first assignee or holder was not perfect and absolute. The ordinary and most im- portant application of this rule is confined to the cus- tomary mode of dealing with certificates of stock. If the owner of stock certificates assigns them as collateral se- curity, or pledges them, or puts them into the hands of an- other for any purpose, and accompanies the delivery by a blank assignment and power of attorney to transfer the same in the usual form, signed by himself, and this as- Ledwich v. McKim, 53 N. T. 307; Cutts v. Guild, 57 N. Y. 229, 232, 233; Barry v. Equitable Life Ins. Co., 59 N. Y. 587, 591 (where an assignment of a non-negotiable thing in action — a life policy — is obtained from the owner by undue influence or coercion, and is then transferred to an inno- cent purchaser for value, this second assignee takes subject to all the rights of the original holder) ; Trustees etc. v. Wheeler, 61 N. Y. 88, 104-106, 113, 114; Greene v. Wamick, B4 N. Y. 220, 224, 225; HaU v. Erwin, 66 N. Y. 649; Crane v. Turner, 67 N. Y. 437, 440 (equities in favor of third persons) .* § 709, (d) See, also, Sutherland of a bond and mortgage deposited V. Eeeve, 151 111. 384, 38 N. E. 130 them for safekeeping with his (original assignment obtained by nephew of the same name. The lat- fraud). For the cases of lost or ter assigned them in his own name stolen instruments, see the previous to the trust company. Held, there notes to this paragraph. In People's was no estoppel against the owner. Trust Co. V. Smith, 215 N. Y. 488, and no negligence, because he did Ann. Cas. 19I7A, 560, L. R. A. not anticipate a forgery by his 19ieB, 840, 109 N. E. 561, the owner nephew. § 710 EQUITY JUEISPEUDENCE. 1436 signee or pledgee wrongfully transfers them to an innocent purchaser for value in the regular course of business, such original owner is estopped from asserting, as against this purchaser in good faith, his own higher title and the want of actual title and authority in his own immediate assignee or bailee.i ^ This conclusion is in no respect necessarily § 710, 1 McNeU v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Eep. 341; re- versing 55 Barb. 59.. The supreme court held, — 1. That certificates of stock are in no respect negotiable ; and 2. The rule as laid down by Denio, J., in Bush V. Lathrop, 22 N. Y. 535. The law of estoppel was not alluded to. In the court of appeals the doctrine of latent equities was discussed; the decision of the court in Bush v. Lathrop, 22 N. Y. 535, and the reasoning of Denio, J., were expressly recognized as correct, and as applicable to aU cases in which the facts do not warrant the application of the principle of estoppel. Mr. Justice Rapallo, in his able judgment, does not discuss the rule in relation to things in action of all kinds; he confines himself exclu- sively to the particular species of security then before the court, — certifi- cates of shares in stock corporations ; and while he does not claim for them absolute negotiability, he does in fact render them indirectly negotiable by means of the estoppel which arises upon dealing with them in the man- ner universally prevalent among business men. Speaking of Judge Denio's opinion, he says (p. 329) : "But in no part of his learned and exhaustive opinion does he seek to apply its doctrine to shares in corporations or other §710, (a) Estoppel BiUe, on Assign- N. W. 147; Joslyn v. St. Paul Dis- ment of StoeTc Certificates. — As re- tilling Co., 4i Minn. 183, 46 N. W. gards the assignment of stock cer- 337; Dueber Watch-Case Mfg. Co. v. tificates, the rule of McNeil v. Bank, Daugherty, 62 Ohio St. 589, 57 N. E. stated in the text, has been almost 455, citing the text; Pennsylvania universally adopted in this country. E. E. Co.'s Appeal, 86 Pa. St. 81; Among innumerable cases, see Nel- Wood's Appeal, 92 Pa. St. 379, 37 son v. Owen, 113 Ala. 372, 21 South. Am. Kep. 694; Burton's Appeal, 93 75; Brittan V. Oakland Bank of Sav- Pa. St. 214; Gilbert v. 'Erie Bldg. ings, 124 Cal. 282, 71 Am. St. Kep. Ass'n, 184 Pa. St. 534, 39 Atl. 291; 58, 57 Pac. 84; Krouse v. Woodward Westinghouse v. German Nat. Bank, (Cal.), 42 Pac. 1085; Supply Ditch 196 Pa. St. 249, 46 Atl. 380; State Co. V. Elliott, 10 Colo. 327, 3 Am. Bank v. Cox, 11 Eich. Eq. 344, 78 St. Bep. 586, 15 Pac. 691; National Am. Dec. 458. See, also, O'Neil v. Safe Dep., S. & T. Co. v. Gray, 12 Wolcott Min. Co., 174 Eed. 527, 27 App. D. C. 276, 287; Otis v. Gard- L. R. A. (N. S.) 200, 98 C. C. A. nor, 105 HI. 436; Eussell v. Ameri- 309; National City Bank of Chicago can, etc., Co., 180 Mass. 467, 62 N. E. v. Wagner, 216 Fed. 473, 132 C. C. 751; Walker v. Detroit Transit Ey. A. 533; O'Mara v. Newcomb, 38 Co., 47 Mich. 338, 11 N. W. 187; Colo. 275, 88 Pac. 167; McCarthy v. Eough V. Breitung, 117 Mich. 48, 75 Crawford, 238 111. 38, 128 Am. St. 1437 CONCERNING PEIOKITIES. § 710 antagonistic to the general doctrine concerning the assign- ment of things in action heretofore stated. The courts have simply recognized the growing and universal tendency of business men, in their customary modes of dealing, to treat stock certificates as though they were in all respects negotiable instruments; and they "have felt themselves personal property the legal title to whieli is capable of being transferred by assignment; and the free transmission of ■which from hand to hand is essential to the prosperity of a commercial people. The question of es- toppel does not seem to have been considered in that case, and perhaps it would have been inappropriate." He expressly approves the rule fre- quently laid down as to chattels, and while invoking the aid of estoppel, is very careful to state the narrow limits within which it may be used, and the kind of facts necessary to its use. He says (pp. 329, 330) : "Simply intrusting the possession of a chattel to another as depositary, pledgee, or other bailee, or even under a conditional executory contract of sale, is clearly insufficient to preclude the real owner from reclaiming his property in case of an unauthorized disposition of it by the person so interested : Ballard v. Burgett, 40 N. Y. 31^. 'The mere possession of chattels, by whatever means acquired, if there be no other evidence of property or authority to sell from the true owner, will not enable the possessor to give a good title.' But if the owner intrusts to another not merely the possession of the property, but also written evidence over his own signature of title thereto, and of an un- Eep. 95, 29 L. R. A. (N. S.) 252, 86 Geilach, 153 Pa. St. 197, 25 Atl.- N. E. 750; Baker v. Davie, 211 Mass. 1031, 26 Atl. 303; or are not iona 429, 97 N. E. 1094; Austin v. Hay- fide purchasers for value: Bronson den, 171 Mich. 38, Ann. Cas. 1915B, Electric Co. v. Eheubottom, 122 894, 137 N. W. 317; Union Trust Co. Mich. 608, 81 N. W. 563; Tecumseh V. Oliver, 214 N. Y. 517, 108 N. E. Nat. Bank v. Russell, 50 Neb. 277, 809; Gray v. Fankhauser, 58 Or. 423, 69 N. W. 673; Cowles v. Kicliel, 65 115 Pac. 146; Colonial Trust Co. v. N. Y. Supp. 349; American Press Central Trust Co., 243 Pa. St. 268, Ass'n v. Brantingham, 78 N. Y. 90 Atl. 189; White River Sav. Bank Supp. 305, 75 App. Div. 435. V. Capital Sav. Bank & Trust Co., The opinion in Dueber Watch-Case 77 Vt. 123, 107 Am. St. Rep. 754, 59 Co. v. Daugherty, 62 Ohio St. 589, Atl. 197. See, however, for the rule 57 N. E. 455, is instructive. The in Maryland, German Sav. Bank v. company issued a certificate of its Renshaw, 78 Md. 475, 28 Atl. 281; stock with the usual power of at- Taliaferro v. Bank, 71 Md. 209, 17 torney, to C, for the purpose of Atl. 1036, 72 Md. 169, 19 Atl. 364, qualifying him to, become a director, and ea,rlier Maryland eases there on his secret agreement to reconvey cited. The estoppel rule does not upon ceasing to be a director. C. apply to the protection of purchasers agreed to assign the certificate to who are put on inquiry: Eyman v. D. on consideration of D.'s becoming § 710 EQUITY JTJEISPRUDENCE. 1438 bound to give validity and effect to this general practice of merchants, as far as that could be done consistently with the established doctrines of the law. It is another instance of the manner in which mercantile customs have been adopted and incorporated into the law by the progressive ' course of judicial legislation. The decisions announcing conditional power of disposition over it, the case is vastly different." The following seems to he the only rule sanctioned by the court in this important decision: If the owner of a thing in action, of the particular species de- scribed, delivers it to an assignee for a special purpose, with a simple writ- ten assignment, even absolute on its face, this of itself is not enough to raise the estoppel; but if, as a part of or accompanying this writing, the owner further gives "an unconditional power of disposition" over the secu- rity, then the estoppel may be involved. It remains to inquire whether other decisions have been confined to this narrow rule. In Holbrook v. N. J. Zinc Co., 57 N. Y. 616, 622, 623, the doctrine of estoppel was applied to the corporation itself whose stock had been transferred in good faith, and in the usual manner, to the plaintiff. In Combes v. Chandler, 33 Ohio St. 178, 181-185, the supreme court commission of Ohio applied the doc- trine of MeNeU v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, to the assignment of a non-negotiable promissory note, — an instrument in the form of a promissory note, but payable to the payee named, without any words of negotiability. The payee indorsed and delivered the note, but his surety on a note, which the lat- certificates, where they had forms ter did without notice of C.'s agree- for assignment . similar to those of ment with the company. Held, that stock certificates and were intended D.'s equity arising from such agree- to be so assigned: McCarthy v, ment was superior to that of the Crawford, 238 HI. 38, 128 Am. St. company, on the principle of estop- Rep. 95, 29 L. B. A. (N. S.) 252, 86 pel. Held, further, that on reeeiv- N. E. 750, reviewing cases, ing notice of the company's equity. Bide of McNeil v. Bank in England. D. might, for his further protection. In Colonial Bank v. Cady, 15 App. clothe himself with the legal title Cas. 267, 278, 285, affirming 38 Ch. by taking a transfer of the stock Div. 388 and reversing 36 Ch. Div.. from C; citing §§ 727, 729, post. 659, it appears to be held that the A written assignment of the car- rule is applicable, in an appropri- tifieate, without delivery, is not with- ate case, to English dealings with in the customary mode of dealing American shares; although the Court with stock certificates; the assignee, of Appeal had intimated (38 Ch. therefore, is not protected by the es- Div. 388, 400) that the rule would toppel rule:' Baker v. Davie, 211 not be followed in England. The Mass. 429, 97 N. E. 1094. case did fiot call for an express de- M'eceiver's Certificates. — The estop- cision of tie question, however; the pel rule was applied to receiver's transfer was not signed by the regis- 1439 CONCERNING PEIOBITIES. §710 tine rule are based exclusively upon the form of the blank assignment and power of attorney, executed by the as- signor and delivered to the assignee, which clothed him with all the apparent rights of ownership that are recog- nized by business men, in their usual course of dealing with like securities, as sufficient to confer a complete title ■without any consideration, and by the fraud of the immediate assignee ; by this person it was transferred to a second assignee for value and without notice. The court held that the payee — the original owner — was estopped from asserting his title as against that of the second and innocent pur- chaser. This decision may be sustained on principle, by reason of the peculiar nature of the security itself.* Although it is commonly said, in general terms, that the transferee of a promissory note after maturity, when it has become non-negotiable, takes it subject to all equities and de- fenses, yet this proposition is not true as to all kinds of equities even in favor of the maker. It is well settled that the assignment under such cir- cumstances is subject only to the equities and defenses inherent in the security itself transferred, and not to those which are collateral or inci- dental. The same rule would probably embrace notes non-negotiable from the want of words of negotiability : See Story on Promisspry Notes, sec. 178; Kyle v. Thompson, 11 Ohio St. 616; Hayward v. Stearns, 39 Cal. 58; In re Overend, Gurney, & Co., L. R. 6 Eq. 344; In re European Bank, L. R. 5 Ch. 358; Sturtevant v. Ford, 4 Maule & G. 101; Quids v. Harrison, tered owner, named in the certifi- cate, but by Ms executors. Their signatures alone would not entitle the holder to obtain a registration in the company's books: (per Lord Watson), such signatures "are not accepted in commercial circles as sufficient vouchers of title, unless they are accompanied by an extract of probate and an attestation of the genuineness of the executors' signa- tures." §710, (h) See, also, Moore v. Moore, 112 Ind. 149, 2 Am. St. Rep. 170, 13 N. E. 673 (citing the above paragraph of the text), where the note was transferred after maturity. In the case of Osborn v. McClelland, 43 Ohio St. 284, 298-307, 1 N. E. 644, the Supreme Court of Ohio, re- lying on the conclusions of. the au- thor in §§ 710, 711, limits the ease of Combes v. Chandler to the facts there involved. The court says, per Johnson, J. (p. 306), "This case gpes to the verge. - - . Combes, the payee and assignor, intended to part with the title and ownership of the paper, for what he then supposed was an adequate consideration. In analogy to the common-law rule applicable to personal property, that when such is the intention, and possession is delivered, a fraudulent vendee may convey absolute ownership on a bona fide purchaser for value, the court held that Combes having intended to, and having in fact conferred the title and absolute ownership of the paper and its possession upon Chand- ler, he, though a fraudulent vendee, could confer , such title and owner- § 710 EQUITY JUEISPKITDENCE, 1440 and power of disposition upon the assignee. Should the doctrine thus invoked to protect the customary modes of transacting business with certificates of stock and similar quasi negotiable securities be extended to all other things in action? Should the effect of an estoppel be produced from a mere assignment of any security, absolute on its 10 Ex. 572; Burrough v. Moss, 10 Bam. & C. 558; Holmes v. Kidd, 3 Hurl. & N. 891. While the decision itself is thus undoubtedly correct, I do not think that some observations of the learned judge concerning the effect of estoppel upon assignors in general can be sustained by McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, as explained by the later cases in the same court cited in the two preceding notes. In several of those cases, as I have shown, it is expressly held that the rule of McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, and Moore v. Metropolitan Bank, 55 N. Y. 41, 14 Am. Rep. 173, does not apply to assignments of ordinary things in action, even when' absolute on their face, when procured by fraud or coercion, or upon an illegal consideration, or without any consideration. The following decisions are also supported by and illustrations of the text : Brewster v. Sime, 42 Cal. 139, 147; Thompson v. Toland, 48 Cal. 99; Win- ter v. Belmorj- Min. Co., 53 Cal. 428, 432; but see Sherwood v. Meadow Val. M. Co., 50 Cal. 412. ship upon Woods, who was a iona no act intending to part with her fide purchaser. It was held that title other than as accommodation Combes so acted as to estop Mm- indorser. She never intended to au- self ." In Osborn v. McClelland, on thorize S. to transfer title and the other hand. Mrs. F., the payee of ownership to M. or anyone else. No avnegotiable rote before due loaned act of hers is shown that amounts it indorsed in blank to B. and S., to an estoppel. She was careless in bankers, for a special purpose and allowing S. to remain a bailee of the solely for their accommodation, they paper, but such bailee can confer no promising to safely keep and return better title than he actually had." it. B. and S. did not use the note, For further observations of the court but it remained in their custody un- in this case, see note to § 711. til after it became due, when S., the The following is the syllabus of survivor of B. and S., transferred it a recent English case, involving the by delivery to M., a iona fide pur- assignment of a bond: "Where an chaser for value, who relied solely owner of property gives all the irir on the blank indorsement of F. and dicia of title to another person with the possession of the note by S. the intention that he should deal The court says (p. 307) : "This dis- with the property, the principles of tinetion between the acts of Combes agency apply, and any limit which in the above case and of Mrs. F. he has imposed on his agent's deal- in the present case is so clear that ing cannot be enforced against an it r<.ix..lxtjs no comment. Mrs. F. did innocent purchaser or mortgagee 1441 CONCERNING PEIOKITIES. § 710 face, executed hy the original owner, and delivered to his assignee^ There are cases which seem to have reached this result. The tendency of these decisions is towards the conclusion that whenever the owner of any non-nego- tiable thing in action delivers the same to another person with an assignment thereof absolute on its face, and this person transfers it to a purchaser for value, who relies upon the apparent ownership created by the written as- signment, and has no notice of anything limiting that title, the original owner is estopped from asserting against such purchaser any equities existing between, himself and his immediate assignee, and any interest or property in the security which he may have notwithstanding the written transfer, even when those equities might arise from fraud, coercion, violation of a fiduciary duty, absence or illegality of consideration, and the like.^ § 710, 2 Moore v. Metropolitan Bank, 55 N. Y. 41, 46-49, 14 Am. Rep. 173. Moore, the owner of a certificate of indebtedness for ten thousand dollars, delivered it to one Miller for a certain special purpose, but not intending to transfer any property therein ; in fact, M. was to procure it to te discounted, and to hand over the proceeds, or else to return the cer- tificate. Moore, however, gave M. the following writing, indorsed on the instrument : "For value received, I hereby transfer, assign, and set over to Isaac Miller the within described amount, say ten thousand dollars. Levi Moore." Miller assigned the certificate to the defendant for value, who took it on the faith of this written assignment without notice of the true relations between Moore and Miller. The action was brought to recover possession of the certificate. The court said, per Grover, J. (pp. 46^9), that it did not intend to abandon the general doctrine concerning assign- ments being subject to equities as declared in Bush v. Lathrop, 22 N. Y. 535, and other authorities, but held that this case was controlled by McNeil V. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, and that the judgment in the latter case was inconsistent with the reasoning of Denio, J., in Bush V. Lathrop, 22 N. Y. 535, and with the decision made on the facts of that case. Grover, J., does not allude to the careful distinction drawn by from the agent, who has no notice topped from asserting his equitable of the limit. If the owner has not title against a person to whom the only transferre-1 property to an transferee has disposed of the prop- agent or trustee, but has aoknowl- erty for value": Eimmer v. Web- edged that the transferee has paid ster, [1902] 2 Ch. 163k full cousidoratiou for it, he is es- ' ' ' 11—91 § 711 EQUITY JUEISPRUDENCE. 1442 § 711. True Limits of Estoppel as Applied to Assign- ments of Things in Action. — ^While the particular applica- tion of the doctrine of estoppel to the usual dealings with shares of stock, as made in McNeil v. Tenth National Rapallo, J., between the circumstances of the two cases, nor his approval of the general doctrine and course of reasoning contained in Judge Denio's masterly opinion. Nor does Judge Grrover make the slightest allusion to the narrow limits placed by Eapallo, J., upon the use of the estoppel, namely, to those cases in which the assignor, by a written instrument over his signature, confers not only the apparent title, but the unconditional power of disposition over the security. While the judgment of Rapallo, J., in McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, was guarded and cautious, and eminently proper in respect to the peculiar class of securities, that of Grover, J., is, I think, unsupported by authority, and unsound in principle. In comparing and weighing such conflicting deci- sions, it is proper for me to express the opinion that the authority of Judge Denio, for ability, learning, and experience, is immeasurably superior to that of Judge Grover, and is not, perhaps, surpassed by that of any of his contemporaries among the American judiciary. In fact, the special force of the decision in Moore v. Metropolitan Bank, 55 N. Y. 41, 14 Am. Rep. 173, has been completely destroyed, and it has been strictly confined to the doctrine laid down in McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 7 Am. Rep. 341, by the more recent cases in the same court heretofore cited. While these cases have not expressly overruled Moore v. Metropolitan Bank, 55 N. Y. 41, 14 Am. Rep. 173, it is plain that they are whoUy inconsistent with it; if its reasoning and result were correct, most of these cases would of necessity have been differently decided: See Trustees etc. v. Wheeler, 61 N. Y. 88 ; Greene v. Warniek, 64 N. Y. 220, and other eases quoted supra, in note 2, under § 709. In Farmers' Nat. Bank v. Fletcher, 44 Iowa, 252, this same doctrine of estoppel was applied to the assignor of a mortgage, as against an assignee for value and without notice." §710, (c) This paragraph of the questioned," except so far as they text, and the ahove note, are cited have been modified in "the case of in the dissenting opinion in Wash- a purchase in good faith of a non- ington Township v. Mrst Nat. Bank, negotiable instrument from an as- 147 Mich. 571, 11 L. B. A. (N. S.) 471, signee of the real owner, upon whom 111 N. W. 349. In the recent ease of he has hy assignment conferred the Fairbanks v. Sargent, 104 N. Y. 117, apparent absolute ownership, when 58 Am. Rep. 490, 9 N. E. 870, the such purchase has been made in re- New York court of appeals took liance upon the title apparently ae- occasion to say that the doctrine an- quired by such assignee." See, also, nouneed in Bush v. Lathrop, 22 N. the remark of Andrews, C. J., in Y. 535, remains in "full force un- Knox v. Eden Jfus6e Americain Co., 1443 CONCEENING PEIOEITIES. § 711 Bank ^ and kindred cases, is clearly a step in the interests of commerce, since it recognizes and validates mercantile customs which had become universal throughout this coun- try, the extension of the same rule to all things in action, as described in the preceding paragraph, plainly tends to undermine, shake, and finally abrogate the well-settled doctrine which renders the assignments of non-negotiable things in action subject to the equities subsisting in favor of the debtor parties, as well as those outstanding in favor of third persons; or at all events, it tends to confine the operation of that doctrine to cases in which the assign- ment is so drawn that it is, on its face, constructive notice to all subsequent assignees deriving title through it. In the class of decisions alluded to, — Moore v. Metropolitan Bank 2 and like cases, — the estoppel is made to arise from a mere naked transfer in writing, absolute in form; the ratio decidendi is the apparent ownership thus conferred upon the assignee; and these elements of the rule will apply to so many cases that things in action are practi- cally rendered negotiable as between the series of succes- sive holders, — the assignors and assignees. This point being reached, it will be an easy and almost necessary step to extend the estoppel to the debtor party himself, — the obligor or promisor who utters the security. If negotia- bility is produced by means of an estoppel between the assignor and assignee, arising from the fact and form of a transfer from one to another, by parity of reasoning the debtor may be regarded as estopped by the fact and _f orm of Ms issuing the undertaking and delivering it to the first holder, and thus creating an apparent liability against himself. In short, there seems to be exactly the same rea- §711, 1 46 N. Y. 325, 7 Am. Rep 341. § 711, 2 55 N. Y. 41, 14 Am. Rep. 173. 148 N. Y. 441, 51 Am. St. Kep. 700, Metropolitan , Bank, see Marling v. 31 L. R. A. 779, 42 N. E. 988, quoted Fitzgerald, 13^ Wis. 93, 131 Am. St. ante, § 709, note b. As tending to Eep. 1003, 23 L. E. A, (N. S.) 177, support the holding in Moore v. 130 N. W. 388. § 712 EQUITY JUEISPBUDENCE, 1444 son for holding the debtor estopped from denying his lia- bility upon a written instrument which apparently creates an absolute liability, when that instrument has passed into the hands of a purchaser who had no notice of the actual relations between the original parties, as for holding an assignor estopped from denying the completeness of a transfer made by him simply because it is absolute on its face. This result, if reached, would make all things in action practically negotiable.^' According to the law mer- chant, "negotiability" consisted of two elements: 1. The fact that the transferee obtained the legal title and could sue at law in his own name ; and 2. The fact that the trans- feree in good faith and for value took free from all equi- ties and nearly all defenses subsisting in favor of prior parties to the paper. The first of these elements now be- longs, in the great majority of the states, to all things in action. There is, as it seems to me, an evident tendency, on the part of the courts in many states, to enlarge the scope of the second element, and to extend it also to all species of things in action which are embodied in con- tracts or instruments in writing. §712. Subsequent Assignee Obtaining the Legal Title may be Protected as a Bona Fide Purchaser. — In the dis- cussions of the foregoing paragraphs,^ it has been con- stantly assumed that the assignee had acquired only an § 712, 1 Viz., from §§ 707 to 711. § 711, (a) In Osborn v. MeClel- strates that this .principle is not land, 43 Ohio St. 284, 306, 1 N. E. applicable to commercial paper, so 644, the Supreme Court of Ohio as to change or modify the rights adopts the author's conclusions, as and liabilities arising thereon, when follows: "This doctrine [of estoppel the only indicia of title or ownership in relation to assignments of things is derived from a blank indorse- in action] is fully and ably dis- ment. . . . Mr. Pomeroy conclusively cussed, ^nd the cases, especially in shows that any other rule would es- New York, where the principle has, top every debtor, and give to choses in the interest of commerce, been in action all the qualities of com- extended beyond reason, as shown mercial paper before due." For the by Prof. Pomeroy, as above cited facts of this case, see ante, editor's [§§698-711]. He clearly demon- note to § 710. 1445 CONCERNING PBIOKITIES. § 712 equitable title, in order that he might take subject to the equities subsisting in favor of a prior assignee or of a third person. If, in addition to his equitable interest conferred by the assignment, he has also obtained the legal title, or even if his situation is such that he has the best right to call for the legal title, then the doctrine of pur- chase for a valuable consideration and without notice may apply so as to protect him against all such outstanding equities. It should be constantly borne in mind that priority of time gives precedence of right among suc^^ cessive and conflicting equitable interests only when these equitable interests are equal in their nature or incidents. An illustration may be seen in the decisions of many able courts with respect to dealings in shares of stock. Where a transfer of a certificate has been made by the owner's own signature, but procured only through the fraud, breach of duty, or conversion of the person who actually effects the first assignment, or without consideration, or upon an illegal consideration, and even where the transfer is accomplished solely by a forgery of the owner's name to the indorsement and power of attorney, and the certificate thus comes into the hands of a purchaser for a valuable consideration and without notice, and he perfects his legal title by surrendering the original certificate to the corpora- tion and receiving a new one in his own name, and by pro- curing the transaction to be properly entered upon the company's transfer-books, which thereupon show him to be the legal owner of the shares, the assignee under these cir- cumstances, as is held in many cases, obtains a complete precedence over the original owner; he is not liable to the owner for the shares nor 'for their value; the owner's remedy, if any exists at all, is against the corporation alone, to compel it either to issue new shares or to pay the value of the old ones.^ These decisions should, on prin- § 712, 2 This conclusion has been reached in cases of forgery, and it would a fortiori seem to follow in cases of fraud, conversion, want of consideration, etc. ; in the latter cases, however, the corporation might not § 713 EQT7ITY JUEISPEUDENCB. 1446 ciple, apply to and protect the assignee of every other species of thing in action who has acquired the legal title. § 713. Successive Assignments by Same Assignor to Different Assignees. — The remaining case to be considered under this head, as mentioned in a former paragraph,^ is that of successive transfers of the same thing in action be liable : Pratt v. Taunton Copper M. Co., 123 Mass. 110, 112, 25 Am. Rep. 37. Plaintiff's certificate of shares, with a forged power of attorney, was delivered, without his knowledge or assent, to an auctioneer for sale ; this certificate was surrendered to the corporation, and it issued a new one in the name of the auctioneer, who sold and delivered it to a hona fide purchaser for value and without notice, and this assignee in turn surren- dered the second certificate and received a third one issued to himself. The owner brought a suit in equity against the corporation and the purchaser. The court held, — 1. That the plaintiff could maintain a suit against the corporation to compel it to issue a certificate of a like number of shares to him, and to pay him all the dividends thereon; citing Ashby v. Black- well, 2 Eden, 299; Amb. 503; Sloman v. Bank of England, 14 Sim. 475; Midland R'y v. Taylor, 8 H. L. Cas. 751; Pollock v. National Bank, 7 N. Y. 274, 57 Am. Dec. 520 ; but 2. The plaintiff was entitled to no relief against the purchaser, who was a purchaser in good faith for a valuable considera- tion and without notice, and who did not hold the certificate of shares which the plaintiff had; citing Bank v. Lanier, 11 Wall. 369; In re Bahia etc. R'y, L. R. 3 Q. B. 584; and the Massachusetts cases hereafter named in this note ; 3. If the purchaser claimed under a transfer which he knew or was bound to know to be forged or invalid, a different case would be presented ; citing Cottam v. Eastern Co. R'y, 1 Johns. & H. 243; Johnston v. Renton, L. R. 9 Eq. 181; Tayler v. Great Ind. Pen. R'y, 4 De Gex & J. 559; Denny V. Lyon, 38 Pa. St. 98, 80 Am. Dec. 463. See, also, to the same effect. Bewail V. Boston Water P. Co., 4 Allen, 277, 81 Am. Dec. 701; Loring v. Salisbury Mills, 125 Mass. 138; Pratt v. Boston & A. R. R., 126 Mass, 443; Machinists' Nat. Bank v. Field, 126 Mass. 345 (this case holds that the bank, after having obeyed the decree under the circumstances stated in 123 Mass. 110, cannot maintain any suit for reimbursement against the purchaser) ; Telegraph Co. v. Davenport, 97 U. S. 369 (holds the corpo- ration liable, but rather implies than expressly declares the purchaser not to be liable). The following California decisions involve, if they do not ex- pressly declare, the same rule : Brewster v. Sime, 42 Cal. 139, 147 ; Thomp- son V. Toland, 48 Cal. 99; Winter v. Belmont Min. Co., 53 Cal. 428, 432 (but see Shei'wood v. Meadow Valley M. Co., 50 Cal. 412) ; People v. Elmore, 35 Cal. 653 ; Weston v. Bear River etc. Co., 5 Cal. 186, 63 Am. Dec. 117; q Cal. 425; Naglee v. Pac. Wharf Co., 20 Cal. 529, 533. § 713, 1 See § 707. 1447 CONOEHNING PEIOBITIES. § 713 made by the same person — the creditor party — ^to different assignees. The American decisions upon this particular case cannot be reconciled. I can only present those settled doctrines of equity which, it would seem, should apply to and govern such a condition of circumstances. In Eng- land and in several of the states the rule giving to the assignee who first notifies the debtor party or trustee a precedence over all others, even those who are earlier in date, furnishes a certain and simple criterion for deter- mining the priority, it being remembered that this rule is confined to pure personal things in action, and does not extend to liens and other equitable interests 'in real es- tate.2 a In the states where the rule referred to does not prevail, the question must turn upon other doctrines. If the interests are equitable ia their nature, and the equity of no assignee is intrinsically superior to the others, the settled principle of equity should control, that the order of time determines the order of priority; or in other words, that the subsequent assignee takes subject to the rights of the one prior in time; and this principle has been applied, in such cases, by many able decisions. ^ ^ On § 713, 2 See supra, §§ 695-697. § 713, 3 Taylor v. Bates, 5 Cow. 376; Muir v. Schenek, 3 Hill, 228, 38 Am. Dec. 633; Pratt's Appeal, 77 Pa. St. 378, 381; Coon v. Reed, 79 Pa. St. 240 ; Lindsay v. Wilson, 2 Dev. & B. Eq. 85 ; Allen v. Smitherman, 6 Ired. Eq. 341; Wallston v. Braswell, 1 Jones Eq. 137; Downer v. Bank, 39 Vt. 25, 32. §713, (a) This paragraph of the v. Diebold Safe & Look Co., 66 Ohio text was quoted by the Orphans' St. 367, 90 Am. St. Rep. 586, 58 L. Court in In re Phillips' Estate, 205 R. A. 620, 64 N. B. 518 (double as- Pa. 515, 97 Am. St. Eep. 746, 55 Atl. signment of stock certificate) ; Pair- 213, adopting the English rule. The banks v. Sargent, 104 N. Y. 108, 58 text is cited and followed in Jenkin- Am. Eep. 490; S. C, 117 N. Y. 320, son V. New York Finance Co., 79 6 L. E. A. 475, 22 N. E. 1039; York N. J. Eq. 247, 82 Atl. 36 (successive v. Conde, 147 N. Y. 486, 42 N. E. assignees of a mortgage as an in- 193, 61 Hun, 26, 15 N. Y. Supp. 380; terest in land). Niles v. Mathusa, 162 N. Y. 546, 57 §713, (b) See also supra, last note N. E. 184; Central Trust Co. v. West to § 695; Portunato v. Patten, 147 N. India Imp. Co., 169 N. Y. 314, 62 Y. 277, 41 N. E. 572; Farmers' Bank N. E. 387; Mitchell v. Hockett, 25 § 714 EQUITY JUEISPKTJDENCE. 1448 the other hand, if the subsequent assignee has acquired the legal title, and was a purchaser in good faith for a valuable consideration and vdthout notice, he is protected ; and this doctrine of bona fide purchase seems to have been extended, by some decisions, to subsequent assignees who had only obtained an equitable interest.* "= § 714. 3. Equities in Favor of Third Persons. — ^Equities in favor of third persons through whom the title to the thing in action has never passed, and those in favor of a former assignor, are intimately connected; indeed, they are only different phases of the same doctrine, and must stand or fall together. If the imperfection of an as- signee's title is not confined to equities subsisting in favor of the debtor party, there is no reason, in the nature of things, why it should not extend to the equities of all other parties, — third persons as well as previous holders and assignors; in fact, the doctrine would apply with fewer exceptions in the case of third persons than in the case of prior assignors. As a third person, although having some interest or claim which constitutes his "equity," has never been an owner or holder of the chose in action, and has never transferred it, his conduct towards it cannot, ia general, enable the assignee to invoke against him the § 713, 4 See Judson v. Corcoran, 17 How. 612, and other decisions, where a subsequent assignee without notice has been protected by obtaining a legal title or advantage, or by his diligence, or the laches, etc., of the prior as- signee, supra, § 698, and notes. Cal. 538, 85 Am. Dec. 151; Gillette quent assignee of whole fund, ac- V. Murphy, 7 Okl. 91, 54 Pae. 413; quiring legal title without notice of Harris County v. Donaldson, 20 Tex. earlier equitable assignment of part Civ. App. 9, 48 S. W. 791; Clark v. of the fund). For an instructive Hogeman, 13 W. Va. 718; Columbia illustration, see Dueber Watch-Case Finance & Trust Co. v. First Nat. Mfg. Co. v. Daugherty, 62 Ohio St. Bank, 25 Ky. Law Eep. 561, 76 S. 589, 57 N. E. 455, the facts of which W. 156. are stated ante, in editor's note to § 713, (c) The text ia cited in § 710. See, also, Fairbanks v. Sar- King Bros. & Co. v. Central of gent, 117 N. T. 320, 6 L. K. A. 475, Georgia Ey. Co., 135 Ga. 225, Ann. 22 N. E. 1039. Cas. 1912A, 672, 69 S. E. 113 (subse- 1449 CONCERNING PBIOBITIES. § 714 doctrine of estoppel. These conclusions are fully sustained by judicial authority. Wherever the narrower view that an assignee takes subject only to the equities of the debtor has been rejected, and the theory of "latent" equities has been disregarded, the courts have described the assign- ment as subject to all claims existing against the assignor, — have laid down the rule in comprehensive and positive terms, that the assignee takes subject to all equities, latent or open, of third persons. Of course the "equity," in such a case, must be some subsisting claim to or against the thing in action itself, or the fund which it represents, which the third person held and could have enforced if it had remained in the hands of the assignor; as, for example, a lien or charge upon the fund or some part of it, or upon the security, or an equitable ownership or right to the fund or security, and the like.^ ^ The case of subsequent exe- § 714, 1 Davies v. Austen, 1 Ves. 247, per Lord Thurlow ; Mangles v. Dixon, 3 H. L. Cas. 702, 731; Bebee v. Bank of New York, 1 Johns. 529, 552, per Spencer, J.; 549, per Tompkins, J. (in these cases the rule is laid down in the most general form) ; Shropshire etc. R'y v. The Queen, L. E. 7 H. L. 496 (A, for value and without notice, obtained an equitable interest by assignment in certain shares of stock from B, wlio had the legal title. A's interest was held subject to the rights of a cestui que trust, C, for whom B really held the shares as trustee. See the cases cited in the opin- §714, (a) This paragraph is cited mortgage is subject to a latent in Third Nat. Bank of Springfield, equity of a third person in the Mass., V. National Bank of Com- mortgaged premises). In Dixon v. meree (Tex. Civ. App.), 139 S. W. Bentley, 68 N. J. Eq. 108, 59 Atl. 665. See, also, Owen v. Evans, 134 1036, 1042, Pitney, V. C, was of the N. T. 514, 31 N. E. 999 (assign- opinion that it was the duty of a menf of mortgage); David Steven- remote assignee to make inquiries son Brewing Co. v. Iba, 155 N. T. for latent equities from all his prede- 224, 49 N. E. 677 (assignment of cessors in title. But the doctrine chattel mortgage subject to mort- has its exceptions: it does not aj>- gagee's agreement giving another ply against a purchaser in good faith mortgage priority) ; Ames v. Rich- • and for value of a real estate mort- ardson, 29 Minn. 330 (assignment gage executed by one in possession of proceeds of insurance subject to of and holding the legal title to latent equitable lien of mortgagee land, whose conveyance was pro- of the insured premises); Patterson cured by fraud on his grantor: Simp- V. Babb, 38 S. C. 138, 19 L. E. A. son v. Del Hoyo, 94 N. Y. 189. 831, 17 S. E. 463 (assignment of § 714 EQUITY JUEISPEUDENCE. 1450 cution or attaekment creditors of the assignor stands upon a somewhat different footing, since their equities in the subject-matter are not existing at the time of the assign- ment." ions) ;* Bush v. Lathrop, 22 N. T. 535, per Denio, J. (a most able review of the preceding authorities) ; Schafer v. ReUly, 50 N. Y. 61, 67, 68, per Allen, J.; Trustees etc. v. Wheeler, 61 N. Y. 88, 104-106, 113, 114, per Dwight, J.; Greene v. Wamick, 64 N. Y. 220, 224, 225 (the rule fully dis- cussed and applied to equities of third persons) ; Van Rensselaer v. Staf- ford, Hopk. Ch. 569, 575; afarmed 9 Cow. 316, 318 (Van D. bought lands from Van R. on credit ; sold part to W., from whom he took two mortgages of the same date for the price, intending to assign one of them to Van R. as security for the debt due him. Both mortgages were recorded at the same time ; he first assigned one of them to Van R., and afterwards assigned the other to S. S., who was a bona fide purchaser for value, etc. Held, that the mortgage assigned to Van R. obta;ined a priority, and S. S. took the one assigned to Viim subject to all the equities which Van R. had against the assignor. Van D., and in or upon the land) ; Taylor v. Bates, 5 Cow. 376 (A, a bona fide assignee of an entire pecuniary demand held subject to the rights of B, who, by a previous arrangement with thie creditor-assignor, was entitled to a portion of the proceeds) ; Muir v. Schenck, 3 Hill, 228, 38 J^m. Dec. 633 (disapproving of dicta of Chancellor Kent in Murray v. Lylbum, 2 Johns. Ch. 441, 443) ; Brooks v. Record, 47 111. 30 (assignee of a negotiable note and chattel mortgage after maturity held subject to the rights of one who had purchased the chattels for value and without notice after the mortgage was given; the mortgagee had estopped himself by his conduct from enforcing the mortgage against such purchaser, and the as- signee was affected by the same equity) ; Allen v. Watt, 79 lU. 284 (assignee of a judgment held subject to a lien acquired by creditors previous to the assignment) ; Pindall v. Trevor, 30 Ark. 249 ; Trabue v. Bankhead, 2 Tenn. Ch. 412; Parrish v. Brooks, 4 Brewst. 154; Bradley v. Root, 5 Paige, 632; § 714, (fc) Equitable Assignment by London & Provincial Bank, [1893] Trustee of Shares of Stock. — ^For 1 Ch. 610 (stock transferred by an other cases presenting substantially imperfectly executed deed, passing the same facts, viz., a pledge of only an equitable title) ; Ireland v.- shares by a trustee or other trans- Hart, [1902] 1 Ch. 522 (transferee fer not passing the legal title, and did not obtain a "present abso- therefore subject to the rights of lute unconditional right to registra- the cestui que trust, see Soci^te Gen- tion"). erale de Paris v. Walker, 11 App. § 714, (c) For cases postponing Cas. 20; Koots v. Williamson, 38 Ch. the equities of the assignor's credi- Div. 485; Moore v. Northwestern tors, see ante, §§ 694, and note, 70O, Bank, [1891] 2 Ch. 599; Powell v. and note. 1451 CONCEENING PRIORITIES. § 715 §715. Contraxy Rule, That Assignments of Things in Action are Free from Latent Equities in Favor of Third Persons or Previous Assignors. — On the other hand, the conclusions reached by this imposing line of authorities have been wholly rejected. Able judges and courts have maintained the position that assignments of things in ac- tion are subject only to equities of the debtor party; that they are never subject to equities in favor of third persons, and especially that they are free from that kind of prior claim often called "latent equities." i* Although this Poillon V. Martin, 1 Sand. Cli. 569; Maybin v. Kirby, 4 Rich. Eq. 105; Judson V. Corcoran, 17 How. 612. § 715, 1 Livingston v. Dean, 2 Johns. Ch. 479 ; Murray v. Lylbum, 2 Johns. Ch. 441, 443 (the opinion of Kent, C, in" these cases seems to be the authority on which all the later similar decisions are rested. His opinion on this point has been repcEitedly overruled by the New York courts : See Muir V. Schenek, 3 Hill, 228, 38 Am. Dec. 633; Bush v. Lathrop, 22 N. Y. 535) ; Bebee v. Bank of New York, 1 Johns. 529, 573, per Kent, C. J. ; James v. Morey, 2 Cow. 246, 298, 14 Am. Dec. 475, per Sutherland, J.; Losey v. Simpson, 11 N. J. Eq. 246; Bloomer v. Henderson, 8 Mich. 395, 402, 77 Am. Dec. 453; Croft v. Bunster, 9 Wis. 503, 508; Mott v. Clark, 9 Pa. St. 399, 404, 49 Am. Dec. 566; Taylor v. Gitt, 10 Pa. St. 428; Metzgar v. Metz- gar, 1 Rawle, 227; McConnell v. Wenrich, 16 Pa. St. 365; Moore v. Hol- combe, 3 Leigh, 597, 24 Am. Dec. 683; Ohio Life Ins. Co. v. Boss, 2 Md. Ch. 25, 39. An assignee for value and without notice of a chattel mortgage, fraudulent as against the creditors of the mortgagor, obtains a good title superior to the equities of such creditors : Sleeper v. Chapman, 121 Mass. 404; see, also, upon the general question discussed in the text, Sumner v. Waugh, 56 111. 531. §715, (a) See, also. Winter v. since, by statute, such assignee ob- Montgomery G. K Co., 89 Ala. 544, tains the legal title) ; Yarnell v. 7 South. 773 (bona fide assignee of Brown, 170 111. 362, 62 Am. St. Kep. stock oertificate takes it free from 380, 48 N. E. 909 (assignment of secret trust on which the' original judgment based on attachment) ; owner held the stock); First Nat. Garland v. Plummer, 72 Me. 397 Bank v. Perris Irr. Dist., 107 Cal. 55, (assignee of a cause of action to re- 40 Pae. 45; Western Nat. Bank v. cover for injury to chattels takes Maverick Nat. Bank, 90 Ga. 339, 35 proceeds free from a mortgage on Am. St. Rep. 210, 16 S. E. 942 (as- the chattels which, as against a pur- signee of judgment takes it free chaser thereof, would have been from equity of a person not a party void for want of recording) ; Duke thereto to share in the proceeds, v. Clark, 58 Miss. 465 (assignment 716 EQUITY JUEISPRTJDENCE. 1452 direct conflict cannot be completely reconciled, yet the ap- parent discrepancy which exists among similar cases may be explained, and at least partly removed, by certain well- settled principles of equity which are recognized by all courts. The equity of the second assignee may, from some intrinsic element or some external incident, be "superior," and may therefore be entitled to a precedence ; or the sec- ond assignee may have obtained a legal title, so that the doctrine of bona fide purchaser for a valuable considera- tion will apply and give him protection ; ^ or the holder of the prior equity may have been guilty of laches or other conduct making it inequitable to subject an innocent subse- quent assignee to his claim.^ § 716, Equitable Estates, Mortgages, Liens, and Other Interests. — ^Having thus considered the general principles § 715, 2 See supra, § 698, quotation from Judson v. Corcoran, 17 How. 612, and other cases cited. of judgment) ; Williams v. Donnelly, 54 Neb. 193, 74 N. W. 601; Appeal of Mifflin Co. Bank, 98 Pa. St. 150 (assignment of judgment). See, fur- ther, Ironstone Ditch Co. v. Equi- table Securities Co., 52 Colo. 268, 121 Pac. 174 (transferee of stock certificate in good faith and for value takes it free from latent equi- ties in favor of third parties) : Brooks V. Greil Bros. Co., 192 AJa. S35, 68 South. 874 (assignee is bound, however, to exercise such prudence and inquiry as circum- stances would suggest to reasonably careful men) ; First National Bank V. Brotherton, 78- Ohio St. 162, 84 N. E. 794 (transferee of note se- cured by mortgage has a lien free from latent equities). In Tarnell v. Brown, 170 IlL 362, 62 Am. St. Eep. 380, 48 N. E. 909, it was held that the equity of the assignee, in order to be protected, must be at least equal to the 'latent" equity; if he is a donee, or his lien is essentially inferior, he is not preferred. The lien of a judgment, being general, is inferior to the equity of a mort- gagee whose mortgage, by mistake, did not correctly describe the land; but the lien of an attachment, being specific, is equal to the equity of such mortgagee, and the assignee of a judgment based on the attachment takes, therefore, free from the mort- gagee's "latent" equity. §715, (b) As in Western Nat. Bank v. Maverick Nat. Bank, 90 Ga. 339, 35 Am. St. Rep. 210, 16 S. E. 942; Winter v. Montgomery G. L. Co., 89 Ala. 544, 7 South. 773 (hona fide purchaser of stock certificate with the usual indorsement from a trustee takes it free from the trust, since he obtains the legal title against all persons except the com- pany). 1453 CONCERNING PRIORITIES. § 717 concerning priority in their effect upon assignments of pure things in action, I shall now examine their applica- tion to another group of equitable interests in property, including estates, liens, charges, and the like. The general doctrines which control these kinds of interests, and de- termine their order of priority, have been presented in the • former part of this section, and require no further discus- sion; it only remains to illustrate their application under various circumstances to different conditions of fact. It will be remembered that among equitable interests only in the same subject-matter, otherwise equal, the order of time controls ; that between two or more equities, one may be intrinsically superior in its nature, and thus entitled to the precedence; that between an equitable title and a legal title in the same thing, the latter generally prevails ; and finally, the priority resulting from order of time merely, or that resulting from the superior nature of the equity itself, or that belonging to a legal title, may be postponed or defeated in various manners and by various incidents, among which the most important are, notice given to or fraud or negligence of the holder of the interest which would otherwise have been preferred.^ ^ §717. Doctrine of Priorities Greatly Modified by the Recording Acts. — These doctrines, forming a most impor- tant part of the equity jurisprudence, have been well settled, applied to every kind of equitable estate, lien, and interest, and illustrated by innumerable examples. The scope and operation of these purely equitable doctrines throughout the United States have been greatly broken in upon and modified by the various recording acts; so that any uniformity of the practical rules has been made virtu- ally impossible- The provisions of the recording acts § 716, 1 See supra, §% 683-692. § 716, (a) Section 716 is cited in (prior lien postponed on account of Gilchrist V. Helena Co., 58 Fed. 708; fraud); §§716 et seq., are cited in in Hooper v. Central Trust Co., 81 Trentman v. Eldridge, 98 Ind. 525. Md. 559, 29 L. B. A. 262, 32 Atl. 505 § 718 EQUITY JUEISPKUDENCB. 1454 differ exceedingly in the different commonwealtlis, as has been shown in the preceding section.^ In some states only "conveyances," including deeds and mortgages, are to be recorded; in others, every kind of instrument creating or assigning any interest in or lien or charge upon land, and even instruments dealing only with personal property, may be recorded. A similar diversity exists in the statutory provisions regulating the effect of docketed judgments. Another cause which has disturbed the uniformity of rules upon this general subject is found m the various theories which prevail concerning the nature and effect of mort- gages of land, — theories which are not only unlike the com- mon law and equitable system originally settled in Eng- land, but which greatly differ among themselves. To discuss ta an exhaustive manner the subject of priorities as modified by the statutory legislation, and to present all the rules growing out of their local recording acts, as settled in the various states, would plainly transcend the limits of this work, and would, in fact, require a volume by itself; for such an extended and minute treatment the reader must be referred to treatises upon mortgages and conveyancing, and to the decisions in each state which have given a construction to its own statutes. I shall en- deavor simply to illustrate the well-settled doctrines of equity, independent of statutory rules, and then to de- scribe some effects of the registration system, with the modifications, somewhat different in different eonamon- wealths, which it has introduced. § 718. I. Priority of Time Among Equal Equities. — The general doctrine is well settled, as already stated,^ that among successive equitable estates, liens, and interests which are equal,— that is, where neither claimant holds the legal estate or has the best right to call for it, and neither is intrinsically superior to the others, nor is af- fected with any collateral incident, such as negligence or § 717, 1 See supra, § 646. § 718, 1 See supra, §§ 678, 682. 1455 CONCERNING PRIOBITIES. § 718 fraud, — the order of time controls, even though a. subse- quent holder acquired his interest without any notice of the prior one. Under these circumstances the maxim, Qui prior est tempore, potior est jure, applies. The doctrine has been fully recognized and constantly enforced by American courts, wherever its operation has not been in- terfered with or modified by the recording acts.^ a The equities to which this rule has been most frequently ap- plied by the English courts are equitable mortgages, especially those created by a deposit of title deeds, — a kind of security almost unknown in this country. In order to accurately appreciate the decisions upon this subject, it is important to keep in mind the peculiar rules concerning the nature of legal and equitable mortgages which prevail in the English law, and which are in many respects different from our own system. ^ § 718, 2 Phillips V. Phillips, 4 De Gex, F. & G. 208, 215, 218; Cave v. Cave, L. R. 15 Ch. Div. 639, 646 (interest of a cestui que trust and an equitable mortgage) ; Rice v. Rice, 2 Drew. 73 (vendor's lien and equitable mortgage) ; Bradley v. Riches, L. R. 9 Ch. Div. 189 (two equitable mort- gages) ; Dixon v. Muckleston, L. R. 8 Ch. 155; Newton v. Newton, L. R. 4 Ch. 143; 6 Eq. 135, 140; Waldy v. Gray, L. R. 20 Eq. 238; Thorpe v. Holdsworth, L. R. 7 Eq. 139; Cory v. Eyre, 1 De Gex, J. & S. 149, 163; Roberts v. Croft, 2 De Gex & J. 1; Beckett v. Cordley, 1 Brown Ch. 353, 358; Mackreth v. Symmons, 15 Ves. 329, 354; Wilmot v. Pike, 5 Hare, 14; Potter V. Sanders, 6 Hare, 1 ; Ford v. "White, 16 Beav. 120 ; Ben-y v. Mut. Ins. Co., 2 Johns. Ch. 603 ; Cherry v. Monro, 2 Barb. Ch. 618 ; Grosvenor V. Allen, 9 Paige, 74, 76; Thorpe v. Durbon, 45 Iowa, 192; Hoadley v. Hadley, 48 Ind. 452; Stevens v. Watson, 4 Abb. App. 302; Littlefield v. Nichols, 42 Cal. 372; Walker v. Matthews, 58 111. 196. § 718, 3 With respect to priorities between successive equitable mort- gages, see Bradley v. Riches, L. R. 9 Ch. Div. 189; Dixon v. Muckleston, § 718, (a) This paragraph is cited conditional sale, and thereafter gave in Pugh V. Whitsitt & Guerry (Tex. an equitable mortgage to a bank by Civ. App.), 161 S. W. 953. See, also, deposit of title deeds. It was held Carlisle v. Jumper, 81 Ky. 282 (sue- that the affixing of the chattel gave cessive assignments of a grantor's the vendor an equity in the real es- reserved lien to different persons). tate, which being prior in time to In In re Samuel Allen & So;ns, Ltd., the equitable mortgage, prevailed; [1907] 1 Ch. 575, the company had followed in In re Morrison, Jones & bought machinery, which it installed Taylor, Ltd., [1914] 1 Ch. 50. in its premises, under a contract of § 719 EQUITY JX7KISPEUDENCE. 1456 §719. Illustrations — Simultaneous Mortgages, Substi- tuted Liens, etc. — It has naturally followed, from the pro- visions of the recording acts, and from the quite different • modes of conducting business prevailing in this country, that the questions presented to the American courts for decision have been of another character, arising from other circumstances. Among these questions, one relates to simultaneous mortgages or other liens. ^ Two or more L. R. 8 Ch. 155; Waldy v. Gray, L. R. 20 Eq. 238; Thorpe v. Holdsworth, L. R. 7 Eq. 139, and other cases cited in last note. With respect to such priority where there has been negligence on the part of the one first in order of time, see Layard v. Maud, L. R. 4 Eq. 397, 406 ; Hunter v. Walters, L. R. 11 Eq. 292 ; Pease v. Jackson, L. R. 3 Ch. 576.»» If the legal owner of land gives a first mortgage on it to A in the ordinary form known to the common law, of a deed with a condition, this is, of course, a legal mortgage ; A obtains and holds the legal title and estate, if the mortgage is of the fee, then his estate is the legal fee. While this first mortgage is outstanding, all subsequent mortgages of the same land to B, C, D, etc., no matter what may be their forms, are necessarily equitable mortgages; even if such a sub- sequent mortgage be in the form of a legal conveyance, it can only convey an equitable estate, since the legal estate has already been conveyed away and it vested in the first mortgagee, A. This is the settled rule necessarily resulting from the English theory of mortgages. Again, if the legal owner of land creates a first mortgage upon it by depositing all his title deeds with A, A's interest is certainly an equitable mortgage ; but since he is first in order of time, and possesses all the legal muniments of title, and has the right to call for the execution of an ordinary legal mortgage by con- veyance in order to perfect his security, his position is plainly similar to that of a legal mortgagee. § 719, 1 Morse v. Brockett, 67 Barb. 234. A first mortgage being given to A and a second to B, both on the same land, and as a part of one and the same arrangement, no money passing between the parties at the time, B may insist that, as against his own mortgage, A's mortgage has no force except to the extent that A has performed the agreement under which they were given. The consideration of A's mortgage was his undertaking to satisfy the mortgagor's liabilities to the amount of twenty thousand dol- lars. Held, that he could only enforce to the extent he had performed his agreement. Also, by his agreement, he became, as between himself and the mortgagor, with respect to these liabilities, the principal debtor; and when §718, (*) See ante, § 687, and Law T. (N. S.) 109, 46 Wkly. Eep. notes; In re Castell & Brown, [1898] 248. 1 Ch. 315, 67 Law J. (Ch.) 169, 78 1457 CONCBBNING PRIORITIES. § 719 mortgages having been given at the same time, or as parts of the same single transaction, with the intention that they he had satisfied judgments against the mortgagor, he could not hold them as assignee, and enforce them against the mortgagor : Van Aken v. Gleason, 34 Mich. 477. Where two mortgages are of even date, and intended to be simultaneous, but recorded on different days, the foreclosure of one of them by advertisement would not settle the equities of the purchaser at the sale and of the person holding the other; a suit in equity would be necessary to determine their respective rights. The fact that the one re- corded on the later day bore an acknowledgment of an earlier date does not show that it was intended to be the prior security: Gausen v. Tom- linson, 23 N. J. Eq. 405. Where two mortgages on the same land are given at the same time to the same person, an earlier record of one will not give it any precedence over the other, even when between assignees. Such mortgages, in the hands of different assignees, are concurrent liens, payable ratably, if necessary : Gausen v. Tomlinson, 23 N. J. Eq. 405 ; How^ ard V. Chase, 104 Mass. 249. Where two simultaneous mortgages are given with an agreement that they are to be equal liens, the earlier record of one gives no priority over the other, even to an assignee of the one first recorded. Such assignee is charged with notice by the record of the other mortgage. If both the mortgages, or either of them, contain a stipulation that they are to be simultaneous, or a statement that both were given for purchase- money, then the first record of one will give it no priority, either in the hands of the mortgagee or of an assignee: Greene v. Warnick, 64 N. Y. 220. On the other hand, if simultaneous mortgages are given to different persons as parts of the same transaction, each having notice of the other, their priorities as between the mortgagees will depend upon the equities intrinsically belonging to them, without reference to the order of record- ing: Rhodes v. Canfield, 8 Paige, 545; Jones v. Phelps, 2 Barb. Ch. 440; Pomeroy v. Latting, 15 Gray, 435; Sparks v. State Bank, 7 Blackf. 469.» If, however, one of these mortgages is assigned to a bona fide purchaser for value and without notice, he may, by obtaining the earliest record, secure the priority over the other which has intrinsically a superior equity: Coming v. Murray,3 Barb. 652. If a grantee of land, as a part of his purchase, and the whole constituting one transaction, gives a mortgage back to his grantor for purchase-money, and also a mortgage to another person, and the deed and two mortgage^ are recorded at the same time, the pur- chase-money moiigage to the grantor is entitled to the priority: Clark v. Brown, 3 Allen, 509; and see Dusenbury v. Hulbert, 2 Thomp. & C. 177. This subject is more fully discussed in 1 Jones on Mortgages, sees. 566-563, from which a portion of this note has been borrowed.* § 719, (a) See, also, Lampkin v. § 719, (b) No presumption of pri- First Nat. Bank, 96 Ga. 487, 23 S. ority arises from the fact of prior £. 390. lecording, nor does such fact tend 11—92 §719 EQIHTX JUEISPBTTDENCB. 1458 should be simultaneous liens, they may perhaps be re- corded on different days, and the court may be called upon to settle the equities between the mortgagees or their as- signees. A second and most important question concerns the respective claims of precedence between a prior iinre- corded mortgage or other specified equitable lien, and a subsequent docketed judgment.^ Another question re- § 719, 2 This particular question, which has given rise to a direct conflict of opinion, is more fully examined under the next head {infra, §§ 721- 724), and I simply here cite some of the cases involving it: Galway v. Malchow, 7 Neb. 285 ; King v. Portis, 77 N. C. 25 ; Corpman v. Baecastow, 84 Pa. St. 363; Van Thomiley v. Peters, 26 Ohio St. 471; Stevens v. Wat- son, 4 Abb. App. 302; Merriman v. Polk, 5 Heisk. 717; Tain v. Inman, 6 H»isk. 5; Wheeler v. Kirtland, 24 N. J. Eq. 552; Knell v. Building Ass'n, 34 Md. 67. to show that the one first recorded was executed and delivered before the other: Walker v. Buffandeau, 63 Cal. 312. If, however, facts appear- ing on the face of the mortgages show that it was the intention of the parties to give preference to one over the other, that lien will be given priority: Coleman v. Car- hart, 74 Ga. 392. Where, however, as between the simultaneous mort- gagees, an equitable priority exists in favor of one, and the other as- signs for value, and the assignee has no notice, actual or construc- tive, of such priority, he will take Ms mortgage discharged of the equity: Eiddle v. George, 58 N. H. 25. And where the concurrent mprt- gages are held by the same person, and one is assigned by the mort- gagee, with a representation that it is the first lien, such representation will give it priority as against the mortgagee, but not as against a sub- sequent assignee of the other mort- gage without notice: Vredenburgh v. Burnet, 31 N. J. Eq. 229. But the fact that one of the mortgages becomes due before the other is held not to give it priority: CoUerd v. Huson, 34 N. J. Eq. 38. In Utley v. Dunkelberger, 86 Iowa, 469, 53 N. W. 408, two mortgages were exe- cuted and recorded simultaneously: one was accepted with the under- standing that it was to be first; the other was accepted the next day, with full knowledge of the exist- ence of the former, but not of its priority: held, that the priority was determined by the time of accept- ance. In Naylor v. Throckmorton, 7 Leigh ) Compare Capell v. Win- eideratioii, but the deed was defec- ter, [1907] 2 Ch. 376. Se^e, also, tive as a conveyance of the legal Hume v. Dixon, 37 Ohio St. 66. K., title, because the oflSeer taking the having the legal title to land, sub- acknowledgment omitted to sub- ject to a grantor's lien in favor of scribe the same. Held, in reliance D., sold and undertook to convey on Eice v. Eice, that H.'s equity the same to H., for a valuable con- was superior. § 721 EQUITY JTJBISPKUDENCB. 1462 § 721. Prior Unrecorded Mortgage Superior to Subse- quent Docketed Judgment. — The most important question und^r this head which has come before the American courts relates to the respective claims arising from a prior specific and a subsequent general lien. The doctrine is certainly established as part of the equity jurisprudence, and rests upon the solid basis of principle, that prior equi- table interests in rem, including equitable liens upon specific parcels of land, have priority of right over the general statutory lien of subsequent docketed judgments, although the latter is legal in its nature. Judgment creditors are not "purchasers" within the meaning of the recording acts, and unless expressly put upon the same was entitled to preference over that of the mortgagees. The same rule seems to be sustained by the following cases : In Stevens v. Watson, 4 Abb. App. 302, it is held that while a mortgage by a railroad company of all its property then existing or afterwards to be acquired, creates a valid equi- table lien upon all the after-acquired property, which is superior to that of an ordinary subsequent judgment, still, if such subsequent judgment is confessed to secure the payment of money advanced at the time on the faith of it by the judgment creditor, the latter lien thereby becomes en- titled to a precedence over the prior encumbrance by the mortgage ; citing, to the same effect, Hulett v. Whipple, 58 Barb. 224. In Fain v. Inman, 6 Heisk. 5, it is held that where the vendor conveys the legal title without retaining a lien for the purchase-money in any express manner, his right to enforce payment against the land in the hands of the vendee is a mere "equity," and must be postponed to a specific lien subsequently acquired, either with or without notice, by a creditor of the vendee. This case seems to recognize the rule stated in the text, but, in my opinion, by a mistaken course of reasoning. By the overwhelming weight of authority, the Ken of a vendor, even when not reserved by any express language, is more than a mere equity; it is an equitable interest in rem, and entitled to preference over all subsequent equitable interests of no higher nature : See Rice v. Rice, 2 Drew. 73.« § 720, (e) See, however, post, misappropriated by his trustee, to § 1253, and note. In Wales v. Sam- charge the individual property of mis, 120 Iowa, 293, 94 N. W. 840, the trustee for reimbursement does it appears to have been correctly not take preeedence of an attach- held that the mere inchoate right, ment levied upon such land by the not amounting to a lien, of a cestui trustee's creditor. que trust whose property has been 1463 CONCEENING PRIORITIES. § 721 footing, they do not obtain the benefit which a subsequent purchaser does by a prior record. The equitable doctrine is, that a judgment and the legal lien of its docket binds only the actual interest of the judgment debtor, and is subject to all existing equities which are valid as against such debtor.! * It follows, as a necessary consequence, § 721, 1 The doctrine was well stated by Bartley, J., in White v. Denman, 1 Ohio St. 110, 112, although the decision upon the authority of earlier Ohio cases was not in accordance with it. "It is a principle of familiar applica- tion in equity jurisprudence that a specific equitable interest in real estate, whether it be created by an executory agreement for the sale of land, or by deed so defectively executed as not to pass the legal estate, but treated in equity as a contract to convey, or even a vendor's lien, is upheld by courts of equity, and uniformly takes priority over judgment liens, assiga- ments in bankruptcy, and assignments for the benefit of creditors gener- ally." See, also. Finch v. Earl of "Winchelsea, 1 P. Wms. 277; Legard v. Hodges, 1 Ves. 477; Burn v. Burn, 3 Ves. 573, 582; Lodge v. Tyseley, 4 Sim. 70; Beavan v. Earl of Oxford, 6 De Gex, M. & G. 507, 517, 518; New- lands V. Paynter, 4 Mylne & C. 408 ; Langton v. Horton, 1 Hare, 549 ; Ever- ett v. Stone, 3 Story, 446, 455; Briggs v. French, 2 Sum. 251. In the following cases the doctrine has been applied to a great variety of equi- table interests, — that of a vendee, to the lien of a vendor, to the interest of a cestui que trust, whether the trust was express or by operation of law, to equitable mortgages or liens arising from contract, or from intended legal mortgages defectively executed, etc. : Ells v. Tousley, 1 Paige, 280 ; In re Howe, 1 Paige, 125 ; White v. Carpenter, 2 Paige, 217, 266 ; Gouverneur v. § 721, (a) Judgment Lien Subject 104 Pae. 10 (trust) ; Salisbury v. La to Existing Equities. — The text is Fitte, 21 Colo. App. 13, 121 Pac. 952 quoted in Harney v. First Nat. (option to purchase land) ; Lowe v. Bank, 52 N. J. Eq. 697, 29 Atl. 221; Allen, 68 Ga. 225 (deed reformed as Dawson v. MeCarty, 21 Wash. 314, against grantoi's judgment credi- 75 Am. St. Hep. 841, 57 Pac. 816, tors); Lowe v. Matson, 140 III. 108, citing many cases. Cited, in Marj ;__ 29 N. E. 1036 (assignment for credi- tin V. Bowen^l N. J. Eq. 452, 26 tors); Boyd v. Anderson, 102 Ind. AtnSS (judgment creditors, inde- 217, 1 N. E. 724 (equity to reform pendently of statute, inferior to judgment debtor's prior deed for prior equitable mortgage). See, also, mistake; judgment creditor cannot Kiley v. Martinelli, 97 Cal. 575, 33 make the defense that the mistake Am. St. Kep. 209, 21 L. K. A. 33, 32 was one of law, not of fact) ; Heberd Pae. 599; Huff v. Sweetser, 8 Cal. v. Wine, 105 Ind. 237, 4 N. E. 457 App. 689, 97 Pae. 705 (prior con- (land subject to resulting trust); tract of purchase); Zenda Min. & Wells v. Benton, 108 Ind. 585 Mill. Co. V. Tifin, 11 Cal. App. 62, (equity to reform judgment debtor's §721 EQUITY JUEISPRUDENCB, 1464 that, unless prevented by express statutory provisions, the equitable lien of a prior unrecorded mortgage given upon a specific parcel of land should have precedence over the Titus, 6 Paige, 347; Kiersted v. Avery, 4 Paige, 9; Arnold v. Patrick, 6 Paige, 310; Morris v. Mowatt, 2 Paige, 586, 590, 22 Am. Dec. 661; Suehan V. Sumner, 2 Barb. Ch. 165, 207, 47 Am. Dec. 305; Hoagland v. Latourette, 2 N. J. Eq. 254; Dunlap v. Burnett, 5 Smedes & M. 702, 45 Am. Dec. 269 ; Money v. Dorsey, 7 Smedes & M. 15 ; Bank v. Camp- bell, 2 Ricb. Eq. 179; Watkins v. Wassell, 15 Ark.. 73, 94, 95; Cover v. Black, 1 Pa. St.M93; Sbryoek v. Waggoner, 28 Pa. St. 430; Hampson v. Edelen, 2 Har. & 3. 64, 3 Am. Dec. 530; Hackett v. CaUender, 32 Vt. 97, prior deed so as to include land omitted by mistake); Peek v. Will- iams, 113 Ind. 256, 15 N. E. 270 (contract to sell the land); Justice T. Justice, 115 Ind. 201, 16 N. E. 615 (attorney's lien for professional ser- vices upon land recovered as result of suit superior to subsequent judg- ment against his client) ; Leonard v. Broughton, 120 Ind. 536, 16 Am. St. Kep. 347, 22 N. E. 731; Koons v. Millett, 121 Ind. 591, 7 L. E. A. 231, 23 N. E. 95; Warren v. Hull, 123 Ind. 126, 24 N. E. 96 (land subject to resulting trust); Apple v. Eobb, 54 Ind. App. 359, 103 N. E. 12 (in- ferior to the equitable interest of judgment debtor's grantee under a defective conveyance) ; Eea v. Wil- son, 112 Iowa, 517, 84 N. W. 539; Witmer v. Shreves, 141 Iowa, 496, 120 N. W. 86; Burke v. Johnson, 37 Kan. 337, 1 Am. St. Eep. 252, 15 Pac. 204 (contract for sale of the land); Oder v. Jump, 32 Ky. Law, 1276, 108 S. W. 292 (trustee's bond to convey to a person designated by the cestui que trust has priority over a subsequent judgment against the cestui) ; Valentine v. Seiss, 79 Md. 187, 28 Atl. 892 (unrecorded con- tract for sale) ; Horton v. Hubbard, 83 Mich. 123, 47 N. W. 115 (con- tract for sale) ; Westervelt v. Hagge, 61 Neb. 647, 54 L. R. A. 333, 85 N. W. 852 (attachment inferior to equity of creditors of debtor's gran- tor to set aside the conveyance as in fraud of their rights); Depeyster v. Gould, 3 N. J. Eq. (2 H. W. Green) 474, 29 Am. Dec. 723 (re- sulting trust is prior to subsequent attachment); J. J. Case Threshing Machine Co. v. Walton Trust Co., 39 Okl. 748, 136 Pac. 769 (resulting trust); First State Bank v. Jones, 107 Tex. 623, 183 S. W. 874 (judg- ment inferior to equity of prior mortgagee, whose mortgage had been satisfied by mistake) ; Summers v, Darne, 31 Gratt. 791; Cowardin v. Anderson, 78 Va. 88; Hurt v. Prilla- man, 79 Va. 257; Sinclair v. Sinclair, 79 Va. 40; Bowman -v. Hicks, 80 Va. 806. In Wales v. Sammis, 120 Iowa, 293, 94 N. W. 840, it was held that a cestui que trust whose property has been misappropriated by his trustee has no lien for the purpose of re- imbursement upon the property of the trustee, not acquired by the use of trust funds. His mere inchoate right to -charge the trustee's land, therefore, does not take precedence of an attachment levied upon the land. In many states where by tne ex- press terms of the recording acts 1465 CONCERNING PKIOBITIES. §721 general legal lien of a subsequent docketed Judgment against the owner of the mortgaged premises, even when the judgment was recovered and docketed without any no- 108, 109; Hart v. Farmers' etc. Bank, 33 Vt. 252; Brown v. Pierce, 7 Wall. 205 ; Baker v. Morton, 12 Wall. 150. In these two latter cases the doctrine was applied to the equitable interest of a grantor who had executed a deed through duress, but had remained in possession, against a judgment creditor of the grantee. Notwithstanding this imposing array of authorities, the doctrine has been rejected or departed from in a few cases. In Richeson V. Richeson, 2 Gratt. 497, the lien of a vendor was held subordinate to the right of the vendee's creditor. In Bayley v. Greenleaf, 7 Wheat. 46, 51, the judgment lien is superior to a prior unrecorded mortgage or con^ veyanee, it is held to be inferior to a prior trust arising by opera- tion of law, which necessarily can- not be made a matter of record: Overall v. Taylor (Ala.), 11 South. 738; Morgan v. Morgan, 3 Stew. 383' 21 Am. Dec. 638; Waterman v. Buckingham, 79 Conn. 286, 64 Atl. 212 (attaching creditor who gave no credit to apparent or record title of debtor, not protected against re- sulting trust; otherwise if he gave credit in reliance upon apparent ownership) ; Hunter v. State Bank of Florida, 65 Fla. 202, 61 South. 497 (judgment lien inferior to right of cancellation) ; Yarnell v. Brown, 170 111. 362, 62 Am. St. Kep. 380, 48 N. E. 909 (inferior to the equity of a mortgage which, by mistake, did not correctly describe the land); School District No. 10 v. Peterson, 74 Minn. 122, 73 Am. St. Eep. 337, 76 N. W. 1126; Lissa v. Posey, 64 Miss. 362, 1 South. 500; Harney v. First Nat. Bank, 52 N. J. Eq. 697, 29 Atl. 221; Miller v. Baker, 166 Pa. St. 414, 45 Am. St. Eep. 680, 31 Atl. 121; Senter v. Lambeth, 59 Tex. 259; Calvert v. Eoehe, 59 Tex. 463; McKamey v. Thorp, 61 Tex. 648; Parker v. Coop, 60 Tex. Ill; Toe V. Montgomery, 68 Tex. 341, 4 S. W. 622; Hicks v. Pogue (Tex. Civ. App.), 76 S. W. 786; Blankenship v. Doug- las, 26 Tex. 225, 82 Am. Dec. 608; Hawkins v. Willard (Tex. Civ. App.), 38 S. W. 365 (equitable right); Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S. W. 174; Hornbeck v. Barker (Tex. Civ. App.), 192 s'. W. 276 (re- sulting trust). See last note to § 721. Thus, the equity of partners to have partnership lands, the rec- ord title to which stand's in the names of individual partners, ap- plied to partnership debts, is su- perior to the liens of judgment credi- tors of the individual partners: Har- ney V. First Nat. Bank, 52 N. J. Eq. 697, 29 Atl. 221. In Snyder v. Martin, 17 W. Va. 276, 41 Am. Eep. 670, and Snyder v. Botlcin, 37 W. Va. 355, 16 S. E. 591, it was held that a parol contract to convey land, accompanied by possession, and pay- ment, is valid, and not subect to registry laws. Hence, it has pri- ority over a subsequent judgment against the vendor. See the opin- ion of Green, Pr., in the first of these two cases, for an instructive discussion and review of cases. To the same effect are Floyd v. Hard- ing, 28 Gratt. 401, 414, 416; Long v. Hagerstown Agricultural Co., 30 721 EQUITY JUEISPRUDENCB. 1466 tice to the judgment creditor of such outstanding mort- gage. This rule,, which is plainly correct, as being in ac- cordance with principle and preserving the consistency and symmetry of the equity jurisprudence, has been adopted and firmly established by the courts in many of the states.2 c The general rule, wherever it thus prevails, the same preference was given to a subsequent judgment against the vendee over the lien of the vendor. The decision cannot be of any weight, since Marshall, C. J., doubts whether the vendor's lien exists at all in the law of this country, and expressly declares that there is no American case protecting it.'* § 721, 2 In some of these cases it is a prior unrecorded deed that pre- vails over the subsequent judgment; but where this is so held of a deed, it must of necessity be also held of a mortgage: Stevens v. Watson, 4 Abb. Gratt. 665; Brown v. Butler, 87 Va. 621, 13 S. E. 71; Powell v. Bell's Admr., 81 Va. 222; Westinghouse Lamp Co. v. Ingram (W. Va.), 90 S. E. 837. ■ Compare Fulkerson v. Taylor (Va.), 46 S. E. 309. See, also, Blaha v. Borgmann, 142 Wis. 43, 124 N. W. 1047 (parol trust in land, declared with ineffective con- veyance, takes priority over subse- quent judgment against creator of the trust). §721, (b) Vendor's or Grantor's Lien on Conveyance. — The author subsequently changed Ms opinion on the question of priority between the grantor's implied lien and that of the grantee's judgment creditor; see post, § 1253, note, where he argues that the lien, being less than an equitable estate, and not superior in quality to that of a judgment, should yield thereto, because of the latter's legal character. See, also. Cutler V. Ammon, 65 Iowa, 281, 21 N. W. 604; Gordon v. Eixey, 76 Va. 694. Contra, that the lien is su- perior to the judgment against the grantee, see Walton v. Hargroves, 42 Miss. 18, 97 Am. Dec. 433; Bowles v. Belt (Tex. Civ. App.), 159 S. W., 885. § 721, (c) Prior Unrecorded Mort- gage superior to judgment or attach- ment. This note is cited in Ameri- can Savings Bank & Trust Co. v. Helgesen, 67 Wash. 572, Ann. Cas. 1913A, 390, 122 Pac. 26. See, also, Martin v. Ogden, 41 Ark. 186; Bank of Ukiah v. Petaluma SaV. Bank, 100 Cal. 590, 35 Pac. 170; Seaboard Air Line By. v. Knickerbocker Trust Co., 125 Ga. 463, 54 S. E. 138; Eea V. Wilson, 112 Iowa, 517, 84 N. W. 539; Swarts v. Stees, 2 Kan. 236, 85 Am. Dec. 588; Albia State Bank V. Smith, 141 Iowa, 255, 119 N. W. 608; Glen Morris-Glyndon Supply Co. V. McColgan, 100 Md. 479, 60 Atl. 608; Hord v. Harlan, 143 Mo. 469, 45 S. W. 274; Vaughn v. Schmalsde, 10 Mont. 186, 10 L. E. A. 411, 25 Pac. 102, and cases cited; Kohn v. Lap- ham, 13 S. D. 78, 82 N. W. 408, and cases cited; Dawson v. McCarthy, 21 Wash. 314, 75 Am. St. Eep. 841, 57 Pac. 816. Prior Unrecorded Deed superior to judgment or attachment: Morrow v. Graves, 77 Cal. 218, 19 Pac. 489; 1467 CONCEKNINQ PEIOEITIES. § 721 is still susceptible to modifications and exceptions depend- ing upon special circumstances. ^ App. 302; Wheeler v. Kirtland, 24 N. J. Eq. 552; Knell v. Building Ass'n, 34 Md. 67; Gaiway v. Malchow, 7 Neb. 285; Jackson v. Dubois, 4 Johns. 216; Schmitt v. Hoyt, 1 Edw. Ch. 652; Thomas v. Kelsey, 30 Barb. 268; Wilder v. Butterfield, 50 How. Pr. 385; In re Howe, 1 Paige, 125 (contract for a mortgage) ; Schroeder v. Gumey, 73 N. Y. 430 (a deed) ; Moyer v. Hinman, 13 N. Y. 180; 17 Barb. 137 (equitable interest of a vendee) ; Wil- coxon V. Miller, 49 Cal. 193 (deed) ; Pixley v. Huggms, 15 Cal. 127 (deed) ; Plant V. Smythe, 45 Cal. 161; Hunter v. Watson, 12 Cal. 363, 73 Am. Dec. 543; Rose v. Munie, 4 Cal. 173; First Nat. Bank v. Hayzlett, 40 Iowa, 659; Hoy V. Allen, 27 Iowa, 208; Churchill v. Morse, 23 Iowa, 229, 92 Am. Dec. 422; Evans v. McGlasson, 18 Iowa, 150; Welton v. Tizzard, 15 Iowa, 495; Patterson v. Linder, 14 Iowa, 414 ; Bell v. Evans, 10 Iowa, 353 ; Norton v. Williams, 9 Iowa, 528; Sappington v. Oeschli, 49 Mo. 244; Potter v. Mc- Dowell, 43 Mo. 93; Stillwell v. McDonald, 39 Mo. 282; Valentine v. Havener, 20 Mo. 133; Apperson v. Burgett, 33 Ark. 328; Kelly v. Mills, 41 Miss. 267; Righter v. Forrester, 1 Bush, 278; Morton v. Robards, 4 Dana, 258; Greenleaf v. Edes, 2 Minn. 264; Orth v. Jennings, 8 Blackf. 420; Hampton v. Levy, 1 McCord Ch. 107, 111. In Gaiway v. Mulchow, 7 Neb. 285, it is held that where land is omitted from a mortgage by mistake, the lien of a subsequent judgment against the mortgagor is still subject to the equity of the mortgagee and to the mortgage when corrected. This is a correct application of the equitable doctrine.* § 721, 3 As illustrations : In Stevens v. Watson, 4 Abb. App. 302, while the rule is expressly recognized as ordinarily controlling, it is said to be Hoag V. Howard, 55 Cal. 564; Wolfe S. W. 595; Naudain v. FuUeuwider V. Langford, 14 Cal. App. 359, 112 (Neb.), 100- N. W. 296; Eoblin v. Pae. 203; Donovan v. Simmons, 96 Palmer, 9 S. T>. 36,_67 N. W. 949 Ga. 340, 22 S. E. 966; Lytle v. Black, (attachment); Murphy v. Planking- 107 Ga. 386, 33 S. E. 414; Shirk v. ton Bank, 13 S. D. 501, 83 N. W. Thomas, 121 Ind. 147, 16 Am. St. 575 (attachment); Eeynolds v. Has- Rep. 381, 22 N. E. 976; Moorman v. kins, 68 Vt. 426, 35 Atl. 349 (attach- Gibbs, 75 Iowa, 537, 39 N. W. 832; ment); Stanhilber v. Graves, 97 Wis. Smith V. Savage, 3 Kan. App. 556, 515, 73 N. W. 48; Frank v. Hieks, 43 Pac. 847; McCalla v. Knight In- 4 Wyo. 502, 35 Pae. 475, 1025. And vestment Co., 77 Kan. 770, 14 L. R. in general, see Taylor v. Mississippi A. (N. S.) 1258, 94 Pac. 126; Good Mills, 47 Ark. 247, 1 S. W. 283 (at- v. Williams, 81 Kan. 388, 135 Am. taching creditor not a iona fide pur- St. Rep. 392, 105 Pac. 433; Cramer chaser); Bush v. Bush, 33 Kan. 556,' V. Eoderick, 128 Md. 422, 98 Atl. 42; 6 Pac. 794; Carraway v. Carraway, Columbia Bank v. Jacobs, 10 Mieh. 27 S. C. 576, 5 S. E. 157. 349, 81 Am. Dec. 792; Hope v. Blair, §721, (d) Equity to Reform Deed 105 Mo. 85, 24 Am. St. Kep. 366, 16 or Mortgage for mistake in omitting § 722 EQUITY JUEISPETJDENCB. 1468 § 722. Contrary Rule, in Some States, That the Subse- quent Judgment has Precedence. — A very different rule prevails in many states, in which it is settled that the lien of a subsequent docketed judgment prevails over that of a prior unrecorded mortgage or other prior equitable in- terest or lien not recorded, of which the judgment creditor had no notice at the time of recovering and docketing his judgment. This result is reached, in some of the states, from express provisions of the statutes; in others, from what was deemed to be the necessary interpretation of the statutory language; and in a few, as it would seem, from an intentional rejection of the equitable doctrine which lies at the basis of the whole subject.^ * otherwise where the subsequent judgment is one confessed to secure the repayment advanced at the time on the faith of it by the judgment credi- tor ; and to the same effect is Hulett v. Whipple, 58 Barb. 224. In Wheeler V. Kjrtland, 24 N. J. Eq. 552, it is held that an equitable mortgage for a precedent debt will not prevail over the lien of a subsequent valid judg- ment; between two such contestants, the first perfected legal lien should have preference. If the prior equitable mortgage arose upon a new con- sideration paid at the time, it would have priority of right. And in Dwight V. Newell, 3 N. Y. 185, it is said that where an equitable lien and a judg- ment lien come into existence at the same time, the former will not prevail, unless it was given upon a new consideration advanced on the faith of it. § 722, 1 For the statutes, see ante, § 646 ; Corpman v. Baccastow, 84 Pa. St. 363 (an absolute deed and a defeasance made at the same time constitute a mortgage, and if the deed only is recorded, and the defeasance is not, to include lands intended to be con- Martin v. Nixon, 92 Mo. 26, 4 S. veyed or mortgaged, is superior to , W. 503. Contra, Van Thorniley v. lien of subsequent judgments against Peters, 26 Ohio St. 471, in author's the grantor or mortgagor. See, also, note to § 722; Wilcox v. Leominster Lowe V. Allen, 68 Ga. 225; Boyd v. Nat. Bank, 43 Minn. 541, 19 Am. St. Anderson, 102 Ind. 217; Wells v. Eep. 259, 45 N. W. 1136. Benton, 108 Ind. 585; Yarnell v. §722, (a) The text is quoted in Brown, 170 111. 362, 62 Am. St. Eep. Dawson v. MeCarty, 21 Wash. 314, 380, 48 N. E. 909 (but the equity of 75 Am. St. Eep. 841, 57 Pac. 816. an attachment lien, being specific, is See, also, McCoy v. Ehodes, 52 U. equal); Welton v. Tizzard, 15 Iowa, S. (11 How.) 131 (Louisiana); 495; Duncan v. Miller, 64 Iowa, Stevenson v. Texas By. Co., 105 U. 223, 20 N. W. 161 (superior to sub- S. 703 (Texas); United States v. sequent attachment) ; Eea v. Wilson, Devereux, 90 Fed. 182, 32 C. C. A, 112 Iowa, 517, 84 N. W. 539 (same); 564 (North Carolina); Ee Buehner, 1469 CONCEENING PRIORITIES. § 723 § 723. Subsequent Judgment Creditor had Notice of the Prior Unrecorded Mortgage, — In a large number of the states, including many of those which have adopted the rule as laid down in the last paragraph, if the judgment they are to be regarded as an unrecorded mortgage, and postponed to a subsequent judgment); King v. Portis, 77 N. C. 25; Van Thorniley v. Peters, 26 Ohio St. 471 (a" defective recorded mortgage when reformed will not affect the lien of a judgment docketed between the execution and the reformation of the mortgage) ; White v. Denman, 1 Ohio St. 110, 112, 114; Mayham v. Coombes, 14 Ohio, 428 ; Jackson v. Luce, 14 Ohio, 514 ; HoUiday V. Franklin Bank, 16' Ohio, 533 ; Guiteau v. Wisely, 47 111. 433 ; McFadden V. Worthington, 45 111. 362; Massey v. Westeott, 40 111. 160; Reichert v. MeClure, 23 111. 516; Barker v. Bell, 37 Ala. 354; Mainwaring v. Temple- man, 51 Tex. 205 ; Firebaugh v. Ward, 51 Tex. 409 ; Cavanaugh v. Peterson, 47 Tex. 197; Grace v. Wade, 45 Tex. 522; Andrews v. Mathews, 59 Ga. 4G6; Young v. Devries, 31 Gratt. 304; Eidson v. Huff, 29 Gratt. 338; Me- Clure V. Thistle's Ex'rs, 2 Gratt. 182 ; Anderson v. l^'agle, 12 W. Va. 93 ; Uhler V. Hutchinson, 23 Pa. St. 110 ; Jaques v. Weeks, 7 Watts, 261 ; IIul- ings V. Guthrie, 4 Pa. St. 123 ; Hibberd v. Bovier, 1 Grant Gas. 266 ; Mallory V. Stodder, 6 Ala. 801; Ohio Life Ins. & T. Co. v. Ledyard, 8 Ala. 860; Pollard V. Cocke, 19 Ala. 188 (these three cases are of unrecorded deeds). 232 Fed. 979 (equitable mortgagees superior to prior equity for refor- and llenees — Illinois); Motley v. mation); Columbus Buggy Co. v. Jones, 98 Ala. 443, 13 South. 782; Graves, 108 111. 459; Smith v. Wil- Hall V. Griffin, 119 Ala. 214, 24 lard, 174 111. 538, 66 Am. St. Kep. South. 27; Berney Nat. Bank v. 313, 51 N. E. 835; Cutler v. Ammon, Pinekard, 87 Ala. 577, 6 South. 364; 65 Iowa, 281, 21 N. W. 604 (gran- Eiehards v. Steiner Bros., 166 Ala. tor's lien) ; Baker v. Atkins, 107 La. 353, 52 South. 200 (unrecorded 490, 32 South. 69; First Nat. Bank deed) ; Western Chemical Mfg. Co. of Durand v. Phillpotts, 155 Mich. V. McCaffrey, 47 Colo. 397, 135 Am. 331, 119 N. W. 1; Schmidt 'v. Stoin- St. Eep. 234, 107 Pac. 1081 (result- .bach, 193 Mich. 640, 160 N. W. 448; ing trust); Hallett v. Alexander, 50 Button v. McEeynolds, 31 Minn. 66, Colo. 37, Ann. Cas. 19I2B, 1277, 34 16 N. W. 468; Wilkins v. Bevier, 43 L. R. A. (N. S.) 328, 111 Pac. 490; Minn. 213, 19 Am. St. Eep. 238, 45 Teller v. Hill (Colo. App.), 72 Pac. N. W. 157; Wilcox v. Leominster 811 (prior to secret lien); Doyle v. Nat. Bank, 43 Minn. 541, 19 Am. Wade,. 23 Fla. 90, 11 Am. St. Eep. St. Eep. 259, 45 N. W. 1136 (su- 334, 1 South. 516; Lusk v. Eeel, 36 perior to equity of debtor's grantee Pla. 418, 51 Am. St. Eep. 32, 18 to have deed reformed so as to in- South. 582; Carolina Portland Ce- elude land in question); Berryhill v. ment Co. v. Koper, 68 Fla. 299, 67 Smith, 59 Minn. 285, 61 N. W. 144; South. 115; Thorpe v. Helmer, 275 Hall v. Sauntry, 72 Minn. 420, 71 m. 86, 113 N. B. 954 (judgment Am. St. Eep. 497, 75 N. W. 720; Gen. §723 EQUITY JtTEISPBUDENCB. 1470 creditor lias notice of a prior unrecorded mortgage, or other outstanding equitable lien upon or interest in the land of his judgment debtor, at the time when he recovers the judgment, the lien arising from the docket of his judg- Stats. Minn. (1894), § 4180; Lough- ridge V. Bowland, 52 Miss. 546; Mis- sissippi Val. Co. V. C, etc., E. E. Co., 58 Miss. 846; Nugent v. Priebatch, 61 Miss. 402; Eeed v. Austin's Heirs, 9 Mo. 722, 45 Am. Dec. 336; Tarboro V. Micks, 118 N. C. 162, 24 S. E. 729; Ildvedsen v. First State Bank of Bowbells, 24 N. D. 227, 139 N. W. 105; National Bank of Colum- bus V. Tennessee C. I. & E. Co., 62 Ohio St. 564, 57 N. E. 450; Lewis v. Atherton, 5 Okl. 90,. 47 Pao. 1070; Oak Cliff College for Young Ladies V. Armstrong (Tex. Civ. App.), 50 S. W. 610; Stovall v. Odell, 10 Tex. Civ. App. 169, 30 S. W. 66; Whitaker V. Farris, 45 Tex. Civ. App. 378, 101 S. "W. 456; Bowles v. Belt (Tex. Civ. App.), 159 S. W. 885 (grantor's or vendor's lien reserved in the deed and henee capable of record); Cetti V. Wilson (Tex. Civ. App.), 168 S. W. 996; Eobinson v. Commercial & F. Bank (Va.), 17 S. E. 739; Heer- mans v. Montague (Va.), 20 S. E. 899; Hockman v. Hoekman, 93 Va. 455, 57 Am. St. Eep. 815, 25 S. E. 534; Price v. Wall, 97 Va. 334, 75 Am. St. Bep. 788, 33 S. E. 599; Jones- ' V. Byrne's Ex'x, 94 Va. 751, 27 S. E. 591; March, Price & Co. v. Cham- bers, 30 Gratt. 299 (prior written contract of sale of land) ; Hurley v. Charles, 112 Va. 706, 72 S. E. 689 (unrecorded deed) ; Calvert v. Eoche, 59 Tex. 463; Senter v. Lambeth, 59 Tex. 259. ti Alabama the statute (Code, sec. 122) gives judgment creditors having a lien a priority over secret equities, — such as a ven- dor's lien: Dickerson v. Carroll, 76 Ala. 377. In Georgia, the statute requires mortgages to be recorded within thirty days of their date, and if not so recorded, intervening judgments are given priority: Code, § 1957; Cabot v. Armstrong, 100 Ga. 438, 28 S. E. 123; New England Mtg. Sec. Co. V. Ober, 84 Ga. 294, 10 S. E. 625. The statute makes no such provision in regard to deeds, and accordingly it is held that an un- recorded deed is prior to a subse- quent judgment. See cases cited in editor's note, ante, § 721. Where a statute makes an unrecorded mort- gage void as to judgment creditors and gives judgment creditors pri- ority in the order in which execu- tions are issued, ' a judgment ren- dered after the recording of a mort- gage is not given priority over it merely because it has priority over a judgment rendered before the rec- ord: Meeker v. Warren (N. J. Eq.), 57 Atl. 421. In many states the same priority is given, by statute, to holders of attachment liens: Jerome V. Carbonate Nat. Bank, 22 Colo. 37, 43 Pae. 215; Wahrenberger v. Waid, 8 Colo. App. 200, 45 Pac. 518; Wicks V. MeConnell, 102 Ky. 434, 43 S. W. 205; First Nat. Bank v. Ft. Wayne Artificial lee Co., 105 La. 133, 29 South. 379; D'Aicy v. Moosh- kin, 183 Mass. 382, 67 N. E. 339; Gushing v. Hurd, 21 Mass. (4 Pick.) 253, 16 Am. Dec. 335; Eev. Laws Mass., c. 127, § 4; Butler v. Wheeler, 73 N. H. 156, 59 Atl. 935; Security Sav. & Tr. Co. v. Loewenberg, 38 Or. 159, 62 Pae. 647; Jennings v. Lentz, 50 Or. 483, 29 L. R. A. (N. S.) 584,, 1471 CONCEENING PBIOBITIES. §723 ment is postponed to such prior encumbrance or equity.^ * In a few of the states, however, the statutory language is regarded as so peremptory, and the necessity of recording so complete, that even notice of an unrecorded mortgage § 723, 1 Priest v. Rice, 1 Pick. 164, 11 Am. Dec. 156; Hart v. Farmers' etc. Bank, 33 Vt. 252; Hackett v. Callender, 32 Vt. 97, 108, 109; Cover v. Black, 1 Pa. St. 493; O'Rourke v. O'Connor, 39 Cal. 442; Britten's Ap- peal, 45 Pa. St. 172; Mellon's Appeal, 32 Pa. St. 121; Lawrence v. Stratton, 6 Cush. 163, 167; Goddard v. Prenticej-l? Conn. 546; Cox v. Milner, 23 111. 476; Ogden v. Haven, 24 111. 57; Dixon v. Doe, 1 Smedes & M. 70; Ayres v. Duprey, 27 Tex. 593, 86 Am. Dec. 657; Wyatt v. Stewart, 34 Ala. 716, 721; Burt, v. Cassety, 12 Ala. 734; Wallis v. Ehea, 10 Ala. 451, 12 Ala. 646; Garwood v. Garwood, 9 N. J. L. 193. 93 Pae. 327; Eobertson v. McClay, 19 Tex. Civ. App. 513, 48 S. W. 35. But this rule does not apply to per- sonalty: Gates Iron Works v. Cohen, 7 Colo. App. 341, 43 Pae. 667. The statutes are usually interpreted to the effect that the subsequent judg- ment lien is inferior to a trust aris- ing from operation of law which is necessarily incapable of record; ante, note to § 721. A statute declaring an unrecorded conveyance void as against a subsequent attachment ap- plies only when the attachment is against the person holding the rec- ord title; hence, an attachment against a vendee of land under an unrecorded contract, who has as- signed the contract prior to the at- tachment, is inferior to the right of the assignee: Lyman v. Gaar, 75 Minn. 207, 74 Am. St. Rep. 452, 77 N. W. 828. § 723, (a) McAdow v. Wachob (Pla.), 33 South. 702 (citing the text; notice by possession); Camp- bell V. First Nat. Bank, 22 Colo. 177, 43 Pae. 1007 (notice to agent); Adam v. Tolman, 180 111. 61, 54 N. E. 61 (notice by possession); A. E. Beck Lumber Co. v. Rupp, 188 III. 562, 80 Am. St. Rep. 190, 59 N. E. 429; Priest v. Rice, 18 Mass. (1 Pick.) 164, 11 Am. Dec. 156; Lit- tauer v. Houek, 92 Mich. 162, 31 Am. St. Rep. 572, 52 N. W. 464 (un recorded chattel mortgage); Jorgen son V. Minneapolis Threshing Co., 64 Minn^489, 67 N. W. 364; Berryhil V. Potter, 42 Minn. 279, 44 N. W, 251; Lebanon Sav. Bank v. Hollen- beek, 29 Minn. 322, 13 N. W. 145; Wahu V. Fall, 55 Neb. 547, 70 Am. St. Rep. 397, 76 N. W. 13 (notice by possession); Merchants' B. & L. Ass'n V. Barber (N. J. Eq.), 30 Atl. 865 (attachment creditor who, be- fore the completion of his levy, dis- covers an unrecorded deed, has suffi- cient notice to deprive his subse- quent judgment of priority) ; H. G. Tack Co. V. Ayers, 56 N. J. Eq. 56, 88 Atl. 194 (whatever is sufficient to charge a purchaser with notice is sufficient to charge a judgment creditor) ; Gardom v. Chester, 60 N. J. Eq. 238, 46 Atl. 602 (notice from grantee's possession) ; Laurent v. Lanning, 32 Or. 11, 51 Pae. 80; Se- curity Sav. & Tr. Co. v. Lowenberg, 38 Or. 159, 62 Pae. 647; Glenden- ning V. Bell, 70 Tex. 632, 8 S. W. 324 (notice by possession) ; Barnett V. Squyres (Tex. Civ. App.), 52 S. §724 EQUITY JTJEISPBrUDElSrCE. 1472 or other subsisting equity, given to the creditor before the recovery and docketing of his judgment, is held not to affect the priority of the lien acquired by the subsequent docketed judgment.^ § 724. Between Prior Unrecorded Mortgage and a Pur- chase at Execution Sale Under Subsequent Judgment. — Having thus examined the relations subsisting between un- recorded mortgages and other equities, and the liens of subsequent docketed judgments, it remains to consider the effects produced by a judicial sale under such judgments. Several varying conditions of fact may exist, and conflict- ing rules concerning them prevail to a certain extent, in different states. In the first place, it is a rule universally adopted, and in strict accordance with the general doctrine concerning bona fide purchasers as established in this coun- try, that in all the instances heretofore mentioned, even where the lien of a subsequent judgment is subject to an outstanding equity, if the judgment is enforced at a sheriff's sale, and the judgment debtor's land is sold and conveyed to a bona fide purchaser for a valuable consid- eration and without any notice, he stands in the position of any other bona fide purchaser who acquires the legal estate, and takes the land free from any unrecorded mort- gage and any outstanding equitable interest or lien not appearing of record which might have affected the land in the hands of the judgment debtor. In other words, such a purchaser at the execution sale is to all intents a pur- chaser in good faith for a valuable consideration and with- § 723, 2 Guerrant v. Anderson, 4 Rand. 208 ; Davidson v. Cowan, 1 Dev. Eq. 474; Davey v. Littlejohn, 2 Ired. Eq. 495; Mayham v. Coombs, 14 Ohio, 428; Butler v. Maury, 10 Humph. 420; Lillard v. Ruckers, 9 Yerg. 64. W. 612; Hirseh v. Howell (Tex. Civ App.), 60 S. W. 887; Walker v Downs (Tex. Civ. App.), 64 S. W 682; Burkholder v. Ludlam, 30 Gratt 255, 32 Am. Kep. 668. But an as- signee of a judgment is not affected" by Ms assignor's notice, before its rendition, of an unrecorded deed, but he must have the notice himself: Clark v. Duke, 59 Miss. 575, 1473 CONCEBJSriNG PRIORITIES. §724 out notice, as is described in the succeeding section.^ » Secondly, where the lien of the subsequent judgment is, in pursuance of the settled doctrine of equity, subject to a prior unrecorded mortgage or other outstanding equity, § 724, 1 Orth v. Jennings, 8 Blackf. 420; Rodgers v. Gibson, 4 Yeates, 111; Heister v. Fortner, 2 Binn. 40, 4 Am. Dec. 417; Sieman v. Schurck, 29 N. Y. 598; Jackson v. Chamberlain, 8 Wend. 620, 625; Jackson v. Post, 15 Wend. 588; 9 Cow. 120; Jackson v. Town, 4 Cow. 509, 15 Am. Dec. 405; Gouverneur v. Titus, 6 Paige, 347; Den v. Richman, 13 N. J. L. 43; Morrison v. Punk, 23 Pa. St. 421; Stewart v. Freeman, 22 Pa. St. 120, 123; Kellam v. Janson, 17 Pa. St. 467; Mann's Appeal, 1 Pa. St. 24; Wil- son V. Shoneberger, 34 Pa. St. 121; Seribner v. Lockwood, 9 Ohio, 184; Paine v. Mooreland, 15 Ohio, 435, 45 Am. Dec. 585 ; Runyan v. McClellan, 24 Ind. 165 ; Ehle v. Brown, 31 Wis. 405, 414 ; Rogers v. Hussey, 36 Iowa, 664; Draper v. Bryson, 26 Mo. 108, 69 Am. Dec. 483; Harrison v. Cachelin, 23 Mo. 117, 126; Waldo v. Russell, 5 Mo. 387; Ohio Life Ins. & T. Co. v. Ledyard, 8 Ala. 866; Ayres v. Duprey, 27 Tex. 593, 605, 86 Am. Dec. 657; Cooper V. Blakey, 10 Ga. 263; Miles v. King, 5 S. C. 146. It has even been held that if the judgment creditor purchases at the sheriff's sale with- §724, (a) Bona Fide Purchaser at Execution Sale. — This portion of the text is quoted in Tennant v. Wat- son, 58 Ark. 252, 24 S. W. 495. "The text is cited in Harney v. First Nat. Bank, 52 N. J. Eq. 697, 29 Atl. 221; Troy V. Walter, 87 Ala. 233, 6 South. 54. See, also, Garden v. Lane, 48 Ark. 316, 3 Am. St. Rep. 228, 2 S. W. 709; Smith v. Richards, 6 Cal. 47, 65 Am. Dec. 475; Tyler v. John- son, 61 Fla. 730, 55 South. 870; Me- Candless v. Inland Acid Co., 108 Ga. 618, 34 S. E. 618; Johnson v. Equi- table Securities Co., 114 Ga. 604, 56 L. R. A. 933, 40 S. E. 787; Sills v. Lawson, 133 Ind. 137, 32 N. E. 875; Halley v. Oldham, 5 B. Mon. 233, 41 Am. Dec. 262; Luton v. Sharp, 94 Mich. 202, 53 N. W. 1054; Gardner V. Mason, 130 Mich. 436, 9 Detroit Leg. N. 94, 90 N. W. 28; Duke v. Clark, 58 Miss. 465; Voorhis v. Wes- tervelt, 43 N. J. Eq. 642, 3 Am. St. Eep. 315, 12 Atl. 533; Oviatt v, 11—93 Brown, 14 Ohio 285, 45 Am. Dec, 539; Lance v. Gorman, 136 Pa. St, 200, 20 Am. St. Kep. 914, 20 Atl, 792; West v. Loeb, 16 Tex. Civ. App, 399, 42 S. W. 612;Lebreton v. Le maire (Tex. Civ. App.), 43 S. W. 31 Central City Tr. Co. v. Waco Bldg. Assn., 95 Tex. 48, 64 S. W. 998 Barnard v. Whipple, 29 Vt. 401, 70 Am. Dec. 422 (prior to assignment of church pew). One redeeming from an execution sale is, in effect, a purchaser, and entitled to the same protection: Martin v. Baldwin, 30 Minn. 537, 16 N. W. 449. But a purekaser at a bankrupt sale is not a bona fide purchaser: Eeniek v. Dawson, 55 Tex. 102. In Hawkins V. Eiles, 51 Ark. 417, 11 S. W. 681, the lien acquired by the levy of an execution is held superior to ihat of a prior unrecorded mortgage, al- though the mortgage be subsequently filed for record before the sale of the land. §724 EQUITY JtlKISPEtJDENCB. 1474 even without notice thereof to the judgment creditor, and also where the lien of the judgment is thus subject because the judgment creditor had received notice before its recov- ery, if the judgment is enforced, and the land is sold and out notice, takes a conveyance, and has his bid applied in partial or full discharge of his judgment, he becomes a bona fide purchaser for value with- out notice, with all the rights belonging to that position :'' Gower v. Doheney, 33 Iowa, 36, 39; Halloway v. Platner, 20 Iowa, 121, 89 Am. Dec. 517; and see Wood v. Chapin, 13 N. Y. S09; 67 Am. Dec. 62. But this con- clusion is clearly inconsistent with the settled doctrine concerning the nature of the "valuable consideration" which entitles a purchaser to the § 724, («>) Judgment Creditor Pur- chasiug at his own sale, held to be a bona fide purchaser: Hunter v. Watson, 12 Cal. 377, 73 Am. Dec. 543; Foorman v. Wallace, 75 Cal. 552, 17 Pac. 680; Eichards v. Grif- fith, 92 Cal. 493, 27 Am. St. Rep. 156, 28 Pae. 484; Eiley v. Martinelli, 97 Cal. 575, 33 Am. St. Eep. 209, 21 L. E. A. 33, 32 Pac. 579, and cases cited; MeMurtrie v. Kiddell, 9 Colo. 497, 13 Pac. 181; Mansfield v. John- son, 51 Pla. 239, 120 Am. St. Kep. 159, 40 South. 196; Union Cent. Life Ins. Co. v. Dodds, 155 Ind. 365, 58 N. E. 258; Pugh v. HigHley, 152 Ind. 252, 71 Am. St. Eep. 327, 44 L. E. A. 392, 53 N. E. 171, citing many eases and discussing the con- flicting Indiana dicta on this ques- tion; Butterfield v. Walsh, 21 Iowa, 99, 89 Am. Dec. 557; Ettenheimer v. Northgraves, 75 Iowa, 28, 39 N. W. 120; McNamara v. McNamara, 167 Iowa, 479, 149 N. W. 642, citing the note; Walker v. McKnight, 15 B. Mon. 467, 61 Am. Dec. 190; Hart V. Gardner, 81 Miss. 650, 33 South. 442, 497; Sipley v. Wass, 49 N. J. Eq. 463, 24 Atl. 463; Sternberger v. Eagland, 57 Ohio St. 148, 48 N. E. 811; Eussell v. Nail, 2 Tex. Civ. App. 60, 23 S. W. 901; Stephens v. Keat- ing (Tex.), 17 S. W. 37. "If A. ad- vances money to B., which is not paid, and he obtains judgment, is- sues execution, levies upon the prop- erty of B., attends the sale, and be- ing the highest bidder, purchases the property, it is difiScult to see why he is in a different position from any other purchaser. In such a ease the law seizes the property and sells it to the highest bidder, and the judgment creditor takes it, not in his capacity as creditor, but as pur- chaser. The law of this state, with a view, no doubt, of benefiting the debtor by causing his property to bring the best attainable price, per- mits and encourages the Rreditcp, alike with others, to purchase at sales under execution, and having done so, the fact that he advanced the purchase price last month or last year should not militate against his rights or alter his status in the eye of the law. It has been repeat- edly held in this court that a con- veyance in consideration of the cancellation of a pre-existing indebt- edness is a conveyance for a valu- able consideration within the mean- ing of § 1214 of our Civil Code": Eiley v. Martinelli, 97 Cal. 575, 33 Am. St. Eep. 209, 21 L. E. A. 33, 32 Pac. 579. In Pugh v. Highley, 152 Ind. 252, 71 Am. St. Eep. 327, 1475 CONCERNING PEIOKITIES. §724 conveyed to a purchaser who has duly received notice of the prior unrecorded mortgage or other subsisting equity, the inferiority of the judgment lien still remains and at- taches to the conveyance which is the result of that lien. rights of a bona fide purchaser, and has been rejected by many decisions :" Arnold v. Patrick, 6 Paige, 310, 316; Dickerson v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528; Wright v. Douglass, 10 Barb. 97; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Onne v. Eoberts, 33 Tex. 768; Ayres v. Duprey, 27 Tex. 593, 86 Am. Dec. 657. 44 L. R. A. 392, 53 N. E. 171, the arguments in favor of this view are stated with much force. In Indiana, as in California^ the cancellation of a pre-existing debt constitutes a. valuable consideration; and it is held that the judgment creditor pur- chaser parts with value and, under the statutes, changes his position for the worse. § 724, (c) Judgment Creditor Pur- chasing at his own sale and credit- ing his bid upon the judgment, not a purchaser for a valuable con- sideration: Williams v. Mcllroy, 34 Ark. 85; Beidler v. Beidler (Ark.), 74 S. W. 13; Sturdivant v. Cook, 81 Ark. 279, 98 S. W. 964; Shirk v. Thomas, 121 Ind. 147, 16 Am. St. Eep. 381, 22 N. E. 976; Boos v: Mor- gan, 130 Ind. 305, 30 Am. St. Rep. 237, 30 N. E. 141; Old Nat. Bank v. Findley, 131 Ind. 225, 31 N. E. 62 (but these Indiana cases have been overruled; see editor's note last pre- ceding); McCalla v. Knight Inv. Co., 77 Kan. 770, 14 L. R. A. (N. S.) 1258, 94 Pae. 126; Lewis v. Taylor, 96 Ky. 556, 29 S. W. 444; Walton v. Hargraves, 42 Miss. 18, 97 Am. Dec. 429; McAdow v. Black, 6 Mont. 601, 13 Pac. 377; Williams v. Hollings- worth, 1 Strob. Eq. 10-3, 47 Am. Dec. 527; MeKamey v. Thorp, 61 Tex. 648, and cases cited; Delespine v. Campbell, 52 Tex. 12; Lightfoot v. Horst (Tex. Civ. App.), 122 S. W. 606; Cetti v. Wilson (Tex. Civ. App.), 168 S. W. 996; Benney v. Cleen, 15 Wash. 581, 46 Pac. 1037; Hacker v. White, 22 Wash. 415, 79 Am. St. Eep. 945, 60 Pac. 1114; American Savings Bank & Trust Co. V. Helgesen, 67 Wash. 572, Ann. Cas. 1913 A, 390, 122 Pae. 26; Lon- don & S. E. Bank, Lt. v. Dexter, Horton & Co. (C. C. A.), 126 Fed. 593 (Washington); Collins v. Smith, 57 .Wis. 284, 15 N. W. 192 (he is presumed to have notice of all de- fects in the record and proceed- ings). "This view is founded upon the theory that to constitute a per- son a bona fide purchaser within the meaning of the law, he must, upon the faith of the purchase of the property, have advanced for it a valuable consideration, and that a creditor, antecedent to his purchase, who pays for a purchase by a credit on his own demand, has parted with no consideration on the faith of the purchase, and is not such a iona fide purchaser as is entitled to pro- tection against equities of which he has no notice": Eiley v. Martinelli, 97 Cal. 575, 33 Am. St. Rep. 209, 21 L. R. A. 33, 32 Pac. 579. Such creditor, however, acquires all the rights of the defendant in the exe- cution: Walker v. EUedge, 65 Ala. 51. ' § 724 EQUITY JXJEISPBTJDENCE. 1476 The purchaser under these circumstances is not a bona fide purchaser; he takes the land subject to the same en- cumbrances and equities which affected the lien of the dock- eted judgment.2 d Thirdly, wherever, in pursuance of the rule adopted in many states, the lien of a subsequent judg- ment is paramount to that of a prior unrecorded mortgage and to any outstandiag equitable interest not of record, if the judgment is enforced and the land sold and conveyed to a purchaser who has received notice of the prior encum- brances or equities, the superiority of the lien still con- tinues and attaches to the conveyance. The purchaser § 724, 2 This rule must clearly apply to the case of the judgment credi- tor who, having received notice, himself hecomes the purchaser at the sheriff's sale : Ells v. Tousley, 1 Paige, 280 ; Gouvemeur v. Titus, 6 Paige, 347; Morris v. Mowatt, 2 Paige, 586, 590, 22 Am. Dec. 661; Parks v. Jack- son, 11 Wend. 442, 25 Am. Dec. 656; Siemon v. Schurck, 29 N. Y. 598; Moyer v. Hinman, 13 N. T. 180, and cases cited, per Denio, J.; Bank v. Camphell, 2 Rich. Eq. 179; ChurehiU v. Morse, 23 Iowa, 229, 92 Am. Dec. 422; Hoy v. Allen, 27 Iowa, 208; Chapman v. Coats, 26 Iowa, 288; O'Rourke v. O'Connor, 39 Cal. 442; Davis v. Ownsby, 14 Mo. 170, 55 Am. Dec. 105; Valentine v. Havener, 20 Mo. 133; Sappington v. Oeschli, 49 Mo. 244, 246 ; Byers v. Engles, 16 Ark. 543 ; Preseott v. Heard, 10 Mass. 60; Ogden v. Haven, 24 lU. 57; Ayres v. Duprey, 27 Tex. 593, 86 Am. Dec. 657. § 724, (d) Execution Purchaser Detroit Leg. N. 1164, 89 N. W. 720; With Notice, Judgment Lien Being Hope v. Blair, 105 Mo. 85, 24 Am. Inferior.— Walker v. Elledge, 65 St. Eep. 366, 16 S. W. 595; Sugg Ala. 51; Murphy v. Green, 120 Ala. v. Duncan, 238 Mo. 422, 142 S. W. 112, 22 South. 112; Luke v. Smith, 321 (purchaser at execution sale 13 Ariz. 155, 108 Pac. 494; Zenda takes with notice of deed executed Min. & Mill Co. v. Tiffin, 11 Cal. before judgment and recorded after App. 62, 104 Pae. 10; Peck v. Will- judgment); Miller v. Baker, 166 iams, 113 Ind. 256, 15 N. E. 270 Pa. St. 414, 45 Am. St. Eep. 680, 31 (judgment creditor); Zuber v. John- Atl. 121; Armstrong v. Carwile, 56 son, 108 Iowa, 273, 79 N. W. 76; S. C. 463, 35 S. E. 196; Yoe v. Mont- McNamara v. McNa'mara, 167 Iowa, gomery, 68 Tex. 341, 4 S. W. 622; 479, 149 N. W. 642; Bean v. Ever- Glendenning v. Bell, 70 Tex. 632, 8 ett, 21 Ky. Law Eep. 1790, 56 S. W. S. W. 324; Hicks v. Pogue (Tex. 403; Chandler V. Dixon, 31 Ky. Law Civ. App.), 76 S. W. 786; Holt v. Rep. 174, 101 S. W. 939; Spring v. Hunt, 18 Tex. Civ. App. 363, 44 S. Raymond (Mich.), 95 N. W. 1003; W. 889; Caldwell v. Bryan's Ex'r CampbeU v. Keys, 130 Mich. 127, 8 (Tex. Civ. App.), 49 S. W. 240. 1477 CONCERNING PEIOKITIES. §724 holds the land free from all such claims not of record, on the ground that when a right has once been vested and made absolute, it cannot be divested or defeated by any mere notice. The judgment creditor having obtained a complete and fixed right, any notice which he might after- wards receive could not affect that right; nor would it be affected by a transfer to a purchaser having notice.^ « § 724, 3 Jaques v. Weeks, 7 Watts, 261, 270; Uhler v. Hutchinson, 23 Pa. St. 110; Calder v. Chapman, 52 Pa. St. 359, 362, 91 Am. Dec. 163; Mas- sey V. Westcott, 40 111. 160; McFadden v. Worthington, 45 111. 362; Guiteau V. Wisely, 47 111. 433; Potter v. McDowell, 43 Mb. 93; Stillwell v. McDon- ald, 39 Mo. 282; Davis v. Ownsby, 14 Mo. 170, 55 Am. Dec. 105; Green- leaf V. Edes, 2 Minn. 264; Henderson v. Downing, 24 Miss. 106; Kelly v. Mills, 41 Miss. 267, 273; Fash v. Ravesies, 32 Ala. 451; De Vendell v. Hamilton, 27 Ala. 156; Pollard v. Cocke, 19 Ala. 188; Smith v. Jordan, 25 Ga. 687. The conclusion reached by these cases, which seems to be in such direct antagonism with well-settled doctrines concerning the effect of notice upon the rights of purchasers, is in most instances the result of what is supposed to be the imperative language of the recording statutes. § 724, (e) Execution Purchaser With Notice, Judgment Lien Being Superior. — The text is cited in Mc- Coy V. Davis (N. D.), 164 N. W. 951. See, also, Winston v. Hodges, 102 Ala. 304, 15 South. 528; Banner V. Crew (Ala.), 34 South. 822; John Silvey & Co. v. Cook, 191 Ala. 228, 68 South. 37; Lusk v. Keed, 36 Pla. 418, 51 Am. St. Eep. 32, 18 South. 582, and cases cited; Doyle v. Wade, 23 Fla. 90, 11 Am. St. Eep. 334, 1 South. 516; Mansfield v. Johnson, 51 Fla. 239,, 120 Am. St. Kep. 159, 40 South. 196; Nugent v. Priebatch, 61 Miss. 402; Eeed v. Austin's Heirs, 9 Mo. 722, 45 Am. Dec. 336; Condit V. Wilson, 36 N. J. Eq. 370 (judg- ment creditor purchasing); Me- Knight V. Gordon, 13 Eich. Eq. 222, 94; Am. Dec. 164; Grace v. Wade, 45 Tex. 522; Wallace v. Campbell, 54 Tex. 87, and cases cited; McKamey V. Thorp, 61 Tex. 648; Eussell v. Nail, 2 Tex. Civ. App. 60, 23 S. W. 901; Eobertsou v. MeClay (Tex. Civ. App.), 48 S. W. 35; Barnett v. Squyres, 93 Tex. 193, 77 Am. St. Eep. 854, 54 S. W. 241; Stovall v. Odell, 10 Tex. Civ. App. 169, 30 S. W. 66; Stevenson v. Texas K'y Co., 105 TJ. S. 703 (Texas); Whitaker v. Farris, 45 Tex. Civ. App. 378, 101 S. W. 456. In Wallace v. Campbell, 54 Tex. 87, the rule is said to be "analogous to the familiar doctrine, that one who purchases the legal title, even with notice of the su- perior title in another, will be pro- tected if he claims under a bona fide purchaser for' value without no- tice": see post, § 754. As to the effect of allowing the judgment to become dormant, see Eichards v. Steiner Bros., 166 Ala. 35a .'52 South. 200. § 725 EQUITY JUEISPBUDENCB. 1478 , § 725. Purchase-money Mortgages. — ^Another very im- portant instance in this country, of intrinsic superiority, is that of the purchase-money mortgage.^ A mortgage to secure the purchase-money of land, given at the same time with the deed of conveyance, or in pursuance of agreement as a part of the same transaction, has precedence, so far as it is a charge upon the particular parcel of land, over judg- ments and other dehts of the mortgagor.^ It is a familiar rule iu those states where the common-law dower exists that such a mortgage, although not executed by the wife, takes precedence over her dower right in the same land.3 ^ The statutes of some states give a purchase-money mort- gage precedence over a previous judgment recovered against the mortgagor. This provision applies only to mortgages executed by the grantee directly to his grantor, and not to those executed to third persons as security for money loaned for the purpose of paying the purchase price.* ^ Even in the absence of any statute, and upon § 725, 1 See 1 Jones on Mortgages, sees. 464-466, from which I have bor- rowed in this paragraph. § 725, 2 In many states this is expressly enacted by statute. § 725, 3 MUls V. Van Voorhies, 20 N. T. 412; McGowan v. Smith, 44 Barb. 232; Kittle v. Van Dyek, 1 Sand. Ch. 76; Clark v. Munroe, 14 Mass. 351; Yomig v. Tarbell, 37 Me. 509; Bimie v. Main, 29 Ark. 591. § 725, 4 Heuisler v. Nickum, 38 Md. 270; Alderson v. Ames, 6 Md. 52, 56; Clabaugh v. Byerly, 7 Gill, 354, 48 Am. Dec. 575; Stansele v. Eoberts, 13 Ohio, 148. As to other matters arising under such statutes, see Ahem V. White, 39 Md. 409; Hpuisler v. Nickum, 38 Md. 270; Cake's Appeal, 23 Pa. St. 186, 62 Am. Dec. 328; Foster's Appeal, 3 Pa. St. 79; Banning v. Edes, 6 Minn. 402; Stephenson v. Haines, 16 Ohio St. 478; Maybury v. Brien, 15 Pet. 21. §725, (a) Purchase-money Mort- S. C. 206, 4 L. E. A. 606, 9 S. E. 822; gage Superior to Dower. — The text Kneen v. Halin, 6 Idaho, 621, 59 is cited in Demeter v. Wilcox, 115 Pac. 14 (superior to wife's interest Mo. 634, 37 Am. St. Eep. 422, 22 in the land as "community" prop- S. W. 613. See, also, Frederick v. erty). Bmig, 186 111. 319, 78 Am. St. Eep. § 725, (b) In some states the stat- 283, 59 N. E. 883; Lohmeyer v. Dar- ute is held to apply to purchase- bin, 206 HI. 574, 69 N. E. 523; Har- money mortgages executed to third row V. Grogan, 219 111. 288, 76 N. persons: Hopler v. Cutler (N. J; E. 350; Agnew v. Eenwick, 27 S. C. Eq.), 34 Atl. 746; Beebe v. Austin, 562, 4 S. E. 223: Seibert v. Todd, 31 15 Johns. 477; Kneen v. Halin, 6 1479 COlirCEKNING PBIOEiailBS. §725 the general prineiples of equity, a purchase-imoiiey mort- gage given at the same time as ihe deed, or as a part of the same transaction, has precedence over any prior gen- eral lien, such as that of a prior judgment against the mortgagor.5 o The same equitable rule , applies in like § 725, 5 Curtis v. Root, 20 111. 53; Fitts v. DAvis, 42 III. 391; Grant V. Dodge, 43 Me. 489; Banning v. Edes, 6 Minn. 402; Bolles v. Carii, 12 Minn. 113. In Curtis v. Boot, 20 lU. 5^;'Cat6n^' C. J., said : "It is a prin- ciple of law, too familiar to justify a ref etenee to authorities, that a mort- gage given for the purchase-money of land, and executed at the same time the deed is executed to the mortgagor, takes precedence of a judgment against the mortgagor. The execution of the deed and mortgage being simultaneous acts, the title to the land does not for a single moment vest in the purchaser, but merely passes through his hands and vests in the mortgagee, without stopping at all in the. purchaser, and during this in- stantaneous passage the judgment lien cannot attach to the title. This is the reason assigned by the books why the mortgage takes precedence of the judgment, rather than any supposed equity which the vendor may be Idaho, 621, 59 Pac. 14. A., the grantee in a deed intended as a mortgage, conveyed the premises to the grantor, B., and he to C, who gave back a mortgage to A. for the amount to which A. had been se- cured. Held, a purchase-money mortgage, under the statute, and entitled to priority over an earlier judgment against C: Bradley v. Bryan, 43 N. J. Bq. 396, 13 Atl. 806. § 725, (c) Superior to Prior Judg- ments Against the Mortgagor. — The text is quoted in Western Tie & Timber Co. v. Campbell, 113 Ark. 570, Ann. Cas. 1916C, 943, 169. S. W. 253. See, also, Courson v. Walker, 94 Ga. 175, 21 S. E. 287; Boane v. Baker, 120 III. 308, 11 N. .E. 246; Kent V. Bailey (Iowa), 164 N. W. 852; Chandler v. Parsons, 100 Mich. 313, 58 N. W. 1011; Marin v. Knox, 117 Minn. 428, 40 L. R. A. (N. S.) 272, 136 N. W. 15; Wendler v. Lam- beth, 163 Mo. 428, 63 S. W. 684, quoting from this paragraph of the text; Pope v. Mead, 99 N. T. 201, 1 N. E., 671; Weil v. Casey, 125 N. C. 356, 74 Am. St. Kep. 644, 34 S. E. 506; Appeal of Cake, 23 Pa. St. (11 Harris) 186, 62 Am. Dec. 328; Mas- tersou V. Burnett, 27 Tex. Civ. App. 370, 66 S. W. 90; Cowardin v. Anderson, 78 Va. 88; Straus v. Bodeker's Ex'x, 86 Va. 543, 10 S. E. 570; Bisbee v. Carey, 17 Wash. 224, 49 Pac. 220; Bees v. Ludingtou, 13 Wis. 276, 80 Am. Dec. 741; but such judgment is superior to a mortgage for any other purpose than payment of purchase-money executed by the grantee immediately after the con- veyance: Weil V. Casey, 125 N. C. 356, 74 .Am. St. Rep. 644, 34 S. E. 506. In Jacob's Appeal, 107 Pa. St. 137, it was held that the entry of a judgment bond for part of the purchase-money must be a continu-, ous act with the giving of the deed, in order to entitle the judgment to priority as a purchase-money lien: Compare Stewart v. Smith, 36 Minn. §725 EQUITY JUEISPRUDENCB. 1480 manner to a mortgage given by the grantee to a third per- son, as security for money loaned for the purpose of being used, and which is actually used, in paying the purchase price.6 « A substitution of one species of lien for another, supposed to have for the purchase-money." * Whatever of truth there may be in the reason thus assig^ned, it is certainly not all the truth. In the first place, the notion that the title passes thr6ugh the mortgagor and vests in the mortgagee, and that the mortgagor obtains but an instantaneous seisin, has been entirely abandoned in very many of the states, and the mortgagee is regarded as acquiring only a lien. In the second place, since the grantor exchanges his ownership of the land for the lien of the mortgage, so that the mortgage in his hands represents the title to the land which he has conveyed, it is very clear that the mortgage, so far as it is a specific charge upon the very land, is intrinsically superior to any other general lien, although existing prior in time. § 725, 6 Beebe v. Austin, 15 Johns. 477; Haywood v. Nooney, 3 Barb. 643; Adams v. Hill, 29 N. H. 202; Curtis v. Root, 20 HI. 53. 82, 1 Am. St. Rep. 651, 30 N. W. 430; and see Western Tie & Timber Co. V. Campbell, 113 Ark. 570, Ann. Cas. 1916C, 943, 169 S. W. 253 (where statute declares that a mort- gage is not a lien until it is re- corded). That an unrecorded pur- chase-money mortgage does not pre- vail ovei a later judgment, though it does over a prior judgment, see Thorpe v. Helmer, 275 111. 86, 113 N. E. 954; Spindler v. Iowa, & 0. S. L. E. Co., 173 Iowa, 348, 155 N. W. 271; that it does so prevail, see Charlottesville Hardware Co v. Per- kins, 118 Va. 34, 86 S. E. 869. §725, (d) The "instantaneous seisin" theory of the purchase- money mortgage's priority is criti- cised in New Jersey B. L. & Inv. Co. V. Bachelor, 54 N. J. Eq. 600, 35 Atl. 745. §725, (e) Purchase-money Mort- gage to Third Person. — The text is quoted in Rogers v. Tucker, 94 Mo. 346, 7 S. W. 414; cited, in Demeter V. Wilcox, 115 Mo. 634, 37 Am. St. Eep. 422, 22 S. W. 613; Powers v Pense, 20 Wyo. 327, 40 L. E. A. (N. S.) 785, 123 Pac. 925 (such mortgage superior to, homestead); - Western Tie & Timber Co. v. Camp- bell, 113 Ark. 570, Ann. Cas. 1916C, 943, 169 S. W. 253. See, also, Las- sen V. Vance, 8 Cal. 271, 68 Am. Dec. 322 (superior to homestead); Hill V. Cole, 84 Ga. 245, 10 S. B. 739; Aehey v. Coleman, 92 Ga. 745, 19 S. E. 710 (superior to judgment); Protestant Episcopal Church v. E. E. Lowe Co., 131 Ga. 666, 127 Am. St. Eep. 243, 63 S. E. 136 (superior to judgment); Laidley v. Aiken, 80 Iowa, 112, 20 Am. St. Eep. 408, 45 N. W. 384; Foster Lumber Co. v. Harlan County Bank, 71 Kan. 158, 114 Am. St. Eep. 470, 6 Ann. Cds. 44, 80 Pac. 49 (superior to home- stead); Stewart v. Smith, 36 Minn. 82, 1 Am. St. Eep. 651, 30 N. W. 430; Marin v. Knox, 117 Minn. 428, 40 L. E. A. (N. S.) 272, 136 N. W. 15; Henry MeShane Mfg. Co. v. Kolb, 59 N. J. Eq. 146, 45 Atl. 533 (superior to judgment); New Jersey B. L. & Inv. Co. V. Bachelor, 54 N. 1481 CONOEKNING PEIOKITIES. §725 by changing the form of the security given for the pur- chase-money, does not affect the operation of the rule J* The purchase-money mortgage not only thus takes prece- dence of a prior judgment, but it also cuts off or prevents the attachment of any other lien upon the premises which might otherwise have affected them.^ s § 725, 7 As, for example, substituting a deed of trust for the mortgage : Curtis V. Koot, 20 111. 53; Austin v. Underwood, 37 111. 438, 87 Am. Dec. 254. § 725, 8 As illustrations : A lien for work and materials furnished, or a mechanic's lien for a building erected, on behalf of the grantee, after the J. Eq. 600, 35 Atl. 745 (superior grantor's or vendor's lien for the unpaid price is superior to a pur- chase-money mortgage to a third person for a part of the price, though that mortgage was given with the grantor's consent: Eubank V. Pinnell, 118 Mo. App. 535, 94 S. W. 591j Stickle v. High Standard Steel Co., 78 N. J. Eq. 549, 80 Atl. 500; and see Euasell v. Stockton (Ala.), 74 South. 225. See, also. Protection B. & L. Ass'n v. Chicker- ing, 54 N. J. Eq. 519, 34 Atl. 1083, affirmed on appeal, 55 N. J. Eq. 822, 41 Atl. 1116; Schoch v. Birdsall, 48 Minn. 441, 51 N. W. 382. A mort- gage given to secure money bor- rowed for the purpose of paying off a mortgage which was only in part for the purchase price is not a pur- chase-money mortgage; Nicholson v. Aney, 127 Iowa, 278, 103 N. W. 201. §725, (f) The text is cited in Powers V. Pense, 20 Wyo. 327, 40 L. E. A. (N. S.) 785, 123 Pac. 925. As to substituted liens, see ante, § 719, and notes. § 725, (g) In general, see Com. monwealth Title Ins. & T. Co. v. Ellis, 192 Pa. St. 321, 73 Am. St. Eep. 816, 43 Atl. 1034; Barb v. Say- ers, 107 Pa. St. 246 (the purchaser at foreclosure sale of the mortgage is also entitled to the game prior- ity). See, also, Baxter v. Ft. Payne to mechanic's lien) ; Cowardin v. Anderson, 78 Va. 88 (superior to judgment). "But the claims of third persons to have their mortgages up- held as purchase-money mortgages have been recognized only when it has been made to appear that the money was loaned to the purchaser for the express purpose of paying for the property." Van Loben Sels V. Bunnell, 120 Cal. 680, 53 Pac. 266. In some states this result is reached by interpretation of the statute giving priority to purchase-money mortgages generally: Hopler v. Cut- ler (N. J. Eq.), 34 Atl. 746; Beebe V. Austin, .15 Johns. 477; Kneen v. Halin, 6 Idaho, 621, 59 Pac. 14. The grantor's equity, however, is in- trinsically superior to that of the third person; therefore, as between a purchase-money mortgage given to the grantor to secure a balance due On the purchase price, and a mort- gage given to a third person to se- cure the money used in making the cash payment to the grantor, the mortgage to the grantor has prefer- ence, although it was recorded three hours later than the other: Rogers V. Tucker, 94 Mo. 346, 7 S. W. 414 (citing Bank's Appeal, 91 Pa. St. 163, and Turk v. Funk, 68 Mo. 18, 30 Am. Eep. 771). Similarly, a §726 EQUITY JtrEISPEUDElSrOB. 1482 § 726. Other Illustrations. — ^In addition to these most important questions of priority between different equitable purchase was arranged) Ijiit before the deed and mortgage were executed :'' Virgin v. Brubaker, 4 Nev. 31; Guy v. Carriere, 5 Cal.Sll; Strong v. Co., 182 Ala. 249, 62 South. 42 (su- perior to a trust accruing after the title passed). The PuTehase-money Mortgage is Superior to a Mortgage made and recorded prior to the passing of title to the grantee-mortgagor J the gran- tor-mortgagee is not required to search the records for encumbrances placed upon the property prior to the execution of the deed: Ante, § 658, and notes; Balen v. Mercier, 75 Mich. 42, 42 N. W. 666; Elder v. Derby, 98 111. 228; Protection B. & L. Ass'n V. Chickering, 54 N. J. Eq. 519, 34 Atl. 1083, affirmed on appeal, 55 N. J. Eq. 822, 41 Atl. 1116 (though such prior mortgage was also for purchase-money) ; Gould v. Wise, 97 Cal. 532, 32 Pac. 576, 33 Pac. 323; Ely v. Pingrj, 56 Kan. 17, 42 Pac. 330; Schoeh v. Biirdsall, 48 Minn. 441, 51 N. W. 382 (though such prior mortgage was also for purchase-money) ; Turk v. Funk, 68 Mo. 18, 30 Am. Rep. ; 771 (same) ; Demeter v. Wilcox, 115 Mo. 634, 37 Am. St. Rep. 422, 22 S. W. 613 (mortgage to third person who ad- vanced the purchase-money has sim- ilar priority over previous mortgage of the vendee's equity in the land); Daly V. New York & G. L. R. Co., 55 N. J. Eq. 595, 38 Atl. 202 (priority not lost by delay in re- cording the purchase-money mort- gage) ; Smith & Ricker v. HiU Bros., 17 N. M. 415, 134 Pac. 243; and it has even been held that the grantor- mortgagee who has delayed in put- ting his deed and mortgage on record is not postponed to a mortgage made by the grantee intermediate between the execution and the re- cording of the deed: Continental 1. & Ij. Soc. v. Wood, 168 HI. 421, 48 N. B. 221; but see contra, editor's note to § 658, ante. In order that a purchase-money mortgage shall have priority over a mortgage made after the title has passed and the deed has been recorded it must be recorded first: Trigg v. Vermillion, 113 Mo. 230, 20 S. W. 1047; Koon v. Tramel,. 71 Iowa, 137, 32 N. W. 243. See, also, Spindler v. Iowa & O. S. L. R. Co., 173 Iowa, 348, 155 N. W. 271; but see Charlottesville Hardware Co. V. Perkins, 118 Va. 34, 86 S. E. 869 (mortgagee affected by recitals in the deed, referring to the purchase- money mortgage). The purchase-money mortgage is not entitled to priority over a sub- sequent deed which is first recorded: Jackson v. Reid, 30 Kan. 10, 1 Pac. 308. Where a prior mortgagee, pending the negotiations for his mortgage, acquires knowledge that the property offered for security be- longs to a third person, and was to be purchased by the mortgagor, and that negotiations for its purchase were then pending, he is charged with notice of the terms upon which the purchase is to be made; and when such terms involve the execu- tion of a mortgage to the vendor to secure the purchase price, the latter mortgage, although subsequently re- corded, takes priority: Montgomery V. Keppel, 75 Cal. 128, 7 Am. St. Rep, 125, 19 Pac. 178. §725, (h) Superior to Mechanic's Lien.^Saunders v. Bennett, 160 Mass. 48, 39 Am. St. Rep. 456, 35 1483 GONCERlflNG PKIOEITIES. § 726 liens, there may be maiiy other particular instances in which a subsequent interest is intrinsically superior, or an earlier one intrinsically inferior, so as to determine the precedence between them. A few may be mentioned by way of illustration. Fraud inhering in a prior mortgage, encumbrance, or other apparent claim will, of course, post- Van Deursen, 23 N. J. Eq. 369; Lamb v. Cannon, 38 N. J. L. 362; Mackin- tosh V. Thurston, 25 N. J. Eq. 242. A contract concerning the premises made by the grantee before the purchase: BoUes v. Carli, 12 Minn. 113'; Morris v. Pate, 31 Mo. 315. A homestead right on the land:* Hooper v. Parkinson, 5 Nev. 233; Nichols v. Overacker, 16 Kan. 54; Pratt v. Topeka Bank, 12 Kan. 570; Carr v. Caldwell, 10 Cal. 380, 70 Am. Dec. 740; Magee V. Magee, 51 111. 500, 99 Am. Dec. 571; AUen v. Hawley, 66 111. 164, 168!; Austin V. Underwood, 37 111. 438, 87 Am. Dec. 254; Amphlett v. Hibbard, 29 Mich. 298; New England etc. Co. v. Merriam, 2 Allen, 391; Lane v. Collier, 46 Ga. 580. If a grantee, as a part of the same transaction, gives back a purchase- money mortgage to his grantor, and also gives another mortgage to a third person, and the deed and two mortgages are all recorded at the same time, the purchase-money mortgage is entitled to a precedence over the other: Clark V. Brown, 3 Allen, 509. As to the effect of delay in the recording, see Dusenbury v. Hulbert, 2 Thomp. & C. 177. N. E. Ill; New Jersey B. L. & Inv. 617 and note, 78 N. E. 313, reviewing Co. V. Bachelor, 54 N. J. Eq. 600, 35 eases. Atl. 745 (purchase-money mortgag'e §725, (i) Superior to Homestead to third person; inferior so far as Bight, if made by the owner of the the mortgage did not secure pur- premises, though not also executed ehase-money) ; Bees v. Ludington, ^7 "^ife or husband of the owner: 13 Wis. 276, 80 Am. Dec. 741. In ^°^y ^- Bismarck Nat. Bank, 4 N. California, however, the mechanic's ^- ^^S, 50 Am. St. Bep. 633, 59 N. lien statute is interpreted as de- f' ^^^'.^"^ "^''^ "^t^* (^"* ^°id so far as it secures indebtedness other manding the inferiority of the pur- than the purchase-money) ; and see chase-money mortgage in such cases: Lassen v. Vance, 8 Cal. 271, 68 Am. Avery v. Clark, 87 Cal. 619, 22 Am. j,^^^ g^^ g^^^ ^,^^^ Foster Lumber St. Eep. 272, 25 Pac. 919. But a go. v. Harlan County Bank, 71 Kan. mortgage made at the time of ac- jg^^ ^^^ j^ g^^ -g,^^ ^^^^ g j^^ quiring title, for the purpose of se- cas. 44, 80 Pac. 49; Lapoint v. Sage, curing money for the building, is 90 Vt. 560, 99 Atl. 233; Powers v. not entitled to a purchase-money Pense, 20 Wyo. 327, 40 L. E, A. (N. mortgage's superiority; Libbey v. S.) 785, 123 Pac. 925 (mortgage to Tidden, 192 Mass. 175, 7 Ann. Cas. third person). § 727 EQUITY JUKISPEtTDENCB. 1484 pone it to a subsequent valid lien.^ * A prior equitable lien upon cbattels arising from contract will not prevail against a subsequent chattel mortgage which has been perfected and filed according to statute.^ The priority among liens may also be fixed by express agreement among the parties at the time they are created, so as even to follow them sometimes into the hands of an assignee. ^ ^ §727. III. A Subsequent Equity Protected by the Legal Title. — The case to be considered is not that merely of an equitable- interest held by A, and a subsequent con- veyance of the legal estate to B, in which the latter 's su- perior right would be a simple application of the doctrine concerning bona fide purchase for a valuable consideration. The subject to be examined assumes the existence of suc- cessive equities held by different persons, equal in their nature, and acquired in such a manner that, having regard § 726, 1 Kelly v. Lenihan, 56 Ind. 448 (fraudulent mortgage and subse- quent judgment) ; Eggeman v. Eggeman, 37 Mich. 436 (prior fraudulent and subsequent valid mortgage). § 726, 2 Smith v. Worman, 19 Ohio St. 145. The equitable lien in favor of a lessor, arising from a stipulation in the lease, upon the lessee's chattels which were placed upon the premises, postponed to a subsequent chattel mortgage given by the tenant, which had been duly filed, etc. § 726, 3 Balkum v. Owens, 47 Ala. 266, as an illustration. § 726, (a) See Hooper v. Central favor of a mortgage to be subse- Trust Co., 81 Md. 559, 29 L. K. A. quently executed); Coe v. Colum- 262, 32 Atl. 505, citing the text. bug, P. & I. E. Co., 10 Ohio St. 372, §726, (b) Priority Fixed by Ex- 75 Am. Dec. 518; Collier v. Miller, press Agreement.— McCaslin v. Ad- 137 N. Y. 332, 33 N. E. 374, affirm- vance Mfg. Co., 155 Ind. 298, 58 N. ing 62 Hun, 99, 42 N. Y. St. Kep. E. 67 (agreement that if another 66, 16 N. Y. Supp. 633; Eigler v. mortgage shall be subsequently exe- Light, 90 Pa. St. 235; Trompezynski cuted on the property, it shall be a v. Struck, 105 Wis. 437, 81 N. W. prior lien); Eose v. Provident S., L. 650. But when the mortgage so & I. Ass'n, 28 Ind. App. 25, 62 NrE. postponed is recorded first, a pur- 293; Loewen v. Porsee (Mo.), 35 S. chaser at its foreclosure sale with- W. 1138 (the agreement may be by out any actual notice of the agree- parol); Hopler v. Cutler (N. J. Eq.), ment is preferred: Loewen v. Porsee 34 Atl. 746 (same); Hendrickson v. (Mo.), 35 S. W. 1138. See, also, Wooley, 39 N. J. Eq. 307 (same; ante, § 719, and notes, as to simul- mortgagee may waive his priority in taneous mortgages. 1485 CONCEENING PEIORITIES. § 727 to these interests alone, the priority of right among them would depend upon their order of time. Under these cir- cumstances, it is assumed that one of the parties acquires, in some manner, the legal title in addition to his equity. The settled doctrine is, that if a second or other subsequent holder, who would otherwise be postponed to the earlier ones, obtains the legal estate, or acquires the best right to call for the legal estate, he thereby secures an advantage which entitles him to a priority.^ It is absolutely essen- tial, however, that he should have acquired his equitable intei^t without any notice of the prior claims, and that lis subsequent procurement of the legal estate should be free from fraud and from undue negligence,^ a Several illustrations are placed in the foot-note.^ § 727, 1 In this country the practical examples of this rule would gener- ally, if not always, be instances of bona fide purchase for a valuable con- sideration, and governed by the doctrine on that subject ; but the rule does not require such a state of facts. In other words, the rule does not require that the one who protects himself by getting the legal estate should be in all respects a bona fide purchaser of that estate for a valuable considera- tion and without notice. The rights of mere priority and the rights of a bona fide purchase are by no means identical. § 727, 2 The effects of fraud and negligence in defeating the precedence which would otherwise follow the legal title are considered in the subse- quent head V (§§ 731, 732). § 727, 3 Cave v. Cave, L. R. 15 Ch. Div. 639 : A tn-.st existed in favor of A. The trustee used the funds in purchasing an estate which was conveyed to B (the trustee's brother), so that the legal title was vested in him. Afterwards money was raised for or in the name of B, and secured by a first legal mortgage on the land given to C, one of the lenders, and subse- quent equitable mortgages given to D and E, other lenders. All these trans- actions were made without any notice of the original trust given to C, D, or E. Held, that as between the original cestui que trust A, and the first mortgagee C, the latter was entitled to the precedence, since he had a legal §727, (a) This paragraph of the assignee a portion of the money text is quoted and followed in Due- paid in pursuance of a judgment ber Watch-Case Mfg. Co. v. Daugh- which was afterwards held to be erty, 62 Ohio St. 589, 57 N. E. 455. fraudulent); American Bonding Co. The text is cited in Fidelity Mutual of Baltimore v. State Savings Bank, Life Ins. Co. v. Clark, 203 U. S. 64, 47 Mont. 332, 46 L. E. A. (N. S.), 51 !<. Ed. 91, 27 Sup. Ct. 19 (prin- 557, 133 Pae. 367. clple applied to party receiving as § 728 EQUITY JTJRISPBXJDElirCE. 1486 §728. Legal Estate Obtained from a Trustee.^ — Such being the general rule, there are special circumstances in which the acquisition of the legal estate, even without no- tice, will not confer a priority. Thus it seems now to be settled by the most recent English decisions that where the legal estate is vested in a trustee, and the holder of a sub- sequent equitable interest, even without notice of the prior estate ; but as between A and the mortgagees D and B, A was prior in right, since all their interests were equitable and he was prior in time. This case well illustrates both rules. Hunter v. "Walters, L. E. 7 Ch. 75 : There were two outstanding mortgages upon a piece of land, of which the first alone was legal, and both mortgagees employed the same solicitor, A. By his procurement both mortgagees united in a deed of conveyance to their solici- tor, A. This deed was given voluntarily, and intending to vest the legal title in A, but was in fact grossly fraudulent as against the mortgagees. Still the apparent legal title, was held by A, although liable to be set aside. He took possession of the land, and, claiming to be owner, gave an equi- table mortgage on it to B, to secure payment of money borrowed from B, he acting in good faith and without notice. B's equitable mortgage was held entitled to priority over the two original mortgagees, because he held under the legal title in A, and through the laches of the original mortgagees, which made the fraud possible, he obtained a higher right as against them. See, also, Ratcliffe v. Barnard, L. R. 6 Ch. 652, and Hewitt v. Lopsemore,. 9 Hare, 449. Fitzsimmons v. Ogden,7 Cranch, 2; Newton v. McLean, 41 Barb. 285 : Land was conveyed to A by a deed absolute on its face, and vesting an apparently perfect legal estate, but in fact the land was held in trust for B, and it was not intended that A should have any beneficial inter- - est. In this condition A executed a mortgage on the land to C for a valu- able consideration and without notice. Held, that C was protected against B's interest, because the mortgage clothed him with the legal estate. This can hardly be the correct reason according to the law of New York, by which a mortgage never conveys the legal estate. C would probably be protected by the recording acts. Beall v. Butler, 54 Ga. 43 : The statutory lien of a laborer on his employer's property is cut off by a sale and con- veyance to a purchaser without notice. In Jones v. Lapham, 15 Kan. 640, it is held that, between a prior lien upon an equitable interest, and a sub- sequent lien upon the full legal estate, the latter is preferred, if the holder acquired without notice; but not if at the time of obtaining his lien he knew of the outstanding equity and the prior lien thereon. Pox v. Palmer, 25 N. J. Eq. 416 : A mortgage signed in blank and given to an agent, by whom it is afterwards filled up and delivered, is not a valid and legal mort- §728, (a) See, -iu connection with this paragraph and § 729, post, %^ 769, 770. 1487 CONCERNING PKIORITIBS. § 728 equities, obtains a conveyance of the legal estate from the trustee, which would of itself be a breach of the trust, pro- vided the conveyance is not so made as to constitute him- self a bona j^cZe. purchaser from the trustee for a valuable consideration and without notice, he does not thereby ac- quire a precedence over the existing equities which are prior in time, because the act is necessarily a breach of trust. 1 It is settled that where the legal estate is vested in a trustee for a prior encumbrancer, a subsequent equi- gage. At most, it only creates an equitable lien which can be enforced be- tween proper parties.! As such, it will not prevail over the subsequent equitable interest of another, who has also the legal title: Straus v. Kern- good, 21 Gratt. 584. Between two equal equitable liens, the holder who obtains the legal advantage of a judgment will prevail over the other.'' § 728, 1 It must be carefully borne in mind, or else confusion will be inevitable, that the question under examination is one of priority merely, and not of the rights obtained through a bona fide purchase for value : Mumford v. Stohwasser, L. B. 18 Eq. 556, 592, 563. Sir George Jessel, M. R., after quoting with approval the language of James, L. J., in Pilcher V. Rawlins, L. R. 7 Ch. 25&, adds: "This would be the case of a trustee knowing that he was a trustee assigning over the legal estate to a person who did not know he was a trustee, that person having previously acquired an equitable interest; aind I should hold, if that point came for decision, which I think does not in this case, that the second equitable encumbrancer or the purchaser of the equity did not thereby gain any priority; in other words, that a person, knowing he is a trustee, cannot, without receiving value at the time, by committing a breach of trust, deprive his own cestui que trust of his rights." *• See, also Pilcher v. Rawlins, L. R. 7 Ch. 259, 268, per James, L. J. §727, (b) In Georgia, a purchaser 169 N. T. 314, 62 N. E. 387. See, of land who has paid the eonsidera- also, Harpham v. Shacklock, L. E. tion and taken possession has a 19 Ch. Div. 207; Newman v. New- "perfect equity," on which he can man, L. R. 28 Ch. Div. 674. In the either maintain or defend ejectment, latter case, a trustee, holding the and is entitled to priority over a legal estate, who takes from his prior equitable estate of which he cestui que trust an assignment of the had no notice: Temples v. Temples, . equitable interest as security for 70 Ga. 480. money advanced to the cestui gae § 728, (to) This passage from the trust, was held entitled to avail opinion in Mumford v. Stohwasser, himself of the legal estate as a Ii. E. 18 Eq. 556, 562, 563, was protection against a prior encum- quoted with approval in Central brance of which he had no notice. Trust Co. V. "West India Imp. Co., § 729 EQUITY JUKISPBUDENCE. 1488 table encumbrancer gains no priority by obtaining a con- veyance of it from such trustee.^ Also where there are successive equitable mortgages, the legal estate remaining in the mortgagor, the mortgagor cannot himself give pri- ority to a subsequent encumbrancer by conveying the legal estate to him. Here, also, it must be understood that the second encumbrancer getting the legal title is not a hona fide purchaser for a valuable consideration. ^ " § 729, Legal Estate Obtained After Notice of a Prior Equity. — One further question remains to be examined. It has already been stated as an essential part of the gen- eral rule that the subsequent equitable lien or other in- terest must be completely acquired, and of course the con- sideration upon which it is founded fully parted with, without notice of any prior equity, in order that the holder may be protected by getting the legal estate. The ques- tion is, whether the legal estate must also be obtained be- fore any notice is received of the prior equity. One par- ticular case involving this question, but depending upon special reasons, is well settled. If a person becomes holder in good faith of an equitable interest without notice of an existing trust, and afterwards, upon receiving notice of the trust, he obtains a conveyance of the legal estate from the trustee, he cannot protect himself against, nor even assert priority over, the right of the cestui que trust, for his act has necessarily made him a party to a breach of trust.i a Does the same rule extend to all instances of a § 728, 2 Allen v. Knight, 5 Hare, 272, afarmed in 11 Jur. 527; and see Wilmot V. Pike, 5 Hare, 22. § 728, 3 Sharpies v. Adams, 32 Beav. 213, 216. The reason undoubtedly is, that under such circumstances the mortgagor is regarded as a trustee for all the equitable mortgagees. §729, IMumford v. Stohwasser, L. R. 18 Eq. 556, 563; Saunders v. Dehew, 2 Vern. 271 ; Allen v. Knight, 5 Hare, 272 ; Sharpies v. Adams, 32 § 728, (c) This portion of the text § 729, (a) See, also, Harpham v. was quoted in Central Trust Co. v. Shacklock, L. E. 19 Ch. Div. 207. West India Imp. Co., 169 N. Y. 314, "An equitable mortgagee, who has 62 N. E. 387. made an advance without notice of 1489 CONCEENING PEIOEITIES. § 729 legal estate procured by the holders of subsequent equi- table mortgages, liens, and other equitable interests? There is some conflict, or apparent conflict, of opinion upon this point, but it all arises, I think, from the failure to dis- tinguish mere rights of priority from the more complete rights of defense belonging to the bona fide purchaser for a valuable consideration. The confounding of these two entirely distinct and separate matters can only lead to a confusion of decisions and rules.^ The very object of the rule is, that a person who has in good faith become holder of an equitable lien or interest, on discovering his dan- ger of being postponed to an outstanding equity already in the hands of another, may protect himself and secure his priority by procuring the legal title. Principle and au- thority seem to be agreed that such a holder of a subse- quent equity, who obtained it for value and without notice, may, even after notice of an earlier equity in favor of a third person, secure the advantage given by a conveyance of the legal estate, and thus establish his own priority. By this act the subsequent holder would become entitled to priority. The decisions and dicta which conflict with this conclusion will be found, upon examination, to be dealing Beav. 213; Carter v. Carter, 3 Kay & J. 617. In fact, it seems that the mere obtaining the legal estate from the trustee without notice would not give him priority. § 729, 2 In a case of priorities merely, the court in a proper proceeding awards the subject-matter to the various claimants in the order of prece- dence ; in the other case it refuses any relief to the plaintiff attempting to establish his title or claim against the bona fide purchaser. This most im- portant distinction is not always sufficiently observed in the exhaustive American notes to Basset v. Nosworthy, and Le Neve v. Le Neve, in 2 Leading Cases in Equity. a prior equitable title, may gain pri- time when it is so got in, is held ority by getting in the legal title, on an express trust in favor of per- unless there are circumstances which sons who assert a claim to the prop- make it inequitable for him to do erty": Taylor v. London & County so. One case which falls within this Banking Co., [1901] 2 Oh. 231; Tay- exception is where the mortgagee has lor v. Eussell, [1892] App. Cas. 244, notice that the legal title, at the 259. 11—94 § 730 . EQUITY JUBISPBUDEITCE, 1490 with the alleged rights of a hona fide purchaser for value, and not with a mere question of priority.^ ^ % 730. IV. Notice of Existing Equities.— The doctrine is universally settled, and. has already been fully" examined, that, among successive interests wholly equitable, and be- tween an earlier equity and a subsequent legal estate, even when purchased for a valuable consideration, the one who acquires the subsequent estate or interest with notice of the earlier equity in favor of another person will hold his acquisition subject and subordinate to such outstanding interest or right ; ^ in the contest for priority between the two claimants, he must be postponed ; he takes his interest burdened with the obligation of recognizing, providing for, and carrying out the previous equity according to its na- ture. This subordinating effect is produced alike by every § 729, 3 While the proposition of the text is implied by many text-writ- ers, it is expressly announced by Mr. Adams as a settled rule in the ad- justment of priorities: Adam's Equity, 161, 162, 6th Am. ed., 339. See, also, Brace v. Duchess of Marlborough, 2 P. Wms. 491 ; Belchier v. Butler, 1 Eden, 523; Wortley v. Birkhead, 2 Ves. Sr. 571; Ex parte Knott, 11 Ves. 609, 619 ; Leach v. Ansbacher, 55 Pa. St. 85 ; Baggerly v. Gaither, 2 Jones Eq. 80 ; Carroll v. Johnston, 2 Jones Eq. 120, 123 ; Pitzsimmons v. Ogden, 7 Cranch, 2, 18; Siter v. McClanachan, 2 Gratt. 280, 283; ZoUman V. Moore, 21 Gratt. 313; Osbom v. Carr, 12 Conn. 195, 208; Gibler v. Trimble, 14 Ohio, 323; Campbell v. Brackenridge, 8 Blaekf. 471.« In some of these American decisions the rule may, under a mistaken view of the English authorities, be carried too far, and applied to a party who was asserting the rights to a bona fide purchaser. The eases of Grimstone v. Carter, 3 Paige, 421, 437, 24 Am. Dec. 230, and Fash v, Ravesies,-32 Ala. 451, appear to be opposed to this rule, but they are really dealing with the bona fide purchaser, and not with priorities. In the first, the chancellor says that "to enable a party to defend himself as a bona fide purchaser, he must state, not only that there was equal equity in himself by reason of his having paid the purchase-money, but also that he had clothed his equity with the legal title before he had notice of the prior equity." § 729 (b) See, also, Dueber Watch- § 729, (c) Also, Taylor v. Bussell, Case Mfg. Co. v. Daugherty, 62 Ohio [1891] 1 Ch. 9. St. 589, 57 N. E. 455, citing and fol- § 730, (a) The text is quoted in lowing the text; Bailey v. Barnes, Thompson v. E. I. Dupont Co., 100> [1894] 1 Ch. 25. Minn. 367, 111 N. W. 302. 1491 CONCERNING PEIOKITIES. § 730 species of notice ; actual notice proved by direct or inferred from circumstantial evidence, and constructive notice aris- ing from information suflScient to put the prudent man upon an inquiry, — from possession, from the contents of title deeds, from Us pendens, from registration, from in- formation given to an agent, or from any other cause, — when once established, are followed by the same conse- quences upon the rights of the subsequent holder or pur- chaser. Tie doctrine applies to all successive equities in the same subject-matter, even where they are equal and governed by the order of time, and in such a case it does not disturb the priority already existing. Its special and more important application is where the subsequent equi- table interest is superior in its intrinsic nature or from some incident, or where the subsequent interest is a legal estate, or where it possesses the advantage resulting from the compliance with some statutory requirement, so that the holder thereof would, in the absence of notice, be entitled to the preference; and its effect is then to defeat the precedence which would otherwise have existed, and to restore the priority from order of time among the suc- cessive claimants. By far the most frequent application of the doctrine in this country has been in connection with the recording acts, where the superiority of title or of lien otherwise acquired by the recording of a conveyance, mort- gage, or other instrument has been held to be lost by rea- son of a notice of some outstanding unrecorded estate, title, mortgage, lien, or other equitable interest. As the doctrine of notice, both with respect to its nature and its effects, has already been discussed as fully as my limits will permit, I shall add nothing further here except a few cases placed in the foot-note by way of illustration, i ^ §730, 1 Bradley v. Riches, L. R. 9 Ch. Div. 189; Greaves v. Tofield, L. R. 14 Ch. Div. 563; Baker v. Gray, L. R. 1 Ch. Div. 491; Maxfield v. §730, (b) This paragraph of the 62 N. E. 387; Third Nat. Bank of text is cited in Central Trust Co. v. Springfield, Mass., v. National Bank West India Imp. Co., 169 N. Y. 314, of Commeree (Tex. Civ. App.), 139 § 731 EQUITY JTTKISPBUDENCE. 1492 § 731. V. Effect of Fraud or Negligence upon Priori- ties. — ^A priority which would otherwise have existed may also be disturbed and defeated by fraud or negligence in obtaining the interest or iu failing to secure it properly. It is therefore a settled doctrine, that among successive equities otherwise equal, and also between a legal title or superior equitable interest earlier in time and a subsequent equity, the holder of the interest which is prior in time and would be prior in right may lose his precedence, and be postponed to the subsequent one by his own fraud or negligence, or that of his agent. The same rule applies to the holder of a subsequent legal estate who would other- wise have the precedence over a prior equitable interest-^ he may be postponed by reason of his neglect or fraud.. While the general rule has been fully adopted by the American courts, the cases involving it are much less f re- Burton, L. R. 17 Eq. 15; Dryden v. Frost, 3 Mylne & C. 670; Whitbread V. Jordan, 1 Younge & C. 303; Holmes v. Powell, 8 De Gex, M. & G. 572;. Atterbury v. Wallis, 8 De Gex, M. & G. 454; Penny v. "Watts, 1 Macn. & G. 150; Jones v. Smith, 1 Hare, 43, 55; Ware v. Lord Egmont, 4 De Gex^ M. & G. 460, 473; Greenfield v. Edwards, 2 De Gex, J. & S. 562; Montefiore V. Browne, 7 H. L. Cas. 241, 269 ; Wason v. Wareing, 15 Beav. 151 ; Hipkins V. Amery, 2 GifE. 292 ; Prosser v. Rice, 28 Beav. 68, 74 ; Bamhart v. Green- shields, 9 Moore P. C. C. 18; Birch v. EUames, 2 Anstr. 427; Gibson v> Ingo, 6 Hare, 112, 124; Joiies v. Williams, 24 Beav. 47; Mackreth v. Sym- mons, 15 Ves. 329, 350; Tourville v. Naish, 3 P. Wms. 307; Maundrell v, Maundrell, 10 Ves. 246, 271; Tildesley v. Lodge, 3 Smale & G. 543; Wigg- V. Wigg, 1 Atk. 382, 384; Rayne v. Baker, 1 Giff. 241; Harrison v. Forth, Prec. Ch. 51; Ferrars v. Cherry, 2 Vern. 383; Mertins v. JollifEe, Amb. 313; Lowther v. Carlton, 2 Atk. 242; Kennedy v. Daly, 1 Schoales & L. 355^ 379; Merry v. Abney, 1 Cas. Ch. 38; Earl Brook v. Bulkeley, 2 Ves. Sen. 498; Taylor v. Stibbert, 2 Ves. 437; Daniels v. Davison, 16 Ves. 249; Van Meter v. McFaddin, 8 B. Mon. 435; School District v. Taylor, 19 Kan. 287 (recorded mortgage held subject to a prior unrecorded deed by reason of the absolute constructive notice from the open possession by the grantee, although the mortgagee had no actual knowledge of such possession) ; In r& Sands Brewing Co., 3 Biss. 175 (effect of notice of a covenant in prior con- veyance to a subsequent purchaser). S. W. 665. See, also, Durant v. of equity); Poe v. Paxton, 26 W. Crowell, 97 N. C. 367, 2 S. E. 541 Va. 607, and cases cited in notes to- (purchaser of legal title with notice § 688, ante. 1493 CONCERNING PBIOBITTES. § 731 qiient in this country than in Englancl, because almost every kind of interest in land is within the operation of the recording acts, and may be protected by a record. Most instances of laches, therefore, coming "before our courts have arisen from a neglect to record an instrument, or to comply with the provisions of some statute analogous to that of recording.! a' rjriie effects of negligence and want of diligence ia postponing or even defeating the rights of an assignee of a thing in action, earlier in point of time, have already been described.^ One instance which may be regarded as an example of fraud, although no actual fraudulent intent is essential, is, where a prior encum- brancer, upon inquiry being made by a person interested, denies the existence of his lien, or where the owner of the legal estate denies his title under like circumstances, or even keeps sUent and does not announce his title to an § 731, 1 See, as examples of fraud in a prior mortgage, Kelly v. Lenihan, 56 Ind. 448; Eggemaa v. Eggeman, 37 Mich. 436. Tor examples of neg- lect, Fisher v. Knox, 13 Pa. St. 622, 53 Am. Dec. 503; Hendrickson's Ap-- peal, 24 Pa. St. 363; Eider v. Johnson, 20 Pa. St. 190, 193; Campbell's Appeal, 29 Pa. St. 401, 72 Am. Dec. 641; Garland v. Harrison, 17 Mo. 282. § 731, 2 See ante, §§ 698-702. §731, (a) Effects of Fraud. — See oil of Charleston v. Eyan, 22 S. 0. Hooper v. Central Trust Co., 81 Md. 339, 53 Am. Kep. 713. See, also, the 559, 29 Ii. R. A. 262, 32 Atl. 505, analogous case of Mills v. Kossiter citing the text (where priority of etc. Mfg. Co., 156 Cal. 167, 103 Pae. one lien obtained over another by S96, ante, in note (d) to § 687 (suc- fraudulent representations, first lien cessive assignments of land con- postponed to the other); ante, § 686, tract). Where the record of a mort- and notes. gsge was lost the negligence of the Effects of Negligence. — Where a mortgagee in failing for five years mortgage is fraudulently canceled to cause the record to be restored, of record as result of the mortgagee's as authorized by statute, destroyed negligence in permitting the instru- the lien of the mortgage as against a ment to remain in the custody and subsequent innocent purchaser from control of the mortgagor, its priority the mortgagor: ToUe v. Alley, 24 S. is lost in favor of a subsequent bona W. 113 (Kentucky). For the Eng- ■fide purchaser: Heyder v. Excelsior lish cases, see ante, § 687, notes, and B. & L. Ass'n, 42 N. J. Eq. 403, 59 notes to the next paragraph. Am. Rep. 49, 8 Atl. 310; City Coun- § 732 EQUITY JUBISPKTTDENCB. 1494 innocent person who is making expenditures, or advancing money upon the supposed security of the property.^ §732, Effect of Gross Negligence.^^ — It is now settled by the English decisions, after some fluctuation, that where a person has become entitled to the precedence because he has acquired the prior legal estate, or because, being sub- sequent in time, he has fortified his equity by obtaining the legal estate, he cannot lose such precedence and be postponed, unless by himself or by his agent he is charge- able with fraud or with gross negligence ; mere neglect will not suffice.! Whether the same requirement of gross negli- § 731, 3 These instances may undoubtedly be referred to the doctrine of equitable estoppel ; but the notion of constructive fraud lies at the founda- tion of that doctrine. Example.-! of prior mortgagee losing his priority, by denying his own security, to aii intended mortgagee, who makes inquiry and states that he is about to lend money on the same property : Ibboteson V. Rhodes, 2 Vern. 554; Berrisford v. Milward, 2 Atk. 49; see Stronge v. Hawkes, 4 De Gex, M. & G. 186; 4 De Gex & J. 632; Beckett v. Cordley, , 1 Brown Ch. 353, 357; Pearson v. Morgan, 2 Brown Ch. 385, 388; Evans V. Bicknell, 6 Ves. 173, 182; Lee v. Munroe, 7 Craneh, 366, 368; BrinckerhofE v. Lansing, 4 Johns. Ch. 65, 8 Am. Dec. 538.* Examples of legal owner concealing his title, and. suffering others to expend money, etc. : Storrs v. Barker, 6 Johns. Ch. 166, 168, 10 Am. Dec. 316; WendeU v. Van Rensselaer, 1 Johns. Ch. 344 ; Bright v. Boyd, 1 Story, 478 ; see Eldiidge v. Walker, 80 111. 270; see, also, Piatt v. Squire, 12 Met. 494; Fay v. Valen- tine, 12 Pick. 40, 22 Am. Dec. 397; Marston v. Brackett, 9 N. H. 336; Miller v. Bingham, 29 Vt. 82; Stafford v. Ballon, 17 Vt. 329; Broome v. Beers, 6 Conn. 198; Rice v. Dewey, 54 Barb. 455; L'Amoreux v. Vanden- bergh, 7 Paige, 316; Paine v. French, 4 Ohio, 318; Chester v. Greer, 5 Humph. 26.« § 732, 1 The cases furnish a great variety of instances and forms of fraud or neglect. The leading case is Hewitt v. Loosemore, 9 Hare, 449. See, also, Tourle v. Rand, 2 Brown Ch. 650; Bamett v. Weston, 12 Ves. 129; Colyer v. Finch, 5 H. L. Cas. 905; Espin v. Pemberton, 4 Drew. 333; 3 De Gex & J. 547; Hopgood v. Ernest, 3 De Gex, J. & S. 116; Ratcliffe V. Barnard, L. R. 6 Ch. 652.'* The following eases are illustrations of neg- §731, (b) See, also, ante, § 686, in Central Trust Co. v. West India and notes. Imp. Co., 169 N. Y. 314, 62 N. E. 387. § 731, (c) See, also, yost, § 818, and § 732, (b) The leading case on the notes. subject in recent years is Northern §732, (a) This paragraph is cited Counties, etc., Co. v. WMpp, L. B. 1495 CONCEENING PBIOBITTES. §732 gence applies to successive interests which, are all purely equitable, or whether mere negligence is sulficient to affect ligence insufficient to affect the priority acquired by means of the legal es- tate : Dixon v. Muckleston, L. R. 8 Ch. 155 ; Ratcliffe v. Barnard, L. R. 6 Ch. 652; Cory v. Eyre, 1 De Gex, J. & S. 149, 163; Hunt v. Elmes, 2 De Gex, F. & J. 578; Roberts v. Crofts, 2 De Gex & J. 1; Hewitt v. Loose- 26 Ch. Div. 482. In this case the question of what degree of negli- gence is sufScient to postpone a prior legal mortgage to a subsequent equitable mortgage is elaborately discussed, and the prior authorities reviewed. The conclusions reached were summed up as follows: "That the court will postpone the prior legal estate to a subsequent equi- table estate, — ^1. Where the owner of the legal estate has assisted in or connived at the fraud which has led to tlie creation of a subsequent equi- table estate, without notice of the prior legal estate, of which assist- ance or connivance the omission to use ordinary care in inquiry after or keeping may be, and in some eases has been, held to be sufficient evi- dence, where such conduct cannot otherwise be explained; 2. Where the owner of the legal estate has con- stituted the mortgagor his agent with authority to raise money, and the estate thus created has by the fraud or misconduct of the agent been represented as being the first estate. But that the court will not postpone the prior legal estate to the subsequent equitable estate on the ground of any mere carelessness or want of prudence on the part of the legal owner." In the case of Manners v. Mew, L. B. 29 Ch. Div. 730, North, J., in quoting the fore- going, said: "Mere carelessness there includes, in my opinion, gross care- lessness, if there is any distinction." In the opinions in these two cases the court was careful to say that the question there discussed referred to what conduct would postpone a prior legal estate, and not the ques- tion as to what circumstances would give priority as between two equi- table estates. In the subsequent case of Farrand v. Yorkshire Bank- ing Co., L. E. 40 Ch. Div. 182, the latter question was determined, and it was there held that negligence amounting to fraud • on the part of the holder of the prior equitable estate was not necessary to be shown, in order to work a postpone- ment. In the well-considered opinion of Parker, J., in Walker v. Linom, [1907] 2 Ch. 104, the question was reconsidered. It was pointed out that the broad statements relating to the effect of negligence in North- ern Counties etc. Ins. Co. v. Whipp, L. E. 26 Ch. Div. 482, supra, have not met with approval in certain later cases; and held that the neg- ligence of trustees, taking the legal title, in not getting possession of one of the title deeds, postponed their legal estate to a subsequent equitable mortgage created by the settler who retained this deed. (P. 114.) "In my opinion any conduct on the part of the holder of the legal estate in relation to the deeds which would make it inequitable for him to rely on his legal estate against a prior equitable estate of which he had no notice ought also to be sufficient to postpone him to §732 EQUITY JUEISPBUDENCB. 1496 the priority, must be regarded as still unsettled by the decisions.2 ^ more, 9 Hare, 449." Examples of neglect sufiBcient to destroy a precedence othei-wise existing: Worthington v. Morgan, 16 Sim. 547; Kice v. Rice, 2 Drew. 73; Briggs v. Jones, L. R. 10 Eq. 92; Hopgood v. Ernest, 3 De Gex, J. & S. 116; Perry Herriek v. Attwood, 2 De Gex & J. 21; Waldron v. Sloper, 1 Drew. 193 ; Carter v. Carter, 3 Kay & J. 617.* Examples of fraud; Hunter v. Walters, L. R. 7 Ch. 75; Sharpe v. Toy, L. R. 4 Ch. 35; Lloyd v. Attwood, 3 De Gex & J. 614. See, further, as to the neg- lect in making proper inquiry, and the notice resulting therefrom, ante, §612. § 732, 2 See supra, note imder § 687, where the recent English cases upon this question are cited. a subsequent equitable estate the creation of which has only been ren- dered possible by the possession of deeds which but for such conduct would have passed into the posses- sion of the owner of the legal es- tate." The views of Parker, J., have been mentioned favorably in several recent cases. § 732, (c) See, also. In re Ingham, [1893] 1 Ch. 352 (as between legal mortgagee and subsequent equitable mortgagee, by fraud of the mort- gagor using title papers which came into his possession, the former has priority in the absence of his or his predecessor's fraud or negligence). §732, (d) See, also, as to negli- gence displacing legal estate, Clarke V. Palmer, L. E. 21 Ch. Div. 124; Lloyd's Banking Co. v. Jones, L. E. 29 Ch. Div 221, 227; Brocklesby v. Temperance Permanent Building So- ciety, [1895] App. Cas. 173, affirming [1893] 3 Ch. 130; Oliver v. Hinton, [1899] 2 Ch. 264, 81 Law T. (N. S.) 212, 48 Wkly. Eep. 3; Grierson v. National Provincial Bank of Eng- land, Ltd., [1913] 2 Ch. 18 (acta not such negligence as to postpoire the legal mortgage). § 732, (e) The case of Farrand v. Yorkshire Banking Co., L. E. 40 Ch. Div. 182, settled this question in England. It was there held that gross negligence amounting to fraud is not necessary, but that negligence such as an omission to obtain pos- session of or to make inquiries con- cerning the title deeds may be suffi- cient. See, also, National Provincial Bank v. Jackson, L. E. 33 Ch. Div. 1 (between two equitable claimants, carelessness or want of prudence is enough to postpone); Taylor v. Lon- don and County Banking Co., [1901] 2 Ch. 231, 260. The two following recent cases well illustrate the prin- ciple: Prior debenture holders (equi- table mortgagees), who left the title deeds with the company so as to enable it to deal with its property as if it had not been encumbered, could not set up their prior charge against a subsequent equitable mort- gage to a bank, which had not been guilty of negligence; In re Castell & Brown, [1898] 1 Ch. 315, 67 Law J. (Ch.) 169, 78 Law T. (N. S.) 109, 46 Wkly. Eep. 248; In re Valletort Sanitary Steam Laundry Co., Ltd., [1903] 2 Ch. 654. But in one im- • portant group of cases negligence is not imputed to the prior equitable 1497 CONCEBNING PEIOEITIES. §733 § 733.a Assignments of Mortgages— Rights of Priority Depending upon. — An assignment of a mortgage is, throughout this country, with the exception, perhaps, of a very few states, a mere transfer of a thing in action, and the assignee can acquire no higher rights as against the mortgagor than those possessed by the original mortga- gee.i b Such assignments are generally within the opera- § 733, 1 See ante, § 704; Wanzer v. Gary, 76 N Y. 526. mortgagee under such eircumstanees. "Where the relation between the equitable encumbrancer and the per- son in possession of the title deeds is not merely that of mortgagee and mortgagor, but is of a fiduciary na- ture (as, for example, that of a ces- tui que trust and trustee, or client and solicitor), there is a great body of authority to show that the equi- table encumbrancer is not to be de- prived of his priority by reason of the improper acts of the person en- trusted with the deeds, so long, at all events, as the encumbrancer has no ground to suppose that there has been any want of good faith on the part of the custodian of the deeds": Taylor v. London and County Bank- ing Co., 11901] 2 Ch. 231, 260fe., cit- ing Cory V. Eyre, 1 De G. J. & S. 149; Shropshire Union Eailways & Canal Co. v. Eeg., L. E. 7 H. L. 496; In re Vernon, Ewens & Co., L. E. 33 Ch. Div. 402; Carritt v. Real & Personal Advance Co., L. E. 42 Ch. Div. 263. Compare the decision of Parker, J., in Walker v. Linom, [1907] 2 Ch. 104, relying on Lloyd's Banking Co. v. Jones, 29 Ch. D. 221. In these cases the cestui que trust was held bound by the trustee's neg- ligence; the distinction being made, [1907] 2 Ch. 118, 119, that here the trustee's breach of duty consisted in never getting possession of the title deeds, so that the trusteeship was incomplete; while in Taylor v. London and County Banking Co., [1901] 2 Ch. 231, su-pra, and similar cases, the trustees having possession of the deeds "and dealing improperly with them, the cestui que trustent had the right to assume that the trustees would do their duty and were not affected by their negligence. This paragraph and notes are cited in Eohde V. Eohn, 232 111. 180, 83 N. E. 465, reviewing the Farrand case and other cases. §733, (a) Sections 733, 734 are cited, generally, in Third Nat. Bank of Springfield, Mass., v. National Bank of Commerce (Tex. Civ. App.), 139 S. W. 665. §733, (b) Assignment is Subject to Mortgagor's Equities. — See, also, Turner v. Smith, [1901] 1 Ch. 213; San Jose Ranch Co. v. San Jose L. & W. Co., 132 Cal. 582, 64 Pae. 1097; Meyer v. Webber, 133 Cal. 681, 65 Pac. 1110; Adams v. Hopkins (Cal.), 69 Pac. 228, 73 Pac. 971; Briggs v. Crawford, 162 Cal. 124, 121 Pac. 381 (partial failure of consideration); Mentry v. Broadway Bank & Trust Co., 20 Cal. App. 388, 129 Pac. 470; Taylor v. Jones, 165 Cal. 108, 131 Pac. 114 (want of consideration) ; Beach v. Lattner, 101 Ga. 357, 28 S. E. 110 (usury) ; Chicago Title" & Tr. Co. V. Afe, 183 HI. 91, 55 N. E. §733 EQUITY JURISPBUDENCB. 1498 tion of the recording statutes, either ia express terms, or by a judicial interpretation of the statutory language, hold- 659 (no negligence on mortgagor's part); Bartholf v. Bensley, 234 111. 336, 84 N. E. 928 (rents collected by the mortgagee after assignment but before notice to the mortgagor of the assignment must be deducted from the mortgage debt); Shuey v. Latta, 90 Ind. 136; Tabor v. Foy, 56 Iowa, 539, 9 N. W. 897 (mort- gage securing a forged negotiable note); Timms v. Shannon, 19 Md. 296, 81 Am. Dec. 632 (subject only to equities existing at time of as- signment); Nichols V. Lee, 10 Mich. 526, 82 Am. Dec. 57; McKenna v. Kirkwood, 50 Mich. 544, 15 N. W. 898; Cooley v. Harris, 92 Mich. 126, 135, 52 N. W. 997; Walker v. Thomp- son, 108 Mich. 686, 66 N. "W. 584; Eedin v. Branhan, 43 Minn. 283, 45 N. W. 445 (mortgage paid before as- signment) ; Bobeson v. Eobeson (N. J. Eq.), 23 Atl. 612; Magie v. Key- nolds, 51 N. J. Eq. 113, 26 Atl. 150 (assignment in the form of a con- veyance of land) ; Black y. Thur- ston, 71 N. J. Eq. 643, 63 Atl. 999; Yoorhees v. Nixon, 72 N. J. Eq. 791, 66 Atl. 192; Cartun v. Myers, 78 N. J. Eq. 303, 82 Atl. 14 (mortgagor may be estopped by laches from set- ting up his equities); HUl v. Hoole, 116 N. Y. 302, 5 L. R. A. 620, 22 N. E. 547; Merchants' Bank v. Weill, 163 N. Y. 486, 79 Am. St. Rep. 605, 57 N. E. 749 (not subject to new- equities arising or defenses accru- ing after the assignment) ; Eapps v. Gottlieb, 142 N. Y. 164, 36 N. E. 1052 (bond and mortgage delivered to mortgagee on understanding that they were not to be operative until the consideration therefor was paid; mortgagor not estopped); Taylor v. Carmon, 153 N. C. 101, 68 S. E. 1058; Winterer v. Minneapolis, St. P. & S. g. M. E. Co., 20 N. D. 412, Ann. Cas. 1912C, 871, 30 L. R. A. (N. S.) 1219, 127 N. W. 995; Eeineman v. Eobb, 98 Pa. St. 474; Earnest v. Hoskins, 100 Pa. St. 551; Theyken V. Howe Maeh. Co., 109 Pa. St. 95; Stephens v. Weldon, 151 Pa. St. 520, 25 Atl.- 28 (set-off); Wilson v. Ott, 173 Pa. St. 253, 51 Am. St. Rep. 767, 34 Atl. 23; Myerstown Bapk v. Eoessler, 186 Pa. St. 431, 44- L. R. A. 442, 40 Atl. 963. In Moffett v. Parker, 71 Minn. 139, 70 Am. St. Rep. 319, 73 N. W. 850, the mort- gagor was estopped by the fact that the mortgage was in fraud of his creditors from setting up against the assignee the defense of no con- sideration. In Merchants' Bank v Weill, 163 N. Y. 486, 79 Am. St. Rep. 605, 57 N. E. 749, an important limi- tation was laid down to the rule as generally expressed; viz., that the rule does not apply to "new equi- ties arising, or defenses accruing," after the assignment; that the de- fenses by the mortgagor to which the assignment is subject are only those "arising out of matters inher- ent in the contract by which the chose in action is evidenced and ex- isting before it is assigned." In this case the mortgagor in a purchase- money mortgage attempted to exer- cise, after the assignment, an option conferred by a secret agreement to rescind the sale of the property and thus to be relieved of the obligation of the bond and mortgage. Payment by Mortgagor to Mort- gagee. — In the absence of notice of the assignment to the mortgagor, or of facts putting him on inquiry as to an assignment, he is protected in 1499 COIir'GEBIiriNG PKIOEITIES. 733 ing that an asisigament is a species of conveyance. 2 o The record of an assignment, like that of any other instrument, ■ § 733, 2 See 1 Jones on' Morfgages, sees. 472-478, ■where the subject is f-ully discussed,''aiid from which I have borrowed. In the recent and very cfarefully considered case of Westbrook v. Gleason, 79 N. Y. 23, it is held that an assignment is a "conveyance" within the general requirements of the recording acit, and therefore when a second mortgagee, with notice of a prior unrecorded mortgage, assigns his mortgage to a bona fide purchaser for value, who has no notice, such assign'ee is entitled to preference only in case he records his assignment before the first mortgage is recorded ; if the first mortgage is recorded before the assignment is put on record, that operates as a constructive notice to the assignee, and cuts off his priority. Prom this it appears that the effects of recording an assignment are not the payments subBequently .made by him to the mortgagee, See ante, § 702; Berwick & Co. v. Price, [1905] 1 Ch. 632; Towner Vw McClelland, 110 111. 542; Bliss V. Young, 7 Kan. App. 728, 52 Pac. 577; Bull v. Sink, 8 Kan. App. 860, 57 Pac. 853; Foster v. Carson, 159 Pa. St. 477, 39 Am. St. Rep. 696, 28 Atl. 356. It is not usually necessary for the mortgagor's protection that he should require the production of the mortgage, or bond or other non-nego- tiable instrument secured thereby at the time of making payment: Vann V. Marbury, 100 Ala. 438, 46 Am. St. Kep. 70, 23 L. B. A. 325, 14 South. 273 (burden of proof on assignee to show notice to mortgagor) ; Olson v., Northwestern Guaranty Loan Co., 65 Minn. 475, 68 N. W. 100; Wein- berger V. Brumberg, 69 N., J. Eq. 669, 61 Atl. 732; Clinton Loan Ass'n V. Merritt, 112 N. C. 243, 17 S. E. 296; Horstman v. Gerker, 49 Pa. St. 282, 88 Am. Dec. 501 (inconvenience of a rule that would require such production); but see Eodgers v. Peckham, 120 Cal. 238, 52 Pae. 483, post, in note (f), infra; but it has ben held that failure to make in- quiry as to the whereabouts of the bond and mortgage may constitute "gross negligence amounting to con- structive notice": Clinton Loan Ass'n V. Merritt, 112 N. C. 243, 17 S. E. 296, following the analogy of the English equitable mortgage cases where no inquiry was made for the title deeds. Assignment of KTegotiable Note Secured by Mortgage. — See ante, § 704, note. § 733, (e) Assignments Usually Within the Recording Acts. — See, also, Williams v. Jackson, 107 TT. S. 478, 2 Sup. Ct. 814 (District of Columbia); Nashua Trust Co. v. W. S. Edwards Mfg. Co., 99 Iowa, 109, 61 Am. St. Eep. 226, 68 N. W. 587 (written assignment is an "instru- ment conveying real estate," under the recording acts) ; Morrow v. Stan- ley, 119 Md. 590, 87 Atl. 484; Swasey V. Emerson, 168 Mass. 118, 60 Am. St. Eep. 368, 46 N. E. 426; Huitink V. Thompson, 95 Minn. 392, 111 Am. St. Eep. 476, 5 Ann. Cas. 338, 104 N. W. 237; Jones v. Fisher, 88 Neb. 627, 130 N. W. 269; Settle v. Tied- gen, 77 Nfeb. 795, 799, 110 N. W. 548, 116 N. W. 959; Higgins v. Jamesburg Mut. B. & L. Ass'n (N. J. Eq.), 58 Atl. 1078 (by Eev. 1898, §733 EQUITY JUKISPBUDENCE. 1500 does not operate as a notice retrospectively ; it is not there- confined, as has sometimes been supposed, to the rights of successive as- signees of the same mortgage. In illustration of the text, see Belden v. Meeker, 47 N. Y. 307; 2 Lans. 470; Campbell v. Vedder, 1 Abb. App. 295; Fort V. Bureh, 5 Denio, 187; Vanderkemp v. Shelton, 11 Paige, 23; James V. Johnson, 6 Johns. Ch. 417; St. John v. Spalding, 1 Thomp. & C. 483; Byles V. Tome, 39 Md. 461; Bowling v. Cook, 39 Iowa, 200; Bank of State of Indiana v. Anderson, 14 Iowa, 544, 83 Am. Dec. 390 ; Comog v. Fuller, 30 Iowa, 212; MeClure v. Burris, 16 Iowa, 591; Henderson v. Pilgrim, 22 Tex. 464. In Pennsylvania it is held, under a construction of the general statute, that a record of an assignment is notice to subsequent assignees, and also to subsequent mortgagees and purchasers of the same j)remises ; Pepper's Appeal, 77 Pa. St. 373 ; Neide v. Pennypacker, 9 Phila. 86 ; Leech V. Bonsall, 9 Phila. 204; Philips v. Bank of Lewiston, 18 Pa. St. 394, 401. In Indiana it is held, upon a construction of the statute, that no provision is made for recording assignments, and therefore a record of them is not §53; N. J. Laws 1898, p. 690); Hen- niges V. Pasehke, 9 N. D. 489, 81 Am. St. Eep. 588, 84 N. W. 350; Merrill v. Luce, 6 S. D. 354, 55 Am. St. Eep. 844, 61 N. W. 43; Van Burk- leo v. Southwestern Mfg. Co. (Tex. Civ. App.), 39 S. W. 1085; Donald- son v. Grant, 15 Utah, 231, 49 Pae. 779 (mortgage creates an "interest in real estate," the assignment of which must be recorded) ; and eases cited infra in the notes to this and the following paragraph. An unre- corded assignment is, of course, su- perior to the right of one who pur- chases the land with notice of the assignment: Passumpsic Sav. Bank V. Buck, 71 Vt. 190, 44 Atl. 93. An assignment being a conveyance un- der the recording act, and therefore, tfcough unrecorded, good as against all persons except subsequent pur- chasers for value without notice (Iowa), has priority over subsequent judgment or mechanics' liens against the property: Nashua Tr"ust Co. v. W. S. Edwards Mfg. Co., 99 Iowa, 109, 61 Am. St. Bep. 226, 68 N. W. 587. By a recent statute in Kansas (Laws of 1897, e. 160) unrecorded assignments of mortgages cannot be received in evidence; for cases in- terpreting this statute, see Myers v. Wheeloek, 60 Kan. 747, 57 Pae. 956 (its constitutionality affirmed) ; Burt V. Moore, 62 Kan. 536, 64 Pae. 57; Neosho Val. Inv. Co. v. Sharpless, 63 Kan. 885, 65 Pae. 667; Hulme v. Neosho Val. Inv. Co., 63 Kan. 886, fi6 Pae. 239. In a few states, assign- ments of mortgages are held not to be within the operation of the re- cording acts: Hull v. Diehl, 21 Mont. 71, 76, 52 Pae. 782; Leonard v. Leonia Heights Land Co., 81 N. J. Eq. 489, Ann. Cas. 1914C, 749, 87 Atl. 645, reversing 81 N. J. Eq. 43, 85 Atl. 602; Bamberger v. Geiser, 24 Or. 203, 33 Pae. 609; Howard v. Shaw, 10 Wash. 151, 38 Pae. 746; Fischer v. Woodruff, 25 Wash. 67, 87 Am. St. Rep. 742, 64 Pae. 923; that the record of the assignment in such case is a nullity, see ante, § 651, note. 1501 CON-CEBNING PRIORITIES. §733 fore a constructive notice of the assignee's interest to the notice : Hasselman v. McKernan, 50 Ind. 441* It necessarily follows that when a mortgage is assigned, and the assignment is not recorded, and the mortgagee afterwards satisfies the mortgage of record, the lien is thereby destroyed as against a bona fide purchaser or encumbrancer without notice of the premises : Bowling v. Cook, 39 Iowa, 200 ; Henderson v. Pilgrim, 22 Tex. 464; and see Warner v. Winslow, 1 Sand. Ch. 430; St. JohnV. Spald- ing, 1 Thomp. & C. 483.« § 733, (fl) By the express terms of the present statutes of Indiana they are recordable: Eev. Stats. 1881, 1897, §§ 1093, 1094; Eev. Stats. 1894, §§ 1107, 1108; Citizens' State Bank V. Julian, 153 Ind. 655, 55 N. E. 1007; Artz v. Yeager, 80 Ind. App. 677, 66 N. E. 917. §733, (e) Satisfaction by Mort- gagee; Effect on SiibsecLuent Bona fide Purchasers or Encumbrancers. See, also, the following cases: Will- iams V. Jaekson, 107 U. S. 478, 483, 484, 2 Sup. Ct. 814; Re Buchner, 202 Fed. 979, 205 Fed. 454, 123 C. C. A. 522; Newman v. Fidelity Savings & Loan Ass'n, 14 Ariz. 354, 128 Pao. 53; McConnell v. American Nat. Bank, 59 Ind. App. 319, 103 N. B. 809 (though satisfaction procured 'by fraud of mortgagor); Livermore V. Maxwell, 87 Iowa, 705, 55 N. W. 37; Quincy v. Ginsbach, 92 Iowa, 144, 60 N. W. 511; Lewis v. Kirk, 28 Kan. 497, 42 Am. Rep. 173 (an instructive case) ; Harrison Nat. Bk. V. Pease, 8 Kan. App. 573, 54 Pac. 1038; Swasey v. Emerson, 168 Mass. 118, 60 Am. St. Kep. 368, 46 N. B. 426, and cases cited; Foss v. Dul- 1am, 111 Minn. 220, 126 N. W. 820; Huitink v. Thompson, 95 Minn. 392, 111 Am. St. Eep. 476, 5 Ann. Cas. 338, 104 N. W. 237 (mortgagee fore- closed and purchased at foreclosure sale, and then mortgaged to a bona fide mortgagee, who had no notice of the assignment of the former mort- gage) ; Cram v. Cottrell, 48 Neb. 646, 58 Am. St. Eep. 714, 67 N. W. 452; Porter v. Ourada, 51 Neb. 510, 71 N. W. 52; Whitney v. Lowe, 59 Neb. 87, 80 N. W. 266; Bacon v. Van Schoon- hooven, 87 N. Y. 447; Henniges v. Pasehke, 9' N. D. 489, 81 Am. St. Eep. 588, 84 N. W. 350; Merrill v. Luce, 6 S. D. 354, 55 Am. St. Eep. 844, 61 N. W. 43; Merrill v. Hurley, 6 S. D. 592, 55 Am. St. Rep. 859, 62 N. W. 958; Christenson v. Eaggio, 47 Wash. 468, 92 Pac. 348; Seattle Nat. Bank v. Ally, 66 Wash. 610, 120 Pac. 94; Friend v. Yahr, 126 Wis. 291, 110 Am. St. Eep. 924, 1 L. E. A. (N. S.) 891, 104 N. W. 997; Bautz v. Adams, 131 Wis. 152,. 120 Am. St. Eep. 1030, 111 N. W. 69. Even when the note secured by the mortgage was nego- tiable, and was transferred before maturity to a bona fide purchaser, thus cutting off defenses between the parties to the mortgage (see ante, § 704, notes), a bona fide pur- chaser or encumbrancer of the mort- gaged premises may rely on the recorded satisfaction by the mort- gagee. The fact that the mortgage may show that the notes secured were negotiable and not yet payable does not put him on inquiry as to a possible transfer of the notes, since there is generally no person to whom he can apply for information save . the mortgagor and mortgagee: Will- iams v. Jackson, 107 U. S. 478, 484, 2 Sup. Ct. 814; Ee Buehner, 202 Fed. §733 EQUITY JUEISPBUDENOt!. 1502 mortgagor, so as to destroy the effect of payments made by him, without actual notice to the mortgagee;* but a 979, 205 Fed. 454, 123 C. C. A. 522 (Illinois) ; Lewis v. Kirk, 28 Kan. 497, 42 Am. Rep. 173; Harrison Nat. Bank v. Pease, 8 Kan. App. 573, 54 Pac. 1038.; Henniges v. Paschke, 9 N. D. 489, 81 Am. St. Rep. 588, 84 N. W. 350; contra, Borgess Invest- ment Co. V. Vette, 142 Mo. 560, 64 Am, St. Rep. 567, 44 S. W. 754; Black V. Eeno, 59 Fed. 917 (Mis- souri). The position of the iona fide purchaser, who deals with both the mortgagor and mortgagee, but not in reliance on any recorded sat- isfaction, is a matter of more un- certainty. Thus, it has been held that 'he is not bound to make any inquiry concerning the note secured, even though that is negotiable: Jenks V. Shaw, 99 Iowa, 604, 61 Am. St. Rep. 256, 68 N. W. 900; or that it is sufficient if he make in- quiry of the mortgagee and of all persons who had owned the land since the date of the mortgage: Artz V. Yeager, 30 Ind. App. 677, 66 N. E. 917; and see this important series of Wisconsin cases: Marling V. Nommensen (Marling v. Milwau- kee Realty Co.), 127 Wis. 363, 115 Am. St. Rep. 1017, 7 Ann. Cas. 364, 5 L. R. A. (N. S.) 412, 106 N. W. 844 (strong case in favor of estop- pel of assignee by his failure to record the assignment; purchaser made payment in full after inquiry^ from mortgagee, but assignment re- corded in the interval between that and the recording of the release Qf the mortgage and deed to the pur- chaser) ; Marling v. Jones, 138 Wis. 82, 131 Am. St. Rep. 996, 119 N. W. 931 (purchaser obtained his deed simultaneouBly with the satisfaction of the mortgage, and recorded it be- fore the record of the assignment) : City Bank of Portage v. Plank, 141 Wis. 653, 135 Am. St. Rep. 62, 18 Ann. Cas. 869, 124 N. W. 1000; while on the other hand it is held that such a purchaser, though lie would be protected by a previous entry of satisfaction, in the absence thereof purchases at the peril that the nego- tiable note may have been assigned before maturity: Porter v. Ourada, 51 Neb. 510, 71 N. W. 52. In sup- port of this last rule, see Hayden V. Speakman, 20 N. M. 513, 150 Pae. 292; Assets Realization Co. v. Clark, 205 N. Y. 105, 41 L. R. A. (N. S.) 462, 98 N. E. 457; Wynn v. Grant, 166 N. C. 39, 81 S. E. 949. In some states where the recording statutes do not apply to the assign- ment of mortgages, the recorded sat- isfaction of the mortgage is no pro- tection whatever to the subsequent bona fide purchaser from a previous transfer of the note and the mort- gagee's rights; the purchaser must at his peril ascertain whether the mortgagee held the note at the time when he discharged the mortgage: Bamberger v. Geiser, 24 Or. 203, 33 Pac. 609; Howard v. Shaw, 10 Wash. 151, 38 Pae. 746; Fischer v. Wood- ruff, 25 Wash. 67, 87 Am. St. Rep. 742, 64 Pac. 923; and see Northup V. Reese, 68 Fla. 451, L. R. A. 1915F, 554, 67 South. 136; W. C. Early & Co. V. Williams, 135 Tenn. 249, 186 S. W. 102. Sueh a rule must be a great obstacle to the free alienation of property that has ever been the subject of a mortgage; its impolicy is conceded. §733, (f) Record of Assignment not Notice to Mortgagor. — Eodgers V. Parker, 136 Cal. 313, 68 Pae. 975;. 1503 CONCEENING PEIOEITIES. §733 mortgagor who obtains a discharge from the mortgagee without any payment is not protected as against the as- signee.3 § 733, 3 New York Life Ins. & T. Co. v. Smith, 2 Barb. Ch. 82; Ely y. Scofield, 35 Barb. 330. This rule is held not to apply to a mortgage given to secure a negotiable note which is assigned before maturity: Jones v. Smith, 22 Mich. 360. The record of an assignment is, however, a con- structive notice to a subsequent grantee of the mortgagor, and a subse- quent discharge given to him by the mortgagee would be inoperative as against the assigjnee.s' Also a discharge obtained by the mortgagor without Helmer v. Parsons, 18 Cal. App. 450, 123 Pac. 356; Murphy v. Barnard, 162 Mass. 72, 44 Am. St. Eep. 340, 38 N. E. 29 (rule no protection to mortgagor when the note secured is negotiable and assigned before ma- turity) ; Williams v. Keyes, 90 Mich. 290, 30 Am. St. Eep. 438, 51 N. W. 520 (same); Eggert v. Beyer, 43 Neb. 711, 62 N. W. 57 (same); Stark V. Olson, 44 Neb. 646, 63 N. W. 37 (same) ; Foster v. Carson, 159 Pa. St. 477, 39 Am. St. Eep. 696, 28 Atl. 356. Contra, Detwilder v. Heck- enlaible, 63 Kan. 627, 66 Pac. 653 (opinion cites no authorities and ignores the established principle that the record is not notice to prior par- ties; OJite, §657); Steadman v. Fos- ter, 83 N. J. Eq. 641, 92 Atl. 353. The California statute purports to protect the mortgagor who makes payments to the "holder of the note, bond, or other instrument"; if, there- fore, the assignee has possession of the notes and mortgage, payments made to mortgagee are of no avail: Eodgers v. Peckham, 120 Cal. 238, 52 Pac. 483; and see California Title Ins. & Trust Co. v. Kuchenbeiser, 20 Cal. App. 11, 127 Pac. 1039; though if the mortgagee has retained pos- session of the instruments, the mort- gagor is not affected by the rec- ord of the assignment: Eodgers v. Parker, 136 Cal. 313, 68 Pac. 975. The effect of this interpretation of the statute is not only to nullify its purpose of facilitating payments by the mortgagor, but even to impose upon him an onerous duty that did not exist before the statute, of as- certaining at his peril the where- abouts of the instruments at the time of each payment. See supra, note (b). §733, (b) Eecord of the Assign- ment is Notice to subsequent pur- chasers and encumbrancers of the mortgaged premises: Woodward v. Brown, 119 Cal. 283, 303, 63 Am. St. Eep. 108, 52 Pac. 2, 542; Bob- bins V. Larson, 69 Minn. 436, 65 Am. St. Eep. 572, 72 N. W. 456 (to sec- ond mortgagee and his assignee); Cornish v. Woolverton, 32 Mont. 456, 108 Am. St. Eep. 598, 81 Pac. 4 (pur- chaser after such record charged with notice that a release of the mortgage by the original mortgagee is ineffective) ; Settle v. Tiedgen, 77 Neb. 795, 799, 110 N. W. 548, 116 N. W. 959 (record is notice to sub- sequent purchaser when he pays the mortgage, though he bought the land without notice of the assign- ment, which at that date had not been recorded); Higgins v. James- burg Mut. B. &. L. Ass'n (N. J. Eq.), 58 Atl. 1078 (although the § 734 EQUITY JUEISPEUDENCE. 1504 § 734. Unrecorded Assignment — Rights of the Assignee. When a mortgage duly recorded is assigned, that original record continues to be constructive notice of the existence of the lien to all subsequent purchiasers and encumbrancers of the same premises, and the assignee does not lose his precedence over such parties by a failure to record the assignment.^ * A conveyance of the mortgaged premises any payment is ineffectual: Belden v. Meeker, 47 N. Y. 307; 2 Lans. 470; and see Westbrook v. Gleason, 79 N. Y. 23.'' The rule given in the text as to the effect of the record as notice to the mortgagor is expressly enacted by the statutes of several states. California. — Civ. Code, sees. 2934, 2935. Indiana. — 2 Gavin and Hord's Stats. 356. Kansas. — Dassler's Stats., c. 68, see. 3. Michigan. — Comp. Laws, 1347. Minnesota. — Rev. Stats. 1866, p. 331. Nebraska. — Gen. Stats., c. 61, sec. 39. New York.—l Fay's Dig. of Laws, 585. Oregon. — Gen. Laws, 651. Wisconsin. — Rev. Stats. 1149. § 734, 1 CampbeU v. Vedder, 3 Keyes, 174; 1 Abb. App. 295. prior mortgage was left in the to the mortgagee. Such discharge, mortgagor's hands by the assignee made after a second mortgage is thereof) ; Assets Realization Co. v. given, will not avail the second Clark, 205 N. Y. 105, 41 L. R. A. mortgagee, if he has not parted with (N. S.) 462, 98 N. E. 457 (section value or otherwise changed his posi- 271 of real property law, providing tion on the faith of such discharge: that the recording of assignment of Spieer v. First Nat. Bank, 66 N. Y. mortgage shall not be actual notice Supp. 902, 55 App. Div. 172, afSrmed, of such assignment to a mortgagor 170 N. Y. 562, 62 N. E. 1100. so as to invalidate a payment to § 734, (a) See, also, Zehner v. the mortgagee, does not apply to a Johnston, 22 Ind. App. 452, 53 N. subsequent purchaser of the prem- E. 1080; James v. Newman, 147 jses). Iowa, 574, 126 N. W. 781; Babcock § 733, (h) Discharge Without Pay- v. Young, 117 Mich. 155, 75 N. W. ment. — See, also, Lamed v. Dono- 302; Wilson v. Campbell; 110 Mich, van, 155 N. Y. 341, 49 N. E. 942. 580, 35 L. B. A. 544, 68 N. W. 278; This results from the terms of the Curtis v. Moore, 152 N. Y. 159, 57 statute (1 Rev. Stats. 763, § 41), Am. St. Eep. 506, 46 N. E. 168; which provides that the recording Spieer v. First Nat. Bank, 66 N. Y. of an assignment is not in itself no- Supp. 902, 55 App. Div. 172, af- tice to the mortgagor so as to in- firmed, 170 N. Y. 562, 62 N. E. 1100. validate any payment made by him 1505 CONCEEITING PBIOEITIES. § 734 to the mortgagee after lie had assigned the mortgage would not work a merger, but the rights of the assignee would remain unatfected.2 If the mortgagee, having thus ac- quired title after the assignment, should in turn convey the mortgaged premises to a third person without knowledge nor actual notice of the assignment, it is held that such grantee would be charged with constructive notice and would take subject to the rights of the assignee, because the records would give him notice of the facts sufficient to put a reasonable man upon an inquiry, and a due in- quiry would necessarily lead to a discovery of the real situation.^ ^ If a second mortgagee, with notice of a prior unrecorded mortgage, assigns to a bona fide purchaser without notice, but the prior mortgage is recorded before the assignment, the assignee would fail to secure a prece- dence.*'' Since a mortgage is a thing in action, an as- § 734, 2 Purdy v. Huntington, 42 N. Y. 334, 1 Am. Eep. 532; Campbell V. Vedder, 3 Keyes, 174; 1 Abb. App. 295. § 734, 3 Purdy v. Huntington, 42 N. Y. 334, 1 Am. Rep. 532; overruling 46 Barb. 389; GUlig v. Maass, 28 N. Y. 19J; Warren v. Winslow, 1 Sand. Ch. 430; Van Keuren v. Corkins, 4 Hun, 129; 6 Thomp. & C. 355. § 734, 4 Westbrook v. Gleason, 79 N. Y. 23 ; Fort v. Burch, 5 Denio, 187. The same would be true where, a junior mortgage being assigned, the elder § 734, (b) See, also, Demuth v. 61, 51 Pac. 11 (citing Mahoney v. Old Town Bank, 85 Md. 315, 60 Am. Middleton, 41 Cal. 41) ; Eumery v. St. Eep. 322, 37 Atl. 266. To the Soy, 61 Neb. 755, 86 N. W. 478 same effect, Hebert v. Fellheimer, (Comp. Stats. Neb., 1899, c. 73, §§ 39, 115 Ark. 366, 171 S. W. 144 (deed 46); Butler v. Bank of Mazeppa, 94 of A to B recited the retention of Wis. 351, 68 N. W. 998; and see Hop- a vendor's lien to secure the pay- kins Mfg. Co. v. Katterer, 237 Pa. ment of a series of purchase-money St. 285, Ann. Cas. 1914S, 558, 85 notes; certain of these notes were Atl. 421 (prior lease recorded after assigned by A to C; B then recon- mortgage was given, but before its veyed to A, who gave a mortgage assignment, notice to assignee). to D; held, D was affected by the But if the assignment of the see- record with notice of the notes, and ond mortgage is recorded before the his rights were subordinate to C). first mortgage is recorded, the as- Contra, Ames v. Miller (Neb.), 91 signee is protected as a "subsequent N. W. 250; James v. Newman, 147 purchaser" under the recording acts: Iowa, 574, 126 N. W. 781. Decker v. Boice, 83 N. Y. 215, dis- §734, (c) See, also, County Bank tinguishing Westbrook v. Gleason, Of San Luis Obispo v. Fox, 119 Cal. 79 N. Y. 23. 11—95 S734 EQUITY JURISPBUDENCB. 1506 signee, even without notice, will be subject to all outstand- ing equities and claims in favor of third persons which were existing and available against the assignor, wherever the general doctrine prevails that all assignments of things in action are subject to such latent equities.^ ^ Questions mortgage was recorded before the assignment was given, although after the recording of the junior mortgage assigned: Ibid.^ §734, 5 See orate, §§708, 709, 714, and cases cited; Conover v. Van Mater, 18 N. J. Eq. 481; per contra, see ante, § 715, and cases cited; Sum- ner V. Waugh, 56 111. 531. §734, (d) See, also, Hoagland v. Shampanore, 37 N. J. Eq. 592. §734, (e) Assignment, Whether Subject to Ectuities of Third Per- sons. — See, also, Owen v. Evans, 134 N. Y. 514, 31 N. E. 999; David Stevenson Brewing Co. v. Iba, 155 N. Y. 224, 49 N. E. 677 (assignment of chattel mortgage is subject to agreement between the mortgagee and another mortgagee that the lat- ter's mortgage is to have priority); Kernohan v. Durham, 48 Ohio St. 1, 12 L. B. A. 41, 26 N. E. 982 (as- signee of mortgage note charged with equities of one to whom mort- gagee had previously assigned the mortgage) ; Patterson v. Kabb, 38 S. C. 138, 19 L. K. A. 831, 17 S. E. 463 (subject to latent equity of third person in the mortgaged premises) ; Voris V. Ferrell, 57 Ind. App. 1, 103 N. E. 122 (holder of prior lien fraudulently induced by mortgagee to release his lien; such lien good against purchaser of the mortgage). But the doctrine has its exceptions. It does not apply as against a pur- chaser in good faith and for value of a real estate mortgage executed by one in possession of and holding the legal title to land, whose con- veyance was procured by fraud on the grantor. "It would lead to great inconvenience and great in- security if persons taking or pur- chasing mortgages were obliged to go back of the mortgagor who owned the land and had the record title thereto, and at their peril as- certain whether any fraud bad been perpetrated upon some prior owner of the land": Simpson v. Del Hoyo, 94 N. Y. 189; Sweetzer v. Atterbury, 100 Pa. St. 18 (assignee takes free from equity of mortgagor's grantor to have his deed declared a mort- gage). Contra, in states where the assign- ment is free from latent equities: Dulin V. Hunter, 98 Ala. 539, 13 South. 301; Taylor v. American Na- tional Bank of Pensacola, 63 Fla. 631, Ann. Cas. 1914A, 309, 57 South. 678 (record of another mortgage, executed apparently on the same date, between the same parties, aid on the same property as the mort- gage assigned, but recorded later, does not charge the assignee with notice of latent equities in favor of the other mortgage) ; Mullanphy Sav. Bank v. Sehott, 135 111. 655, 25 Am. St. Rep. 401, 26 N. E. 640; (but assignee takes subject to equi- ties of which he had notice at the time of the assignment); Himrod v. Gilman, 147 lU. 293, 35 N. E. 373, affirming 44 111. App. 516; Humble v. Curtis, 160 111. 193, 43 N. E. 749, a£- 1507 CONCERNING PRIORITIES. §734 of priority might arise between successive assignees of tlie same mortgage from the same assignor. If an assignment is perfected by an actual delivery of the mortgage itself and of the bond, note, or other evidence of debt secured, even though it be not recorded, a subsequent assignee would necessarily be. put upon an inquiry, and chargeable with constructive notice, and could obtain no precedence even by a first record.^^ In other instances where the assignments are equal, made for a valuable consideration and without notice, if all were unrecorded^ the earliest in § 734, 6 Kellogg. V. Smith, 26 N. Y. 18; Brown v. Blydenburgh, 7 N. Y. 141, 57 Am. Dec. 506. firming 57 111. App. 513 (free from equities in favor of mortgagor's grantor); Schultz v. Stroelowitz, 191 111. 249, 61 N. E. 92, reversing 86 111. App. 344 (free from equity of mort- gagor's grantee who has made pay- ments to the wrong party); Vreden- buTgh V. Burnet, 31 N. J. Eq. 229 (but assignee is put on inquiry as to latent equities) ; Davis v. Piggott, 57 N. J. Eq. 619, 39 Atl. 698; Tate v. Security Trust Co., 63 N. J. Eq. 559, 52 Atl. 313 (must be assignee for value in order to have protection) ; Sweetzer v. Atterbury, 100 Pa. St. 18 (free from equity of mortgagor's grantor to have the deed declared a mortgage); Anderson v. Citizens' Bank, 97 S. C. 453, 81 S. E. 158; Van Burkleo v. Southwestern Mfg. Co. (Tex. Civ. App.), 39 S. W. 1085; Congregational Ch. Bldg. Soe. v. Scandinavian Free Church, 24 Wash. 433, 64 Pac. 750. § 734, (f ) See, also,- Miller Brew- ing Co. V. Manasse, 99 Wis. 99, 67 Am. St. Eep. 854, 74 N. W. 535 (negotiable note indorsed before ma- turity to A. and mortgage delivered; mortgage afterward assigned to B.; fact that mortgagee did not have note in his possession was snflScient notice); Kernohan v. Durham, 48 Ohio St. 1, 12 L. K. A. 41, 26 N. E. 982 (mortgagee made written as- signment of note and mortgage to K.; he then forged a note and gs^'e it with the genuine mortgage to K.; later, he transferred the genuine note after maturity to C, promising to deliver the mortgage. Held, K. has priority; K. holds equitable title to the genuine note, while C. lacked diligence in taking the note without the mortgage). See, also, Syracuse Sav. - Bank v. Merrick, 182 N. Y. 387, 75 N. E. 232 (delivery of mort- gage alone to second assignee puts him on inquiry and charges him with notice of a former assignment in which the bond was delivered without the mortgage); Eichards Trust Co. V. Ehomberg, 19 S. D. 595, 104 N. W. 268 (if the first assignee reduces to possession both note and mortgage, he is not required to re- cord his assignment in order to be protected against subsequent as- signees) ; Bunker v. International Harvester Co. of America, 148 Iowa, 708, 127 N. W. 1016 (same). § 734 EQUITY JUEiSPEUDENCE. 1508 order of time prevails; the assignee for value and without notice who first obtains a record secures thereby the title ; a record when made is a construqtive notice to all subse- quent assignees of the same mortgage.'^ s § 734, 7 Purdy v. Huntington, 42 N. Y. 334, 1 Am. Rep. 532, 46 Barb. S89; Westbrook v. Gleason, 79 N. Y. 23; Campbell v. Vedder, 3 Keyes, 174; 1 Abb. App. 295; Pickett v. Barron, 29 Barb. 505. §734, (g) See, also, Breed v. Na- assignee obtained no interest, legal tional Bank - of Auburn, 68 N. Y. or equitable, but only a right of Supp. 68, 57 App. Difr. 468, affirmed, action against the mortgagee per- 171 N. Y. 648, 63 N. E. 1115 (where sonally). See, also. Morrow v. Stan- neither assignment recorded, first in ley, 119 Md. 590, 87 Atl. 484 (sub- time has priority); Murphy v. Bar- sequent hona fide assignee for value, nard, 162 Mass. 72, 44 Am. St. Kep. who obtains and records assignment 340, 38 N. E. 29 (recorded assign- without notice of earlier unrecorded ment is notice to subsequent as- assignment, protected); Froelich v. signee from the mortgagee) ; Himrod SwafiEord, 33 S. D. 142, 144 N. W. V. Oilman, 147 111. 293, 35 N. E. 373, 925 (but subsequent assignee who affirming 44 HI. App. 516 (mort- first records his assignment has bur- gagee assigned forged note and, den of proving lack of notice of the later, the genuine note; held, not a earlier assignment), case of equal equities, since the first SECTION vn. CONCERNING BONA FIDE PURCHASE FOR A VALUABLE CONSIDERATION AND WITHOUT NOTICE. § 735. General meaning and scope of the doctrine. § 736. General effect of the recording acts. §■§ 737-744. First. Eationale of the doctrine. § 738. Its purely equitable origin, nature, and operation. § 739. It is not a rule of property or of title. §§ 740, 741. General extent and limits; kinds of estates protected. §§742,743. Phillips v. Phillips; formula of Lord Westbury. §§ 745-762. Second. What constitutes a iona fide purchase. §§ 746-751. I. The valuable consideration. § 747. 1. What is a valuable consideration; illustrations. §? 748, 749. Antecedent debts, securing or satisfying; giving time, etc §§750,751. 2. Payment; effect of part payment; giving security. §§ 752-761. II. Absence of notice. § 753. 1. Effects of notice in general. 1509 CONCBENING BONA FIDE PUKCHASE. § 735 § 754. Second purchase without notice from first purchaser with, also second purchaser with from first purchaser without notice. § 755. 2. Time of giving notice; English and American rules. § 756. Effect of notice to a bona fide purchaser of an equitable interest before he obtains a deed of the legal estate. §1 757-761. 3. Recording in connection with notice. § 758. Interest under a prior unrecorded instrument. § 759. Requisites to protection from the first record by a subsequent purchaser. 5 760. Purchaser in good faith with apparent record title from a grantor charged with notice of a prior unrecorded conveyance. S 761. Break in the record title; when purchaser is still charged with notice of a prior instrument. § 762. III. Good faith. §§ 763-778. Third. Effects of a iona fide purchase as a defense. § 764. I. Suits by holder of legal estate under the auxiliary juris^c-. tion of equity, discovery, etc. § 765. Same: exceptions and limitations. §§ 766-774. II. Suits by holder of an equitable estate or interest against a purchaser of the legal estate. § 767. Legal estate acquired by the original purchase. § 768. Purchaser first of an equitable interest subsequently acquires the legal estate; tabula in naufragio. §769. Extent and limits of this rule. § 770. Purchaser acquires the legal estate from a trustee. §§ 771-773. This rule is applied in the United States. § 774. Other instances; purchase at execution sale; purchase of things in action. §§ 775-778. ni. Suits by holders of an "equity." § 776. For relief against accident or mistake. §§ 777, 778. For relief from fraud, upon creditors, or between parties. §§ 779-783. Fourth. AfSrmative relief to a bona fide purchaser. § 779. General rule. §§ 780-782. Illustrations. § 783. Removing a cloud from title. §§ 784, 785. Fifth. Mode and form of the defense. § 784. The pleadings. § 785. Necessary allegations and proofs. § 735. General Meaning, Scope, and Limitations of the Doctrine.*— This section will deal with the equitable doc- trine of bona fide purchase for a valuable consideration §735, (a) This chapter is cited, 735 et seq. are cited, generally, in generally, in Hill v. Moore, 62 Tex. Rosenheiiuer v. Krenn, 126 Wis. 617, 610; Williams v. Rand, 9 Tex. Civ. 5 L. R. A. (BT. S.) 395, 106 N. W. App. 631, 30 8. W. 509. Sections 20. § 735 EQUITY JUEISPRTTDENCE. 1510 and without notice. The doctrine in its original form was exclusively equitable. Questions of priority cannot, as has already been stated, arise between successive adverse es- tates which are purely legal, and therefore cannot, inde- pendently of statutory permission, come before courts of law for settlement; such estates must stand or fall upon their own intrinsic merits and validity. ^ A contest con- cerning priority or precedence properly so called can only exist where one of the two claimants holds a legal and the other an equitable title, or where both hold equitable titles, and must therefore belong to the original exclusive jurisdiction of equity. Courts of equity do' not have juris- diction of suits brought merely to establish one purely legal title against another and conflicting legal title.2 ^ In the United States these elementary notions seem to have been sometimes overlooked, and the courts sometimes seem to have extended the doctrine of bona fide purchase farther than the acknowledged principles of equity would warrant. The tendency is marked and strong in the courts of many states, even when acting as tribunals of law, to make the doctrine a legal ride of property, and to apply it alike to persons who have acquired either a legal or an equitable title to chattels and things in action, as well as to those who have acquired any legal or equitable interest in land. A subsequent holder, even for a valuable consideration and without notice, has certainly no higher right than a prior holder equally innocent and with an equally meritorious ownership. American courts seem sometimes to have acted upon exactly the opposite notion, and to have assumed § 735, 1 See supra, § 679. § 735, 2 Such suits are often called "ejectment bills." See vol. 1, §§ 176-178. Equity has concurrent jurisdiction in certain classes of suits dealing with legal titles alone, as suits for dower. In regard to them the doctrine of bona fide purchase is applied in a special and peculiar manner. § 735, (b) The text is quoted in followed in Cole v. Mette, 65 Ark. Smyly v. Colleton Cypress Co., 95 503, 67 Am. St. Eep. 945, 47 S. W. B. C. 347, 78 S. E. 1026; cited and 407. -1511 CONCEKNING BONA FIDE PUECHASE. § 736 that a sUhsequent title was necessarily the better one. When the original legal owner has done or omitted some- thing by which it was made possible that his property should come into the hands of a bona fide holder by an apparently valid title, it may be just to regard him as estopped from asserting his ownership, and thus to pro- tect the subsequent purchaser. But when the prior legal owner is wholly innocent, has done and omitted nothing, it certainly transcends, even if it does not violate, the principles of equity to sustain the claims of a subsequent and even bona fide purchaser.^ § 736. Effects of the Recording Acts. — The most exten- sive and important change, however, in the United States has been produced by the recording acts. They have ex- tended the doctrine of bona fide purchase to all conveyances and mortgages, and often to executory contracts, and to every instrument which can create, transfer, or affect legal estates or equitable interests, liens, and encumbrances, and have therefore brought it within the cognizance of the courts of law as a rule for determining the validity of legal titles. The greatest diversity is found in the statu- tory provisions of the various states, and a consequent diversity prevails among the local rules which define the resulting rights of the bona fide purchaser. In some they are conferred upon judgment creditors, upon all purchasers at execution sales, and even upon those who have secured the first record although charged with notice. It would be impossible, within any reasonable limits, to state all the results of these statutes, and to formulate all the special rules which have been derived from them in the different states. So far as the doctrine of bona fide purchase has been made a rule of law, either by the operation of the § 735, (c) The text is quoted in in Hopkins v. Hebard, 194 Fed. 301, MaoGregOT v. Thompson, 7 Tex. Civ. 319, dissenting opinion of Severens, App. 32, 26 S. W. 649; in Houston J. This paragraph is cited in Lee Oil Co. of Texas v. Wilhelm, 182 v. Parker, 171 N. C. 144, 88 S. E. Fed. 474, 477, 104 C. C. A. 618; and 217. § 737 EQUITY JUBISPKUDENCB. 1512. recording acts or by the independent action of the courts, it does not properly come within the scope of a treatise upon equity jurisprudence.* I shall therefore explain the principles of the equitable doctrine as established in the United States and in England, and describe the general applications and modifications made necessary by the com- mon American system of registration. The minute ef- fects growing out of the differing types of legislation must be passed over, except so far as they have been mentioned in the foregoing sections upon notice and priorities. The subject will be discussed under the following heads: 1. Rationale of the doctrine; 2. What constitutes a bona fide purchase; 3. Effects of the doctrine as a defense; 4. Cases in which courts of equity give afiirmative relief; 5. How the bona fide purchaser must avail himself of his position. § 737. First. Rationale of the Doctrine. — ^I purpose to explain, in this division, the essential nature, foundation, and reasons of the doctrine, the general extent and limits of its operation, and the kinds of relief which it furnishes. A correct notion concerning this fundamental theory is necessary to any proper understanding of the practical rules which flow from it. It is sometimes said, in the most unlimited terms, that a purchase for a valuable considera- tion and without notice of any kind of interest is a defense under all circumstances, which constitutes a complete and absolute bar to every proceeding in which it is sought to establish any species of adverse claim, legal or equitable, or to obtain any species of relief. There are dicta of the ablest judges, which, taken literally, without limitation, would go far to sustain this view.i These citations well § 737, 1 The following are examples of such judicial language : In Attorney-General v. Wilkins, 17 Beav. 285, 293, Lord Romilly said : "My opinion is, that when once you establish that a person is a purchaser for §736, (a) The text is eited to this effect, in Smyly v. Colleton Cypress Co., 95 S. C. 347, 78 S. E. 1026. 1513 CONCEBNIITG BONA FIDE PURCHASE. § 738 show how misleading general statements may be when sep- arated from their context. Such modes of declaring the doctrine plainly need some limitation and restriction. Taken in their literal and unqualified form, they are op- posed to conclusions established by an overwhelming weight of judicial authority, and to the settled practice of the courts of equity. § 738.a Equitable Origin, Nature, and Operation of the Doctrine. — The protection given to the bona fide purchaser had its origin exclusively in equity, and is based entirely upon the fact that the jurisdiction of equity is ancillary and supplemental to that of the law, and upon the conception that a court of chancery acts solely upon the conscience of litigant parties, by compelling the defendant to do what, and only what, in foro conscienticB he is bound to do. If the relations between the two contestants standing before value without notice, this court will give no assistance against him, but the right must be enforced at law." In Bowen v. Evans, 1 Jones & L. 178, 264, Chancellor Sugden (Lord St. Leonards) said: "In my opinion, whether the purchaser has the legal estate, or only an equitable interest, he may, by way of defense, avail himself of the character of a purchaser without notice, and is entitled to have the bill dismissed against him, though the next hour he may be turned out of possession by the legal title" (i. e., by ejectment). An earlier and most able chancellor, Lord Northington, said, in Stanhope v. Earl Verney, 2 Eden, 81, 85,: "A pur- chase without notice for a valuable consideration is a bar to the jurisdic- tion of the court." Lord Loughborough said, in the often-quoted case of Jerrard v. Saunders, 2 Ves. 454, 458 : "I think it has been decided that against a purchaser for valuable consideration without notice the court will not take the least step imaginable." In other cases the same judge used more guarded language, in Strode v. Blackburne, 3 Ves. 222. In the celebrated case of Wallwyn v. Lee, 9 Ves. 24, 34, Lord Eldon expressed himself in the following cautious terms : "I am not sure that follows as a principle of sound equity; if the principle of the court is, that against a purchaser for valuable consideration without notice, this court gives no assistance." §738, (a) Sections 738-740 are This paragraph is cited in United cited, generally, in United States v. States t. Grover, 227 Fed. 181. Clark, 138 Fed. 294, 70 C. C. A. 584, § 738 EQUITY JUEISPEUDENCE. 1514 the court of chancery are such that, in equity and good conscience, the plaintiff ought to obtain the aid which he asks, and the defendant ought to do or suffer what is de- manded of him, then the court will interfere and grant the relief; if the relations are not of this character, then the court will withhold its hand, and will leave the parties to the operation of strict legal rules, and to the remedies conferred by the legal tribunals. All equitable principles and doctrines had their origin in this conception, however much it may sometimes be overlooked by courts at present in the administration of the doctrines which have been thus established. The protection given to the hona fide purchaser simply means, therefore, that from the relations subsisting between the two parties, especially that which is involved in the innocent position of the purchaser, equity refuses to interfere and to aid the plaintiff in what he is seeking to obtain, because it would be unconscientious and inequi- table to do so, and the parties must be left to their pure legal rights, liabiHties, and remedies; the court will not aid either against the other. That this is the true rationale is shown by an overwhelming weight of authority.^ In the vast majority of cases the protection is only given to a defendant, and as a consequence the doctrine itself is § 738, 1 Thus in Boone v. Chiles, 10 Pet. 177, 210, the supreme court, adopting the language of Lord St. Leonards in his treatise on vendors, said: "A court of equity acts only on the conscience of the party;' and if he has done nothing that taints it, no demand can attach upon it so as to give jurisdiction." Li the case of Jerrard v. Saunders, 2 Ves. 454, 457, Lord Loughborough said: "Against a purchaser for a valuable con- sideration this court has no jurisdiction. You cannot attach upon the conscience of the party any demand whatever, where he stands as a pur- chaser having paid his money, and denies all notice of the circumstances set up by the bill." I would remark, in passing, that the expression above, "the court has no jurisdiction," like so many similar modes of statement, is open to criticism. The court certainly has jurisdiction in all such cases, since the interest of one, or perhaps of both, of the liti- gants is equitable. The real meaning is, that the court, under these cir- cumstances and according to its settled principles, will not exercise its jurisdiction. 1515 CONCERNING BONA FIDE PUECHASE. § 739 commonly spoken of, and ordinarily treated, as essentially a matter of defense. The very few instances in which af- firmative relief is granted to the bona fide purchaser are ex- ceptional ;. they rest upon their special facts, and arise from the fraud of the defendant against whom the relief is awarded.2 § 739. The Doctrine is not a Rule of Property oi* of Title. In applying the doctrine of bona fide purchase — and this is the very essence of the doctrine — equity does not in- tend to pass upon and decide the merits of the two litigant parties; it does not decide that the title of the defendant is valid, and therefore intrinsically the better and superior to that of the plaintiff. On the contrary, the protection given by way of defense theoretically assumes that the title of the purchaser is really defective as against that of his opponent; at all events, the court of equity wholly ignores the question of validity, declines to examine into the in- trinsic merits of the two claims, and bases its action upon entirely different considerations.^ If a plaintiff, holding § 738, 2 See infra, §§ 779-783. § 739, 1 This truth, so fundamental, and yet so often overlooked, was well stated by Lord Eldon in the celebrated case of Wallwyn v. Lee, 9 Ves. 24, 33,^ 34. The suit was by the holder of the legal title, who was in actual possession of the land, and who was seeking discovery and a deliv- ery up of the title deeds against a mortgagee, who set up the defense of bona fide purchaser. The chancellor said: "Is it not worth consideration, whether every plea of purchase for a valuable consideration without notice does not admit that the defendant has no title. If he has a good title, why not discover? I apprehend there is a sufficient ground for sa5mig a man who has honestly dealt for valuable consideration without notice shall not be called upon, by confessions wrung from his conscience, to say he has missed his object in the extent in which he meant to acquire it.'' Every one who is familiar with Lord Eldon's judgments knows that it was his invariable practice to express his' most settled opinions in the form of inquiries, or suggestion, or suppositions. In another passage; while speaking of the plaintiff's legal rights and the defendant's corre- sponding legal liabilities, he doubts "whether, upon the argument of this plea, the court has any right to discuss that question," and adds: "Is it not worth consideration, whether the very principle of the plea is not this: § 739 EQUITY JURISPEUDENCE. 1516 some equitable interest of right, sues to enforce it against a defendant who has in good faith obtained the legal es- tate, the court simply refuses to interfere and do an un- conscientious act by depriving him of the advantage ac- companying such an innocent acquisition of the legal title.* On the other hand, if the plaintiff is the legal owner, and sues to obtain some equitable relief against a defendant who is the innocent holder of some equitable estate or in- terest, the court in like manner simply refuses to do an unconscientious act by giving any aid to the plaintiff, but, without at all deciding or even examining the intrinsic merits of their claims, leaves him to whatever rights would be recognized and whatever reliefs granted by a court of law. It is thus seen that the doctrine of hona fide pur- chaser as administered by equity is not in any sense a rvle of property.^ Whenever the relations between the litigants are of such a nature, and the suit is of such a kind, that a court of equity is called upon to decide, and must decide, the merits of the controversy, and determine the validity and sufficiency of the opposing titles or claims, then it does not admit the defense of hona fide purchase as ef- fectual and conclusive. The foregoing description shows that it is wholly unwarranted by the settled principles of equity for a court to sustain and enforce the subsequent legal estate acquired by A in any kind of property or thing in action, merely because he is a hona fide purchaser for a I have honestly and hona fide paid for this, in order to make myself the owner of it, and you shall have no information from me as to the perfec- tion or imperfection of my title, until you deliver me from the peril in which you state I have placed myself in the article of purchasing bona fide?" § 739, (a) The text is quoted in v. Boutwell, 101 Miss. 353, 58 South. Conii V. Boutwell, 101 Miss. 353, 58 105; § 739 is cited and paraphrased South. 105; Blair v. Hennessy (Tex. in Knobloek v. Mueller, 123 111. 554, Civ. App.), 138 S. W. 1076. 17 N. E. 696; and cited, generally, § 739, (b) This portion of the text in United States v. Detroit Timber is quoted in Sengfelder v. Hill, 21 & L. Co. (C. C. A.), 131 Fed. 668, Wash. 371, 58 Pac. 250, and in Conn 678. 1517 CONCERNING BONA FIDE PUEOHASB. § 740 valuable consideration without notice, against the prior legal and equally innocent owner, B, or even to sustain A's defense as a bona fide purchaser in a suit brought by B.« §740. General Extent and Limits — Kinds of Estates Protected. — Such being the rationale of the doctrine, it re- mains to consider the general extent and limits of its opera- tion ; and this chiefly involves the question. To what kinds of estates held by the hona fide purchaser will it be applied? It has never been doubted that the protection will be ex- tended to the defendant in a suit brought by the holder of a prior equitable estate or interest against the subsequent bona fide purchaser of a legal estate, who acquired such estate at the time of and by means of his original pur- chase.i -^ It is also generally extended, in the similar suit by the holder of a prior equitable interest, to a defendant who, having originally been the bona fide purchaser of a subsequent equity, has afterwards obtained an outstand- ing legal estate.2 The vital question is, whether the de- fense will also avail on behalf of a defendant who has ac- quired an equitable interest merely, against a plaintiff who holds a prior legal estate ; and upon this question, de- cisions and judicial dicta, especially the earlier ones, are in direct conflict. Some cases have expressly held, and dicta have stated, that the protection of bona fide purchase § 740, 1 See post, §§ 767, 774, and cases there cited; Demarest v. Wyn- koop, 3 Johns. Ch. 129, 147, 8 Am. Dec. 467; Variek v. Briggs, 6 Paige, 323; Dickersop v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528; Woodruff V. Cook, 2 Edw. Ch. 259; ZoUman v. Moore, 21 Gratt. 311; Carter v. Allan, 21 Gratt. 241; Mundine v. Pitts, 14 Ala. 84; Boyd v. Beck, 29 Ala. 703; Wells v. Morrow, 38 Ala. 125; Sumner v. Waugh, 56 111. 531. § 740, 2 See post, §§ 768-773, and cases cited. § 739, (c) The text is quoted in Sengfelder v. Hill, 21 Wash. 371, 58 Hopkins v. Hebard, 194 Fed. 301, Pae, 250 ; cited, in Eobbins v. Moore, 319, 114 C. C. A. 261, dissenting 129 HI. 30, 21 N. E. 934; Home Sav. opinion of Severens, J.; and cited & State Bank v. Peoria Agricultural in Houston Oil Co. of Texas v. Wil- & Trotting Soc, 206 111. 9, 99 Am. helm, 182 Fed. 474, 104 C. C. A. 618. St. Eep. 132, 69 N. E. 17. § 740, (a) The text is quoted in § 740 EQUITY JUEISPBTJDENCE. 1518 is confined to defendants who have obtained and hold a legal title against plaintiffs who have only a prior equi- table interest, and that it is never granted, where the situa- tion of the parties is reversed, to bona fide purchasers of a mere equitable interest defending against relief sought by plaintiffs holding a prior legal estate.^^ It is proper to remark here, although somewhat in anticipation, that there are certain kinds of suits by the holder of a prior legal estate seeking certain special reliefs, in which it is settled that the defendant having only an equitable interest cannot rely upon his position as a bona fide purchaser by way of defense.4 " On the other hand, there are numerous cases, early and recent, English and American, in which the defense has been permitted to prevail in favor of one holding a mere equitable interest against a plaintiff suing for some equitable relief upon his legal title, sometimes even when such plaintiff was in possession, and this con- § 740, 3 Rogers v. Seale, Freem. Ch. 84, per Lord Nottingham; Will- iams V. Lambe, 3 Brown Ch. 264, per Lord Thurlow; Strode v. Black- bume, 3 Ves. 222, per Lord Rosslyn; Collins v. Archer, 1 Russ. & M. 284, per Sir John Leach; Snelgrove v. Snelgrove, 4 Desaus. Eq. 274; Blake V. Heyward, 1 Bail. Eq. 208; Brown v. Wood, 6 Rich. Eq. 155; Jenkins V. Bodley, 1 Smedes & M. Eq. 338; Wailes v. Cooper, 24 Miss. 208; Lar- rowe V. Beam, 10 Ohio 498. § 740, 4 Williams v. Lambe, 3 Brown Ch. 264 (a suit for dower) ; Col- lins V. Archer, 1 Russ. & M. 284 (a suit concerning tithes). § 740, (b) See, also, Butler v. plaintiffs, heirs of a deceased vendee Douglas, 3 Fed. 612 (defense not who had never received a deed, available to vendee of vendee treated as the "legal title" in a suit against the original vendor, who against a later grantee of the retained the legal title and seeks vendor!) to foreclose his lien) ; Sandley v. § 740, (e) In Mitchell v. Farrish, Caldwell, 28 S. C. 583, 6 S. E. 818 69 Md, 235, 14 Atl. 712, it was held (does not avail a mortgagee against that the defense of a bona fide the claim of dower by the widow of purchase for value and without his mortgagor's prior grantee by an notice was no defense, even in unrecorded deed); Sweetman v. Ed- equity, as against a legal claim to munda, 28 S. C. 58, 5 S. E. 165 (an dower. See, also, Sandley v. Cald- absurd misapplication of the rule; well, 28 S. C. 583, 6 S. E. 818; and the equitable ownership of the post, § 765. 3 519 CONCEENING BONA FIDE PTJECHASB. § 740 elusion must be regarded as settled by the great -weight of authority.5 d ijj gojjjg ^f ^j^ggg cases, the judicial expres- sions of opinion have been so broad and unlimited, that, taken literally, they would allow the protection of bona fide purchase by way of defense to one having only an equitable interest, in every kind of suit brought to obtain any species of relief, and against any plaintiff, whether holding a legal or an equitable estate. ^ e Eelying upon §740, 5 Basset v. Nosworthy, Cas. t. Finch, 102; 2 Lead. Cas. Eq. 1; Burlace v. Cooke, Freem. Ch. 24, per Lord Nottingham; Parker v. Blyth- more, Free. Ch. 58, per Sir John Trevor, M. R. ; Jerrard v. Saunders, 2 Ves. 454, per Lord Rosslyn; Wallwyn v. Lee, 9 Ves. 24, per Lord Eldon; Joyce V. De Moleyns, 2 Jones & L. 374, per Chancellor Sugden; Bowen V. Evans, 1 Jones & L. 178, 264, per Chancellor Sugden; Finch v. Shaw, 19 Beav. 500, per Lord Romilly; CoUyer v. Finch, 5 H. L. Cas. 905, per Lord Cranworth; Attorney-General v. Wilkins, 17 Beav. 285; Lane v. Jackson, 20 Beav. 535; Hope v. Lyddell, 21 Beav. 183; Penny v. Watts, 1 Macn. & G. 150; Flagg v. Mann, 2 Sum. 486, per Story, J.; Union Canal Co. v. Toung, 1 Whart. 410, 431, 30 Am. Dec. 212, per Rogers, J. § 740, 6 As illustrations, in Joyce v. De Moleyns, 2 Jones & L. 374, Chancellor Sugden said: "I apprehend that the purchase for value with- out notice is a shield as well against a legal as an equitable title. There has been a considerable difference of opinion upon the subject among judges. I have always considered the true rule to be that which I have stated. Therefore, I think that the mere circumstance that this is a legal right is not a bar to the defense set up, if in other respects it is a good defense. • That it is a good defense cannot be denied." The same learned judge, in Bowen v. Evans, 1 Jones & L. 178, 264, said: "In my opinion, whether the purchaser has the legal estate or only an equitable interest, he may by way of defense avail himself of the character of a purchaser without notice, and is entitled to have the bill dismissed against him, though the next hour he may be turned out of possession by the legal title" (i. e., by an action of ejectment). In Colyer v. Finch, 5 H. L. Cas. 905, 921, Lord Chancellor Cranworth said: "The principle on which the court protects a purchaser for valuable consideration without notice is wholly regardless of what estate he has. It may be that he has not the legal estate, but that will be quite unimportant as to a court of equity interfering or refusing to interfere. His equity depends on this, that he stands equitably in at least as favorable a position as his opponent, and § 740, (d) See post, §§ 764, 765, Kelley, 38 Minn. 197, 8 Am. St. Eep. and cas^s cited. 661, 36 N. W. 333, citing, but plainly § 740, (e) See, also, Bansman v. misunderstanding, the text. §§ 741, 742 EQUITY JUEISPRUDENCE. 1520 these dicta, some writers and judges have announced the doctrine in a form wholly unlimited and universal. § 741. Same — When the Doctrine Does not Apply. — Such a method of statement is clearly inaccurate. Notwithstand- ing the numerous authorities referred to in the preceding paragraph, and the sweeping expressions of judicial opin- ion, it is certain that the doctrine is subject to limitation; it is settled that in some classes of suits a defendant hav- ing only an equitable interest cannot be protected by his position as a bona fide purchaser. Thus in an action for foreclosure brought by a prior legal mortgagee, holding, of course, the legal estate, against a subsequent equitable mortgagee, the fact that the latter acquired his equitable interest in good faith for a valuable consideration and with- out notice is no def ense.i ^ It is also a well-established and even familiar rule that in the numerous cases between the holders of successive and equal equities, where the holder of a prior equitable interest is seeking to establish or enforce his right, the defense of bona fide purchase will not avail for the holder of a subsequent equity against whom the suit is brought.^ § 742. Phillips v. Phillips— Formula of Lord Westbury. Amidst this apparent conflict and real uncertainty, various judges had attempted to find a mode of reconcilement, and to formulate a rule which should furnish a universal cri- therefore the court wiU not interfere against him." This language, espe- cially of Ijord Cranworth, has been relied upon as sustaining the doctrine in the broadest manner, that hona fide purchasers of mere equities will always he protected. And yet the chancellor and house of lords decided in that very case that the defendant before them, who held an equitable interest, couli not maintain the defense of a bona fide purchase against the plaintiff who had the legal estate. § 741, 1 Finch v. Shaw, 19 Beav. 500 ; affirmed sub nom. Colyer v. Finch, 5 H. L. Cas. 905. § 741, 2 Phillips V. Phillips, 4 De Gex, F. & J. 208, 215, 216, per Lord "Westbury. See araie, §§ 414, note, 682. § 741, (a) See post, % 765. 1521 CONCEKJSriNG BONA FIDE PURCHASE. § 742 terion.i It remained, however, for Lord Westbury to bring -order ont of the conTusion, and by his remarkable grasp of principles and wonderful power of generalization to re- duce the doctrine into a universal formula, so accurate and comprehensive that it hd:s been taken by most subsequent text-writers as the basis of their discussions, and has been accepted by subsequent judges almost without exception.^ a § 742, 1 For example, in Finch v. Shaw, 19 Beav. 500, Sir John Romilly, M. K., after remarking that there were cases requiring nice dis- tinctions in order to reconcile them, and mentioning in particular Will- iams V. Lambe, 3 Brown Ch. 264, and Collins v. Archer, 1 Russ. & M. 284, said : "The distinction I apprehend to be this : if the suit he for the enforcement of a legal claim for the establishment of a legal right, then, although this court may have jurisdiction in the matter, it will not inter- fere against a purchaser for valuable consideration without notice, but will leave the parties to the law. If, on the other hand, the legal title is perfectly clear, and attached to that legal title there is an equitable remedy, or an equitable right, which can only be enforced in this court, I have not found any case, nor am I aware of any, where this court will refuse to enforce the equitable remedy which is incidental to the legal title." This was applied, as has been stated, to a legal mortgagee fore- closing his mortgage against a subsequent bona fide equitable mortgagee without notice. The learned master of rolls plainly apprehended the true distinction, and came very near to a full and sufScient statement of it. § 742, 2 PhiUips V. Phillips, 4 De Gex, F. & J. 208. Lord Westbury's opinion is so concise as well as clear that I quote that part of it entire which deals with the matters contained in the text. After showing (pp. 215, 216) that the doctrine does not apply as between successive holders of purely equitable estates or interests which are equal in their nature, ia the passage quoted ante, vol. 1, § 414, note, he proceeds (p. 216) : "The defense of a purchaser for valuable consideration is a creature of a court of equity, and it can never be used in any manner in variance with the elementary rules which have already been stated. There appear to be three cases in which the use of this, defense is most familiar: 1. Where an application is made to an auxiliary jurisdiction of the court by the possessor of a legal title, as by an heir at law for a discovery (which was the case ia Basset v. Nosworthy, Cas. t. Finch, 102), or by a tenant for life for the delivery of title deeds (which was the case of Wallwyn v. Lee, 9 Ves. 24), and the defendant pleads that he § 742, (a) The text is cited, as to opinion, in Knoblock v. Mueller, 123 the authority of Lord Westbury's 111. 554, 17 N. E. 696. 11—96 § 742 EQUITY JUEISPEUDElirCE. 1522 This formula groups the cases in which the protection of a bona fide purchaser is given to defendants into the three following classes: 1. Where an application is made to the auxiliary jurisdiction of the court by the possessor of a legal title; as against a purchaser for value without no- tice, a court of equity gives no assistance to the legal title. The term "auxiliary jurisdiction" is here used in a sense somewhat broader than that commonly given to it by text- writers. To this first rule there are, however, certain mogt important exceptions. It does not apply to suits in which is a iona fide purchaser for valuable consideration without notice. In such a case the defense is good, and the reason given is, that as against a purchaser for valuable consideration without notice the court gives no assistance, — ^that is, no assistance to the legal title. But this rule does not apply where the court exercises a legal jurisdiction concurrently with courts of law. Thus it was decided by Lord Thurlow, in Williams v. Lambe, 3 Brown Ch. 264, that the defense could not be pleaded to a bill for dower; and by Sir John Leach, in Collins v. Archer, 1 Russ. & M. 284, that it was no answer to a bill for tithes. In those cases the court of equity was not asked to give the plaintiff any equitable as distinguished from legal relief. 2. The second class of cases is the ordinary one of several purchasers or encumbrancers, each claiming in equity, and one who is later and last in time succeeds in obtaining an outstanding le^al estate not held upon existing trusts, or a judgment, or any other legal advantage the possession of which may be a protection to himself or an embarrass- ment to other claimants. He will not be deprived of this advantage by a court of equity. To a bill filed agaiost him for this purpose by a prior purchaser or encumbrancer, the defendant may maintain the plea of purchase for valuable consideration without notice; for the priuciple is, that a court of equity wiU not disarm a purchaser, — ^that is, wiU not take from him the shield of any legal advantage. This is the common doctrine of the tabula in naufragio. 3. Where there are circumstances which give rise to an equity as distinguished from an equitable estate, — as, for ex- ample, an equity to set aside a deed for fraud, or to correct it, for mis- take, — and the purchaser under the instrument maintains the plea of pur- chase for valuable consideration without notice, the court will not interfere.'"* The chancellor concludes by referring to some recent decisions (p. 219). He does not agree with some remarks of Sir John Romilly in Attorney- General V. Wilkins, 17 Beav. 285, but entirely concurs in and accepts the § 742, (1>) This sentence of the opinion is quoted in Knoblock v. Mueller, 123 111. 554, 17 N. E. 696. 1523 CONCERNING BONA FIDE PURCHASE. § 742 the court exercises a legal jurisdiction concurrently with courts of law, nor to suits in which the court gives to a holder of the legal title some equitable remedy belonging to its exclusive general jurisdiction." 2. Where the plain- tiff, holding an equitable estate or interest, is seeking to enforce it against a purchaser of the legal title, including those cases where there are several successive purchasers or encumbrancers, all equitable, and the defendant who is later in time has obtained an outstanding legal estate, or some other legal advantage, often called the "tabula in views as stated by the same judge in Finch v. Shaw, 19 Beav. 500. Lord St. Leonards has dissented from some portions of this celebrated judg- ment, in a late edition of his work on vendors. It is proper to say, in explanation, and the same observation has often been made, that Lord St. Leonards always appeared extremely unwilling to accept any opinion, or even any decision, which differed from what had been before stated in his treatises, and he exhibited a marked prejudice against certain judges who, like Lord Brougham and Lord Westbury, were distinguished for their advocacy of legal reforms. I will add that the exception so dis- tinctly made by Lord "Westbury of successive holders of purely equitable interests which are equal in their nature is most clearly in harmony with the elementary principles and maxims of equity. If the legal owner of land has executed a contract for its sale and conveyance to A, who has paid the stipulated price, and he afterwards gives a similar contract to B, who takes it and pays the price in full without any notice of the prior agreement, there is no reason why B should be preferred to A, and should be allowed to compel a conveyance to himself. On the contrary, between two such equal claimants, A's priority in time clearly gives him a priority of right : See Peabody v. Fenton, 3 Barb. Ch. 451, 464. The same would be true of successive mortgages given on the same land to different mort- gagees, if they were regarded as creating equitable interests only, and there was no recording statute to modify the application of equitable doc- trines. Where both mortgagees were equally meritorious, each having advanced money, the first, of course, without any notice of the second, and the second without any notice of the first, the second would not obtain any intrinsic superiority to the first, and consequently the maxim would control, and the priority in time would turn the scale in equity as well as it would at law between successive legal interests. These examples wUl serve to explain a principle which has been fully discussed in the preced- ing section. $742, (e) See post, §§764, 765. § 743 EQUITY JUEISPKUDENCE. 1524 naufragio." ^ 3. Where the plaintiff is seeking to enforce some "equity" as distinguished from an equitable estate, as the reformation of a deed on account of mistake, or the setting it aside on the ground of f raud.^ § 743. Summary of Conclusions. — The following conclu- sions must be drawn from the foregoing discussion: Wherever one or the other of the parties has a legal estate over which a court of law can exercise jurisdiction, then in an equity suit between them, as a general rule, the de- fense of a bona fide purchase for valuable consideration will avail as against the plaintiff, whether he has a legal or an equitable estate, in either case the court of equity simply withholding its -hand and remitting the parties to a court of law.^ If the plaintiff has a legal estate, he is left to the remedies which a court of law can give, with- out any aid from equity; if the defendant has a legal es- tate, the court does not deprive him, even as against a plaintiff clothed with an equitable interest, of the advan- tage which the law confers upon the holder of such estate, and which it secures through the instrumentality of a legal tribunal. If the suit concerns legal interests, and is one of which a court of equity has jurisdiction concurrently with the courts of law, the defense will not prevail. For even stronger reasons must this be true where the suit belongs to the exclusive general jurisdiction of equity, and not only is the defendant 's interest equitable, but the plain- tiff 's right or remedy is also equitable^ and must be ad- ministered, if at all, by a court of equity. Bearing in mind that, independently of statute, the doctrine of protection to a bona fide purchaser is confined to courts of equity, and the most important truth that it is in no respect a rule of property, but merely a rule of inaction, these conclu- §742, (d) See post, §§ 766-774. Eep. 3S7, 7 L. R. A. 630, 19 Atl. 206 §742, (e) See post, §§775-778. (purchase of house removed from §743, (a) This passage of the text mortgaged land); cited, also, in •was cited and followed in Verner v. Houston Oil Co. of Texas v. Wil- Betz, 46 N. J. Eq. 256, 19 Am. St. helm, 182 Fed. 474, 104 C. C. A. 618. 1525 CONCERNING BONA FIDE PUKCHASE. §§744,745 sions are seen to be equally plain and jnst. In the first- mentioned class of cases, where equity has concurrent juris- diction, the defense is not allowed, for otherwise the parties would be put to unnecessary delay and expense, since the plaintiff would be driven to a second action at law, in which he would, of course, obtain the relief. In the second class of cases, where equity has an exclusive juris- diction, to allow the defense would simply be a complete denial of justice, since no other tribunal could adjudicate upon the conflicting claims, and the plaintiff might thus be deprived of prior and vested rights without any act or default on his own part.i § 744. The explanation which I have thus endeavored to give of the true theory of the doctrine concerning bona fide purchase seemed to be necessary to any accurate un- derstanding of its applications and effects. This original equitable theory has, however, been modified in some im- portant features by the statutory system of registration which prevails in all the American states. Before pro- ceeding to describe the applications and effects of the doc- trine, it is proper to ascertain who the bona fide purchaser for valuable consideration is. § 745. Second. What Constitutes a Bona Fide Purchase. Under this head I shall state those essential elements which enter into the equitable conception and determine the peculiar position of a bona fide purchaser, so that he may come within the operation of the doctrine. The nature of the thing purchased, whether land, chattels, or securi- ties, and of the estate acquired, whether absolute or quali- fied, legal or equitable, is not a part of this conception; it belongs wholly to the effects — the protection — produced by the purchase. The doctrine in its most general form is, that a purchaser in good faith for a valuable considera- tion and without notice of the prior adverse claims is pro- § 743, 1 See 2 Lead. Cas. Eq., 4th Am. ed., 22, notes to Basset v. Nos- worthy, where these conclusions are fully adopted by the English editor. § 746 EQUITY JUBISPBUDEN-CB. 1526 tected against certain suits brought by the holders of such claims.i ^ The essential elements which constitute a bona fide purchase are therefore three, — a valuable considera- tion, the absence of notice, and the presence of good faith.'' It will be practically the more convenient and advantageous to examine these three elements separately and in the order named, although in strict theory the presence of no- tice may perhaps be regarded as only an indication of the want of good faith. If a person goes on and purchases after notice of another's rights, he may be considered as acting in bad faith, and this is undoubtedly the basis upon which the whole doctrine of notice and its effects was rested by the early decisions.^ Practically, however, notice, espe- cially as affected by the recording acts, is an independent element, and should be discussed by itself. § 746. I. The Valuable Consideration. — The discussion of this subject involves two inquiries, which are entirely dis- tinct, and which should not be confounded: 1. What is a valuable consideration; and 2. Its payment. These two § 745, 1 For a statement of what constitutes a bona fide purchase in general, see Willoughby v. Willoughby, 1 Term Rep. 763, 767, per Lord Hardwicke ; also ante, vol. 1, eases cited in notes under § 200 ; Basset v. Nosworthy, 2 Lead. Gas. Eq., 4th Am. ed., 33-42, 73-96; Kinney v. Con- solidated etc. Min. Co., 4 Saw. 382; Fed. Cas. No. 7,827; Hardin v. Har- rington, 11 Bush, 367; Briscoe v. Ashby, 24 Gratt. 454; Hamman v. Keigwin, 39 Tex. 34. § 745, 2 See ante, § 592. §745, (a) This paragraph of the TJnited States v. California & 0. text is cited in The Elmbank, 72 Land Co., 148 IT. S. 31, 13 Sup. Ct. Fed. 6IO5 Martin v. Bowen, 51 N. J. 458; in Manchester v. Goeswich, 95 Eq. 452, 26 Atl. 823; Sweatman v. Ark. 582, 130 S. W. 526; in Sparks City of Deadwood, 9 S. D. 380, 69 v. Taylor, 99 Tex. 411, 6 L. E. A. N. W. 582. See, also, to the same (N. S.) 381, 90 S. W. 485; cited, in effect, Waterman v. Buckingham, 79 Citizens' Bank v. Shaw, 14 S. D. Conn. 286, 64 Atl. 212; Bergstrom 197, 84 N. W. 779; Knoblock v. V. Johnson, 111 Minn. 247, 126 N. W. Mueller, 123 111. 554, 17 N. E. 696; 899. Sections 745-751 are cited in Houston Oil Co. of Texas v. Hayden,' Mountain Home Lumber Co. v. 104 Tex. 175, 135 S. W. 1149; Adams Swartwout (Idaho), 166 Pac. 271. Oil & Gas Co. v. Hudson (Old.), 153 §745, (b) The text is quoted in Pac. 220. 1527 CONCERNING BONA FIDE PUBCHASB. § 747 questions are to be examined, not at all in their general and abstract meaning, but wholly as they affect the con- dition of a bona fide purchaser. The first has no relation to the general law of contracts and binding promises; the second, in like manner, deals with the act and time of pay- ment only in connection with the doctrine of bona fide purchase. § 747. 1. What is Valuable Consideration. — ^What oonsti- tiites a valuable consideration within the mieaning of the doctrine which gives protection to a bona fide purchaser? No person who has acquired title as a mere volunteer, whether by gift, devise, inheritance, post-nuptial settle- ment on wife or child, or otherwise, can thereby be a bona fide purchaser.! »• Valuable consideration means, and neces- sarily requires under every form and kind of purchase, something of actual value, capable, in estimation of the law, of pecuniary measurement, — ^parting with money or money's worth, or an actual change of the purchaser's legal §747, IRoseman v. Miller, 84 111. 297; Bowen v. Prout, 52 HI. 354 (inheritance) ; Everts v; Agnes, 4 Wis. 343, 65 Am. Dec. 314; Upshaw v. Hargrove, 6 Smedes & M. 286, 292; Boon v. Barnes, 23 Miss. 136; Swan V. Ligan, 1 McCord Eq. 227; Patten v. Moore, 32 N. H. 382; Frost v. Beekman, 1 Johns. Ch. 288; Aubuchon v. Bender, 44 Mo. 560; Bishop v. Schneider, 46 Mo. 472, 2 Am. Bep. 533. §747, (a) The text is quoted in 107 Ga. 472, 33 S. E. 686 (quoting Toole v. Toole, 107 Ga. 472, 33 S. E. the text); Fisk v. Osgood, 58 Neb. 686; George M. McDonald & Co. v. 486, 78 N. W. 924; Withers v. Little, Johns, 62 Wash. 521, 33 L. E. A. 56 Cal. 370; Hughes v. Berrien, 70 (N. S.) 57, 114 Pao. 175. See, also, Ga. 273; Pearce v. Jackson, 61 Tex. Baker v. Lever, 67 N. Y. 304, 23 642; Brown v. Texas Cactus Hedge Am. Eep. 117; TejQ_^zck_ v. Wit- Co., 64 Tex. 396; Petry v. Am- beck 135 N; Y. 40 31 Am. St. Rep. brosher, 100 Ind. 510; Bird v. Jones, 8097~3i N. E. 994; Carothers v. 37 Ark. 195; Sheer v. Hoyt, 13 Cal. Sim's, 194 Pa. St. SSe, 45 Atl. 47; App. 662, 110 Pac. 477; Wellendorf First Nat. Bank v. Randall, 20 E. I. v. Wellendorf, 120 Minn. 435, 43 319, 78 Am. St. Eep. 867, 38 Atl. L. E. A. (N. S.) 1144, 139 N. W. 812 1055; Hudna* v. Wilder, 4 McCord, (heirs). 294, 17 Am. Dec. 744; Toole v. Toole, §747 EQUITY JUEISPEUDENCE. 1528 position for the worse.2 ^ The amount of the purchase, if otherwise in good faith, is not generally material.^ As ex- § 747, 2 Id.; Tourville v. Naish, 3 P. Wms. 316; Story v. Lord Wind- sor, 2 Atk. 630; Hardingham v. NichoUs, 3 Atk. 304; Webster v. Van Steenbergh, 46 Barb. 211; Pickett v. Barron, 29 Barb. 505; Dickerson v. TUlinghast, 4 Paige, 215, 25 Am. Dec. 528; Penfield v. Dunbar, 64 Barb. 239; Weaver v. Barden, 49 N. Y. 286; Delancey v. Steams, 66 N. Y. 157; Westbrook v. Gleason, 79 N. Y. 23, 28; Williams v. Shelly, 37 N. Y. 375; Lawrence v. Clark, 36 N. Y. 128; Reed v. Gannon, 3 Daly, 414; Munn V. McDonald, 10 Watts, 270; Union Canal Co. v. Young, 1 Whart. 410, 432, 30 Am. Dec. 212; Eoxborough v. Messiek, 6 Ohio St. 448, 67 Am. Dec. 346; Palmer v. Williams, 24 Mich. 328; Brown v. Welch, 18 III. 343, 68 Am. Dec. 549; Keys v. Test, 33 HI. 316; McLeod v. Nat. Bank, 42 Miss. 99 ; Haughwout v. Murphy, 21 N. J. Eq. 118 ; Aubuchon v. Bender, 44 Mo. 560; Spurlock v. Sullivan, 36 Tex. 511. § 747, 3 If there is an actual value property paid, the amount is not material if the transaction is otherwise in good faith: Wood v. Chapin, 13 N. Y. 509, 67 Am. Dec. 62; Cary v. White, 52 N. Y. 138, 142; Pickett V. Barron, 29 Barb. 505; Seward v. Jackson, 8 Cow. 406, 430; Westbrook V. Gleason, 79 N. Y. 23, 36, per RapaUo, J." The amount if grossly small and inadequate would not be a valuable consideration so as to pro- tect the purchaser, because it would show bad faith: Worthy v. Caddell, §747, (b) The text is quoted in The Elmbank, 72 Fed. 610; in George M. McDonald & Co. v. Johns, 62 Wash. 521, «3 L. R. A. (N. S.) 57, 114 Pac. 175; and cited in Elli- son V. Torpin, 44 W. Va. 414, 30 S. E. 183. Sections 745-747 are cited in Harney v. First Nat. Bank, 52 3Sr. J. Eq. 697, 29 Atl. 221. See, also, Ten Eyck v. Whitbeck, 135 N. T. 40, 31 Am. St. Eep. 809, 31 N. E. 994; Waskey v. Chambers, 224 U. S. 564, 56 L. Ed. 885, 32 Sup. Ct. 597 (work done under a lease is a valuable consideration). No merely moral consideration is sufficient: Peek V. Peek, 77 Cal. 106, 11 Am. St. Rep. 244, 1 L. R. A. 185, 19 Pae. 227. § 747, (c) Amount of Consideia- tlon not Generally Material. — See, also, Skerrett v. Presbyterian Soc, 41 Ohio St. 606 (where a considera- tion of one dollar, that being the value of the premises, was held to constitute the grantee a purchaser for value) : Emonds v. Termehr, 60 Iowa, 92, 14 N. W. 197; Two Eivers Mfg. Co. V. Beyer, 74 Wis. 210, 17 Am. St. Rep. 131, 42 N. W. 232. To the same effect, Eeed v. Munn, 148 Fed. 737, 80 C. C. A. 215; Beebe Stave Co. v. Austin, 92 Ark. 248, 135 Am. St. Eep. 172, 122 S. W. 482; Ennis v. Tucker, 78 Kan. 55, 130 Am. St. Eep. 352, 96 Pac. 140; Strong V. Whybark, 204 Mo. 341; 120 Am. St. Eep. 710. 12 L. R. A. (K S.) 240, 102 S. W. 968 (con- sideration $5); Steinman v. Clinch- field Coal Corp. (Va.),«3 S. E. 684 ($125 paid for coal and minerals underlying 1,000 acres). 1529 CONCEKNING BONA FIDE PUEOHASE. 747 amples of what clearly amount to valuable consideration are the following: A contemporaneous advance or loan of money, or a sale, transfer, or exchange of property, made at the time of the purchase or execution of the instru- 76 N. C. 82.* It has been held that paying a purchase price in con- federate money was not valuable consideration within the rule: Sutton V. Sutton, 39 Tex. 549; Willis v. Johnson, 33 Tex. 303. §747, (d) Gross Inadequacy as SlLOwing Bad Faith. — As to great inadequacy •of price putting the purchaser on inquiry, see ante, § 600, and cases cited. See, also, Dunn v. Barnum, 51 Fed. 355, 359, 2 C. C. A. 265, 269; Maokay v. Gabel, 117 Fed. 873; Ten Eyck v. Witbeek, 135 N. Y. 40, 31 Am. St Eep. 809, 31 N. E. 994; Cox v. Collis, 109 Iowa, 270, 80 N. W. 343; Sewell v. Nelson, 23 Ky. Law Eep. 2438, 67 S. W. 985; Stewart v. Crosby (Tex. Civ. App.), 26 S. W. 138 ($55 paid for property worth $11,000); Hanrick v. Gurley (Tex. Civ. App.), 48 S. W. 994 ($1,000 paid for property worth $500,000) ; Huff v. Maroney, 23 Tex. Civ. App. 465, 56 S. W. 754; Car- penter V. Anderson (Tex. Civ. App.), 77 S. W. 291 ($53 paid for property worth $2,500). To the same effect, see Clinehfield Coal Corp. V. Steinman, 213 Fed.. 557, 130 C. C. A. 137; Sloss v. Sheffield Steel & Iron Co. V. Lollar, 170 Ala. 239, 54 South. 272; Winters v. Powell, 180 Ala. 425, 61 South. 96 (deed in chain of title which recites a mere nominal consideration puts pur- chaser on notice) ; Beebe Stave Co. v. Austin, 92 Ark. 248, 135 Am. St. Eep. 172, 122 S. W. 482 (but inadequacy not Bufaciently gross); Morris v. Wicks, 81 Kan. 790, 19 Ann. Cas. 319, 26 L. B. A. (N. S.) 681, 106 Pac. 1048 (nominal consideration) ; Tinnin v. Brown, 98 Miss. 378, Ann. Cas. 1913A, 1081, 53 South. 780 (one dollar for land worth $1,500); Aber- nathy v. South & W. E. Co., 150 N. C. 97, 63 S. E. 180 ($10 for property worth $20,000); Eastham v. Hunter, 102 Tex. 145, 132 Am. St. Rep. 854 114 S. W. 97; Downs v. Stevenson, 56 Tex. Civ. App. 211, 119 S. W. 315; Houston Oil Co. of Texas v. Hay- den, 104 Tex. 175, 135 S. W. 1149; Kinney v. MeCall, 57 Wash. 545, 107 Pac. 385; Wisconsin Eiver Land Co. V. Selover, 135 Wis. 594, 116 N. W. 265. In Ten Eyck v. Witbeek, 135 N. y. 40, 31 Am. St. Rep. 809^ 31 N. E. 994, a father conveyed to a daughter a farm worth $20,000 in consideration of $10, which was paid, and of her undertaking to pay the net proceeds of the place to him during his life, and after his death a certain portion thereof to his wife and other daughter. Held, that the deed did not render her a purchaser for a valuable considera- tion under the recording act, as against a prior unrecorded convey- ance by the father. The under- takings in the deed were not a val- uable consideration, since they had no binding force apart from the deed; and in a transaction which was in all essentials a gift, "a small sum, inserted and paid, per- haps because of a popular belief that some slight money eonsidera- §747 EQUITY aUEISPBXJDENOB. 1530 ment;** the snrrender or relinquishinent of an existing legal right, or the assumptioij of a new legal obligation § 747, 4 Gerson v. Pool, 31 Ark. 85 (loaning money on the security of a trust deed) ; Bowen v. Prout, 52 HI. 354 (exchange of lands) ; Munn V. McDonald, 10 Watts, 270; Martin v. Jackson, 27 Pa. St. 504, 509, 67 Am. Dec. 489; Roxborough v. Messiek, 6 Ohio St. 448, 67 Am. Dec. 346; Keirsted v. Avery, 4 Paige, 9; Conard v. Atlantic Ins. Co., 1 Pet. 386. And where the price of a conveyance consisted in part of money actually paid, and the residue of antecedent debt satisfied, the -whole has been held to constitute a valuable consideration: Curtis v. Leavitt, 15 N. Y. 11, 179; Glidden v. Hunt, 24 Pick. 221; Baggarly v. Gaither, 2 Jones Eq. 80. tiou is necessary to render the deed valid, will not, of itself, satisfy the terms of the statute, where it ap- pears upon the face of the eonvey- anee or by other competent evidence that it was not the actual consid- eration." In Dunn v. Barnum, 51 Fed. 355, 360, land worth $30,000, and rapidly increasing in value, was bought for $100. Caldwell, Cir. J., says, in part, "In the judgment of all mankind — and there is no surer guide to the right than the universal consesus of opinion among men — such a transaction, unexplained, implies a bad title or bad faith. . . . Such a conveyance passes the legal title, and may be good between the parties as a gift, or as a con- veyance to remove a cloud from the title, or as a sale of a, confessedly doubtful and disputed title, and for such like purposes; but when it is set up and relied on under the regis- tration laws of the state as a means of taking lands from the real owner, because, and only because, his deed was not recorded, it will not be ac- cepted as suflScient evidence that the vendee paid a valuable con- Bideration and purchased without notice, either actual or constructive, or a, well-grounded suspicion that his vendor had no title. . . . The enormous discrepancy between the consideration expressed in this deed and the value of the land compels the conclusion that the grantee knew, or, what is the same thing in_ legal effect, had good reason to be- lieve, there was a fatal infirmity in the title he was acquiring, and so was not a purchaser in good faith." § 747, (e) For other illustrations see Aden v. City of Vallejo, 139 Cal. 165, 72 Pae. 905 (reservation in deed held to be sufBcient); Elvers v. Elvers, 38 Fla. 65, 20 South. 807 (joining in deed by wife is suficient consideration for deed to her); Lane v. Logue, 80 Tenn. (12 Lea) 681 (surrender of rights under contract of sale and title bond sufScieut); Swenson v. Seale (Tex. Civ. App.), 28 S. W. 143 (sur- render of note of third person is a suflScient consideration); Halbert v. De Bode (Tex. Civ. App.), 40 S. W. 1011 (relinquishment of interest in land and in notes and accounts against others than vendor is sufll- eient). 1.531 CONCERNING BONA FIDE PXJECHASB. § 748 which is in its nature irrevocable. ^ f Whether this species of valuable consideration embraces the discharge, or the extension of the time of payment, of an antecedent debt, is a question upon which the authorities are conflicting, and its examination is postponed to the succeeding paragraphs. In general, however, it is requisite that the money be paid or advanced, the property transferred, the right surren- dered, or the obligation assumed, at the time of the convey- ance, and as a part of the transaction, in order that it may be the valuable consideration which can protect the pur- chaser. § 748. Antecedent Debts. — ^Whether an antecedent debt can ever be a valuable consideration has been denied by able courts ; but this general subject has been further compli- cated by the various modes in which such a debt may be § 747, 5 In Westbrook v. Gleason, 79 N. T. 23, 36, a vendee under a land contract was in open possession, having made improvements. While he was thus in possession a mortgage was given upon the land by his ven- dor, which was unrecorded. Afterwards, and before this mortgage was recorded, he took a deed of conveyance of the land from his vendor and gave back a bond and mortgage to secure the whole price. This deed he put on record before the first-named mortgage was recorded. The only question was, whether he could claim the benefit of his earliest record, by being a purchaser for a valuable consideration, although he had not paid any of the price. The court said "that if by accepting the deed he parted with his equitable title to the land, which had precedence of the plaintiff's mortgage [and thereby lost the priority], and with his right to the im- provements, etc., then he was, within all the cases, a purchaser for value." See WUliams v. Shelly, 37 N. Y. 375; Reed v. Gannon, 3 Daly, 414; Mc- Leod V. Nat. Bank, 42 Miss. 99. For examples of giving up or canceling a security, see Youngs v. Lee, 12 N. Y. 551; Meads v. Merchants' Bank, 25 N. Y. 143, 82 Am. Dec. 331; Padgett v. Lawrence, 10 Paige, 170, 40 Am. Dec. 232; Struthers v. Kendall, 41 Pa. St. 214, 218, 80 Am. Dec. 610; Goodman v. Simonds, 20 How. 343, 371. §747, (f) The text is cited in (grantee agreed to support grantor Jones V. Hudson, 23 S. C. 494, to for life; grantor lived only a few the effect that the assumption of months and support was not in fact an irrevocable liability is a valuable furnished; held, not a hona -fide pur- consideration. But see Sunter v. chase). As to irrevocable obliga- Sunter, 190 Mass. 449, 77 N. E. 497 tions, see post, § 751, notes 2 and 3. § 749 EQUITY JURISPEUDENOE. 1532 dealt with, — secured, discharged, postponed," and the like,— and the various questions thence arising which have caused the greatest conflict of judicial opinion. In very many, and perhaps a majority, of the states it is settled that the trans- feree of negotiable paper as security for an antecedent debt may be a hona fide holder by the law merchant; but this rule cannot be a precedent in determining the meaning of valu- able consideration within the equitable doctrine of hona fide purchase.! ^ §749. Security for or Satisfaction of an Antecedent Debt. — ^A conveyance of real or personal property as secur- ity for an antecedent debt does not, upon principle, render the transferee a hona fide purchaser, since the creditor parts with no value, surrenders no right, and places himself in no worse legal position than before. The rule has been settled, therefore, in very many of the states, that such a transfer is not made upon a valuable consideration, within the meaning of the doctrine of hona fide purchase. ^ ^ In § 748, 1 The rule concerning the transfer of negotiable instruments has been thus settled avowedly in the interests of commerce and mercantile business; these reasons do not apply to the purchase of land and chattels and non-negotiable securities. In some of the states, therefore, where it has been applied to negotiable paper, it has been rejected with respect to other conveyances and transfers. § 749, 1 Alexander v. Caldwell, 55 Ala. 517 (mortgage for a pre-exist- ing debt) ; Short v. Battle, 52 Ala. 456; Gafford v. Steams, 51 Ala. 434; Johnson v. Graves, 27 Ark. 557; Gary v. White, 52 N. T. 138; Hart v. Bank, 33 Vt. 252; Poor v. Woodburn, 25 Vt. 235; Hodgeden v. Hub- § 748, (a) This paragraph of the 296. The text is cited in Missouri text is cited in Martin v. Bowen, 51 Broom Mfg. Co. v. Guymon, 115 N. J. Eq. 452, 26 Atl. 823. Fed. 112 (Missouri); Petry v. Am- §749, (a) Security for Antecedent brosher, 100 Ind. 510; Goodwin v. Detit, not a Valuable Consideration. Massachusetts L., etc., Co., 152 Mass. The text is quoted in Marsh v. Earn- 189, 25 N. E. 100 (pledge of chat- sey, 57 S. C. 121, 35 S. E. 433; The tels; but see Merchants' Ins. Co. v. Elmbank, 72 Fed. 610, citing cases; Abbott, 131 Mass. 397); Adams v. in George M. McDonald & Co. v. Vanderbeck, 148 Ind. 92, 62 Am. Johns, 62 Wash. 521, 33 L. E. A. St. Rep. 497, 45 N. K 645, 47 N. E. (N. S.) 57, 114 Pac. 175; Sparrow 24; Foster v. Winstanley, 39 Mont. V. Wilcox, 272 m. 632, 112 N. E. 314, 102 Pac. 574; IngersoU T. 1533 COKCEBNING BOKA FIDE PURCHASE. §749 some states, on tlie contrary, even the securing a pre-exist- bard, 18 Vt. 504, 46 Am. Dec. 167; Clark v. Flint, 22 Pick. 231; 33 Am. Dec. 733; Buffington v. Gerrish, 15 Mass. 156; 8 Am. Dec. 97; Min- giis V. Gondii, 23 N. J. Eq. 313; Wheeler v. Kirtland, 24 N. J. Eq. 552; Ashton's Appeal, 73 Pa. St. 153, 162; Garrard v. Pittsburgh, etc., R. R., 29 Pa. St. 154, 159; Prentice v. Zane, 2 Gratt. 262;"Halstead v. Bank of Ky., 4 J. J. Marsh. 554; Manning v. MeClure, 36 111. 490; Boon v. Barnes, 23 Miss. 136; Upshaw v. Hargrove, 6 Smedes & M. 286, 292; Haynsworth v. Bisehoff, 6 Rich. 159; Spurloek v. Sullivan, 36 Tex. 511; Pancoast v. Duval, 26 N. J. Eq. 445; Van Heusen v. Radcliff, 17 N. Y. 580, 72 Am. Dec. 480; Weaver v. Barden, 49 N. Y. 286; Manhattan Co. V. Evertson, 6 Paige, 457; Padgett v. Lawrence, 10 Paige, 170, 40 Am. Dec. 232; Diekerson v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528; Zona V. R. R. Co., 5 S. C. 90; Morse v. Godfrey, 3 Story, 364, 389; Fed. Cas. No. 9,856; Metropolitan Bank v. Godfrey, 23 111. 579; but see Doo- little V. Cook, 75 111. 354. Somers Land Co., 82 N. J. Eq. 476, 89 Atl. 288. See, also, People's Sav. Bank v. Batts, 120 U. S. 556, 7 Sup. Ct. 679; Gest v. Paekwood, 34 Fed. 368 (Oregon); Hill v. Hitey, 79 Fed. 826; Eandolph v. Webb, 116 Ala. 135, 22 South. 550; Banks v. Long, 79 Ala. 319; Gewin v. Shields, 167 Ala. 593, 52 South. 887; Eich- ardson v. Wren, 11 Ariz. 395, 16 L. K. A. (KT. S.) 190, 95 Pac. 124; Haldiman v. Taft, 102 Ark. 45, 143 S. W. 112; Busenbarke v. Eamey, 53 Ind. 499; Gilchrist v. Gough, 63 Ind. 576, 30 Am. Rep. 250; Davis v. Newcomh, 72 Ind. 413; Hewitt v. Powers, 84 Ind. 295; Louthain v. Miller, ' 85 Ind. 161; Boling v. Howell, 93 Ind. 329; Wert v. Naylor, 93 Ind. 431; First Nat. Bank v. Connecticut Hut. Life Ins. Co., 129 Ind. 241, 28 N. E. 695; Warford V. Hankins, 150 Ind. 489, 50 N. E. 468; Port v. Embree, 54 Iowa, 14, 6 N. W. 83; Phelps v. Fockler, 61 Iowa, 340, 14 N. W. 729; Koon v. Tramel, 71 Iowa, 137, 32 N. W. 243; Smith v. Moore, 112 Iowa, 60, 83 N. W. 813: Holmes v. Stix, 104 Ky. 351, 47 S. W. 243; Bronson Electric Co. V. Eheubottom, 122 Mich. 608, 81 N. W. 563; Southwick v. Rey- nolds, 99 Neb. 393, 156 N. W. 775; Lamb v. Lamb (N. J. Eq.), 23 Atl. 1009; Eeeves v. Evans (N. J. Eq.), 34 Atl. 477; Protection B. & L. Ass'n V. Chickering, 54 N. J. Eq. 519, 34 Atl. 1083; Empire State Trust Co. V. Trustees of Wm. P. Fisher & Co., 67 N. J. Eq. 602, 3 Ann. Cas. 393, and note, 60 Atl. 940; Lawshe v. Trenton Banking Co. (N. J. Eq.) 99 Atl. 617 (mortgage to secure past and future indebted- ness invalid to extent of past in- debtedness) ; Young v. Guy, S7 N. Y. 462; Seymour v. McKinstry, 106 N. Y. 238, 12 N. E. 348, 14 N. E. 94; Breed v. Nat. Bank of Auburn, 68 N. Y. Supp. 68, 57 A.pp. Div. 468, affirmed, 171 N. Y. 648, 63 N. E. 1115, and cases cited; Donaldson v. State Bank, 16 -N. C. 103, 18 Am. Dec. 577; Southerland v. Fremont, 107 N. C. 565, 12 S. E. 237; Harris V. Horner, 21 N. C. (1 Dev. & B. Eq.) 455, 30 Am. Dec. 182; Union Nat. Bank v. Oium, 3 N. D. 193, 44 Am. §749 EQUITY JURISPBUDEiSTCE. 1534 ing debt is held to be a valuable consideration.^ i' Wbetlier the complete satisfaction or discharge or the definite for- bearance of an antecedent debt, without the surrender or cancellation of any written security by the creditor, will be a valuable consideration is a question to which the courts of different statfes have given conflicting answers; but the affirmative seems to be -supported by the numerical weight of authority.^ " Some legal rules ought to be settled in § 749, 2 Babcock v. Jordan, 24 Ind. 14; Trey v. Clifford, 44 Cal. 335. § 749, 3 Satisfaction and discharge merely of an antecedent debt is a valuable consideration: Soule v. Shotwell, 52 Miss. 236 (the settled rule in Mississippi) ; Euth v. Ford, 9 Kan. 17; Love v. Taylor, 26 Miss. 567; Saffold V. Wade's Ex'r, 51 Ala. 214; Ohio Life Ins. etc. Co. v. Ledyard, St. Eep. 533, 54 N. W. 1034; Adam- son V. Souder, 205 Pa. St. 498, 55 Atl. 182; Egan v. Ray nor (S. C), 27 S. E. 475; Summers v. Briee, 36 S. C. 204, 15 S. E. 374; Gibson v. Hutchins, 43 S. C. 287, 21 S. E. 250; Steffian v. Milmo Nat. Bank, 69 Tex. 513, 6 S. W. 823;- Miller v. Vernoy, 2 Tex. Civ. App. 675, 22 S. W. 64; Watts V. Corner, 8 Tex. Civ. App. 588, 27 S. W. 1087; Ingenhuett v. Hunt, 15 Tex. Civ. App. 248, 39 S. W. 310; Pr;de v. WMtfield (Tex. Civ. App.), 51 S. W. 1100; W. L. Moody & Co. V. Martin (Tex. Civ. App.), 117 S. W. 1015; Goetzinger V. Rosenfeld, 16 Wash. 392, 38 L. R. A. 257, 47 Pac. 882; Funk v. Paul, 64 Wis. 35, 54 Am. Kep. 576, 24 N. W. 419. §749, (b) See, also. Turner t. Killian, 12 Neb. 580, 12 N. W. 101; Henry v. Vliet, 3'6 Neb. 138, 19 L. E. A. 590, 54 N. W. 122; Chaffee v. Lumber Co., 43 Neb. 224, 47 Am. St. Bep. 753, 61 N. W. 637; Dorr V. Meyer, 51 Neb. 94, 70 N. W. 543; Longfellow v. Barnard, 58 Neb. 612, 76 Am. St. Eep. 117, 79 N. W. 255; Moore v. Fuller, 6 Or. 272, 25 Am. - Eep. 524; Norwood v. Norwood, 36 S. C. 331, 31 Am. St. Eep. 875, 15 S. E. 382; Gilbert Bros. & Co. v. Lawrence Bros. (W. Va.), 49 S. B. 155. The earlier Indiana cases have been overruled: see West v. Naylor, 93 Ind. 431. §749, (c) Satisfaction or Dis- charge of Antecedent Debt. — The text is quoted in Eetsch v. Eenehan, 16 N. M. 541, 120 Pae. 897; Hunt V. Hunt, 67 Or. 178, 132 Pac. 958, 134 Pae. 1180; cited in West v. Naylor, 93 Ind. 431; Petry v. Am- brosher, 100 Ind. 510; Adams v. Vanderbeek^, 14S Ind. 92, 62 Am. St. Eep. 497, 45 N. E. 645; Sipley v. Wass, 49 N. J. Eq. 463, 24 Atl. 233, citing cases; State Bank v. Frame, 112 Mo. 502, 20 S. W. 620. To the effect that an absolute discharge or payment of an antecedent debt is a sufficient consideration, see Sehluter V. Harvey, 65 Cal. 158, 3 Pac. 659; Saunderson v. Broadwell, 82 Cal. 132, 23 Pac. 36; •Bunn v. Schnell- baeher, 163 HI. 328, 45 N. E. 227 (affirming 59 111. App. 222); West V. Naylor, 93 Ind. 431, citing and relying on the text; Murray v. 1535 CONCEKNING BONA FIDE PTJECHASE. §749 accordance with the results of experience and the dictates of policy, rather than by a compliance with the deductions of a strict logic. To hold that a conveyance as security for an antecedent debt is made without, but that one in satisfaction 8 Ala. 866; Bank v. Godfrey, 23 111. 579, 606; Donaldson v. Bank of Cape Fear, 1 Dev. Eq. 103, 18 Am. Dec. 577. Whether and how far, a defin- ite forbearance, or agreement to extend the time of payment of an ante- cedent debt for a definite time, is a sufficient consideration within the doctrine, see eases last cited, and also Atkinson v. Brooks, 26 Vt. 569, 62 Am. Dec. 592; Griswold v. Davis, 31 Vt. 390, 394; Railroad Co. v. Bar- ker, 29 Pa. St. .160, 162; Lonsdale v. Brown, 4 Wash. C. C. 148, 151; Fed. Cas. No. 8,494.* It has been decided in New York that extending First Nat. Bank, 5 Kan. App. 456, 49 Pao. 326; Hanold v. Kaya, 64 Mieh. 439, 8 Am. St. Eep. 835, 31 N. W. 420; Lane v. Logue, 12 Lea, 681. In State Bank v. Frame, 112 Mo. 502, 20 S. W.~62Q,.Jhi3 section of the text was cited, andtti« .court said: "We think the rule deducible from these authorities is that a deed made in consideration of the abso- lute discharge of a pre-existing debt of the grantor, or an adequate por- tion of it, will constitute the grantee a purchaser for value, so as to protect him against a previous unrecorded deed of the same grantor. By the satisfaction of the debt the creditor divests himself of the right of an action, or of securing the original liability, and places himself in a worse condi- tion than he would have done by a definite forbearance of the debt." But see contra, Petry v. Ambrosher, 100 Ind. 510, citing the text; Lilli- bridg:e v. Allen, 100 Iowa, 582, 69 N. W. 1031; Western Grocer Co. v. iMIeman, 81 Kan. 543, 135 Am. St. Eep. 398, 27 L. E. A. (KT. S.) 620, and note, lO'T'I^c. 460; Swift v. Williams, 68 Md. 236, 11 Atl. 83'5; Sleeper v. Davis, 64 N. H. 59, 10 Am. St. Eep. 377, 6 Atl. 201; De Laneey v. Stearns, 66 N. Y. 161; Ho wella v. Hettriek, 160 N. Y. 308, 54 N. E. 677; Perkins v. McCullough, 31 Or. 69, 49 Pac. 861; Temple v. Osburn, 55 Or. 506, 106 Pac. 16; Grotenkemper v. Carver, 9 Lea (77 Tenn.), 280; Golson v. Fielder, 2 Tex. Civ. App. 400, 21 S. W. 173; Swenson v. Seale (Tex. Civ. App.), 28 S. W. 143; Cavinesj v. Black (Tex. Civ. App.), ^3 S. W. 712; Hirsch v. Jones (Tex. Civ. App.), 42 S. W. 604; Marshall v. Marshall (Tex. Civ. App.), 42 S. W. 353; Huff V. Maroney, 23 Tex. Civ. App. 465, 56 S. W. 754; Overstreet v. Man- ning, 67 Tex. 657, 4 S. W. 248; J. S. Brown Hardware Co. v. Catrett, 45 Tex. Civ. App. 647, 101 S. W. 559; Holland v. Ferris (Tex. Civ. App.), 107 S. W. 102; Tobin v. Benson (Tex. Civ. App.), 152 S. W. 642. §749, («) Extension of Time.— To the effect that an extension of time is a sufficient consideration, see Alston v. Marshall, 112 Ala. 638, 20 South. 850;' Randolph v. Webb, 116 Ala. 13^, 22 South. 550; Hill v. Yarbrough, 62 Ark. 320, 35 S. W. 433; Gilchrist v. Gough, 63 Ind. 576, 30 Am. Eep. 250; Davis v. Lutkei- §749 EQUITY JURISPRUDENCE. 1536 of such a debt is made with., a valuable consideration, when the fact of satisfaction is not evidenced by any act of the creditor, but depends upon mere verbal testimony, is opening the door wide for the easy admission of fraud. It leaves time by a valid agreement is a valuable consideration sufficient to sup- port a mortgage; but that the mere taking collateral security on time without any additional agreement is not: Gary v. White, 52 N. Y. 138; reversing 7 Lans. 1, and disapproving of dictum in Pratt v. Coman, 37 N. Y. 440. See, also, Wood v. Robinson, 22 N. Y. 564.e See, also, on the effect of satisfaction or giving time. Van Heusen v. Radcliflf, 17 N. Y. 580, 72 Am. Dec. 480; Lawrence v. Clark, 36 N. Y. 128; Dickerson v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528 ; Evertson v. Evertson, 5 Paige, 644; Bay v. Coddington, 20 Johns. 637, 5 Johns. Ch. 54, 9 Am. Dec. 268; Mingus V. Condit, 23 N. J. Eq. 313; Pancoast v. Duval, 26 N. J. Eq. 445 ; Ingram v. Morgan, 4 Humph. 66, 40 Am. Dec. 626 ; Wormley v. Lowry, 1 Humph. 468; Clark v. Flint, 22 Pick. 231, 33 Am. Dec. 733; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118.* If, however, the cred- itor actually surrenders up or cancels some written security, such act becomes a valuable consideration, and makes him a bona fide purchaser :Sf weiz, 72 Iowa, 254, 33 N. W. 670; Kobertson v. United States Live- stock Co., 164 Iowa, 230, 145 N. W. 535; De Mey v. Defer, 103 Mich. 239, 61 N. W. 524; Atkinson v. Greaves (Miss.), 11 South. 688; Douredoure v. Humbert, 85 N. J. Eq. 89, 95 Atl. 742; First Nat. Bank v. Lament, 5 N. D. 393, 67 N. W. 145; Farmers & Merchants' Bank v. Citizens' Nat. Bank, 25 S. D. 91, 125 N. W. 642; Steffian v. Milmo Nat. Bank, 69 Tex. 513, 6 S. W. 823; I Watts v. Corner, 8 Tex. Civ. App. 588, 27 S. W. 1087; Hal- bert V. Paddleford (Tex. Civ. App.), 33 S. W. 592; Farmers' Nat. Bank V. James, 13 Tex. Civ. App. 550, 36 S. W. 288; but see Missouri Broom Mfg. Co. v. Guymon, 115 Fed. 112, where the extension of time of payment was merely color- able. § 749, (e) Ingenhuett v. Hunt (Tex. Civ. App.), 39 S. W. 310; Southerlaud v. Fremont, 107 N. C. 565, 12 S. E. 237; Sweeney v. Bix- ler, 69 Ala. 539. § 749, (*) See, also, Price v. Gray (N. J. Eq.), 34 Atl. 678, and cases cited (abandonment of a right of action and extension of time of payment constitute a valuable con- sideration) ; Mobile Life Ins. Co. v. Randall, 71 Ala. 220 (taking note, payable in twelve months, secured by mortgage, thereby suspending right of action on the debt and ef- fecting a release of sureties, is a valuable consideration). §749, (gr) Surrender or Cancella- tion of Written Security. — See, also, Franklin Sav. Bank v. Taylor, 53 Fed. 854, 4 C. G. A. 55, 9 U. S. App. 406, and cases cited (release of old security and extension of time of payment); Thompson Nat. Bank v. Corwine, 89 Fed. 774, affirmed, 95 Fed. 54 (surrender of obligation of third person) ; Eichardson v. Wren, 1537 CONCEENIN-G BONA FIDE PUBCHASB. § 749 the rights of third persons to depend upon the coloring given to a past transaction by the verbal testimony of wit- nesses, after the event has disclosed to the creditor the form and nature in which it is for his interest to picture the transaction. A rule which renders it so easy for an inter- ested party to defeat the rights of others is clearly im- politic> It sometimes happens that rules which are the most logically correct are the ones which most readily ad- mit the possibility of fraud and injustice. It is very gen- erally settled, in accordance with principle, that an assign- ment made by a debtor in trust for the benefit of his creditors is not a conveyance upon valuable consideration, and neither the assignee nor the creditors thereby become feowa ^(^e purchasers.* i The questions concerning judg- Youngs V. Lee, 12 N. Y. 551; Meads v. Merchants' Bank, 25 N. Y. 143; 82 Am. Dec. 331; Padgett v. Lawrence, 10 Paige, 170, 40 Am. Dec. 232; Struthers v. Kendall, 41 Pa. St. 214, 218, 80 Am. Dec. 610; Goodman v. Simonds, 20 How. 343, 371; and see Thompson v. Blanchard, 4 N. Y. 303 ; Penfleld v. Dunbar, 64 Barb. 239. §749, 4 Clark v. Flint, 22 Pick. 231, 33 Am. Dec, 733; Holland v. Cruft, 20 Pick. 321; Grififin v. Marquardt, 17 N. Y.-28; Van Heusen v. 11 Ariz. 395, 16 Ii. B. A. (N. S.) 190, shown to be property belonging to 95 Pao. 124 (giving up equitable the vendor to which the judgment mortgage on other property); Grand lien cojild attach). Iji Texas, the Eapids Nat. Bank v. Ford, 143 surrender of a nots is tre'ated as a Mich. 402, 107 N. W. 76 (release of valuable' consideration if afterwards security on other lands) . But in ' and at the time when the pur- Howells^. Hettriek, 160 N. Y. 308, chaser's title is assailed a suit on 54 N. E. 677, it was held that a the note would be barred by the creditor who recovered judgment for statute of limitations; Alstin v. a loan which had remained uncol- Cundiflf, 52 Tex. 465; Dunlap v. leeted for many years, and then Green, 60 Fed. 242, 8 C. C. A. 600. surrendered the judgment to the See, also, Tobin v. Benson (Tex. Civ. judgment debtor in payment for a App.), 152 S. W. 642. deed of land, was not a purchaser § 749, (h) This passage of the text for value. See, also, J. 8. Brown is quoted with approval in Gest v. Hardware Co. v. Catrett, 45 Tex. Paokwood, 34 Fed. 368; and in Civ. App. 647, 101 S. W. 559 (sur- Eetsoh v. Eenehan, 16 N. M. 541, render of judgment held by pur- 120 Pac. 897. chaser against his vendor not a val- § 749, (i) Assignment for Benefit uable consideration, unless there is of Creditors. — The text is cited in 11—97 §749 EQUITY JURISPETJDENCB. 1538 ment creditors and purchasers at execution sales upon Radcliff, 17 N. T. 580, 72 Am. Dec. 480; Joslin v. Cowee, 60 Barb. 48; Haggerty v. Palmer, 6 Johns. Ch. 437; Mellon's Appeal, 32 Pa. St. 121; Spaekman v. Ott, 65 Pa. St. 131; In re Fulton's Estate, 51 Pa. St. 204, 211; Twelves v. Williams, 3 Whart. 485, 31 Am. Dec. 542; Ludwig v. Highley, 5 Pa. St. 132, 140; Willis v. Henderson, 4 Scam. 13, 38 Am, Dec. 120. Martin v. Bowen, 51 N. J. Eq. ^52, 26 Atl. 823, carefully reviewing the New Jersey and New York deci- sions, and holding that the legisla- tion regulating such assignments has not affected their character as voluntary trusts. See, also, Stew- art V. Piatt, 101 U. S. 731; Sayre v. Weil, 91 Ala. 466, 15 L. R. A. 544, 10 South. 546; Bridgford v. Adams, 45 Ark. 136; Boss v. Hodges, 108 Ark. 270, 157 S. W. 391 (unre- corded vendor's lien not cut off by vendee's assignment under agree- ment that creditors should release him from his indebtedness in con- sideration of receipt of pro rata share of proceeds of the land) ; Shad V. Livingston, 31 Fla. 89, 12 South. 646; Loekett v. Eobinson, 31 Fla. 134, 20 L. R. A. 67, 12 South. 649; Seay v. Bank of Home, 66 Ga. 609; Jack V. Weienmett, 115 HI. 105, 56 Am. Eep. 129, 3 N. E. 445; Wetherell V. Thirty-first St. B. & L. Ass'n, 153 111. 361, 39 N. E. 143; Walker V. Walker's Assignee, 19 Ky. Law Eep. 626, 41 S. W. 315; Exchange etc. Bank v. Stone, 80 Ky. 109 (as- signee in bankruptcy); Bridgford V. Barbour, 80 Ky. 529; Tyler v. Abergh, 65 Md. 18, 3 Atl. 904 (although the creditors, in con- sideration of the assignment, have executed a general release of all claims and demands against the debtor) ; G. Ober & Sons Co. v. Keat- ing, 77 Md. 100, 26 Atl. 501; Paine V. Sykes, 72 Miss. 351, 16 South. 903; Merchants' Nat.- Bank v. Green- hood, 16 Mont. 395, 41 Pac. 250, 851; Salladin v. Mitchell, 42 Neb. 859, 61 N. W. 127; Peterborough Sav. Bank V. Hartshorn, 67 N. H. 156, 33 Atl. 729; Ocean Beach Ass'n v. Trenton Trust & S. D. Co. (N. J. Eq.), 48 Atl. 559; Muller v. Kling, 209 N. Y. 239, 103 N. E. 138; Wallace v. Cohen, 111 N. C. 103, 15 S. E. 892; Klaustermeyer v. Cleveland Trust Co., 89 Ohio St. 142, 105 N. E. 278; Helms V. Gilroy, 20 Or. 517, 26 Pac. 851; O'Connell v. Hansen, 29 Or. 173, 44 Pac. 387; Knowles v. Lord, 4 Whart. 500, 34 Am. Dec. 525; Pierce V. McKeehan, 3 Pa. St. (3 Barr) 136, 45 Am. Dec. 635; Smith v. Equitable Trust Co., 215 Pa. St. 418, 64 Atl. -594; Wilson v. Esten, 14 E. I. 621 (citing Williams v. Winsor, 12 E. I. 9; Gardner v. Com- mercial Nat. Bank, 13 E. I. 155, 173; Housel v. Cremer, 13 Neb. 298; Heinrichs v. Woods, 7 Mo. App. 236; and holding an unrecorded chattel mortgage valid against the assignee); Stainbaek v. Junk Bros. L. & M. Co. (Tcnn. Ch. App.), 39 S. W. 530; Nashville Trust Co. v. Fourth Nat. Bank, 91 Tenn. 336, 15 L. R. A. 710, 18 S. W. 822; Christian V. Hughes, 12 Tex. Civ. App. 622, 36 S. W. 298. That the same rule ap- plies to assignees in bankruptcy, see Exchange, etc., Bank v. Stone, 80 Ky. 109; Brown v. Brabb, 67 Mich. 1539 CONCEENINQ BONA FIDE PURCHASE. §750 judgments have already been examined in the preceding section. 5 J § 750. 2. Payment of the Consideration. — Not only must there be a valuable consideration in fact, but it must be paid before notice of the prior claim. Notice after the agree- ment for the purchase is made, but before any payment, will destroy the character of bona fide purchaser.^ a. The § 749, 5 See supra, §§ 721-724. § 750, 1 Hardingham v. Nicholls, 3 Atk. 304; Maitland v. Wilson, 3 Atk. 814 ; Molony v. Kernan, 2 Dru. & War. 31 ; Wood v. Mann, 1 Sum. 506, 578; Fed. Cas. Nos. 17,951, 17,952; Flagg v. Mann, 2 Sum. 486; Fed. Cas. No. 4,847; Penfield v. Dunbar, 64 Barb. 239; Palmer v. Williams, 24 Mich. 328; Kitteridge v. Chapman, 36 Iowa, 348; Baldwin v. Sager, 70 111. 503. See further, supra, § 691. 17, 11 Am. St. Kep. 549, 34 N. W. 403 (citing Mitford v. Mitford, 9 Ves. Jr. 87; Sherrington v. Yates, 12 Mees. & W. 855; Brown v. Heath- cote, 1 Atk. 160, 162; Yeatman v. Savings Inst., 95 U. S. 764; Adama V. Collier, 122 U. S. 382, 7 Sup. Ct. 1208, and other cases; and holding that an unrecorded chattel mortgage is superior, as against the assignee, BO far as he represents creditors who became such prior to the making of the mortgage). See, also, to the same effect, In re Lane Lumber Co. (Idaho), 210 Fed. 82; Zartman v. First Nat. Bank of Waterloo, 216 tr. S. 134, 54 L. Ed. 418, 30 Sup. Ct. 368 (before amendment of 1910 to Bankruptcy Act). Contra, in Vir- ginia: Chapman v. Chapman, 91' Va, ,397, 50 Am. St. Eep. 846, 21 S. B, 813; West Virginia: Douglas Mdse, Co. V. Laird, 37 W. Va. 687, 17 S. E 188; Liquid Carbonic Co. v. White head, 115 Va. 5S6, 80 S. E. 104. See, also, Newtown Sav. Bank v, Lawrence (Conn.), 41 Atl. 1054 (as signment superior to prior unre- corded mortgage, since that is in- ferior to rights of subsequeht attaching . creditors, and the right of creditors to attach is suspended by the assignment). § 749, (j) That a judgment cred- itor who, without releasing the lien of his judgment, takes a deed from his debtor and credits it on the judgment is not a purchaser for value, in Texas, see Bonner v. Grigsby, 84 Tex. 330, 31 Am. St. Eep. 48, 19 S. W. 511. §750, (a) Consideration must be Pa,id Before Notice. — This portion of the text is quoted in Haydcn v. Charter Oak Driving Park, 63 Conn. 142, 27 Atl. 232. See, also, Balfour V. Parkinson, 84 Fed. 855, citing §§ 750 and 751 of the text; Trice v. Comstock, 121 Fed. 620, 61 L. E. A. 176, and eases cited; Lakin v. Sierra B. G. M. Co., 25 Fed. 337; Cline V. Osborn, 24 Ky. Law Eep. 511, 68 S. W. 1083, citing §§ 750- 752 of the text; Combination Land Co. V. Morgan, 95 Cal. 548, 30 Pae. 1102; Beattie v. Crewdson, 124 Cal. 577, 57 Pac. 463; California Cured Fruit Ass'n v. Stelling, 141 Cal. 713, ( \ § 750 EQIJITT JTJEISPBI7DEN-CE. 1540 rule is settled in England that the entire price or considera- tion must have been paid before any notice, and the same completeness of payment is required by some American decisions.2 b Siace the modes of transferring and dealing with real property in this country are so different from those which prevail in England, the same equitable princi- ples which guided the English judges have led the courts in many of the states, under a change of circumstances, to adopt a necessary modification of this rule ; otherwise great injustice might be wrought. These courts have held that where a part only of the price or consideration has been paid before notice, either the defendant should be entitled to the position and protection of a bona fide purchaser pro tanto; or that the plaintiff should be permitted to enforce his claim to the whole land only upon condition of his doing equity by refunding to the defendant the amount already paid before receiving the notice ; "^ or even, when the plain- tiff has been guilty of laches, or the defendant has perhaps § 750, 2 See cases in last note; also Touirille v. Naish, 3 P. Wms. 307; Story V. Lord Windsor, 2 Atk. 630; More v. Mayhow, 1 Cas. Ch. 34; Wood V. Mann, 1 Sum. 506, 578; Flagg v. Mann, 2 Sum. 486; Jewett v. Palmer, 7 Johns. Ch. 65, 11 Am. Dec, 401; Losey v. Simpson, U N. J. Eq. 246. 75 Pac. 320; Donalson v. Thomason, Eogers, 19 Minn. 32; Wallace v. 137 Ga. 848, 74 S. E. 762; Garmire Wilson, 30 Mo. 335; Bremer v. Case, V. Willy, 36 Neb. 340, 54 N. W. 562; 60 Tex. 151; Houston & T. C. E. B. Teeumseh Nat. Bank v. Eussell, 50 Co. v. Chaffin, 60 Tex. 555; Lamar v. Neb. 277, 69 N. W. 673; Bender v. Hale, 79 Va. 147; Fraser v. Flem- Kingman, 64 Neb. 766, 90 N. W. ing, 190 Mieh. 236, 157 N. W. 269. 886; Lindsay v. Freeman, 83 Tex. §750, (b) See, also, Dugan v. Vat- 259, 18 S. W. 727; Keyser v. Angle, tier, 3 Blackf. (Ind.) 245, 25 Am. 40 N. J. Eq. 481, 4 Atl. 641; Gibson Dec. 105, and cases cited post, note V. Currier (Miss.), 35 South. 315; to § 755. Eichards v. Snyder, 11 Or. 501, 6 § 750, (c) The text is quoted and Pac. 186; Wood v. Eayburn, 18 Or. followed in Davis v. Ward, 109 Cal. 3, 22 Pac. 521; Ellis v. Young, 31 186, 50 Am. St Eep. 29, 41 Pac. S. C. 322, 9 S. E. 955; Peay v. 1010; cited in Henry v. Phillips, 163 Seigler (S. C), 26 S. E. 885; Evans Cal. 135, Ann. Cas. 1914A, 39, 124 V. Templeton, 69 Tex. 375, 5 Am. Pac. 837; Hines v. Meador (Tex. St. Eep. 71, 6 8. W. 843; Morton v. Civ. App.), 193 S. W. 1111. Lowell, 56 Tex. 643; Kiefe'r v. 1541 CONCEENING BONA FIDE PUBCHASB. § 750 made valuable improvements, that the land itself should re- main free from any claim on the plaintiff's part, and his remedy should be confined to a recovery of the portion of purchase-money which was still unpaid when notice was given. 3 d § 750, 3 In many of the cases where this American rule has been ap- plied, the land was contracted to be sold by its owner to a first vendee, A, who did not take possession, and was afterwards contracted to be sold to a second vendee, B, who took possession, made improvements, and paid a part of the price before notice of A's right, and who took a deed from his vendor after such notice. If A had delayed in enforcing his rights, and especially if he had neglected to record his contract in states where he was permitted by statute so to do, the equities of the second vendee, B, have been regarded by the courts as very strong, even if not absolutely the superior; Baldwin v. Sager, 70 111. 503 (where a part of the price has been paid before notice of a prior lien, such lien can be enforced to the extent of the unpaid portion) ; Kitteridge *v. Chapman, 36 Iowa, 348 (protection pro tanto) ; Haughwout v. Murphy, 21 N. J. Eq. 118; Paul V. Fulton, 25 Mo. 156; Fraim v. Frederick, 32 Tex. 294; Frost v. Beek- man, 1 Johns. Ch. 288; Farmers' Loan Co. v. Maltby, 8 Paige, 361; Dos- well V. Buchanan's Ex'rs, 3 Leigh, 365, 23 Am. Dec. 280 ; JEverts v. Agnes, 4 Wis. 343, 65 Am. Dec. 314; Youst v. Martin, 3 Serg. & R. 423; Union etc. Co. V. Young, 1 Wbart. 410, 431, 30 Am. Dec. 212; Juvenal v. Jack- son, 14 Pa. St. 519, 624; Beck v. TJhrich, 13 Pa. St. 636, 639, 53 Am. Dec. 507; 16 Pa. St. 499; Kunkle v. Wolfersberger, 6 Watts, 126; Bellas v. McCarty, 10 Watts, 13; Boggs v. Vamer, 6 Watts & S. 469, 472; Duf- phey v. Frenaye, 5 Stew. & P. 215. In Haughwout v. Murphy, 21 N. J. Eq. 118, the court, while recognizing the general rule that a pur- chaser claiming to be bona fide must have paid the full price before notice, held that a plaintiff who by his own laches, had misled the pur- chaser would not be permitted to enforce this rule, but would be con- fined to a recovery of the price which remained unpaid when notice of his claim was received. In Youst v. Martin, 3 Serg. & R. 423, the reasons of the American modification are clearly stated by TUghman, C. J. §750, (d) Partial Payment Before South. 451; Mackey v. Bowles, 98 Notice. — The text is cited in Spiers Ga. 730, 25 S. E. 834; Spiers v. v. Whitesell, 27 Ind. App. 204, 61 Whitesell, 27 Ind. App. 204, 61 N. E. N. B. 28; Sparks v. Taylor, 99 Tex. 28 (citing this section of the text); 411, 6 L. K. A. (N. S.) 381, 90 S. W. Work v. Coverdale, 47 Kan. 207, 27 485. To the. effect that a purchaser Pac. 984; Lain v. Morton, 23 Ky. is protected to the extent of the Law Eep. 438, 63 S. W. 286; Wiles amount paid before notice, see Free- v. Shaffer, 175 Mich. 704, 141 N. W. man v. Pullen, 130 Ala. 653, 31 599; Riddell v. Munro, 49 Minn. §751 BQUITT JUBISPETJDEIirCB. 1542 §751. Payment Must be Actual. — It is further settled that there must be actual payment before any notice, or, what in law is tantamount to actual payment, a transfer of property or things in action, or an absolute change of the purchaser's legal position for the worse, or the assmnption by him of some new, irrevocable legal obligation. It fol- lows, therefore, that his own promise, contract, bond, cove- nant, bond and mortgage, or other non-negotiable security for the price, will not render the party a hoTui fide pur- chaser, nor entitle him to protection; for upon failure of the consideration he can be relieved from such obliga- 532, 52 N. "W. 141; Flaegel v. Hen- schel, 7 N. D. 276, 66 Am. St. Kep. 642, 74 N. W. 996; Eector v. Wel- drick (Okl.), 158 Pae. 610; Bullock V. Sprowls, 93 Tex. 188, 77 Am. St. Eep. 849, 47 L. R. A. 326, 54 S. W. 657, 661; Hines v. Meador (Tex. Civ. App.), 193 S. W. 1111, citing the text; Vance Shoe Co. v. Haught, 41 W. Va. 275, 23 S. E. 553. In the fol- lowing cases the defendant was held entitled to be reimbursed to the ex- tent of the payments made before notice: Marchbanks v. Banks, 44 Ark. 48; Hedriek v. Strauss, 42 Neb. 485, 60 N. W. 9!;8; Yarnell v. Brown. 170 HI. 362, 62 Am. St. Eep. 380, 48 N. E. 909 (amount paid made a lien on the land) ; Maeaulay v. Smith, 132 N. T. 524, 30 N. E. 997; Webb V. Bailey, 41 W. Va. 463, 23 S. E 644. See, also, Lindley v. Blum berg, 7 Cal. App. 140, 93 Pae. 894 Henry v. Phillips, 163 Cal. 135, Ann. Cas. 1914A, 39, 124 Pae. 837 Donalson v. Thomason, 137 Ga. 848 74 S. E. 762; Weidenbaum v, Eaphael, S3 N. J. Eq. 17, 90 Atl. 683; Nellius v. Thompson Bros Lumber Co. (Tex. Civ. App.), 156 S. W. 259. In Durst, v. Daugherty, 81 Tex. 650, 17 S. W. 388, this sec- tion of the text was citedj and the court held that in order to ascer- tain which rule should be applied to protect a purchaser who has paid part of the consideration before notice, it is necessary to ascertain the equities of the respective par- ties. See the opinion in this case for a statement of the motives which should influence the court in deciding between these competing rules. The opinion in Durst v. Daugherty is followed in Sparks v. Taylor, 99 Tex. 411, 6 K B. A. (N. S.) 381, 90 S. W. 485. In Mitchell v. Dawson, 23 W. Va. 86, a purchaser of the legal title of a tract of land, who had no notice of a prior vendor's lien until he had paid all the purchase-money except twenty-five dollars, was held to take the land discharged of the lien, but to be liable to the holder of the lien for twenty-five dollars. See, also, Culbertson v. H. Witbeck Co., 92 Mich. 469, 52 N. W. 993. That the party holding the prior equity has a charge or lien on the unpaid purchase money, see Hogg v. Mc- Guffin, 67 W. Va. 456, 31 I.. B. A. (N. S.) 491, 68 S. E. 41. 1543 CONCEENING BONA FIDE PUBCHASE. § 751 tions in equity even if not at law.i^ Payment of actual cash, however, is not indispensable. The assumption of an irrevocable obligation, from which the purchaser could not be relieved even by a failure of the consideration aris- ing from the title being invalid, may be sufficient.^ The § 751, 1 See English cases cited under last paragraph. Roseman v. Miller, 84 111. 297; Kitteridge v. Chapman, 36 Iowa, 348; Hutchins v. Chapman, 37 Tex. 612; Spicer v. "Waters, 65 Barb. 227; Haughwout v. Murphy, 21 N. J. Eq. 118; Dickerson v. TiUinghast, 4 Paige, 215, 25 Am. Dec. 528; Ells v. Tousley, 1 Paige, 280; Whittiek v. Kane, 1 Paige, 200, 208; Jewett v. Palmer, 7 Johns. Ch. 65, 68, 11 Am. Dec. 401; De Mott V. Starkey, 3 Barb. Ch. 403; Webster v. Van Steenbergh, 46 Barb. 211; Weaver v. Barden, 49 N. Y. 286; Gary, v. White, 52 N. Y. 138; Delancey V. Stearns, 66 N. Y. 157; Westbrook v.' Gleason, 79 N. Y. 23, 28; Beck v. Uhrich, 13 Pa. St. 636, 639, 53 Am, Dec. 507, 16 Pa. St. 499; Kunkle v. Wolfersberger, 6 Watts, 126. § 751, 2 There are many f orins of such obligation : 1. One of these occurs where the purchaser has given his own negotiable notes for the whole or a part of the price. Some of the cases seem to require that the note so given to the vendor should have been actually negotiated . by him so as to cut off. the maker's defense of a failure of the consideration;'' by others, it seems to be sufBcient that such notes are given by the purchaser to the vendor, so that they may be negotiated and the defense cut off: Baldwin v. Sager, 70 111. 503 (notes given and negotiated) ; Partridge v. Chapman, 81 111. 137 (note given for a part of the price and negotiated by the payee) ; Williams v. Beard, 1 S. C. 309 (a note of a third person guaranteed by the purchaser, given for a part of the price) ; Freeman V. Deming, 3 Sand. Ch. 327 j 'Frost v. Beekman, 1 Johns. Ch. 288.» § 751, (a) This portion of the text § 751, (i>) Davis v. Ward, 109 Cal. is quoted in Hayden v. Charter Oak 1S6, 50 Am. St. Eep. 29, 41 Pac. Driving Park, 63 Conn. 142, 27 Atl. 1010, citing this note and paragraph 232; and in Cleveland v. Butts, 13 of the text; Eush v. Mitchell, 71 Tex. Civ. App. 272, 35 S. W. 804; Iowa, 333, 32 N. W. 367. See, also, cited, in Wyeth v. Eenz-Bowles Co. Beebe Stave Co. v. Austin, 92 Ark. (Kentucky), 66 S. W. 825; cited, 248, 135 Am. St Bep. 172, 122 S. W. also, in Wasserman v. Metzger, 105 482; Davis v. Carter, 55 Tex. Civ. Va. 744, 7 L. B. A. (N. S.) 1019, App. 423, 119 S. W. 724; Nellius v. 54 8. E. 893. See, also, March- Thompson Bros. Lumber Co. (Tex. banks v. Banks, 44 Ark. 48; Beavers Civ. App.), 156 S. W. 259; Donal- V. Baker, 58 Tex. Civ. App. 35, 124 son v. Thomason, 137 Ga. 848, 74 S. W. 450; Bridgewater v. Ocean S. E. 762. > City Ass'n, 85 N. J. Eq. 379, 96 Atl. § 751, (c) See, also. Citizens' Bank 905. V. Shaw (N. D.), 84 N. W. 779. § § 752, 753 ' EQUITY JUKISPEUDENCB. 1544 absolute transfer of notes, bonds, or other securities made by a third person will have the same effect.^ ^ § 752. II. Absence of Notice. — The nature of notice, its various forms, and its general effects have been considered in the preceding sections. The present inquiry only con- cerns its special effects upon a bona fide purchase, the time when it must be received in order that these effects may be produced, and the modifications and additions in- troduced by the recording acts. Since the doctrine of bona fide purchase requires the absence of notice, — a purchase for a valuable consideration and without notice, — the dis- cussion of this negative element must chiefly consist of an affirmative statement of the consequences flowing from the presence of notice. § 753. 1. Effects of Notice. — The rule is universal and elementary, that if a purchaser in any form receives no- tice of prior adverse rights in and to the same subject- matter, before he has completely acquired or perfected his own interests under the purchase, his position as bona fide purchaser is thereby destroyed, even though he may have paid a valuable consideration; on the other hand, notice given after his interests have been completely acquired or perfected produces no injurious effect.!^ Notice suffi- 2. Another form would be the undertaking by the purchaser to pay a debt due from the vendor to a third person, in such a manner that he was absolutely substituted as the debtor in the place of his vendor : * Jackson V. Winslow, 9 Cow. 13; Frost v. Beekman, 1 Johns. Ch. 288. § 751, 3 Williams v. Beard, 1 S. C. 309 ; Murray v. Ballou, 1 Johns. Ch. 566 ; Heatley v. Finster, 2 Johns, Ch. 159 ; Jewett v. Palmer, 7 Johns. Ch. 65, 11 Am. Dec. 401; Christie v. Bishop, 1 Barb. Ch. 105; Harris v. Norton, 16 Barb. 264; Patten v. Moore, 32 N. H. 382; High v. Batte, 10 Yerg. 186; McBee v. Loftis, 1 Strob. Eq. 90. §753, 1 See cases cited ante, vol. 1, under §200; also under §740; Virgin v. Wingfield, 54 Ga. 451; Hardin v. Harrington, 11 Bush, 367; § 751, (d) See, also, Warren v. Wasserman v. Metzger, 105 Va. 744, Wilder, 114 N. T. 215, 21 N. K 159; 7 L. E. A. (N. S.) 1019, 54 S. E. 893, Watkins v. Reynolds, 123 N. Y. 211, dissenting opinion. 25 N. E. 322. § 753, (a) For very numerous cases § 751, (e) The text is cited in illustrating the general rule tliat a 1545 CONCEBNING BONA FIDE PUECHASB. §753 cient to prevent the purchase from being bona fide may in- here in the very form and kind of the conveyance itself. On this ground it is held by one group of authorities that a grantee taking or holding under a quitclaim deed cannot be a bona fide purchaser; but this conclusion is rejected by other decisions.^ ^ Hull V. Swarthout, 29 Mich. 249 (when a purchaser is not bound to make inquiries from his own vendor) ; Hamman v. Keigwin, 39 Tex. 34 ; Batts V. Scott, 37 Tex. 59 (in Texas, under the recording acts, one who inten- tionally purchases an equitable title may be a bona fide purchaser, as much as one who purchases the legal estate) ; Kearney v. Vaughan, 50 Mo. 284 (information obtained by a grantee from his own grantor); Hoyt V. Jones, 31 Wis. 389; Wormley v. Wormley, 8 Wheat. 421; Frost V. Beekman, 1 Johns. Ch. 288; Murray v. Finster, 2 Johns. Ch. 155; Losey v. Simpson, 11 N. J. Eq. 246; Beck v. Uhrieb, 13 Pa. St. 636, 53 Am. Dec. 507; Jewett v. Palmer, 7 Johns. Ch. 64, 11 Am. Dec. 401. § 753, 2 Ciases which hold that a grantee taking or deriving title under a quitclaim deed cannot be bona fide purchasers; that such a deed is party taking with notice of an equity takes subject to that equity, see notes to § 688, ante. §753, (b) The text is cited in United States v. California & 0. Land Co., 49 Fed. 496, 503, 7 U. S. App. 128, 1 C. C. A. 330; Gest v. Paekwood, 84 Fed. 368; Aetna Life Ins. Co. V. Stryker, 38 Ind. App. 312, 78 N. E. 245; G. Aultman & Co. v. XJtsey, 34 S. C. 559, 13 S. E. 848; Parker v. Kandolph, 5 S., D. 549, 29 L. R. A. 33, 59 N. W. 722; Tate v. Kramer, 1 Tex. Civ. App. 427, 23 S. W. 255. Whether Quitclaim Grantee can be a Bona Fide PurchaBer. — No ques- tion in the law of bona fide pur- chaser has been more productive of judicial discussion in this country. Possibly the majority of the adju- dicated cases still support the view that a quitclaim deed is ipso facto notice, and that a grantee there- under cannot claim to be a bona flde purchaser: See May v. Le Claire, 78 _U. S. (11 Wall.) 217; Dickerson v. Colgrove, 100 U. S. 578; Baker v. Humphrey, 101 U. S. 499; O'Neal v. Seixas, 85 Ala. 80, 4 South. 745; Wood V. Holly Mfg. Co., 100 Ala. 326, 46 Am. St. Rep. 56, 13 South. 948; Clemmons v. Cox, 114 Ala. 350, 21 South. 426; Wimbish v. Mont- gomery, etc., Ass'n, 69 Ala. 575; Der- rick V. Brown, 66 Ala. 162; O'Neal V. Prestwood, 153 Ala. 443, 45 South. 251; Eucker v. Tennessee Coal, Iron & E. Co., 176 Ala. 456, 58 South. 465; Hunter v. Briggs, 184 Ala. 327, 63 South. 1004; Snow v. Lake, 20 Fla. 656, 51 Am. Rep. 625; Fries v. Griffin, 35 Fla. 212, 17 South. 66; Leland v. Isenbeck, 1 Idaho, 469; Wrightman v. Spofford, 56 Iowa, 145, 8 N. W. 680 (deed a quitclaim though it contains the words "bar- gain and sell"); Eaymoud v. Morri- son, 59 Iowa, 371, 13 N. W. 332; Laraway v. Larue, 63 Iowa, 407, 19 N. W. 242; Fogg v. Holeomb, 64 Iowa, 621, 21 N. W. Ill; Postel v. §754 EQUITY JUKISPEUDENCE. 1546 § 754. Second Purchaser Without Notice from First Pur- ipso facto notice of all defects in the title : Munn v. Best, 62 Mo. 491 ;- Kearney v. Vaughan, 50 Mo. 284; Ridgeway v. HoUiday, 59 Mo. 444; Palmer, 71 Iowa, 157, 32 N. W. 257; Steele v. Sioux Valley Bank, 79 Iowa, 343, 44 N. W. 564 (review- ing eases) ; Rogers v. Chase, 89 Iowa, 468, 56 N. W. 537; Wickham v. Hen- thorn, 91 Iowa, 242, 59 N. W. 276; Hannan v. Seidentopf, 113 Iowa, 659, 86 N. W. 44; Young v. Charn- quist, 114 Iowa, 116, 86 N. W. 203; Minneapolis & St. L. E. Co. v. Chi- cago, M. & St. P. R. Co., 116 Iowa, 681, 88 N. W. 1082; Peters v. Car- tier, 80 Mich. 124, 20 Am. St. Kep. 508, 45 N. W. 73; Messenger v. Peter, 129 Mich. 93, 88 N. W. 209; Beakley v. Robert, 120 Mieb. 209, 79 N. W. 193; Zeigler v. Valley Coal Co., 150 Mich. 82, 13 Ann. Cas. 90, 113 N. W. 775; Backus v. Cowley, 162 Mich. 585, 127 N. W. 775; Walker v. Schultz, 175 Mich. 280, 141 N. W. 543; Donohue v. Vosper, 189 Mich. 78, 155 N. W. 407; Mar- tin V. Brown, 4 Minn. 282 (Gil. 201); Hope v. Stone, 10 Minn. 141 (Gil. 114); Everest v. Ferris, 16 Minn. 26 (Gil. 14); Marshall v. Rob- erts, 18 Minn. 405 (Gil. 365), 10 Am. Rep. 201; Dunn v. Barnum, 51 Ped. 355, 2 C. C. A. 265, 10 U. S. App. 86 (Minnesota; the rule in that state was changed by statute in ]87o; McAdow V. Black, 6 Mont. 601, 13 Pac. 377; Wetzstein v. Largey, 27 Mont. 212, 70 Pac. 717; Hastings v. Nissen, 31 Fed. 597 (Nebraska); Abernathy v. South & W. E. Co., 150 N. C. 97, 63 S. E. 180; Richards v. Snyder, 11 Or. 501, 6 Pac. 186; Baker v. Woodward, 12 Or. 3, 6 Pac. 173; American Mortgage Co. v. Hutchinson, 19 Or. 334, 24 Pac. 515; Gest V. Packwood, 34 Fed. 368 (Ore- gon); Advance Thresher Co. v. Es- teb, 41 Or. 469, 69 Pae. 447 (deed is not a quitclaim merely because it contains no covenants of warranty); Raymond v. Plavel, 27 Or. 219, 40 Pae. 158 (deed is not quitclaim merely because it contains no cove- nants of warranty); Parker v. Ran- dolph, 5 S. D. 549, 29 L. E. A. 33, 59 N. W. 772; Schmidt v. Musson, 20 S. D. 389, 107 N. W. 367; Hows V. Butterworth (Tenn. Ch. App.), 62 S. W. 1114; and the very numerous Texas cases cited in the latter part of this note. The following extracts from recent opinions may serve to explain the policy of this rule: "Un- der the cloak of quitclaim deeds, schemers and speculators close their eyes to honest and reasonable in- quiries, and traffic in apparent im- perfections in titles. The usual methods of conveying a good title — one in which the grantor has con- fidence — is by warranty deed. The usual method of conveying a doubt- ful title is by quitclaim deed": Peters v. Cartier, 80 Mieh. 124, 20 Am. St. Rep. 508, 45 N. W. 73. "It would be absurd for a grantee under a mere quitclaim deed to undertake to claim that he took title to the property freed from the previous acts of the grantor affecting that title. There is nothing in the na- ture of that character of conveyance which assures the grantee indemnity from such acts. He has no reason to believe that he has purchased a clear title to the property or any- thing more than what the terms of his deed indicate"; and, "The quit- claim deed, . . . purports to convey 1547 CONCERNING BONA FIDE PTJBOHASB. § 754 chaser With Notice — Second Purchaser With Notice from Oliver v. Piatt, 3 How. 333; May v. Le Claire, 11 Wall. 217; Bragg v. Paulk, 42 Me. 502; Smith v. Button, 42 Iowa, 48; Watson v. Phelps, 40 only such right as A. may actually have. It may he something or noth- ing; and the recording act, it is- suggested, will not give to an in- strument of record any greater ioree or larger meaning than that ex- pressed hy its words": American Mortgage Co. v. Hutchinson, 19 Or. 334, 24 Pac. 515. The opinion of Thayer, C. J., in this case is a most viftoTous presentation of this view of the qhestion. On the other hand, in a number of jurisdictions it is held that there is no distinction, in respect to the qual- ity of imparting notice of defects in title, between a quitclaim deed and any other form of conveyance: McDonald v. Belding, 145 TT. S. 492, 12 Sup. Ct. 892 (Arkansas); Moelle V. Sherwood, 148 U. S. 21, 13 Sup. Ct. 426; Hopkins v. Hehard (Sixth Circuit), 194 Fed. 301, 114 C. C. A. 261; Henry Wrape Co. v. Cox, 122. Ark. 445, 183 S. W. 955; Brad- bury V. Davis, 5 Colo. 265; Kel- sey V. Norris, 53 Colo. 306, 125 Pac. Ill; Marshall v. Pierce, 136 Ga. 543, 71 S. E. 893 (taking quitclaim does not negative presumption of good faith) ; Brown v. Banner Coal & Oil- Co., 97 111. 214, 37 Am. Kep. 105; Smith V. McClain, 146 Ind. 77, 45 N. B. 41 (by statute, quitclaim equiva- lent to bargain and sale deed); Strong v. Lynn, 38 Minn. 315, 37 N. W. 448 (by statute; see supra for earlier cases contra); Wilhelm v. Wilken, 149 N. Y. 447, 52 Am. St. Kep. 743, 32 L. R. A. 370, 44 N. E. 82 (affirming 27 N. Y. Supp. 853); Eaymond v. iPlavel, 27 Or. 219, 40 Pac. 158; Babcoek v. "Wells (R. I.), 54 Atl. 596; Virginia & T. Coal & Iroji Co. V. Fields, 94 Va. 102, 26 S. 111. 426; McDougall v. Murray, 57 Wash. 76, 26 L. R. A. (N. S.) 159, 106 Pac. 490; Dunfee v. Childs, 59 W. Va. 225, 53 S. E. 209; Cutler v. James, 64 Wis. 173, 54 Am. Kep. 603, 24 N. W. 874; Olmsted v. McCrory, 158 Wis. 323, 148 N. W. 871. "Soma of the ablest text-writers and jurists of this country hold to the view that a grantor cannot by any form of deed do more than convey all bis right, title, and interest; that a quit- claim will convey a perfect fee- simple title, just as effectually as a warranty deed, if in fact the gran- tor at the time of executing the deed has such a title; that a quitclaim deed no more implies that the gran- tor doubts the goodness of his title than a warranty deed implies that the grantee considers the title un- safe without the support of cove- nants and assurances involving per- sonal liability for damages; and that a purchaser who relies upon the public records showing a clear title in the grantor, even though he takes a quitclaim dee'd, cannot be denied the character of a iona fide purchaser without robbing the re- cording acts of their virtue": United States V. California & 0. Land Co., 49 Fed. 496, 504, 7 TJ. S. App. 128, 1 C. C. A. 330, opinion (dissenting on a question of construction of the deed) of Hanford, D. J. This view has received the sanction of the su- preme court of the United States: Moelle V. Sherwood, 148 CJ. S. 21, 13 Sup. Ct. 426. The opinion of Field, J., makes no allusion to the very §754 EQUITY JUEISPEUDENCB. 1548 First Purchaser Without.* — There are two special rules on Iowa, 482. Cases which hold the contrary, viz., that there is no differ- ence between holding a quitclaim deed and any other species of convey- numerous and often quoted dicta to the contrary to which the court had given utterance in previous cases, but says, in part: "The doctrine ex- pressed in many cases, that the gran- tee in a quitclaim deed cannot be treated as a bona fide purchaser does not seem to rest upon any sound principle. . . . There may be many reasons why the holder of property may refuse to accompany his con- veyance of it with an express war- ranty of the soundness of its title, or its freedom from the claims of others, or to execute a conveyance in such form as to imply a. war- ranty of any kind, even when the title is known to be perfect. . . . In many parts of the country a quit- claim, or a simple Conveyance of the grantor's interest, is the common form in which the transfer of real estate is made. A deed in that form is in such cases as effectual to divest and transfer a complete title as any other form of conveyance. . Covenants of warranty do not con- stitute any operative part of the in- strument in transferring the title, That passes independently of them, They are separate contracts, in- tended only as guaranties against future contingencies. The charac- ter of iona fide purchaser must de- pend upon attending circumstances or proof as to the transaction, and does not arise, as often, though, we think, inadvertently, said, either from the form of the conveyance, or the presence or the absence of any accompanying warranty." In Babeock v. Wells (E. I.), 54 Atl. 596, Stiness, C. J., inquires "How can a court say, as ^ matter either of law or fact, that a quitclaim im- plies that the grantor has reason to believe his title is defective, because he does not warrant it, when an equally reasonable inference may be that he wants the purchaser to sat- isfy himself as to the title from the records or otherwise, and that he is unwilling to burden his estate, by covenants running into the future, against defects of which' he has no more knowledge than the pur- chaser?" A third view of the subject is well expressed in an opinion from which we have already quoted: "Be- tween these two extremes the true doctrine is to be found, and the trend of opinion in this country, as may be gathered from the most recent decisions and the latest contributions from American law- writers, is in the direction of greater liberality, and to regard with favor the more reasonable rule by which the actual good faith of the pur- chaser is made the test of his right in equity; and the question of actual good faith' is chiefly one of fact. So that there is no such thing as a conclusive presumption of mala fides from the mere acceptance of a quitclaim deed. A purchaser who makes diligent and candid inquiry with intent to ascertain the truth concerning his grantor's title, and who, after such inquiry, pays a fair price for property in the honest be- §754, (a) This paragraph is cited, generally, in Sanguinetti v. Bossen, 12 Cal. App. 623, 107 Pac. 560. 1549 COWCEKNING BONA FIDE PUECHASB. §754 the subject wMch have been settled since an early day; one ance: Chapman v. Sims, 53 Miss. 154; Corbin v. Sullivan, 47 Ind. 356; and see Hutchinson v. Harttmann, 15 Kan. 133. Cases involving the lief that the title is perfect, ought to have proteetion against adverse rights which, notwithstanding his efforts to discover them, remained concealed from him, although he re- ceives only a quitclaim deed. . . . This is the common sense of the matter, and the only just rule. Nevertheless it is a true and self- evident proposition that by a quit- claim deed the grantee is necessarily warned. By agreeing to accept that form of conveyance, he avowedly as- sumes all risk of a bad title as be- tween himself and his grantor, and he may be fairly presumed to have made a timely and sufSeient exami- nation of the title. From this it follows that he may be conclusively presumed to have become informed of all facts which could have been discovered by an intelligent and earnest effort, and to have acted in the light of all such facts in mak- ing the purchase": United States v, California & O. Land Co., i9 Fed. 496, 505, 506, 7 U. S. App. 128, 1 C. C. A. 330, opinion of Hanford, D. J. (dissenting only on the ques- tion of construction of the deeds). It is accordingly held, in a consider- able group of states, that the effect of a quitclaim deed is to put the purchaser upon inquiry: Aetna Life Ins. Co. V. Stryker, 38 Ind. App. 312, 73 N. E. 953, 76 N. E. 822, 78 N. E. 245; Sullenger v. Baecher, 55 Ind. App. 365,' 102 N. B. 380; John- son V. Williams, 37 Kan. 179, 1 Am. St. Rep. 243, 14 Pac. 537 (a much cited case) ; Merrill v. Hutchinson, 45 Ka?. 59, 23 Am. St. Eep. 713, 25 Pae. 215; Schott v. Dosh, 49 Neb. 187, 59 Am. St. Eep. 531, 68 N. W. 346 (a careful review of many cases) ; Dodge v. Briggs, 27 Fed. 161; Goddard v. Donaha, 42 Kan. 754, 16 Am. St. Eep. 510, 22 Pac. 708; Smith v. Kudd, 48 Kan. 296, 29 Pac. 310; Ferguson v. Tarbox, 3 Kan. App. 656, 44 Pac. 905; Kelly V. McBlaine, 6 Kan. App. 523, 50 Pac. 963; Fountain v. Kenney, 71 Kan. 642, 81 Pac. 179 (what is a BufScient inquiry); Eger v. Brown, 77 Kan. 510, 15 L. E. A. (N. S.) 459, 94 Pac. 803; Ennis v. Tucker, 78 Kan. 55, 130 Am. St. Eep. 352, 96 Pac. 140; Peck v. Ayres, 79 Kan. 457, 100 Pac. 283 (purchaser can- not set up his belief that he waa taking a warranty deed) : Knox v. Doty, 81 Kan. 138, 135 Am. St. Eep. 351, 105 Pae. 437; Hudson v. Her- man, 81 Kan. 627, 107 Pac. 35; Mil- ler V. Fraley, 23 Ark. 735 j C. Ault- man & Co. v. Utsey, 34 S. C. 559, 13 S. E. 848 (citing text); and Bee , Southern Ey. v. Carroll, 86 S. C. 56, 138 Am. St. Eep. 1017, 67 S. E. 4; or that it is a circumstance bear- ing upon the question of bona fides': Bragg V. Paulk, 42 Me. 502; Nash' v. Bean, 74 Me. 340; Peaks v. Blethen, 77 Me. 510, 1 Atl. 451; Knapp v. Bailey, 79 Me. 195, 205, 1 Am. St. Eep. 295, 9 Atl. 122; Bradley v. Mer- rill, 88 Me. 319, 34 Atl. 160; White V. McGarry, 47 Fed. 420. A large number of decisions, while adhering to the rule that a quitclaim deed implies notice to the grantee, seek to free the rule from the odium of technicality that is sometimes at- tributed to it, by making the "qnit- clalm" character of the deed depend §754 EQtriTY JTJEISPBtrDENCB. 1550 being a mere application of the general doctrine, and the more general rule that the form of conveyance or the nature of the in- terest acquired may ipso facto be notice : Bertram v. Cook, 32 Mich. 518 not upon the presence or absence of technical words, but on the nature of the transaction as disclosed by a construction of the instrument as a whole. If, from all the terms of the instrument, it is evident that it pur- ports to convey a "chance of title," or the "speculative right, title and interest" of the grantor, as distin- guished from the land itself, it is a quitclaim. In support of this view, see Prentice v. Duluth Stor- age & F. Co., 58 Fed. 437, 448, 7 C. C. A. 293 (Minnesota: not a quit- claim); United States v. California & 0. Land Co., 49 Fed. 496, 7 IT. S. App. 128, 1 C. C. A. 33a, affirmed, 148 U. S. 31, 46, 47, 13 Sup. Ct. 458 (not a quitclaim) ; Gest v. Pack- wood, 34 Fed. 368 (Oregon: quit- claim); Wilhelm v. Wilken, 149 N. Y. 447, 52 Am. St. Eep. 743, 32 L. E. A. 370, 44 N. E. 82 (possibly). This distinction has found expres- sion in a long series of Texas cases, the conclusions of which- have been thus summarized: "It does not mat- ter that the instrument uses the word 'quitclaim,' if it conveys to the grantee the land itself, it is not such a deed as will charge him with no- tice of prior unregistered instru- ments, secret liens, or equities; and, on the other hand, although it may contain a clause of warranty, it will have the effect to so charge him with notice, if it purports to con- vey no more than the right and title of the grantor to the land": Thread- gill V. BickerstafE, 87 Tex. 520, 24 S. W. 757; citing Eichardson v. Levi, 67 Tex. 364, 3 S. W. 444; Harrison V. Boring, 44 Tex. 255; Taylor v. Harrison, 47 Tex. 461, 26 Am. Eep. 304, and Carleton v. Lombard!, 81 Tex. 357, 16 S. W. 1081. See, also, Kempner v. Beaumont Lumber Co., 20 Tex. Civ. App. 307, 49 S. W. 412 (partition deed, intended to convey the land Itself, though in form a quitclaim); Hanrick v. Gurley (Tex. Civ. App.), 48 S. W. 994; White v. Frank, 91 Tex. 70, 40 8. W. 964; Dupree v. Frank (Tex. Civ. App.), 32 S. W. 988; Calmell v. Borroum, 13 Tex. Civ. App. 452, 35 S. W. 942 (use of the words "bargain and seU" does not alter the character of the instrument as a quitclaim); Laugh- lin V. Tips, 8 Tex. Civ. App. 649, 28 S. W. 551; Cantrell v. Dyer, 6 Tex. av. App. 551, 25 S. W. 1098; Finch V. Trent, 3 Tex. Civ. App. 568, 24 S. W. 679; Garrett v. Christo- pher, 74 Tex. 454, 15 Am. St. Eep. 850, 12 S. W. 67; Tram Lumber Co. V. Hancock, 70 Tex. 314, 7 S. W. 724; Eichardson v. Levi, 67 Tex. 359, 3 S. W. 444 (conveyance of the land itself intended, though the word "quitclaim" was used); Thorn V. Newsom, 64 Tex. 161, 53 Am. Eep. 747; Baylor v. Scottish- Am. Mort- gage Co., 66 Fed. 631, 13 C. C. A. 659 (Texas) ; Kodgers v. Burchard, 34 Tex. 441, 7 Am. Eep. 283; Green- V. Willis (Tex. Civ. App.), 81 S. W. 1185; Lumpkins v. Adams, 74 Tex. 97, 11 S. W. 1070; Stanley v. HamU- ton (Tex. Civ. App.), ,33 S. W. 601; Hufie V. Crawford, 89 Tex. 214, 34 S. W. 606; Hill v. Grant (Tex. Civ. App.), 44 S. W. 1016. See, also, Wynne v. Ward, 41 Tex. Civ. App. 232, 91 S. W. 237; AUen v. Ander- son (Tex. Civ. App.), 96 S. W. 54; 1551 CONCERNING BONA FIDE PUEOHASB. §754 other a necessary inference from it. The first is, that if (assignee of the vendee in a land contract) ; Stout v. Hyatt, 13 Kan. 232 (purchaser of a mere equitable title) ; Edmonds v. Torrence, 48 Ala. 38 Woody V. Strong, 45 Tex. Civ. App. 256, 100 S. W. 801; Laffare v. Knight (Tex. Civ. App.), 101 S. W. 1034; Eastham v. Hunter, 102 Tex. 145, 132 Am. St. Kep. 854, 114 S. W. 97; MeMurray v. Columbia Lumber Co., 56 Tex. Civ. App. 199, 120 S. W, 246; Hudman v. Henderson, 58 Tex. Civ. App. 358, 124 S. W. 186; Schmitton v. Dunham (Tex. Civ. App.), 142 S. W. 941. It is evi- dent that the question of construc- tion raised by this Texas rule is often one of no little difficulty, and it is intimated that the solution must sometimes be reached by a resort to extrinsic evidence. "If, from the whole instrument, there be doubt as to whether or not the gran- tor intended to convey the land, or his right to it, it becomes a ques- tion of fact to be determined from all the attending circumstances": Threadgill v. BickerstafE, 87 Tex. 520, 29 S. W. 757, citing Harrison v. Boring, 44 Tex. 255; including the adequacy of the price p4id; Moore V. Swift (Tex. Civ. App.), 67 S. W. 1065; Wynne v. Ward, 41 Tex. Civ. App. 232, 91 S. W. 237; Eastham v. Hunter, 102 Tex.. 145, 132 Am. St. Kep. 854, 114 S. W. 97. In Tate v. Kramer, 1 Tex. Civ. App. 427, 23- S. W. 255, it was held that the fact that the purchaser agreed to take a quitclaim deed was sufScient to give notice, although the deed taken was not a quitclaim in form. This sec- tion of the text was cited. A deed from an assignee for creditors is not necessarily a quitclaim: Cantrell v. Dyer, 6 Tex. Civ. App. 551, 25 S. W. 1098. Finally, in a few states, while it results from the operation of the recording acts that a bona fide pur- chaser hy quitclaim deed is pro- tected against prior unrecorded deeds or other recordable instru- ments whereby the title may be af- fected, "equities which arise from transactions or a state of facts which may not be required to be in writing or recorded, if in writ- ing, are not to be cut oflE by a quit- claim deed. As to them it only has an operation, co-extensive with its terms, of releasing such rights and interests as the grantor has at the time of the conveyance": Hope v. Blair, 105 Mo. 85, 24 Am. St. Eep. 366, 16 S. W. 595; Eoff v. Irvine, 108 Mo. 378, 32 Am. St. Kep. 609, 18 S. W. 907 (subject to construc- tive trust) ; M'unson v. Ensor, 94 Mo. 506, and cases cited; Mann v. Best, 62 Mo. 497; Stoffel v. Schroeder, 62 Mo. 147; Eidgeway v. Holliday, '59 Mo. 444; Fox v. Hall, 74 Mo. 315, 41 Am. Kep. 316; Willingham v. Har- din, 75 Mo. 429; Elliott v. Buffing- ton, 149 Mo. 663, 51 S. W. 408; Cobe V. Lovan, 193 Mo. 235, 112 Am. St. Kep. 480, 4 L. K. A. (N. S.) 439, 92 S. W. 93; Southern Bank of Fulton V. Nichols, 202 Mo. 309, 100 S. W. 613; Strong v. Whybark, 204 Mo. 341, 120 Am. St. Kep. 710, 12 L. K. A. (N. S.) 1240, and note, 102 S. W. 968 (quitclaim grantee protected against prior unrecorded warranty deed); Hendricks v. Calloway, 211 Mo. 536, 111 S. W. 60; Starr v. Bartz, 219 Mo. 47, 117 S. W. 1125; Witte V. Storm, 236 Mo. 470, 139 S. W. 384; Graff v. Middleton, 43 §754 EQXHTY JURISPEUDESTCB. 1552 a second purchaser for value and without notice purchases (assignee from vendee under a land contract) ; Lewis v. Boskins, 27 Ark. 61; Peay v. Capps, 27 Ark. 160 (vendee in possession under a land con- tract buying a better title than his vendors cannot become thereby a bona fide purchaser as against his vendor) ; McNary v. Southworth, 58 111. 473 (where a trustee purchased at his own trust sale, a remote purchaser deriving title under him may be a bona fide purchaser)." In Conover v. Van Mater, 18 N. J. Eq. 481, it was held that the assignee of a mort- gage, even without notice, takes it subject to all equities, it being only a ohose in action and a mere equitable lien. The contrary is held in Massa- chusetts, where the mortgage creates a true legal estate : Welch v. Priest, 8 Allen, 165. Cal. 341; Frey v. Clifford, 44 Cal. 335; Allison v. Thomas, 72 Cal. 562, 1 Am. St. Kep. 89; Nidever v. Ayres, 83 Cal. 39, 23 Pac. 192. For a trenchant criticism upon this view, see the opinion of Thayer, C. J., in American Mortgage Co. v. Hutchin- son, 19 Or. 334, 24 Pae. 515, 517. Apart from the practical objections there urged, it is difficult to see'hoW it can be reconciled with generally accepted principles. If a quitclaim deed is a conveyance of the legal estate, it can be subject to a prior unrecorded equitable interest only through the operation of the notice inherent in its character. How can the mere act of spreading it upon_^ the records free it from this inher- ent vice, and render its holder, for certain purposes, a purchaser with- mit notice, so as to be entitled to the benefit of a prior record? It is generally held that the quit- claim deed affects with notice only the grantee therein; one who re- , eeives a warranty deed is not af- fected by the fact that his grantor or some more remote person in his chain of title held by a quitclaim deed: United States v. California & 0. Land Co., 148 U. S. 31, 46, 47, 13 Sup. Ct. 458; Stanley v. Schwalby, 162 U. S. 255, 16 Sup. Ct. 754 (Texas); Brown v. Nelms, 86 Ark. 368, 112 S. W. 373; Meikel v. Bor- ders, 129 Ind. 529, 29 N. E. 29; Einehardt v. Eeifers, 158 Ind. 675, 64 N. E. 459; Hannan v. Seidentopf, 113 Iowa, 659, 86 N. W. 44; Huber V. Bossart, 70 Iowa, 718, 29 N. W. 608; Eich v. Downs, 81 Kan. 43, 23 L. R. A. (N. S.) 1035, 105 Pae. &} Culbertson v. H. Witbeck Co., 92 Mich. 469, 52 N. W. 993; Marstou T. Catterlin, 270 Mo. 5, 192 S. W. 413; Snowden v. Tyler, 21 Neb. 215, 31 N. W. 661; Coombs v. Aborn, 29 E. I. 40, 14 L. E. A. (N. S.) 1248, 68 Atl. 817; Campbell v. Home Ice & Coal Co., 126 Tenn. 524, 150 S. W. 427; Finch v. Trent, 3 Tex. Civ. App. 568, 22 S. W. 132, 24 S. W. 679; but see American Mortgage Co. v. Hutchinson, 19 Or.' 334, 24 Pac. 515, where all the deeds in the chain of title, except the last, were quit- claims: C. Aultman & Co. v. Utsey, 34 S. C. 559, 13 S. E. 848. §753, (c) See, also. Branch v. Griffin, 99 N. C. 173, 5 S. E. 393, 398; but see ante, § 655, note. That the purchaser of a tax-title is not a bona fide purchaser, see Brown v. Cohn, 95 Wis. 90, 60 Am. St. Eep. 83, 69 N. W. 71. 1553 CONCEBNING BONA FIDE PUKOHASE. §754 from a first purchaser who is charged with notice, he there- by becomes a bona fide purchaser, and is entitled to pro- tection.^ This statement may be generalized. If the title to land, having passed through successive grantees, and subject in the hands of each to prior outstanding equities, comes to a purchaser for value and without notice, it is at once freed from these equities ; he obtains a valid title, and, with a single exception, the full power of disposition.^ "^ §754, 1 Paris v. Lewis, 85 111. 597; Hardin v. Harrington, 11 Bush. 367; Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772; Price v. Martin, 46 Miss. 489; Demarest v. Wynkoop, 3 Johns. Ch. 129, 147, 8 Am. Dec. 467; Varick v. Briggs, 6 Paige, 323; Glidden v. Hunt, 24 Pick. 221; Tompkins V. Powell, 6 Leigh, 576. The same rule applies under the recording acts. If A, without notice of a prior unrecorded deed or encumbrance, purchases from B, who had §754, (b) The text is quoted in Arnett's Committee v. Owens (Ky.), 65 S. W. 151; Coombs v. Aborn, 29 ± I. 40, 14 L. E. A. (N. S.) 1248, 68 Atl. 817; Rogis v. Barnatowich, 36 E. I. 227, 89 Atl. 838; Loman v. Paullin (Okl.), 152 Pao. 73; Jones V. Hudson, 23 S. C. 494; London v. Youmans, 31 S. C. 150, 17 Am. St. Kep. 17, 9 S. E. 775. Sections 754- 756 are cited in Tate v. Kramer, 1 Tex. Civ. App. 427, 23 S. W. 255. § 754, (e) The text is quoted in Loman v. Paullin (Okl.), 152 Pac. 73; and cited in Denike V. Santa Clara Val. Agr. Society, 9 Cal. App. 228, 98 Pac. 687; Young v. Wag- goner, 49 Ind. App. 202, 98 N. E. 145. See, also, Fish v. Benson, 71 Cal. 429, 12 Pac. 454; Hewlett v. Pileher, 85 Cal. 542, -24 Pac. 781; King V. Cabaness, 81 Ga. 661, 7 S. E. 620; Latham v. Inman, 88 Ga. 505, 15 S. E. 8; Peavy v. Dure, 131 Ga. 104, 62 S. E. 47; Halverson v. Brown, 75 Iowa, 702, 38 N. W. 123; Jackson v. Eeid, 30 Kan. 10, 1 Pac. 308; Arnett's Committee v. Owens (Ky.), 65 S. W. 151; Simpson v. Del 11—98 Hoyo, 94 N. Y. 189; Zoeller v. Eiley, 100 N. Y. 108, 53 Am. Rep. 157, 2 N. Ef 388; Valentine v. Lunt, 115 N. Y. 496, 22 N. E. 209; Branch v. Grif- fin, 99 N. C. 173, 5 S. E. 393, 398; Saunders v. Lee, 101 N. C. 3, 7 S. E. 590; Odom v. Bid dick, 104 N. C. 515, 17 Am. St. Rep. 686, 7 L. E. A. 118, 10 S. E. 609; Sweetzer v. At- terbury, 100 Pa. St. 18; Jones v. Hudson, 23 S. C. 494; London v. Youmana, 31 S. C. 150, 17 Am. St. Rep. 17, 9 S. E. 775; Gordon v. Cox (Tenn.), 75 S. W. 925; Holmes v. Buekner, 67 Tex. 107, 2 S. W. 452; Martin v. Eobinson, 67 Tex. 368, 3 S. W. 550; Bergen v. Producers' Marble Yard, 72 Tex. 53, 11 S. W. 1027; Cantrell v. Dyer (Tex. Civ. App.), 25 S. W. 1098 (purchaser without notice from assignee for creditors). In Odom v. Eiddiek, 104 N. C. 515, 17 Am. St. Rep. 686, 7 L. R. A. 118, 10 S. E. 609, and Ar- nett's Committee v. Owens (Ky.), 65 S. W. 151, the bona fide purchaser from an insane person's grantee was protected by this rule; but see post) § 946, note. § 754 EQUITY JtTBISPETJDENCE. 1554 This exception is, that such a title, cannot be conveyed, free from the prior equities, back to a former owner who was charged with notice. If A, holding a title affected with notice, conveys to B, a bona fide purchaser, and afterwards takes a reconveyance to himself, all the equities revive and attach to the land in his hands, since the doctrine requires not only valuable consideration and absence of notice, but also good faith.^ * The second rule is, that if a second purchaser with notice acquires title from a first purchaser who was without notice, and bona fide, he succeeds to all the rights of his immediate grantor. In fact, when land notice, his title is free, and may be made perfect by an earlier record:* See Varick v. Briggs, 6 Paige, 323; Jackson y. Valkenburgh, 8 Cow. 260; Knox V. Silloway, 10 Me. 201, 221; Connecticut v. Bradish, 14 Mass. 296; Fallass v. Pierce, 30 Wis. 443; Mallory v. Stodder, 6 Ala. 801; Ti-uluck V. Peeples, 3 Ga. 446. For the same reason, a purchaser for value and ■without notice from a vendor who had himself acquired his title through fraud becomes bona fide free from the eflfeets of the fraud:* Wood v. Mann, 1 Sum. 506; Galatian v. Erwin, Hopk. Ch. 48; Somes v. Brewer, 2 Pick. 184, 13 Am. Dec. 406; see post, § 777. §754, 2 Kennedy v. Daly, 1 Schoales & L. 355, 379; Bumpus v. Plat- ner, 1 Johns. Ch. 213, 219; Schutt v. Large, 6 Barb. 373; Ashton's Ap- peal, 73 Pa. St. 153; Church v. Kuland, 64 Pa. St. 432, 444; Church v. Church, 25 Pa. St. 278; Troy City Bank v. WUcox, 24 Wis. 671. §754, (d) This note is quoted in S. E. 590; Martin v. Bobinson, 67 London v. Toumans, 31 S. C. 150, 17 Tex. 368, 3 S. W. 550. Am. St. Eep. 17, 9 S. E. 775. Com- §754, (f) The text is quoted in pare § 760, post. Trentman v. Eldridge, 98 Ind. 525; §754, (e) See, also. Fish v. Ben- Clark v. McNeal, 114 N. Y. 295, 11 son, 71 Cal. 429, 12 Pae. 454; Hew- Am. St. Eep. 638, 21 N. E. 405; Lo- lett V. Pilcher, 85 Cal. 542, 24 Pac. man v. Paullin (Okl.), 152 Fac. 73; 781; King v. Cabaness, 81 Ga. 661, Phillis v. Gross, 32 S. D. 438, 143 7 S. E. 620; Halverson v. Brown, 75 N. W. 373; and cited in Johnson v. Iowa, 702, 38 N. W. 123; Simpson Gibson, 116 111. 294, 6 N. E. 205; V. Del Hoyo, 94 N. Y. 189 (assignee Bridgewater KoUer Mills Co. y. Ee- of mortgage protected, though mort- ceivers of Baltimore B. & L. Ass'n, gagor's title procured by fraud); 124 Eed. 718; Yost v. Critcher, 112 Zoeller v. Eiley, 100 N. Y. 108, 53 Va. 870, 72 S. E. 594; Kogis v. Bar- Am. Eep. 157, 2 N. E. 388; Valen- natowich, 36 E. I. 227, 89 Atl. 838. tine V. Lunt, 115 N. Y. 496, 22 N. E. See, also, Eogers v. Lindsey, 13 How. 209; Saunders v. Lee, 101 N. C. 3, 7 (54 U. S.) 441. 1555 OONCBENING BONA FIDE PUECHASB. § 754 once comes, freed from equities, into the hands of a bona fide purchaser, he obtains a complete jus disponendi, with the exception last above mentioned, and may transfer a perfect title even to volunteer s.^ g § 754, 3 Allison v. Haga», 12 Nev. 38; Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772; McShirley v. Birt, 44 Ind. 382; Moore v. Curry, 36 Tex. 668; Fletcher v. Peck, 6 Cranch, 87; Alexander v. Pendleton, 8 Cranch, 462; Vattier v. Hinde, 7 Pet. 252; Boone v. Chiles, 10 Pet. 177; Bumpus V. Plainer, 1 Johns. Ch. 213; Demarest v. Wynkoop, 3 Johns. Ch. 129, 147, 8 Am. Dec. 467; Galatian v. Erwin, Hopk. Ch. 48; Varick V. Briggs, 6 Paige, 323, 329; Griffith v. Griffith, 9 Paige, 315; "Webster V. Van Steenbergh, 46 Barb. 211; Dana v. Newhall, 13 Mass. 498; Trull V. Bigelow, 16 Mass. 406, 8 Am. Dec. 144; Boynton v. Eees, 8 Pick. 329, 19 Am. Dec. 326; Rutgers v. Kingsland, 7 N. J. Eq. 178, 658; Holmes V. Stotit, 4 N. J. Eq. 492; Bracken v. Miller, 4 Watts & S. 102; Mott v. Clark, 9 Pa. St. 399, 49 Am. Dec. 566; Church v. Church, 25 Pa. St. 278; Eilby V. Miller, 25 Pa. St. 264; Curtis v. Lunn, 6 Munf. 42; Lacy v. Wilson, 4 Munf. 313; City Council v. Page, Speers Eq. 159; Lindsey v. Rankin, 4 Bibb, 482; Halstead v. Bank of Kentucky, 4 J. J. Marsh. 554; Blight's Heirs v. Banks, 6 T. B. Mon. 192, 198, 17 Am. Dec. 136. The rule was first settled in the early case of Harrison v. Forth, Pree. Ch. 51, and followed in Brandlyn v. Ord, 1 Atk. 571; Lowther v. Carlton, §754, (g) Purchaser With Notice (Colo.), 148 Fed. 737, 80 C. C. A. from Purchaser Without Notice. — 215; John Silvey & Co. v. Cook, 191 This portion of the text is quoted Ala. 228, 68 South. 37; Whitfield v. in Peterson v. MeCauley (Tex. Civ. Eiddle, 78 Ala. 99; Fargason v. Ed- App.), 25 S. W. 826; Eoberts v. W. rington, 49 Ark. 207, 4 S. W. 763; H. Hughes Co., 86 Vt. 76, 83 Atl. Old Settlers' Inv. Co. v. White,. 158 807; Loman v. Paullin (Okl.), 152 Cal. 236, 110 Pac. 922 (vendee of Pac. 73; and cited in Klinger v. chattel with notice, vendor without Lemler, 137 Ind. 77, 34 N. E. 698; notice, of unrecorded chattel mort- Young V. Waggoner, 50 Ind. App. gage); In re Lyon's Estate, 163 Cal. 202, 98 N. E. 145; Mast v. Henry, 803, 127 Pac. 75; Walp v. Lamkin 65 Iowa, 193, 21 N. W. 559; Barks- (Conn.), 57 Atl. 277; Eeinberg dale V. Learnard, 112 Miss. 861, 73 v. Stearns, 56 Ela. 279, 131 Am. South. 736; Eoll v. Eea, 50 N. J. St. Eep. 119, 47 South. 797; Law, 264, 12 Atl. 905; Hayes v._ Ashmore v. Whatley, 99 Ga. 150, 24 Nourse, 114 N. Y. 606, 11 Am. St." S. E. 941; Peavy v. Dure, 131 Ga. Eep. 700, 22 N. E. 40; Gulf, C. & S. 104, 62 S. E. 47; English v. Lindley, F. Ey. Co. V. Gill, 5 Tex. Civ. App. . 194 111. 181, 62 N. E. 522 (aff. 89 496, 23 S. W. 142; Thornburg v. 111. App. 538); Arnold v. Smith, 80 Bowen, 37 W. Va. 538, 16 S. E. 825. Ind. 417, 423; Old Nat. Bank v. See, also, Eyan v. Staples, 23 C. C. Kndley, 131 Ind. 225, 31 N. E. 62; A. 551, 78 Fed. 563; Eeed v. Munn Brown v. Cody, 115 Ind. 488, 18 N. §755 EQUITY JXJKISPRUDElirCB. 1556 § 755. 2. Time of Giviug Notice. — ^We have seen tliat if notice is not given until after the purchaser has fully paid the consideration, received a conveyance, and completed his title, he is not in the least affected by it. If the notice 2 Atk. 242; Sweet v. Southcote, 2 Brown Ch. 66; Ferrars v. Cherry, 2 Vem. 383; McQueen v. Farquhar, 11 Ves. 467, 477. Like the first rule, it also applies to cases of unrecorded instruments under the recording acts: Wehster v. Van Steenbergh, 46 Barb. 211 ; Lacy v. Wilson, 4 Munf . 313 ; Mott V. Clark, 9 Pa. St. 399, 49 Am. Dec. 566; Bo'ynton v. Rees, 8 Pick. 329, 19 Am. Dec. 326. The rule, however, will not apply, under special circumstances, where its enforcement would violate other settled doctrines. In Johns v. Sewell, 33 Ind. 1, a second purchaser, B, bought with notice from a first pur- chaser, A, who had acquired without notice; but since A was a mere volunteer, and therefore did not hold the land free from equities, B took it subject to the same equities. In Blatchley v. Osbom, 33 Conn. 226, it was held that a tenant in common with notice cannot get a clear title from his co-tenant without notice by partition. E. 9; Buck v. Foster, 146 Ind. 530, 62 Am. St. Rep. 427, 46 N. E. 920; Mitchell V. Koeh, 175 Ind. 666, 95 N. E. 231; East v. Pugh, 71 lowaj 162, 32 N. W. 309; Varney v. Des- kins, 146 Ky. 27, 141 S. W. 411; Hill V. MeNiehoU, 76 Me. 314; La Fleur V. Chaee, 171 Mass. 59, 50 N. E. 456; Equitable Sureties Co. v. Shep- pard, 78 Miss. 217, 28 Soutli. 842; Funkhousen v. Lay, 78 Mo. 458; Craig V. Zimmerman, 87 Mo. 478, 56 Am. Eep. 466; Van Syckel v. Beam, 110 Mo. 589, 19 S. W. 946; Hen- dricks V. Calloway, 211 Mo. 536, 111 S. W. 60; Gotland v. Wells, 15 Neb. 298, 18 N. W. 132; Ford v. Axelson, 74 Neb. 92, 103 N. W. 1039; Paul v. Kerswell, 60 N. J. Law, 273, 37 Atl. 1102; McGrath v. Noreross, 78 N. J. Eq. 120, 79 Atl. 85; Phillips v. Buchanan Lumber Co., 151 N. C. 519, 66 S. E. 603; Landigan v. Mayer, 32 Or. 245, 67 Am. St. Eep. 521, 51 Pac. 649 (assignee, with notice, of tona fide mortgagee, protected) ; Foster v. Bailey, 82 S. C. 378, 64 S. E. 423; Southern Ey. v. Carroll, 86 S. C. 56, 138 Am, St. Eep. 1017, 67 S. E. 4; Brown v. Elmendorf (Tex. Civ. App.), 25 S. W. 145; Goddard v. Eeagan, 8 Tex. Civ. App. 272, 28 S. W. 352; Hickman v. Hoffman, 11 Tex. Civ. App. 605, 33 S. W. 257; Long V. Fields (Tex. Civ. App.), 71 S. W. 774; Garner v. Boyle (Tex. Civ. App.), 77 S. W. 987; Allen v. Anderson (Tex. Civ. App.), 96 S. W. 54; Laffare v. Knight (Tex. Civ. App.), 101 S. W. 1034; Thomason v. Berwick, 52 Tex. Civ. App. 153, 113 S. W. 567; E. B. Godley Lumber Co. V. Teagarden (Tex. Civ. App.), 135 S. W. 1109; Masterson v. Crosby (Tex. Civ. App.), 152 S. W. 173; <;onn V. Houston Oil Co. of Texas (Tex. Civ. App.), 171 S. W. 520; Hawkes v. Hoffman, 56 Wash. 120, • 24 L. E. A. (N. S.) 1038, 105 Pac. 156; Biggs v. Hoffman, 60 Wash. 495, 111 Pae. 576 (but such purchaser has burden of showing that his grantor 1557 CONCEBNING BONA FIDE PUECHASB. § 755 is given before any or all of these steps have been taken, its consequences may be different, and are to be considered. The general rule is settled in England, that a bona fide pur- chase requires both the payment of all the price and the execution and delivery of the conveyance before the receipt of notice by the purchaser. In other words, if the party has received the conveyance before notice and paid the price after, or has paid the price before and received the conveyance after, in either instance the bona fides of the purchase is destroyed.^ The American decisions are all agreed that a notice received before any of the purchase price has been paid, as well after the deed of conveyance §755, iWigg V. Wigg, 1 Atk. 382, 384; Story v. Lord Windsor, 2 Atk. 630; Tourville v. Naish, 3 P. Wms. 307; Jones v. Stanley, 2 Bq. Cas. Abr. 685, pi. 9; More v. Mayhow, 1 Cas. Ch. 34; Kayne v. Baker, 1 Gifl. 241; Tildesly v. Lodge, 3 Smale & G. 543; CoUinson v. Lister, 7 De Gex, M. & G. 634; 20 Beav. 356; Sharpe v. Toy, L. R. 4 Ch. 35, 37. The true meaning of this rule should not be misapprehended. If A purchases in the first instance a legal estate, the rule, of course, applies to him. If he purchases or acquires in the first instance an equitable estate, the rule also applies, so far as that purchase is concerned. For example, if A receives a first mortgage, which conveys the legal estate, and B takes a second mortgage of the same form, purporting to convey the land, but which is, nevertheless, only an equitable conveyance, the rule requires that B should both have advanced the money and obtained the instrument be- fore receiving notice, in order to be a bona fide purchaser. This rule, however, does not prevent a person who has thus acquired an equitable estate by conveyance in good faith, and who afterwards receives notice of a prior equity, from obtaining a conveyance of the outstanding legal estate and thus protecting himself from such equity. This latter power is recognized by.an overwhelming array of English authority, and in fact forms c^e of the most frequent occasions for applying the doctrine of bona fide purchase. did not have notice, since taking the the foreclosure sale under a moTt- deed with actual notice was prima gage, who had notice of the fraud- facie a fraud); Cox v. Wayt, 26 W. ulent intent of the mortgagor, be- Va. 807; King v. Porter, 69 W. Va. cause the mortgagee acted in good 80, 71 S. E. 202. In Bergen v. Pro- faith. To the same effect, see In re ducers' Marble Yard, 72 Tex. 53, 11 Lyon's Estate, 163 Cal. 803, 127 Pac. S. W. 1027, this rule was applied 75. for the protection of a purchaser at § 755 EQUITY JURISPETJDENCB. 1558 has been delivered as before, will destroy the bona fides of the purchase, and many of the decisions, following the English rule, attribute the same effect to a notice after a payment of part, but before the whole is paid.^ a Such a payment is, by some authorities, a protection pro tomto? ^ Finally, the case of notice received after payment made, but before the deed of conveyance delivered, has given rise to a direct conflict of judicial opinion. One group of de- cisions adopts and lays down the English rule, that the purchase, under these circumstances, is not hona fide.* "^ Another line of cases holds in the most positive and gen- eral manner that where the purchaser has paid the con- §755, 2 Baldwin v. Sager, 70 111. 503;. Palmer v. Williams, 24 Mich. 328 ; Penfleld v. Dunbar, 64 Barb. 239 ; and see cases supra, under § 691 ; Wormley v. Wormley, 8 Wheat. 421, 449, 450; Frost v. Beekman, 1 Johns. Ch. 288; Murray v. Finster, 2 Johns. Ch. 155; Jewett v. Palmer, 7 Johns. Ch. 65, 11 Am. Dec. 401; Losey v. Simpson, 11 N. J. Eq. 246; Beck V. Uhrieh, 13 Pa. St. 633, 639, 53 Am. Dec. 507; Bennett v. Tither- ington, 6 Bush, 192; Wells v. Morrow, 38 Ala. 125 (must have paid the whole price) ; Moore v. Clay, 7 Ala. 742; Duncan v. Johnson, 13 Ark. 190; S imm s v. Richardson, 2 Ldtt. 274; Blair v. Owles, 1 Munf. 38;. Doswell V. Buchanan, 3 Leigh, 365; Blight's Heirs v. Banks, 6 T. B. Mon. 192, 17 Am. Dec. 136; Halstead v. Bank of Kentucky, 4 J. J. Marsh. 554; Pillow V. Shannon, 3 Yerg. 508; ZoUman v. Moore, 21 Gratt. 313; and see Wil- son V. Hunter, 30 Ind. 466, 471. § 755, 3 See ante, § 750. §755, 4peabody v. Fenton, 3 Barb. Ch. 451, 464, 465; Grimstone v. Carter, 3 Paige, 421, 437, 24 Am. Dec. 230; Fash v. Eavesies, 32 Ala. 451; Moore v. Clay, 7 Ala. 742; Wells v. Morrow, 38 Ala. 125; Duncan v. Johnson, 13 Ark. 190; Osbom v. Carr, 12 Conn. 195, 198; Bennett v. Titherington, 6 Bush, 192; Simms v. Richardson, 2 Litt. 274; Blair v. Owles, 1 Munf. 38; Doswell v. Buchanan, 3 Leigh, 365, 23 Am. Dec. 280; Blight V. Banks, 6 T. B. Mon. 192, 17 Am. Dec. 136 ; Halstead v. Bank of Kentucky, 4 J. J. Marsh. 554; Pillow v. Shannon, 3 Yerg. 508. §755, (a) The text and note 2 are Pherrin, 48 Colo. 522, 21 Ann. Cas. cited in Wenz v. Pastene, 209 Mass.' 460, 111 Pac. 59; Wenz v. Pastene, 359, 95 N. E. 793. 209 Mass. 359, 95 N. E. 793 (rule § 755, (b) The text is cited in defended on ground that purchaser, Henry v. Phillips, 163 Cal. 135, Ann. receiving notice before conveyance, Cas. 1914A, 39, 124 Pac. 837. may rescind his purchase and re- §755, (c) See, also, Paul v. Mc- cover the purchase-money). 1559 cojstcebning bona fide purchase. § 756 sideration without notice of any prior claim, and after receiving notice he obtains a conveyance of the legal estate, he becomes to all intents a bona fide purchaser, and is en- titled to all the protection belonging to that position. And this result seems to be applied without limitation to the acquisition of every kind of equitable estate, interest, or right. 5 d § 756. Effect of Notice on the Bona Fide Purchase of Equitable Interests. — ^An attempt to reconcile these con- flicting authorities would be vain. I can only state what seem to be the necessary conclusions from well-established equitable principles. In the first place, the rule last stated cannot be extended to all equitable interests without vio- lating elementary principles. Between two successive equal equities, the order of time controls, without regard to the fact of consideration or notice; the one subsequent in time obtains no preference by paying consideration with- out notice.* Equities are thus equal where both parties are equally innocent and equally diligent. If an owner of land gives an agreement to convey it to A, who pays all or part of the price, and afterwards gives a second agreement to convey to B, who enters into the contract and pays all or part of the price without any notice of the prior claim of § 755, 5 Carroll v. Johnston, 2 Jones Eq. 120 ; Baggarly v. Gaither, 2 Jones Bq. 80; Leach v. Ansbacher, 55 Pa. St. 85; Gibler v. Trimble, 14 Ohio, 323; Mut. Ass. Soc. v. Stone, 3 Leigh, 218; Wheaton v. Dyer, 15 Conn. 307, 310; and see Phelps v. Morrison, 24 N. J. Eq. 195. In Car- roll V. Johnston, 2 Jones Eq. 120, the question was presented very sharply. Plaintiff held under a prior vendee, A; defendant was a sub- sequent vendee, who had paid part of the price before notice of A's claim ; after receiving notice he obtained a conveyance from the original vendor, and was held to be a bona fide purchaser and protected. Certainly there is nothing in the settled principle." of the doctrine coneeming bona fide purchase which can sustain such a conclusion. §755, (d) See, also, on this sub- chaser of an equity stands in his ject, § 691, ante. vendor's shoes, in Wasserman v. §756, (a) See ante, §683, notes, Metr^ger, 105 Va. 744, 7 L. E. A. and eases cited. This paragraph is (N. S.) 1019, 54 S. E. 893. cited, to the effect that the pur- § 756 EQTHTY JTJEISPEUDENCE, 1560 A, dearly B would have obtained no equitable advantage from the fact of his contract and payment without notice; A's interest would be of the same character and extent, and his priority of time would give him priority of right. To say that B, being thus inferior in equitable right, may, upon receiving notice of A's contract, obtain a conveyance from the owner, and thus establish a precedence over A, is to misapply the doctrine of bona fide purchase, and to ignore a familiar principle of equity that one who acquires a title with notice of a prior equity takes it subject to that equity-i* The same is true of all subsequent equitable in- terests, liens, and claims not arising from conveyances or instruments which purport to be conveyances of the entire estate. This conclusion is fully sustained by the ablest au- thorities, English and American.^ In the second place, the § 756, 1 It is one of the fundamental positions established by Lord Westbury in the celebrated case of Phillips v. Phillips, 4 De Gex, F. & J. 208; ante, §§ 414, note, 742. In Peabody v. Fenton, 3 Barb. Ch. 451, 464, 465, A obtained an assignment of a bond and mortgage from the owner by gross fraud, and assigned it to B, who had no actual notice, and who parted with value, although, as the court held, under suspicious circum- stances which ought to have put him on the inquiry, and which of them- selves showed the absence of good faith. Chancellor Walworth also held that B's title was worthless, upon another ground, as follows: "Again, to protect a party as a bona fide purchaser without notice, he must have acquired the legal title, as well as an equitable right to tbe property." He refers to the case of a conveyance of land obtained by fraud, which is voidable at the election of the grantor, but where the fraudulent grantee has the power to transfer a valid title to a bona fide purchaser without notice of the fraud, and continues: "But if such bona fide purchaser has not obtained the legal title by an actual and valid conveyance, he cannot protect himself against the prior equity of the original owner to rescind tlie convejance to the fraudulent grantee, although such bona fide pur- chaser has a contract for conveyance, and has actually paid for the land." If A has, through fraudulent representations, conveyed land to B, so that the conveyance might be set aside at A's suit, and while B thus held the apparent legal title, he should create an equitable lien upon the land in favor of C, by means of contract as security for money loaned, the money §756, (b) The text is quoted in are precisely those of the author's Louisville & N. E. Co. v. Boykin, 76 hypothetical case. Ala. 560. The facts of this ease 1561 CONCEBNING BONA FIDE PURCHASE. § 756 English decisions are numerous to the effect that when one has purchased an equitable estate, and has received the instrument conveying the same and paid the entire consid- eration without notice of a prior conflicting claim, he may, upon receiving notice thereof, procure a transfer of the outstanding legal title, and thereby obtain protection. This mode of hona fide purchase, it will be found, is strictly confined to cases ih which the purchaser acquires an estate, although equitable, and therefore acquires and holds through an instrument which purports to be and operates being advanced without notice of the fraudulent defect in B's title; or B should give a contract of sale of the land to C, the price being paid with- out notice of the . fraud, — C's equitable interest in either case would be clearly subordinate to A's prior, and therefore superior, equity. A could in one suit set aside the conveyance to B, and cut off the equitable lien which had attached in favor of C. If C, after learning of the fraud, and A's right resulting from it, should obtain a conveyance of the legal estate from B, he would clearly be in no better position; he could not, upon principle, claim the protection given to a hona fide purchaser; he would certainly come under the operation of the doctrine that one who takes even a legal title with notice of a prior equity takes and holds subject to that equity, and barred by its obligations. These illustrations may ap- pear trite and elementary, but they will serve to explain some judicial dicta, which, in all their generality of expression, would be misleading. In Grimstone v. Carter, 3 Paige, 421, 437, Chancellor Walworth stated the doctrine most clearly and accurately: "This court will not permit the party having the subsequent equity to protect himself by obtaining a con- veyance of the legal title, after he has either actual or constructive notice of the prior equity. To protect a party, therefore, and to enable him to defend himself as a bona fide purchaser for a valuable consideration, he must aver in his plea or state in his answer not only that there was an equal equity in himself by reason of his having actually paid the pur- chase-money, but that he had also clothed his equity with the legal title before he had notice of the prior eqvfty."" The contrary decisions illus- trate the very remarkable tendency exhibited by some of the state courts to go far beyond the established principles of equity, and to deal with mere equitable interests as though they had all the features and incidents of legal estates, while in other matters the same courts may fail or refuse, to adopt principles equally well settled, which define the equitable juris- diction, or which recognize the existence of equitable rights. §756, (e) See, also. Fash v. Eavesies, 32 Ala. 451; Louisville & N. E. Co. V. Boykin, 76 Ala. 560. § 756 EQUITY JUEISPEUDENCE. 1562 as a conveyance of the land. The most common example is that of a subsequent mortgagee of land, through a mort- gage in the ordinary form of a legal conveyance, where his estate is necessarily equitable, since the legal estate has been conveyed to and is outstanding in the first mortgagee. The true force and effect of these English decisions have sometimes, I think, been misapprehended by American courts.2 The only conclusions consistent with settled priri- § 756, 2 An opinion contrary to these conclusions has been maintained by a recent able text--writer (see 1 Jones on Mortgages, sec. 581), and a dictum of Lord Hatherley, in the recent case of PUcher v. Rawlins, L. R. 7 Ch. 259, 267, is cited in support of that view. But when the dictum is read in connection with its context, and in the light of the facts and circumstances of the case, and of the decision made, it will be found not only to be consistent with but to fully sustain the distinction which I have drawn. Lord Hatherley, after referring to some observations by Lord Eldon in MaundreU v. Maundrell, 10 Ves. 246, and Ex parte Knott, 11 Yes. 609, said : "It appeared to me then, as now, that Lord Eldon applied his observations to a case in which the purchaser had advanced his money in good faith, but took the legal estate afterwards from one whom he knew to be a trustee for others, distinguishing that case from the case of a legal estate acquired by paying of a mortgage. In itself, it is im- material whether the purchaser knows or not that another has an equitable interest prior to his own, provided he did not know that fact on paying his purchase-money. It may perhaps be sufficient in all possible cases for the purchaser to say, I am not to be sued in equity at all. I hold ijohat was conveyed to me by one in possession, who was, or pretended to be, seised, and who conveyed to me without my having notice of another equitable title; and that the plaintiff in equity must disprove the plea before he can proceed any further in his suit." Now, it is entirely un- critical to take the single sentence beginning "In itself it is immaterial," etc., from the above passage, separate it from its context, and make it a universal rule applicable to all kinds of subsequent equitable interests and liens as well as estates. The facts of this case, the opinions of Lord Eldon referred to, the language of Lord Hatherley, and especially the closing sentences of the quotation show with absolute certainty that he is speaking only of those cases in which a subsequent purchaser acquires an estate by means of a conveyance purporting to convey the title to the land, supposing it to be the legal estate, but which turns out to be only an equitable estate. If he acquired such estate in good faith, he may afterwards, upon learning of the prior right, get a conveyance of the legal title and be protected. It is demonstrable that Lord Hatherley is not referring to those who acquire mere equitable interests, liens, and the like, 1563 CONCEBNING BONA FIDE PURCHASE. § 757 ciples are the following. It is only where a party has acquired an equitable estate by means of a conveyance which purported to convey the land itself, and has re- ceived the instrument and paid the consideration without notice of a prior claim, that he can, after notice, procure the legal title and with it the protection of a bona fide pur- chaser. Where a party has acquired only an equitable lien or interest, not by conveyance, and has advanced the consideration without notice, he cannot, after notice, get in the legal estate, ^nd thus obtain precedence over a prior equity.^ § 757. 3. Recording in Connection With Notice. — This general subdivision involves two entirely distinct matters: 1. The first deals with the record in its operation and ef- fects as a constructive statutory notice to all subsequent purchasers and encumbrancers. This aspect of recording has already been examined in a former section, and nothing need here be added.^ 2. The second deals with notice in its effects upon the holder of a subsequent conveyance or mort- and that he is not interfering with the settled doctrines of priority from time among successive equities. If there could be a possible doubt as to the meaning of Lord Hatherley's language, it is completely put at rest by the opinion of James, L. J., in the same case (p. 268). He begins his opinion as follows: "I do not mean to refer to a class of cases which appear to me entirely distinct in principle from the case now before us. I mean that class of eases in which a person, finding himself in posses- sion under a defective title, has cast about to cure that defect by pro- curing some one else to convey an outstanding legal estate. No doubt it has been held in this court that a man under those circumstances may get in a mortgage and tack his defective title to the estate of that mortgagee." The doctrine of "tacking" has been repudiated by the American courts, and they have thus rejected that application of the rule under discussion which has been altogether the most frequent in England. § 757, 1 See supra, §§ 655-658; Baker v. Griffin, 50 Miss. 158. Subse- quent purchaser is not charged with constructive notice by the record of an encumbrance created by a person other than those through or from whom he is compelled to trace his record title. §756, (d) The text is quoted in Jennings v. Kiernan, 35 Or. 349, 55 Pac. 443, 56 Pae. 72. § § 758, 759 EQUITY JUKISPRUDENCB. 1564 gage who obtains the earliest record, how and when it de- feats his bona fide character and destroys the advantage of his first record; or, to state the same affirmatively, what is necessary to make the holder of a subsequent conveyance, who obtains the earliest record, a bona fide purchaser, so that he may secure the precedence under the statute by means of his record. Although this branch of the subject has also been considered,^ it will be convenient to recapitu- late the results as a part of the present discussion. § 758. The Interest Under a Prior Unrecorded Convey- ance. — ^Although the statutes pronounce unrecorded deeds and mortgages to be void as against subsequent purchasers who have complied with their provisions, yet in the prac- tical operation of this legislation the right created by a prior unrecorded instrument is generally regarded as tan- tamount to an equitable interest, which may therefore be cut off by a subsequent purchaser or encumbrancer who is in all respects bona fide, and who has also obtained the first record.^ The total effect of the system is thus twofold; it both enlarges the scope of the doctrine concerning bona fide purchase, by extending it to all those interests, legal or equitable, which are required or permitted to be re- corded,^ and it adds to the elements constituting a bona fide purchase the further requisite of a registration. § 759. Requisites to the Protection from the First Rec- ord by a Subsequent Purchaser. — ^It follows that, in order to obtain the benefit of the first recording, the subsequent purchase or encumbrance must be for a valuable consid- eration within the meaning of the general doctrine. Al- though the subsequent purchaser or encumbrancer had no § 757, 2 See supra, §§ 659-664. §758, (a) The text is quoted in equity has been enlarged by the re- MuUins V. Butte Hardware Co., 25 cording acts; by virtue of them the Mont. 525, 87 Am. St. Eep. 430, 65 doctrine has become enforceable, Pac. 1004. and is constantly enforced, by courts § 758, (b) This should not be taken of law. See ante, § 680, and note, to imply that the jurisdiction of 1565 CONCERNING BONA FIDE PURCHASE. 759 notice of the unrecorded instrument, still, if he had not paid a valuable consideration, he would not gain any- superior title or lien by his earlier registration.! a. Since § 759, 1 It is held in some of these cases that in a contest between the holder of the prior unrecorded conveyance and the subsequent grantee or mortgagee who has obtained a record, the burden of proof is on the latter of showing affirmatively that he paid a valuable consideration and had no notice ; the record itself is not enough : Landers v. Bolton, 26 Cal. 393 ; Snodgrass v. Ricketts, 13 Cal. 359; Plant v. Smythe, 45 Cal. 161; Long V. Dollarhide, 24 Cal. 218;'' but the contrary rule is established by many other eases, which hold that the burden of proof is on him who claims the priority and charges the other with having had notice: Center v. Connecticut Mut. Life Ins. Co. v. Smith, 117 Mo. 261, 38 Am. St. Eep. 656, 22 S. W. 623; Young v. Scho- field, 132 Mo. 650, 34 S. W. 497; Bishop V. Schneider, 46 Mo. 472, 2 Am. Eep. 533; Bowman v. Crifflth, 35 Neb. 361, 53 N. W. 140; Phoenix Mut. Life Ins. Co. v. Brown, 37 Neb. 705, 56 N. W. 488; Pfund v. Valley Loan & Tr. Co., 52 Neb. 473, 72 N. W. 480; First Nat. Bank v. Gibson, 60 Neb. 767, 84 N. W. 259; Smith V. White, 62 Neb. 56, 86 N. W. 930; Dundee Eealty Co. v. Leavitt, 87 Neb. 711, 80 L. E. A. (N. S.) 389, 127 N. W. 1057; McParland v. Peters, 87 Neb. 829, 12S N. W. 523; Southwick v. Eeynolds, 99 Neb. 393, 156 N. W. 775; Bridgewater v. Ocean City Ass'n, 85 N. J. Eq. 379, 96 Atl. 905; Seymour v. McKinstry, 106 N. T. 238, 12 N. E. 348, 14 N. E. 94; Brooks v. Garner, 20 Old. 236, 94 Pac. 694, 97 Pac. 995; First Nat. Bank of North Bend v. Gage, 71 Or. 373, 142 Pac. 539; Turner v. Cochran, 94 Tex. 480, 61 S. W. 923; Bremer v. Case, 60 Tex. 151; Hous- ton & T. C. E. E. Co. v. Chaffin, 60 Tex. 555 (recital of payment in the deed insufficient proof); King V. Quincy Nat. Bank, 30 Tex. Civ. App. 92, 69 S. W. 978 Csame); Wat- §759, (a) The text is cited in Eoberts v. W. H. Hughes Co., 86 Vt. 76, 83 Atl. 807. Sections 759 et seq. are cited in United States v. Cooper (Mont.), 217 Fed. 846. §759, (b) Burden of Proof as to Bona Fide Purchase. — See, also, United States v. Cooper (Mont.), 217 Fed. 846, citing the text; Tobey V. Kilbourne, 222 Fed. 760, 138 C. C. A. 308; Eozell v. Chicago Mill & Lumber Co., 76 Ark. 525, 89 S. W. 469; Long v. Dollarhide, 24 Cal. 218; Galland v. Jaekman, 26 CaL 79, 85 Am. Dec. 172; Wilhoit v. Lyons, 98 Cal. 409, 413, 33 Pac. 325; Beattie v. Crewdson, 124 CaL 577, 57 Pae. 463; Chapman v. Hughes, 134 Cal. 641, 58 Pac. 298, 60 Pac. 974, 66 Pac. 982; Bell v. Pleasant (Cal.), 78 Pae. 957, roview- ina' the California cases; Austin v. Union Paving & Contracting Co., 4 Cal. App. 610, 88 Pac. 731; Black Eagle Oil Co. v. Belcher, 22 Cal. App. 258, 133 Pac. 1153; Lyon v. Moore, 259 111. 23, 102 N. E. 179; Koebel v. Doyle, 256 111. 610, 100 N. E. 154; Lloyd v. Simons (Minn.), 95 N. W. 903; Errett v. Wheeler, 109 Minn. 157, 26 L. E. A. (N. S.) 816, 123 N. W. 414; Shraiberg v. Hanson (Minn.), 163 N. W. 1032; §759 EQUITY JUBISPBUDENCB. 1566 the subsequent purchaser or encumbrancer must be bona fide, in order to claim the benefits of the first registration, it also follows that if such subsequent purchaser or encum- brancer was, in taking his conveyance, mortgage, or other instrument required or permitted to be recorded, charge- able with notice of a prior unrecorded conveyance or en- cumbrance, withiu the operation of the settled rules con- cerning the nature of notice and the time and mode of its reception, then he is not a bona fide purchaser, and does not obtain the statutory superiority of title or precedence of lien by his earliest registration. This construction was put upon the English statutes at an early day, and has Planters' etc. Bank, 22. Ala. 743; Miles v. Blanton, 3 Dana, 525; Mc- Cormick v. Leonard, 38 Iowa, 272; Fort v. Burch, 6 Barb. 60, 78; Van Wagenen v. Hopper, 8 N. J. Eq. 684, 707; Gary v. White, 52 N. T. 138; Dickerson v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528; Harris v. Norton, 16 Barb. 264; Nice's Appeal, 54 Pa. St. 200; Spackman v. Ott, 65 Pa. St. 131; Maupin v. Emmons, 47 Mo. 304; and see cases cited under §§747, 760, 751." kins V. Edwards, 23 Tex. 448; Morton v. Lowell, 56 Tex. 646; Thompson v. Westbrook, 56 Tex. 268; Hairisou v. Boring, 44 Tex. 263; lilies v. Freriehs, 11 Tex. Civ. App. 575, 32 S. W. 915; Hawley v. Bullock, 29 Tex. 217; Rogers v. Pettus, 80 Tex. 425, 15 S. W. 1093; J. M. Guffey Petroleum Co. v. Hooks, 47 Tex. Civ. App. 560, 106 S. W. 690; Holland v. Ferris (Tex. Civ. App.), 107 S. W. 102 (recital of payment in deed is insufficient proof); Holland v. Nance, 102 Tex. 177, 114 S. W. 346; Eyle v. David- son (Tex. Civ. App.), 116 S. W. 823; La Brie v. Cartwrigkt, 55 Tex. Civ. App. 144, 118 S. W. 785; Downs v. Stevenson, 56 Tex. Civ. App. 211, 119 S. W. 315; William Carlisle & Co. V. King (Tex. Civ. App.), 122 S. W. 581 (recital in deed insuffi- cient proof of payment) ; Haley v. Sabine Valley Timber & Lumber Co. (Tex. Civ. App.), 150 S. W. 596 (recitals in deed insufficient proof of payment); Rule v. Eichards (Tex. Civ. App.), 159 S. W. 386 (same); Sullivan v. Fant (Tex. Civ. App.), 160 S. W. 612; Delay v. Truitt (Tex. Civ. App.), 182, S. W. 732; Biggs V. Hoffman, 60 Wash. 495, 111 Pac. 576 (a purchaser with notice has the burden of proving that his grantor was a purchaser without notice, since taking his deed with actual notice was prima facie a fraud). §759, (c) Burden of Proof as to Bona Fide Purchase. — That the law will make no presumption against the subsequent instrument which was first recorded, and that the bur- den is on the one claiming under the unrecorded instrument to show either notice or a want of consid- 1567 CONCERNING BONA FIDE PUKCHASB. § 759 been adopted in nearly all the American states.^ d These exceptional states are Ohio and North Carolina. §759, 2 See supra, §% 659, 660; 1 Jones on Mortgages, sees. 570-573. In the following discussion of recording in connection with notice, I have availed myself of Mr. Jones's able and full treatment of the same subject in his work, on mortgages, — a work which I may be permitted to say is a credit to the legal literature of the country. In the United States the equitable applications of the doctrine concerning bona fide purchase, as modified by the recording acts, are mainly confined to mortgages. I de- sire to acknowledge the assistance I have received and the material which I have borrowed from Mr. Jones's work: Holland v. Hart, L. R. 6 Ch. 678; Benham v. Keane, 1 Johns. & H. 685; Le Neve v. Le Neve, Amb. 436; Forbes v. Deniston, 4 Brown Pari. C. 189; Hine v. Dodd, 2 Atk. 275; Davis v. Earl of Strathmore, 16 Ves. 419; Wyatt v. Barwell, 19 Ves. 435, 438; Tunstall v. Trappes, 3 Sim. 286, 301; Ford v. White, 16 Beav. 120, 123; Woodworth v. Guzman, 1 Cal. 203; Fair v. Stevenot, 29 Cal. 486; Mahoney v. Middleton, 41 Cal. 41, 50; Galland v. Jackman,.26 Cal. 79, 87, 85 Am. Dec. 172; Lawton v. Gordon, 37 Cal. 202; Thompson V. Pioche, 44 Cal. 508, 516; O'Rourke v. O'Connor, 39 Cal. 442, 446; Smith v. Yule, 31 Cal. 180, 89 Am. Dec. 167; Beal v. Gordon, 55 Me. 482; Copeland v. Copeland, 28 Me. 525; Hart v. Farmers and Mechanics' eration, see Gratz v. Land & Elver where a secret equitable interest or Imp. Co., 82 Fed. 381, 40 L. R. A. "equity," as distinguished from a 393, 27 C. C. A. 305; Eyder v. Eush, recordable title, is asserted against 102 111. •338; Anthony v. Wheeler, the recorded legal title: see Hill v. 130 111. 128, 17 Am. St. Rep. 281, 22 Moore, 62 Tex. 610; Lewis v. Cole, N. E. 494, and note; Hiller v. Jones, 60 Tex. 341; Johnson v. Newman, 66 Miss. 636, 6 South. 465; Atkin- 43 Tex. 628; Bremer v. Case, 60 Tex. son V. Greaves (Miss.), 11 South. 151; McAlpine v. Burnett, 23 Tex. 688; Coonrod v. Kelly, 113 Fed. 378 649; Barnes v. Jamison, 24 Tex. 362; (New Jersey); Eoll v. Rea, 50 N. J. Biggerstaff v. Murphy, 3 Tex. Civ. Law, 264, 12 Atl. 905; McGrath v. App. 363, 22 S. W. 768, and cases Noreross, 78 N. J. Eq. 120, 79 Atl. cited; Saunders v. Isbell, 5 Tex. Civ. 85; Wood v. Chapin, 13 N. T. 509, App. 513, 2i S. W. 307; Peterson v. 67 Am. Dec. 62; Lacustrine Fer- MeCauley (Tex. Civ. App.), 25 S. W. tilizer Co. v. Lake Guano, etc. Co., 826; Stewart v. Crosby (Tex. Civ. 82 N. Y. 477; Ward v. Isbill, 73 Hun, App.), 26 S. W. 138; Hicks v. Hicks 550, 26 N. Y. Supp. 141 (but see (Tex. Civ. App.), 26 S. W. 227; Simpson v. Del Hoyo, 94 N. Y. 189; Oaks v. West (Tex. Civ. App.), 64 Seymour v. McKinstry, 106 N. Y. S. W. 1033; Lane v. De Bode, 29 238, 12 N. E. 34S, 14 N. E. 94); _^ Hoyt V. Jones, 31 Wis. 389, 404; §759, (d) The text is cited and Wilkins v. McCorkle (Tenn.), 80 followed in Tolbert v. Horton, 31 S. W. 834. This is the rule in Texas Minn. 518, 18 N. W. 647. §760 EQUITY JUEISPKUDENCE. 1568 § 760, Purchaser in Good Faith With Apparent Record Title from a Grantor Changed With Notice of a Prior Un- recorded Conveyance,— This rule is of very easy applica- tion under all ordinary circumstances between two consecu- Bank, 33 Vt. 252; Day v. Clark, 25 Vt. 397, 402; Tucker v. Tilton, 55 N. H. 223; Flynt v. Arnold, 2 Met. 619; George v. Kent, 7 Allen, 16; White V. Foster, 102 Mass. 375; Hamilton v. Nutt, 34 Conn. 501; Jackson ■V. Burgott, 10 Johns. 457, 459, 6 Am. Dec. 349; Jackson v. Valkenburgh, 8 Cow. 260; Jackson v. Post, 15 Wend. 588; Van Rensselaer v. Clark, 17 Wend. 25, 31 Am. Dec. 280; Fort v. Burch, 5 Denio, 187; Ring v. Steele, 3 Keyes, 450; Butler v. Viele, 44 Barb. 166; La Farge F. Ins. Co. v. Bell, 22 Barb. 54; Sehutt v. Large, 6 Barb. 373; Goelet v. McManus, 1 Hun, Tex. Civ. App. 602, 69 S. W. 437. See, also, J. S. Brown Hardware Co. V. Catratt, 45 Tex. Civ. App. 647, 101 S. W. 559; Laffare v. Knight (Tex. Civ. App.), 101 S. W. 1034; Middleton v. Johnston (Tex. Civ. App.), 110 S. W. 789; Thomason v. Berwick, 52 Tex. Civ. App. 153, 113 S. W. 567 (where defendant claims as purchaser from a tona fide pur- chaser, plaintiff must prove that latter had notice); Louisiana & Texas Lumber Co. v. Dupuy, 52 Tex. Civ. App. 46, 113 S. W. 973 R. B. Godley Lumber Co. v. Tea garden (Tex. Civ. App.), 135 S. W, 1109; Teagarden v. E. B. Godley Lumber Co., 105 Tex. 616, 154 S. W. 973; Loomis v. Cobb (Tex. Civ. App.), 159 S. W. 305; Meador Bros V. Hines (Tex. Civ. App.), 165 S, W. 915; Delay v. Truitt (Tex. Civ App.), 182 S. W. 732. In the same state, where priority is claimed in favor of an unrecorded deed or mortgage over a subsequent lien "fixed upon land by legal process" and Dot by contract, — -e. g., a judg- ment lien, — on the ground of notice, the burden of proof regarding notice is on the one claiming under such unrecorded instrument; Turner v. Cochran, 94 Tex. 480, 61 S. W. 923; Barnett v. Squyres, 93 Tex. 193, 77 Am. St, Eep. 854, 54 S. W. 241; Wright V. Lassiter, 71 Tex. 644, 10 S. W. 295; Linn v. Le Compte, 47 Tex. 442. See, also, Whitaker v. Farris, 45 Tex. Civ. App. 378, 101 S. W. 456; Eule v. Richards (Tex. Civ. App.), 159 S. W. 386; Bowles V. Belt (Tex. Civ. App.), 159 S. W. 8S5. In California, also, a distinc- tion appears to have been estab- lished between cases of prior un- corded deeds and of prior resulting trusts or other unrecordable "equi- ties": the holder of the recorded title having the burden of proof in the former class of eases, but not in the latter: see cases reviewed in Bell V. Pleasant (Cal.), 78 Pac. 957. Probably the rule which has most authority, and much reason, in its favor, is that the burden is on the one who claims protection as a iona fide purchaser to show the aotual payment of a valuable considera- tion by evidence other than the recitals in his deed: Lakin v. Sierra B. G. M. Co., 25 Fed. 337; Reorganized Church of Jesus Christ of Latter Cay Snints v. Church of Christ, 60 Fed. 937, 946, and cases 1569 CONCEBNING BONA FIDE PUEGHASB. §760 tive deeds or mortgages wlaere the second is recorded before the first. Circumstances may arise which present questions of great intricacy and difficulty, and occasion perhaps a conflict of judicial opinion. A grantee or mort- 306; Smallwood v. Lewin, 15 N. J. Eq. 60; Mathews v. Everitt, 23 N. J. Eq. 473 ; Conover v. Van Mater, 18 N. J. Eq. 481 ; Jaques v. Weeks, 7 Watts, 261 ; Union Canal Co. v. Young, 1 Whart. 410, 432, 30 Am. Dec. 212; Solms v. MeCulloch, 5 Pa. St. 473; Nice's Appeal, 54 Pa. St. 200; Ohio etc. Co. v. Ross, 2 Md. Ch. 25; Owens v. Miller, 29 Md. 144; John- ston V. Canby, 29 Md. 211; Lambert v. Nanny, 2 Munf. 196; Gibbes v. Cobb, 7 Rich. Eq. 54; Nelson v. Dunn, 15 Ala. 501; Harrington v. Allen, 48 Miss. 493 ; Smith v. Nettles, 13 La. Ann. 241 ; Myers v. Ross, 3 Head, citod; Jolmson v. Georgia Loan & Trust Co., 141 Fed. 593, 72 C. G. A. 639; Hodges v. Winston, 94 Ala. 576, 10 South. 535; Barton v. Barton, 75 Ala. 400; Fossett v. Turk, 171 Ala. 565, 54 South. 695 (recitals not evi- dence of payment); John Silvey & ' Go. V. Gook, 191 Ala. 228, 68 South. 37; Osceola Land Go. v. Ghicago Mill & Lumber Go., 84 Ark. 1, 103 S. W. 609, citing this paragraph of the text; Jones v. Ainell, 123 Ark, 532, 186 S. W. 65; Black Eaole Oil Co. V. Belcher, 22 Cal. App. 258, 133 Pae. 1153; Hawke v. Gal. Realty & Construction Co., 28 Cal. App. 377, 152 Pac. 959; Feinberg v. Stearns, 56 Fla. 279, 131 Am. St. Eep. 119, 47 South. 797; Carolina Portland Cement Co. v. Eope?, 68 Fla. 299, 67 South. 115; Lake v. Hancock, 38 Fla. 53, 56 Am. St. Eep. 159, 20 South. 811, and cases cited; Mar- shnll V. Pierce, 136 Ga. 543, 71 S. E. 893; Brown v. Welch, 18 111. 343, 68 Am. Dec. 549; Walter v. Brown, 115 Iowa, 360, 88 N. W. 832; Block & Pollak Iron Go. v. Holcomb-Brown Iron Co., 105 Iowa; 624, 67 Am. St. Eep. 319, .75 N. W. 499; Sillyman V. King, 36 Iowa, 207; Nolan v. Grant, 53 Iowa, 392, 5 N. W. 513; 11—99 Kibby v. Harsh, 61 Iowa, 196, 16 N. W. 85; Rush v. Mitchell, 71 Iowa, 333, 32 N. W. 367; Fogg v. Holcomb, 64 Iowa, 621, 21 N. W; 111; Kruse V. Gonklin, 82 Kan. 358, 36 L. E. A. (N. S.) 1124, and note, 108 Pae. 856; Doty V. Bitner, 82 Kan. 551, 108 Pac. 858; Shotwell v. Harrison, 22 Mich. 410; Morris v. Daniels, 35 Ohio St. 406; Adams Oil & Gas Co. V. Hudson (OkL), 155 Pac. 220; Richards v. Snyder, 11 Or. 501, 6 Pac. 186; Weber v. Eothchild, 15 Or. 385, 3 Am. St. Eep. 162, 15 Pae. 650; Bolton v. Jones, 5 Pa. St. 145, 47 Am. Dec. 404; Lloyd v. Lynch, 28 Pa. St. 417; Lamar v. Hale, 79 Va. 147; Harvey v. Nutter, 66 W. Va. 208, 66 S. E. 363; Gassidy Fork Boom & Lumber Co. v. Terry, 69 W. Va. 572, 73 S. E. 278 (but if the property was purchased with other property for a lump sam, purchaser need not show that a specific price was fixed upon the property in question) ; but when such payment is shown, the burden shifts, and it devolves upon the other party to prove that the - subsequent pur- chaser took with notice, actual or constructive: see Hodges v. Win- ston, 94 Ala. 576, 10 South. 535, and §760 EQUITY JtTEISPEUDENCB. 1570 gagee, being a purchaser in good faith, and holding a record title which appears perfect, may really have no title because a grantor or a mortgagor in the chain of title had knowledge, when he took the conveyance to himself, of a 60; Underwood v. Ogden, 6 B. Mon. 606; rorepaugh v. Appold, 17 B. Mon. 625; Sparks v. State Bank, 7 Blackf. 469; Farmers' Bank v. Bronson, 14 Mich. 361; Baker v. Mather, 25 Mich. 51; Bayliss v. Young, 51 111. 127; anbert v. Jess, 31 Wis. 110; Fallass v. Pierce, 30 Wis. 443; Bell V. Thomas, 2 Iowa, 384; English v. Waples, 13 Iowa, 57; Coe v. Winters, 15 Iowa, 481; Sims v. Hammond, 33 Iowa, 368; Musgrove v. Bouser, 5 Or. 313, 20 Am. Rep. 737. Exceptions: In Ohio and North Carolina, the courts have held, in construing the somewhat special Ian- cases cited; Bynum v. Goldj 106 Ala. 427, 17 South. 667; Barton v. Bar- ton, 75 Ala. 400; Kendrick v. Col- yar, 143 Ala. 597, 42 South. 110; Brown v. International Harvester Co., 179 Ala. 563, 60 South. 841; Manchester v. Gosewich, 95 Ark. 582, 130 S. W. 526; White v. Moffett, 108 Ark. 490, 158 S. W. 505; Kelsey V. Norris, 53 Colo. 306, 125 Pac. Ill; Bush V. Golden, 17 Conn. 594; Lake V. Hancock, 38 Fla. 53, 56 Am. St. Eep. 159, 20 South. 811; West Coast Lumber Co. v. Griffin, 56 Fla. 878, 48 South. 36; Hopkins v. O'Brien, 57 Fla. 444, 49 South. 936; WiUiams V. Smith, 128 Ga. 306, 57 S. E. 801; Marshall v. Pierce, 186 Ga. 543, 71 S. E. 893; Johansen v. Looney (Idaho), 163 Pac. 303; Brown v. Welch, 18 HI. 343, 68 Am. Dec. 549; Walter v. Brown, 115 Iowa, 360, 88 N. W. 832 (overruling dicta in Nolan V. Grant, 53 Iowa, 392; Kibby V. Harsh, 61 Iowa, 196, 16 N. W, 85; Fogg V. Holcomb, 64 Iowa, 621 21 N. W. Ill; Hannan v. Seiden topf, 113 Iowa, 659, 86 N. W. 44 and Gardner v. Early, 72 Iowa, 518, 34 N. W. 311) ; MeCormick v. Leon- ard, 38 Iowa, 272; Hoskins v. Car- ter 66 Iowa, 638, 24 N. W. 249 Block & PoUak Iron Co. v. Holcomb- Brown Iron Co., 105 Iowa, 624, 67 Am. St. Rep. 319, 75 N. W. 499; Blaekman v. Henderson (Iowa), 56 L. E. A. 902, 90 N. W. 825; Jackson T. Eeid, 30 Kan. 10, 1 Pac. 308; Kruse v. Conklin, 82 Kan. 358, 36 L. B. A. (N. S.) 1124, and note; 108 Pae. 856; Spoflford v. Weston, 29 Me. 140; Sidelinger v. Bliss, 95 Me. 316, 49 Atl. 1094; Hooper v. Leavitt, 109 Me. 70, 82 Atl. 547; Shotwell v. Harrison, 22 Mich. 410; Atwood v. Bearss, 45 Mich. 469; Hull v. Diehl, 21 Mont. 71, 52 Pae. 782, and cases cited; Morris v. Daniels, 35 Ohio St. 406; Advance Thresher Co. v. Esteb, 41 Or. 469, 69 Pac. 447; Jennings v. Lentz, 50 Or. 483, 29 L. E. A. (N. S.) 584, 93 Pae. 327 (attaching creditor claiming as iona fide purchaser) ; Eyle v. Davidson (Tex". Civ. App.), 116 S. W. 823; Lamar v. Hale, 79 Va. 147; Snyder v. Grandstaff, 96 Va. 473, 70 Am. St. Eep. 863, 31 S. E. 647; Crane's Nest Coal & Coke Co. V. Virginia Iron, Coal & Coke Co., 108 Va. 862, 62 S. E. 954, 1119; Liquid Carbonic Co. v. Whitehead, 115 Va. 586, 80 S. E. 104; Scott v. Farnam, 55 Wash. 336, 104 Pac. 639; Daly V. Eizzutto, 59 Wash. 62, 29 1571 OONCEENING BONA FIDE PUECHASB. § 760 prior unrecorded deed or mortgage, which was, however, recorded before his own deed or mortgage to his own grantee. The essential facts giving rise to such a ques- tion are as follows : A gives a deed to B, which for a while is unrecorded. A subsequently conveys the same land to C, who pays a valuable consideration, but who has actual notice of B's prior deed, and C puts his deed on record first. B then, after the recording of C 's deed, puts his own prior deed on record. After the record of B 's deed; C con- veys the land to D, who pays a valuable consideration, and has no actual notice of B's deed, and only the constructive notice given by the record. The facts might be varied by supposing mortgages in place of deeds. Which has the priority, B or D? There are earlier decisions which give the precedence to D.^^ These decisions, however, have guage of the local statutes, that notice, whether actual or constructive, of a prior unrecorded instrument shall not affect the precedence acquired by the earlier record of a subsequent conveyance or mortgage.* It has al- ready been shown (ante, § 722) that in Ohio a docketed judgment has pre- cedence over a prior unrecorded mortgage : Bercaw v. Cockerill, 20 Ohio St. 163; Bloom v. Noggle, 4 Ohio St. 45; Mayham v. Coombs, 14 Ohioi 428^ Stansell v. Roberts, 13 Ohio, 148, 42 Am. Dec. 193; Robinson v. Wilr loughby, 70 N. C. 358; Fleming v. Burgin, 2 Ired. Eq. 584. §760, 1 Connecticut V. Bradish, 14 Mass. 296, 303; Trull v. Bigelow, 16 Mass. 406, 8 Am. Dec. 144; Glidden v. Hunt, 24 Pick. 221; Ely v. "Wil- cox, 20 Wis. 523, 530, 91 Am. Dec. 436; and see 2 Lead. Cas. Eq., 4th L. B. A. (N. S.) 467, 109 Pac. 276; money, when the deed recites its Lohr V. George, 65 W. Va. 241, 64 payment. S. E. 609; Cassidy Fork Boom & §759, (e) But if a mortgage is ex- Lumber Co. V. Terry, 69 W. Va. 572, pressly taken subject to a prior 73 S. E. 278. mortgage, it is postponed, though In Wynn v. Eosette, 66 Ala. 517, the prior mortgage was not entitled it is held that when a defendant to record: Coe v. Columbus, P. & I. sets lip a purchase for a valuable E. Co., 10 Ohio St. 372, 75 Am. Dec. consideration without notice in de- 518. fense to a bill to enforce a vendor's § 760, (a) See, also, Morse v. lien, the burden of proof is on him Curtis, 140 Mass. 112, 54 Am. Eep. to prove payment of such consid- 456; Delay v. Truitt (Tex. Civ. eration; but he is not required to App.), 182 S. W. 732; Bowman v. disprove notice of the non-payment Holland, 116 Va. 805, 83 8. E. 393. by his grantor of the purchase- §760 EQUITY JXTEISPKUDENCE. 1572 been overruled in the same states in which they were given, and it is now settled by an overwhelming weight of au- thority that B would have the precedence over D. It is plain that C got no title by his first recording, because he had actual" notice. When C conveyed to D, if B's deed had not then been on record, and D had put his own deed on record before B's deed was recorded, D would have obtained the title. But the record of B 's deed prior to the conveyance to D cut off the latter 's precedence, because D could claim nothing from C's first record, by reason of C's having actual notice.^ ^ This result evidently . rests upon Am. ed., Am. notes, 40, 41, 212. The reason given is, that D, on taking his deed or mortgage, and on making search, would find an unbroken chain of record title from himself through C up to A, and that he was under no obligation to go out of such a chain of record title, and search for deeds or mortgages to persons hy or through whom he did not derive his title. § 760, 2 1 Jones on Mortgages, sees. 574, 575 ; Flynt v. Arnold, 2 Met. 619; Maboney v. Middleton, 41 Cal. 41, 50; Fallass v. Pierce, 30 Wis. 443; English v. Waples, 13 Iowa, 57; Sims v. Hammond, 33 Iowa, 368; Van Rensselaer v. Clark, 17 Wend. 25, 31 Am. Dec. 280 ; Jackson v. Post, 15 Wend. 588; Ring v. Steele, 3 Keyes, 450; Schutt v. Large, 6 Barb. 373; Goelet v. McManus, 1 Hun, 306. In Flynt v. Arnold, 2 Met. 619, Shaw, C. J., said : "Suppose, for instance, A conveys to B, who does not immediately record his deed. A then conveys to C, who has notice of the prior unregistered deed to B ; C's deed, though first recorded, will be postponed to the prior deed to B. Then, suppose B puts his deed on record, and afterwards C conveys to D. If the above views are correct, D could not hold against B ; not in the right of C, because, in consequence of actual knowledge of t]je prior deed, C had but a voidable title; and not in his own right, because, before he took his deed, B's deed was on record, and was constructive notice to him of the prior conveyance to B from A, under whom his title is derived. But, in such a ease, if, before B §760, (b) See, also, Pairish v. v. Garnett, 72 Miss. 78, 16 South.. Mahany, 10 S. D. 276, 66 Am. St. 390. See, also. White v. Moffett, 108 ReT'. 715, 73 N. W. 97, reviewing the Ark. 490, 158 S. W. 505; Ryle v. cases; S. C, 12 S. D. 278, 76 Am. St. Davidson (Tex. Civ. App.), 116 S. W. Eep. 604, 81 N. W. 295 (burden of 823. The Massachusetts courts, how- proof rests on D. to show that C. ever, have returned to their former was a hona -fide purchaser); Erwin v. rule: Morse v. Curtis, 140 Mass. 112, Lewis, 32 Wis. 276; Cook v. French, 54 Am. Eep. 456. 96 Mich. 5-25, 56 N. W. 101; Woods 1573 C0NCEK5riNG BONA FIDE PXTECHASE. §760 the fact— ^and there all of the decisions place it— that C took with actual notice, and so could acquire no precedence by his earliest record. If .this fact were otherwise, if C had no notice and first put his deed or mortgage upon recorded his deed, C had conveyed to D without actual notice, then D, having neither actual nor constructive notice of the prior deed, would take a good title. And as ~D, in such case, would have an indefeasible title himself against B's prior deed, so, as an incident to the right of property, he could convey a good and indefeasible title to any other per- son, although such grantee should have full notice of the prior conveyance, from A to B. Such purchaser, and all claiming under him, would rest on D's indefeasible title, unaffected by any early defect of title, by want of registration, which had ceased to have any effect on the title, by a con- veyance to D without notice, from one having a good apparent record title." Shaw, C. J., criticises the earlier Massachusetts cases, and adds some very valuable remarks upon the general policy and operation of the recording acts, and the duties of purchasers in searching the records." The New York case of Van Rensselaer v. Clark, 17 Wend. 25, 31 Am. Dec. 280, is a leading authority in support of the proposition contained in the text, and has been followed by all the other decisions in the same state. §760, (c) See, also, the following extract from tlie opinion of Dixon, C. J., in Fallass v. Pierce, 30 Wis. 443: "Now, the reason why the pur- chaser from C, in the case above supposed, who buys after the re- cording of the prior deed to B.from A, also the grantor of C, is bound to take notice of B's deed, or of .the fact that the true title is or may be in B, is that such purchaser, in look- ing upon the statute, sees that B's prior and paramount title at com- mon law is not to be divested, or his deed avoided, except upon the happening of three distinct events or contingencies, the absence of either of which will save the title of B, or prove fatal to that claimed by C,- or which may bo acquired by a purchaser from him. Those events or contingencies are: First, good faith in C, or the purchase by him without nOtiee[;of the ;grev:i'ou.S^lconi' veyance to B; second, the payment of a valuable consideration by C; and, third, the first recording of C's deed. The purchaser from C, look- ing upon the record, sees — first, the prior conveyance from. A to B; and, second, the first recording of C'a deed. Of these two facts the rec- ord informs him, but of the other two facts requisite, under the stat- ute, to constitute valid title in C, as against the prior purchaser, B, the recdrd gives him no informa- tion. For knowledge of the other two facts, namely, the good faith of C, and valuable consideration paid by him, the purchaser from, or , any one claiming title under, C, as against B or his grantees, must inquire else- where than by the record, and is bound, at the peril of his title, or of, any right which can be granted by or claimed undef C, to ascertain the ^a)Jistenioe:-of ithosfe: facts.'' ; § 760 EQUITY JTJBISPKTJDBNOE. 1574 record, he would then clearly obtain a perfect title or su- perior lien over B's prior but unrecorded deed. That being. the case, and C having obtained an indefeasible title, if he should -then convey to D, who had notice, the latter, by virtue of another settled rule, would succeed to his grantor's rights, and also acquire a like perfect title, as Chief Justice Shaw expressly states in the passage quoted.^ The same would be true in the succession of purchasers, each obtaining a record but each affected with notice. As soon as any one in the series purchases for value and with- out notice, and places his conveyance upon record, he ac- quires a title or lien secure as against the earliest unre- corded deed to B. This necessarily leads to another most In Mahoney v. Middleton, 41 Cal. 41, the supreme court of California squarely meets the question, and decides in full accordance with the fore- going Massachusetts and New York cases. The same rule applies, not only to one, but to any number of successive grantees and grantors who have put their conveyances on record, but who have had notice of a prior unrecorded deed or mortgage, or who have not paid a valuable considera- tion. In the recent case of Tallass v. Pierce, 30 Wis. 443, Dixon, C. J., discussing the same general question, and adopting the same supposition as that given in the text and used by Shaw, C. J., said: "If, in the ease supposed, C took his deed with knowledge of the prior conveyance to B, and had then conveyed to D, who had like knowledge, and D should con- vey to E, and so on, conveyances should be executed to the. end of the alphabet, each subsequent grantee having knowledge of B's prior right, and all of their conveyances being recorded, yet then, if B should record his deed before the last grantee with knowledge, and Z should make con- veyance, the purchaser from Z would be bound to take notice of B's right, and of the relations existing between him and all the subsequent pur- chasers from C to Z, inclusive. And in the same case, if Z should sell to a purchaser in good faith for value from him, yet if B should get his conveyance recorded before that of such purchaser, his title would be pre- ferred, because of such first record. And it is manifest that the same result would follow if in the case supposed none of the subsequent grantees, from C to Z, inclusive, paid any valuable consideration for the land, or, if in the case of each successive grantee, his title was defective and in- valid as against B, either by reason of his knowledge of B's title, or be- cause he was a mere volunteer, paying no consideration whatever for the (Conveyance." §760, (d) See, also, Hooper v; Leavitt, 109 Me. 70, 82 Atl. 547. 1575 OONCEBNING BONA FIDE PURCHASE. § 761 imporlant rule concerning notice in connection witli re- cording, and the extent to which a record is constructive notice to subsequent purchasers and encumbrancers. § 761. Break in the Record Title— When Purchaser is Still Charged With Notice of Prior Unrecorded Title. — A purchaser or encumbrancer is not, in general, bound to search the records for encumbrances as against a title which does not appear on the jrecord. From the general policy of the recording acts to protect purchasers and en- cumbrancers against prior unrecorded deeds and mort- gages, it necessarily follows that the title upon record, in the absence of notice cdiunde, is the purchaser's protection- As has been shown in the section upon notice,^ *• the record of a conveyance or of a mortgage is a constructive notice to those, and to those only, who must trace their title from or through the grantor, or the mortgagor by whom the deed or mortgage was executed. If there is a break in the chain of record title, the records will not enable the purchaser to supply the missing links and to connect the broken parts by any systematic search. If a purchaser has traced the title by the records regularly up or down to A, and the record does not show the title out of A, then the statutes render A's title a protection to the purchaser under it. As a general rule, therefore, if the records show a regular chain of conveyances from A to B, from B to C, the record of a mortgage or deed of the same land from B, prior to the date of the conveyance by which he received the title from his grantor, A, would not affect a purchaser or mortgagee from C with notice.^ b Notwithstanding the § 761, 1 See supra, § 658. §761, 2 Page v. Waring, 76 N. Y. 463, 467-469; Cook v. Travis, 20 N. Y. 400; Fanners' Loan & T. Co. v. Maltby, 8 Paige, 361; Losey v. § 761, (a) See, also, Traphagen v. text is cited and followed in Bright Irwin, 18 Neb. 195, 24 N. W. 684, v. Buckman, 39 Fed. 243. See citing § 761 of the text. Wheeler v. Young (Conn.), 55 Atl. §761, (b) This principle is fur- 670; Higgins v.. Dennis, 104 Iowa, ther explained in § 658, sv,vra. The 605, 74 K W. 9; Schooh v. Birdsall, § 761 EQUITY JXJBISPEUDENCE. 1576 generality of this rule, a purchaser or encTimbrancer may be bound to search for encumbrances as against a title not appearing of record, and may therefore be affected with notice by such encumbrances. Thus in the case last sup- posed, if before the conveyance to B from A, B had held Simpson, 11 N. J. Eq. 246; Calder v. Chapman, 52 Pa. St. 359, 91 Am. Dec. 163 ; Wing v. McDowell, Walk. Ch. 175. The late case of Page V. Waring, 76 N. Y. 463, clearly illustrates this rule. The controversy- was between two titles. Peter Poillon owned the land in 1827. In 1827 he gave a deed of it to one Hart, but this deed was not recorded until 1864. In 1830, Hart executed a deed to one Greenly which was recorded at once. In 1863, a deed from Greenly's executors was given to the plain- tiff and recorded. "This is the chain of the plaintifE's title, upon which he bases his right to recover, and if there was nothing to break this chain, his right would be plain enough.'' The following is the chain of defend- ant's title : In 1861, Peter Poillon gave a deed of the same land to Gold- smith, which was recorded immediately. In 1862, Goldsmith gave a deed of an undivided half of the land to Marks, which was recorded in Sep- tember of that year. In March, 1863, Goldsmith and Marks gave a deed of the land to Morton, which was recorded during the same month. In 1869, Morton conveyed to Fox, and immediately after. Fox to the defend- ant, both deeds being immediately put on record. "It will be seen that the defendant has a regular chain of title from Poillon, and that all the deeds of his claim, down to and including the deed to Morton, were re- corded before the deed from Poillon to Hart was recorded; and this priority upon the records presents the question to be considered in deter- mining the rights of the parties." Earl, J., said (p. 468) : "It matters not that the deed from Hart to Greenly was recorded before the deeds iu the defendant's chain of title; because if the defendant, by reason of the record of the deeds under which he holds, has priority over the deed to, Hart, and a title good as against that deed, then there is a break in the plaintiff's chain of title, and no title could be derived from Hart that would be good as against the deferjdant : Cook v. Travis, 20 N. Y. 400. And it matters not that all the deeds in the plaintiff's chain were recorded before the conveyance by Morton to Fox, and by Fox to the defendant; because if Morton was protected by the recording act, and had good title under such act, then the persons taking title under him were also pro- tected: Webster v. Van Steenbergh, 46 Barb. 211; Wood v. Chapin, 13 48 Minn. 441, 51 N. W. 382; Ford v. 34 N. J. Eq. 229; Oliphant v. Burns, Unity Cliurcli Society, 120 Mo. 498, 146 N. T. 218, 40 N. E. 980; Cole- 41 Am. St. Rep. 711, 23 L. E. A. 561, man v. Eeynolds, 181 Pa. St. 317, 37 25 S. W. 394; Boyd v. Mundorf, 30 Atl. 543. N. J. Eq. 545; Bingham v. Kirkland, 1577 CONCEKNING BONA FIDE PURCHASE. § 761 feome estate, legal or equitable, whicli was a mortgageable interest, though not the legal fee, and had given a mortgage while holding such estate, which was put on record, the mortgage being executed and recorded before he received the deed of the fee from A, then if the purchaser from C had notice of the fact that B held such an estate, he would be bound to search the records for any mortgage made by B while holder thereof, and would be affected with con- structive notice by the record of such a notice. The equi- table estate of a vendee in possession under an executory contract for sale, even in states where the contract is not to be recorded, and even when it is verbal,. is such a mort- gageable interest; and if the vendee gives a mortgage which is recorded before he obtains a conveyance of the fee, a purchaser who has notice of his prior equitable in- terest must search for the mortgage; it would take prece- dence over his own conveyance or encumbrance.^ The notice of such mortgageable interest might be actual or constructive; and an example of the latter kind would be that given by recitals in a deed through which the subse^ quent purchaser must derive his title.^ What is notice, in its various forms and species, has been considered in a former section. ^ N. T. 509, 67 Am. Dec. 62 ; Hooker v. Pierce, 2 Hill, 650." After quoting the sections of the statutes, he adds: "Under these acts the unrecorded deed, though prior in date, has no effect as to the subsequent deed first recorded, and the subsequent deed conveys the title as if the first deed had not been executed : Hetzel v. Barber, 69 N. Y. 1. §761, 3 Crane v. Turner, 7 Hun, 357; affirmed, 67 N. Y. 437. § 761, 4 Crane v.- Turner, 7 Hun, 357; 67 N. Y. 437. Thus the subse- quent purchaser or encumbrancer must derive his title not only through the deed from B to C, but also through that from A to B. If the latter deed should contain a recital that the grantee B had been in possession of the land for a certain period of time prior to the execution of the deed, under a contract for the sale of the land, the purchaser would, by such recital, be charged with notice of B's equitable interest, and that it was a mortgageable interest, and would be bound to search for encumbrances created by B during the entire period while he was in possession by vir- tue of his equitable interest as stated by the recital. § 761, 5 See ante, sec. V., §§ 591-676. § 762 EQUITY JUEISPETJDENCE. 1578 § 762. III. Good Faith Necessary. — The most general statement of the doctrine describes the purchase as one, made in good faith for a valuable consideration and with- out notice. It is true that in most instances the want of good faith consists in the completion of the purchase after the party has been charged with notice, for such conduct is regarded by equity as constructively fraudulent. ^ The requisite of good faith extends much further. A purchaser may part with a valuable consideration, may have no notice of any opposing claim, and yet lack the good faith which is essential to render his position a protection, and his de- fense available. It is an elementary doctrine, therefore, that, independently of notice and valuable consideration, any want of good faith on the purchaser's part, any inequi- table conduct of his, such as fraud committed in the trans- action against his own immediate vendor or grantor, or a participation in an intended fraud against the creditors of his vendor or grantor, or his obtaining the transfer through misrepresentations or concealments which are inequitable, although not amounting to positive fraud, and the like, will destroy the character of a bona fide purchase, and defeat the protection otherwise given to i;t. The party claiming to be a bona fide purchaser must come into a court of equity with absolutely clean hands.^ » § 762, 1 See ante, § 591. § 762, 2 Cram v. Mitchell, 1 Sand. Ch. 251. There are some old cases in which a so-called bona fide purchaser, through fraud or violence, was pro- tected : See Culpepper's Case, cited in Sanders v. Deligne, Freem. Ch. 123; Fagg's Case, cited in 2 Vem. 701; 1 Cas. Ch. 68; Harcourt v. Knowel, cited in 2 Vern. 159; but they have long been overruled: See Garter v. Carter, 3 Kay & J. 617, 636, 637; ZoUman v. Moore, 21 Gratt. 313, 321. §762 (a) This paragraph is quoted 656, 22 S. W. 623; Schneider v. Sell- in full in Scoggin v. Mason, 46 Tex. ers (Tex. Civ. App.), 81 S. W. 126; Civ. App. 4S0, 103 S. W. 831. The Houston Oil Co. of Texas v. Hayden, text is quoted in Young v. Schofield, 104 Tex. 175, 135 S. W. 1149. See, 132 Mo. 650, 34 S. W. 497; and cited, also, Laprad v. Sherwood, 79 Mich. Connecticut Mut. Life Ins. Co. v. 520, 44 N. W. 943 (mortgage ob- Smith, 117 Mo. 261, 38 Am. St. Eep. tained by fraud or perjury of agent) ; 1579 CONCEBNING BONA riDB PTTBOHASE. §§763,764 §763. Third. Effects of a Bona Fide Purchase as a Defense. — Having explained the rationale of the doctriQe, and ascertained what elements enter into the conception of a bona fide purchase, I pass to consider with somewhat more of detail the effects which it produces by way, of a defense in equitable suits, — the protection which it affords to a defendant. Pursuing the order, already mentioned, adopted by Lord "Westbury, the various cases in which the defense will prevail may be collected into three classes: 1. Where the holder of a legal estate appeals to the auxili- ary jurisdiction of equity for relief; 2. Where the holder of an equitable estate seeks relief against a subsequent pur- chaser of the legal estate, or against a purchaser of a subsequent equitable estate who has obtained the legal es- tate; 3. Where the holder of a mere "equity," or right to some distinctively equitable relief, . as distinguished from an equitable estate, seeks to enforce it against a subsequent purchaser of either a legal or an equitable estate. §764. I. Suits by Holder of the Legal Estate Under the Auxiliary Jurisdiction of Equity. — As cases falling within this class are very infrequent in the United States, no detailed discussion seems to be necessary. The kinds of suits embraced within the term "auxiliary jurisdiction" as here used are those for discovery, proper, those for the delivery up of title deeds in connection with discovery, those to prevent a defendant in ejectment from setting up outstanding terms to defeat thfe action, and those to per- petuate testimony. It has been settled from an early day Koebel v. Doyle, 256 HI. 610, 100 South. 147; National Mut. B. & L. N. E. 154 (land taken in settlement Ass'n v. Culberson (Ala.), 25 South. of a criminal charge). In some 173; Southern Home B. & L. Ass'n states it is held that if there be v. Eiddle (Ala.), 29 South. 667; any usury in the debt secured by a Clark v. Johnson, 133 Ala. 432, 31 mortgage, that vitiates the defense South. 960; Hoots v. Williams,' 116 of a bona fide purchase by thp mort- Ala. 372, 22 South; 497 (but a bona gagee, and permits any equity, even fide purchaser .at the foreclosure though latent, to prevail: Smith v. sale, having no notice of the usury, Lehrman, 85 Ala. 394, 5 South. 204; is protected) ; White v. Interstate B. Meyer Bros. v. Cook, 85 Ala. 417, 5 & L;. Ass'n, 106 Ga. 146, 32'- S. B. 26. § 764 EQUITY JUEISPRUDENCE. 1580 that no suit for a discovery can be maintained by the holder of the legal estate in order to assist him in maintaining his title against a bona fide purchaser of an equitable es- tate, further than as to facts relevant to the question whether the defendant had notice. After such purchaser has sufficiently denied notice, he will not be compelled to make discovery in aid of plaintiff's title.^* It is equally well settled that the holder of the legal estate cannot com- pel a delivery up of the title deeds by a bona fide purchaser of an equitable estate — for example, an equitable mort- gagee — even though some other relief, such as a foreclos- ure, may have been granted.^ The defense likewise pre- § 764, 1 Burlace v. Cooke, Freem. Ch. 24, per Lord Nottingham ; Par- ker V. Blythmore, Prec. Ch. 58, per Sir John Trevor, M. R. ; Basset v. Nosworthy, Cas. t. Finch, 102; 2 Lead. Cas. Eq. 1, per Lord Nottingham (this is the leading case. An heir at law sued a purchaser from a devisee of plaintiff's ancestor seeking to discover a revocation of the will, and also to set aside certain outstanding terms which defendant hought in order to protect his equitahle title. The defense of bona fide purchase was sustained against both reliefs) ; Jerrard v. Saunders, 2 Ves. 187, 454^ per Lord Loughborough (a bill for discovery only). § 764, 2 Wallwyn v. Lee, 9 Ves. 24 (a life tenant mortgaged property in fee, fraudulently concealing the fact of his mere life estate and pre- tending to be owner in fee, and delivered the title deeds to the mortgagee. On his death the remainderman sued for a discovery and to have the deeds surrendered. Lord Eldon sustained the defense of bona fide pur- cnase) ; Joyce v. De Moleyns, 2 Jones & L. 374 (an heir at law of a de- ceased owner obtained possession of the title deeds, and deposited them with bankers as security by way of equitable mortgage for a loan. The real title was in a devisee from the deceased owner. A suit was brought on behalf of the devisee to compel a delivery up of the deeds by the bankers, but the relief was refused by Chancellor Sugden) ; Heath v. Crealock, L. R. 10 Ch. 22, 28 (a mortgagor, fraudulently concealing the fact of the outstanding mortgage, which had conveyed the legal estate, sold and conveyed the property to the defendant and handed over the title deeds. The prior mortgagee sues for a foreclosure and a delivery up of the deeds. While the foreclosure was granted, the other relief was refused. It should be noticed that the defendant, although receiving a conveyance purporting to transfer the legal estate, only obtained an equitable estate, since the legal estate had already been vested in the prior § 764, (a) See, also, ante, § 200. 1581 CONCERNING BONA EIDE l^URCHASE. § 765 vails .in suits, unkno-w:n in this country, brought by the legal owner against a defendant who has been sued in ejectment, to restrain the latter from setting up old out- standing legal terms, in order to defeat a recovery in such action, and to set aside thos6 terms.3 Finally, it has been isaid that the defense of bona fide purchase is sufficient to defeat a suit for the perpetuation of testimony; but with respect to the correctness of this conclusion there is at least some doubt.* i § 765. Exceptions and Limitations. — There are, how- ever, well-considered and authbritative decisions, in which the defense has not been permitted to prevail against the holder of the legal estate suing .for relief. Although these decisions were not in express terms placed by the judges mortgagee, the plaintiff; also that the defense of bona fi^e purchase un- der these circumstances did not prevent the main relief of a foreclosure) ; Waldy V. Gray, L. R. 20 Eq. 238. See, however, Newton v. Newton, L. R. 6 Eq. 135 ; L. R. 4 Ch. 143, where, under the special facts, Lord Romilly drew a distinction, and ordered the deeds to be surrendered. The opjr i of Lord Hatherley in this case on appeal is valuable as drawing the lin^ between the cases of successive equities where the priority is determined by order of time, and the cases where the purchaser of a subsequent equitable estate may set up the defense of bona fide purchase.** § 764, 3 Basset v. Nosworthy, Cas. t. Finch, 102; Golebom v. Alcock, 2 Sim. 552. § 764, 4 The reasons which shield the purchaser from making a dis- covery which shall undermine his title do not seem to apply to a mere suit for the perpetuation of testimony. Bechinall v. Arnold, 1 Vern. 354, and Jerrard v. Saunders, 2 Ves. 454, 458 (a dictum of Lord Lough- borough), either sustain or seem to favor the defense; per contra, see Dursley v. Fitzhardinge, 6 Ves. 251, 263, 264, per Lord Eldon. See Cooper's Eq. PI. 56, 57, 283, 287. §764, (fc) Since the passage of the without notice: Cooper v. Vesey, L. Judicature Act in England, these E. 20 Ch. Div. 611; see, also, the rules have been modified. The Chan- quotation from the opinion in Ind, eery Division of the High Court of Coope & Co. v. Emmerson, L. E. 12 Justice now'have jurisdiction, on the App. Cas. 300, cited ante, vol. 1, application of the legal owner of S 200, whsre the changes effected by title deeds, to order them to be de- the Judicature Act, and the reasons livered up by a purchaser for value therefor, are fully stated. § 765 EQUITY JUEISPBTJDENCE. 1582 rendering them upon the ground now mentioned, yet the general doctrine upon which they can alone be sustained and harmonized with the current of authority is that first explained by Lord Westbury, and already stated.^ Where the suit is one belonging to the concurrent jurisdiction of equity and law, and is brought by the holder of a legal title to obtain a relief purely legal, the defense of bona fide pur- chase will not prevail, because it would not prevail at law, and to allow it in equity would simply be an abdication of its rightful jurisdiction by a court of equity, and a putting the plaintiff to the unnecessary expense and delay of a second action at law. Such suits especially are those brought to establish and recover dower, and those brought to establish tithes in England.^ »• Whatever difference of opinion there may be as to the correctness of this limita- tion, it is fully settled in England, independently of any statutes concerning registration, that the defense of bona fide purchase cannot avail to defeat a suit for foreclosure brought by a prior legal mortgagee against a su"bsequent equitable mortgagee or purchaser of an equitable estate who has paid a valuable consideration without notice of § 765, 1 See supra, § 742. § 765, 2 Williams v. Lambe, 3 Brown Ch. 263, per Lord Thurlow (dower) ; Collins v. Archer, 1 Buss. & M. 284, per Sir John Leach (tithes), as explained by Lord Westbury in Phillips v. Phillips, 4 De Gex, F. & J. 208, 217. These decisions themselves, as well as the principle laid down by Lord Westbury, do not stand unchallenged. Their correct- ness has been denied by some; the explanation given by Lord Westbury has been rejected by others : See Bowen v. Evans, 1 Jones & L. 178, 263 ; Attorney-General v. Wilkins, 17 Beav. 285, 292; Payne v. Compton, 2 Younge & C. 457; Blain v. Harrison, 11 111. 384. Mr. Roper strongly upholds the correctness of the decisions and the ground upon which they , are rested : 1 Roper on Husband and Wife, 446 ; while Lord St. Leonards, in the later editions of his work on vendors, of course opposes the opinion of Lord Westbury. § 765, (a) See, also, Mitchell v. S. C. 583, 6 S. E. 818 (dower) ; Ind, Farrisb, 69 Md. 235, 14 Atl. 712 Coope & Co. v. Emmerson, L. B. 12 (dower); Sandley v. Caldwell, 28 App. Cas. 300; ante, % 200, note. 1583 CONCEKNING BONA FIDE PURCHASE. § 766 the prior mortgage.^ The system of recording necessarily hinders the operation of this particular rule in the United States; but it is based upon principle, and in the absence of recording acts would doubtless be adopted by our courts. § 766. II. Suits by the Holder of an Equitable Estate or Interest Against the Purchaser of the Legal Estate. — This application of the doctrine includes not only pur- chasers who receive a conveyance of the legal estate at the time and as a part of their original and single pur- chase, but also those who, having originally purchased and acquired merely an equitable estate, afterwards obtain a conveyance of the outstanding legal title from the one in whom it was vested.^ It has even been extended to such purchasers of an equitable estate, who have not yet actu- ally acquired the legal title, but who have the best right to call for it. Cases in which this last phase of the doc- trine can be properly applied are, from the nature of our modes of dealing with real estate, very infrequent in the United States. The common occasions for a resort to the doctrine in England, where it is little affected by statutes of registration, are the cases of a prior equitable mort- gage, and a subsequent sale and conveyance of the land by the mortgagor, he concealing the fact of such existing mortgage; of several consecutive mortgages of the same land, the later ones being taken in ignorance of the earlier ; successive conveyances of his equitable estate by the same cestui que trust, the later purchaser being ignorant of the earlier transfer; and purchasers from a trustee in viola- tion of his trust. In the United States the recording- system has greatly modified the practical operation of the § 765, 3 Heath v. Crealock, L. R. 10 Ch. 22, 28; Waldy v. Gray, L. R. 20 Eq. 238; Finch v. Shaw, 19 Beav. 500; affirmed sub nom. Colyer v. Finch, 5 H. L. Cas. 905. For the general doctrine upon which such cases must be rested, as laid down by Lord Romilly, see quotation supra, in note under § 742. § 766, (a) The text is cited in (where, however, the purchaser ac- United States v. Detroit Timber & quired the outstanding legal title li. Co. (C. C. A.), 131 Fed. 668 before receiving notice). § 767 EQUITY JUEISPEUDENCB, 1584 doctrine, since the defendant must generally show, in or- der to obtain protection, that he has recorded the instru- ment by which his title was acquired. With this additional feature, the instances most frequently coming before the American courts of equity are cases of a prior unrecorded mortgage and a subsequent recorded conveyance, a prior anrecorded and a subsequent recorded mortgage, a prior contract of sale and a subsequent recorded conveyance or mortgage, a prior vendor 's lien or other equitable lien and a subsequent recorded conveyance or mortgage, and a con- veyance by a trustee of land subject to a prior trust, the trust being more often constructive or resulting than ex- press. The case of a prior unrecorded deed purporting to convey the legal estate, and a subsequent recorded deed depending wholly upon the recording acts, does not belong to the equitable jurisdiction. § 767. Legal Estate Acquired by the Original Purchase. In the first place, it is the very central portion of the doc- trine, to which all others have been additions, that where the defendant acquired the legal estate at the time and as a part of his original purchase, the fact of his purchase having been bona fide for value and without notice is a perfect defense in equity to any suit brought by the holder of a prior equitable estate, lien, encumbrance, or other in- terest, seeking either to establish and enforce his equitable estate, lien, or interest, or to obtain any other relief with respect thereto which can be given by a court of equity, i ^ . § 767, 1 See Basset v. Nosworthy, 2 Lead. Cas. Eq., 4th Am. ed., 1, 4, and notes; Pileher v. Rawlins, L. R. 7 Ch. 259, 268, 269, per James, L. J.; Willoughby v. Willoughby, 1 Term Rep. 763, 767, per Lord Hardwieke, §767, (a) The text is quoted in E. 934; Hennessy v. Blair, 107 Tex. Sengfelder v. Hill, 21 Wash. 371, 58 39, 173 S. W. 871. See some in- Pae. 250; Conn v. Boutwell, 101 structive observationa on the doe- Miss. 353, 58 South. 105; Blair v. trine by Stayton, C. J., in Patty v. Hennessy (Tex. Civ. App.), 138 S. Middleton, 82 Tex. 586, 17 S. W. 909.- W. 1076; and cited in Freeman v. Forged and Undelivered Deeds. — Pnllen,, 130 Ala. 653, 31 South. 451; The doctrine of bona -fide purchase Eobbius^v. Moore,^ 129 lU. 30, 21 N. does not ajply for the protee,tioa 1585 CONCEKNIITG BONA FIDE PUECHASB. §767 A mortgagee of land may be a bona fide purchaser within the meaning of the general doctrine. In some states every mortgagee, subsequent as well as prior, acquires the legal and other cases cited ante, in vol. 1, under § 200.* In this country, it must be remembered that the defense is only made available by the de- fendant's having first put his title deed upon record. The following are some illustrations merely taken from innumerable decisions: A bona fide of one who claims through a forged deed, since his title is a nullity: JBird V. Jones, 37 Ark. 195; Camp V. Carpenter, 52 Mich. 375, 18 N. W. 113 (assignee of forged mortgage); Crawford v. Hoeft, 58 Mich. 1, 23 N. W. 27, 24 N. W. 645, 25 N. W. 567, 26 N. W. 870; McGinn v. Tobey, 62 Mich. 252, 4 Am. St. Rep. .848, 28 N, W. 818; Gross v. Watts, 206 Mo. 373, 121 Am. St. Rep. 662, 104 S. W. 30; Lee v. Parker, 171 N. C. 144, 88 e. E. 217; Smith v. Markland, 223 Pa. St. 605, 132 Am. St. Rep. 747, 72 Atl. 1047 (forged- deed with ac knowledgjnent obtained by fraud) Abee v. Bargas (Tex. Civ. App.) 65 S. W. 489. See, also, post, § 918, Blair v. Hennessy (Tex. Civ. App.) 138 S. W. 1076. For similar rea- sons, it is held, by the weight of au- thority, that one who claims through a deed which was placed in escrow by the grantor therein, and fraudu- lently abstracted and recorded by the grantee, cannot have the benefit of his bona fide purchase: Dixon v. Bristol Savings Bank, 102 Ga. 461, 66 Am. St. Rep. 193, 31 S. E. 96, and cases cited; Mays v. Shields, 117 Ga. gl4, 45 S. E. 68; Foreum v. Brown, 251 111. 301, 96 N. E. 259; Jackson v. Lynn, 94 Iowa, 151, 58 Am. St. Rep. 386, 62 N. W. 704; Everts v. Agnes, 4 Wis. 343, 65 Am. ■ Dec. 314, 6 Wis. 453; unless there are circumstances by which the -grantor is-estopped:-Mays V. Shields, 11—100 117 Ga. 814, 45 S. E. 68; Johnson v. Erlandsop, 14 N. D. 518, 105 N. W. 722 (estopped by allowing grantee's apparent ownership to go unchal- lenged an unreasonable length of time); Shurtz v. Colvin (Ohio St.), 45 N. E. 527, See, also, Allen v. Ayer, 26 Or. 589, 39 Pac. 1, and cases cited (6ona fide purchaser not pro- tected, where deed fraudulently de- livered by agent); StefEan v. Milmo Nat. Bank, 69 Tex. 513, 6 S. W. 823 (holla fide purchaser not protected, when possession of undelivered deed had been fraudulently obtained); Burns v. Kennedy, 49 Or. 588, 90 Pac. 1102 (same); and it has been held that, since a conveyance by a married woman passes no legal title, the fact that the records do not dis- close that a grantor was a married woman does not render one claim- ing through such conveyance a iona fide purchaser: Daniels v. Mason, 90 Tex. 240) 59 Am. St. Rep. 815, 38 S. W. 161, reversing 36 S. W. 1113. So, the right of an infant to avoid his deed may be exercised against a iona fide purchaser from his gran- tee: Conn V. Boutwell, 101 Miss. 353, 58 South. 105. As to purchaser from one claiming under a decree which is void, see Kwentsky v. Sirovy, 142 Iowa, 385, 121 N. W. 27. § 767, (l>) See, also, Taylor v. Lon- don and County: Banking Co., [1901] 2 Ch. 231, §767 EQUITY JUEISPBUDBNCB. 1586 estate as against the mortgagor. In other states, although mortgages create only an equitable lien, they are expressly purchaser from a trustee of land subject to a constructive or resulting trust is protected against the claims of the beneficiaries : " Wilson v. West- ern etc. Co., 77 N. C. 445; Bass v. Wheless, 2 Tenn. Ch. 531; Fahn v. Bleckley, 55 Ga. 81; Gray v. Coan, 40 Iowa, 327; Maxwell v. Campbell, 45 Ind. 360 (purchaser at judicial sale by a guardian is protected against claims by the wards). Against prior liens. -^ Burehard v. Fair Haven, 48 Vt. 327 (attachment lien) ; Beall v. Butler, 54 Ga. 43 (laborer's lien) ; Jones V. Lapham, 15 Kan. 540 (equitable lien). Against other equitable interests:'' Eldridge v. Walker, 80 111. 270; Farmers' Nat. Bank v. §767, (c) Against Eesulting or Constructive Trust. — See, also, Mc- Neil V. Congregational Soc, 66 Cal. 105, 4 Pac. 1096 (purchase of part- nership lands standing in the name of one of the partners) ; Warnock v. Harlow, 96 Cal. 298, 31 Am. St. Rep. 209, 31 Pao. 166; Warner v. Watson, 35 Fla. 402, 17 South. 654; Gorman V. Wood, 68 Ga. 524; Parker v. Barnesville Sav. Bank, 107 Ga. 650, 34 S. E. 365; Dill v. Hamilton (Ga.), 44 S. E. 989; Richardson v. Haney, 76 Iowa, 101, 40 N. W. 115; Very V. Eussell, 65 N. H. 646, 23 Atl. 522; Bigley v. Jones, 114 Pa. St. 517, 7 Atl. 54; Harris v. Smith, 98 Tenn. 286, 39 S. W. 343; Hawley v. Geer (Tex.), 17 S. W. 914; Phillips v. Sherman (Tex. Civ. App.), 39 S. W. 187. See, also, Straeffer v. Eodman, 146 Ky. 1, Ann. Cas. 1913C, 549, 141 S. W. 742 (bona fide mortgagee pro- tected against resulting trust, though the mortgage was defectively ac- knowledged and hence incapable of record). §767, (d) Against Prior Liens. — Watkins v. Eeynolds, 123 N. Y. 211, 25 N. E. 322 (prior equitable mort- gage) ; Lynch v. Murphy, 161 U. S. 247, 16 Sup. Ct. 523 (same). See, also, Murphey v. Brown, 12 Ariz. 268, 100 Pac. 801. Against Prior Grantor's Lien. — See post, § 1253, and eases cited; Lewis V. Henderson, 22 Or. 548, 30 Pac. 324; Taylor v. Callaway, 7 Tex. Civ. App. 461, 27 S. W. 934; John- son V. Dyer, 19 Tex. Civ. App. 602, 47 S. W. 727. § 767, (e) Against Other EqnitaWe Interests. — Express trust: See post, § 1048, and cases cited; Learned v. Tritch, 6 Colo. 432; Peavy v. 'Dure, 131 Ga. 104, 62 S. E. 47. Against the "community" property interest of the wife or her heirs, in favor of a purchaser from the husband in whose name the legal title stands: Hill V. Moore, 62 Tex. 610; Edwards V. Brown, 68 Tex. 329, 4 S. W. 380, 5 S. W. 87, reviewing earlier Texas cases; Patty v. Middleton, 82 Tex. 586, 17 S. W. 909; Mangum v. White, 16 Tex. Civ. App. 254, 41 S. W. 80; . Oaks V. West (Tex. Civ. App.), 64 S. W. 1033. Holder of legal title through patentee, protected against one who afterwards establishes right to have the patent set aside because of prior entry: Bobbins v. Moore, 129 111. 30, 21 N. E. 934, citing the text. Bona fide purchaser for value from devisee, against claims of de- cedent's creditors: Van Bibber v. Eeese, 71 Md. 608, 6 L. E. A. 332, 18 Atl. 892. Bona fide purchaser of 1587 CONCEBNING BONA FIDE PTJBCHASB. § 767 embraced within tlie recording aets.^ s The doctrine is also extended, in many of the states at least, to assignments of mortgages, the assignment being regarded as a "convey- ance," and the assignee as a "purchaser." It should be observed that the effect of a bona fide purchase and a pre- vious registration is applied not only between successive assignees of the mortgage from the same assignor, but also between such an assignee and a third person who has ob- Metcher, 44 Iowa, 252; Hardin v. Harrington, 11 Bush, 367; Briscoe v. Ashby, 24 Gratt. 454; Carter v. Allan, 21 Gratt. 241; Zollman v. Moore, 21 Gratt. 313; Campbell v. Texas, etc., R. R. Co., 2 Woods, 263. Against an unrecorded defeasance:' Knight v. Dyer, 57 Me. 174, 99 Am. Dec. 765; Cogan v. Cook, 22 Minn. 137; Hart v. Farmers' etc. Bank, 33 Vt. 252; Bailey v. Myriek, 50 Me. 171; Newton v. McLean, 41 Barb. 285; Koons V. Grooves, 20 Iowa, 373. See, however, Corpman v. Baceastow, 84 Pa. St. 363. Against an unrecorded mortgage: Parker v. Jones, 57 Ga. 204; Saffold v. Wade's Ex'r, 51 Ala. 214; Williams v. Beard, 1 S. C. 309. Purchasers of chattels, when protected: Reed v. Grannon, 3 Daly, 414 (trustee to whom personal property had been conveyed by a marriage settlement protected against a prior unrecorded mortgage of the same -chattels given by the husband) ; Sleeper v. Chapman, 121 Mass. 404 (bona fide assignee of a chattel mortgage, given in fraud of mortgagor's credi- tors, protected as against such creditors) ; Thomdike v. Hunt, 3 De Gex & J. 563. § 767, 2 Haynsworth v. Bischoff, 6 Rich. 159 ; Porter v. Green, 4 Iowa, 571; Seevers v. Delashmutt, 11 Iowa, 174, 77 Am. Dec. 139; Willoughby V. Willoughby, 1 Term Rep. 763, per Lord Hardwieke. land from vendor who has contracted § 767, (g) Mortgagee as Bona Fide to convey the land or an interest Purchaser. — See, also, Warner v. therein: Churchill v. Eussell, 148 Watson, 35 Fla. 402, 17 South. 654; Cal. 1, 82 Pac. 440 (prior water right Parker v. Barnesville Sav: Bank, created hy parol agreement); Ver- 107 Ga. 650, 34 S. E. 365; Barney mont Marble Co. v. Mead, 85 Vt. 20, v. McCarty, 15 Iowa, 510, 88 Am. 80 Atl. 852. Dec. 427; Warren v. Hayes, 74 N. H. §767, (t) Against Unrecorded De- 355, 68 Atl. 193; Doye v. Carey, 3 feasance. — See post, § 1196, and eases Okl. 627, 41 Pac. 432; Landigan v. cited; Frink v. Adams, 36 N. J. Mayer, 32 Or. -245, 67 Am. St. Bep. Eq. 485; Hicks v. Hicks (Tex. Civ. 521, 51 Pac. 649; Bigley v. Jones, App.), 26 S. W. 227; Brigham v. 114 Pa. St. 517, 7 Atl. 54; Jones v. Thompson, 12 Tex. Civ. App. 562, 34 Hudson, 23 S. C. 494; Brigham v. B. W. 358; Lynn v. Sims (Tex. Civ. Thompson, 12 Tex. Civ. App. 562, 34 App.), 43 S. W. 554. S. W. 358. § 768 EQUITY JUKISPKODENCB. . 1588 tained some title, estate, or interest in or lien upon the mortgaged premises.^^ § 768. Purchaser First of an Equitable Estate Subse- quently Acquires the Legal Estate — Tabula in Naufragio.'* The protection is not confined to a defendant who obtained the legal title contemporaneously with his original pur- chase. It includes those cases where, of several successive purchasers holding equitable estates, one of them later in time has obtained an outstanding legal estate. By far the most frequent instance in England is that of three or more successive mortgagees by conveyance. A, B, and C, where the first only would obtain the legal estate and the others an equitable one. If C, at the time of loaning his money and taking his mortgage, had no notice of B's prior en- cumbrance, — that is, was a bona fide purchaser of the equi- table estate, — on afterwards learning of B's claim, he m_ay buy in or procure a transfer of A's mortgage to himself, and may thus put himself in a position of perfect defense against the enforcement of B's lien; he thus acquires, in fact, not only a defense to any suit brought by B, but the absolute precedence over B in the satisfaction of the liens out of the mortgaged premises.^ This particular applica- §767, 3 Westbrook v. Gleason, 79 N. T. 23, 30, 31; Fort v. Burch, 5 Denio, 187; St. John v. Spalding, 1 Thomp. & C. 483; Farmers' Nat. Bank v. Fletcher, 44 Iowa, 242 ; and see ante, § § 733, 734, and cases cited. § 768, 1 The leading case in which this rule was formulated is Brace v. Duchess of Marlborough, 2 P. Wms. 491. Sir Joseph Jekyll said: "1. That if a third mortgagee buys in the first mortgage, though it be pending a bill brought by the second mortgagee to redeem the first, yet the third mortgagee having obtained the first mortgage, and got the law on his side and equal equity, he shall thereby squeeze out the second mort- gagee; and this Lord Chief Justice Hale called ^ plank gained by the § 767, (h) Bacon v. Van Sehoon- § 768, (a) This paragraph is cited, hoven, 87 N. Y. 447; Simpson v. Del generally, in Fidelity Mutual Life Hoyo, 94 N. T. 189; Sweetzer v. At- Ins. Co. v. Clark, 203 IT. S. 64, 51 terbury, 100 Pa. St. 18; Economy L. Ed. 91, 27. Sup. Ct. 19; American Sav. Bank v. Gordon, 90 Md. 486, 48 Bonding Co. of Baltimore v. State L. R. A. 63, 45 Atl. 176. See, also, Savings Bank, 47 Mont. 332, 46 L. Macomber v. Bremer, 198 Mass. 20, R. A. (N. S.) 557, 133 Pac. 367. 84 N. E. 328. 1589 CONCERNING BONA FIDE PURCHASE. § 769 tion of the doctrine to successive mortgages is known in the English equity as the rule, concerning "tacking," — a rule which has been universally rejected by the courts of the various states. § 769. Extent and Limitations of This Rule. — The doc- trine under consideration has not been confined to mort- gagees. It is fully settled in England that a bona fide purchaser of an equitable estate, without notice of a prior conflicting equitable interest, may, even on afterwards dis- covering the same and the consequent defect of his own title, protect himself against such claimant by procuring a conveyance to himself of the outstanding legal estate; subject, however, to this important exception, that if the prior claimant is a cestui que trust, and the title of the purchaser is thus subject to a trust either express or im- plied, he cannot, after notice of such a defect, protect him- self by acquiring the legal estate from the trustee.^ ^ Even third mortgagee, or tabula in naufragio, which construction is in favor of a purchaser, every mortgagee being such pro tanto. ... 6. His honor said in all these cases it must be intended that the puisne mortgagee, when he lent his money, had no notice of the second mortgage." In the earlier case of Marsh v. Lee, 2 Vent. 337, 1 Cas. Ch. 162, decided in 1670, the same rule was recognized, and Chief Baron Hale used the figure tabula in naufragio, which has since been constantly repeated. See, also. Marsh v. Lee, 1 Lead. Cas. Eq., 4th Am. ed., Eng. note, 837; Young v. Young, L. E. 3 Eq. 801; Pease v. Jackson, L. R. 3 Ch. 576; Prosser v. Rice, 28 Beav. 68; Bates v. Johnson, Johns. 304.* Although the doctrine applied to successive mortgages, as stated in the text, forms that peculiar rule known to English equity as "tacking," and has been completely rejected by the courts of this country as both inequitable and impossible under our regis- try system, yet these and similar cases are sometimes quoted as authority upon the general proposition that the purchaser of a subsequent equity may protect himself by obtaining the legal title. I doubt their authority in this country upon that general question. § 769, 1 The English cases in support of the above proposition are numerous. The following are some of the more recent: Pilcher v. Raw- §768, {*>) As to the notice suffi- 167, 48 Wkly. Eep. 9 (notice to £ cient to prevent tacking, see Free- joint mortgagee), man v. Laing, [1899] 2 Ch. 355, 68 §769, (a) See, also, BaUey v. Law J. (Ch.) 586, 81 Law T. (N. S.) Barnes, [1894] 1 Ch. 25; Hosting v. § 770 EQUITY JUKISPRUDENCB. 1590 where the bona fide purchaser has the best right to call for the legal estate, but has not yet actually obtained it, he is protected agaiast the prior equitable claimant.^ § 770. The Purchaser Acquires the Legal Estate from a Trustee. — The exception already mentioned is no less firmly settled. It has already been seen that one who ob- tains the legal title at the time of and as a part of his original purpose may acquire his estate from a trustee in derogation of the trust; but if he purchases in good faith and for value and without notice, he will be pro- tected against the claims of the beneficiary, and hold the property free from the trust; and this effect extends in equity not only to conveyances of land, but to transfers of all kinds of personal property.^ * The following are the four possible conditions of fact: 1. Both the trustee and the purchaser might at the time of the conveyance be aware of the trust, and therefore of its violation by the conveyance. Here the purchaser would clearly obtain no title, and the trustee himself would be responsible. 2. Both might be ignorant of the trust. This case is barely pos- sible, but very improbable. If it should occur, the pur- chaser would clearly be protected. 3. The trustee might be ignorant and the purchaser have knowledge. This case, lins, L. R. 7 Ch. 259; L. R. 11 Eq. 53; Carter v. Carter, 3 Kay & J. 617; Young V. Young, L. R. 3 Eq. 801; Jones v. Powles, 3 Mylne & K. 581; Prosser v. Rice, 28 Beav. 68; Pease v. Jackson, L. R. 3 Cli. 576. § 769, 2 Willoughby v. Willoughby, 1 Tenn Rep. 763, per Lord Hai-d- wieke; Charlton v. Low, 3 P. Wms. 328; Ex parte Knott, 11 Ves. 609; Tildesley v. Lodge, 3 Smale & G-. 543; Bowen v. Evans, 1 Jones & L. 178, 264; Shine v. Gough, 1 Ball & B. 436. § 770, 1 Thorndike v. Hunt, 3 De Gex & J. 563; Dawson v. Prince, 2 De Gex & J. 41. Smith, L. B. 13 App. Cas. 582; Hoult lard, 174 III. 538, 66 Am. St. Bep. V. Donahue, 21 W. Va. 294 {dictum). 313, 51 N. E. 835; Home Sav. & § 770, (a) The text is cited in San- State Bank v. Peoria Agricultural guinetti v. Bossen, 12 Cal. App. 623, & Trotting Soc» 206 111. 9, 99 Am. 107 Pac. 560; Bobbins v. Moore, 129 St. Eep. 132, 69 N. E. 17; Coleman 111. 30, 21 N. E. 934; Smith v. Wil- v. Dunton (Me.), 58 Atl. 430. 1591 CONCEBNIIf G BONA FIDE PTTBCHASB. § 770 ' SO far as it relates to tlie trustee's ignorance, is improb- able; but the purchaser would plainly obtain no secure title. 4. The trustee might have knowledge and the pur- chaser be ignorant. This is a more common case. The purchaser, being bona fide, would obtain the title, but the trustee would be responsible personally for his violation of duty. When we pass to the other condition, of the pur- chaser of an equitable estate seeking to obtain protection by getting in the legal title, it is clear that two of the fore- going cases could not exist. The very question assumes that the purchaser had discovered the defect in his own title, and has therefore become aware of the trust, and that a conveyance to himself by the trustee would be a violation of the trust, and of the rights of the prior and opposing cestui que trust. The only two possible cases, therefore, are: 1. The trustee and the purchaser both aware of the trust; 2. The trustee ignorant and the pur- chaser aware. The latter is not probable, but is possible. The foregoing considerations show that in both of these cases the purchaser would not be protected; taking the legal estate from the trustee with notice of the existing trust, he would himself become a trustee. In this conclu- sion the decisions are unanimous, holding that the pur- chaser without notice and for value of an equitable estate cannot after notice protect himself and defeat the claims of the prior beneficial owner by getting a conveyance of the legal title from the trustee.^^ § 770, 2 Saunders v. Dehew, 2 Vem. 270 ; Willoughby v. Willoughby, 1 Term Rep. 763, 771; Carter v. Carter, 3 Kay & J. 617, 642; Allen v. Knight, 5 Hare, 272; Baillie v. McKewan, 35 Beav. 177; Sharpies v. Adams, 32 Beav. 213; Colyer v. Finch, 19 Beav. 500; 5 H. L. Cas. 905. § 770, (b) "An equitable mort- where the mortgagee has notice that gagee, who has made an advance the legal title, at the time when it without notice of a prior equitable is so got in, is held on an express title, may gain priority by getting trust in favor of persons who assert in the legal title, unless there are a claim to the property": Taylor v. circumstances which make it inequi- London and County Banking Co., table for him to do so. One case [1901] 2 Ch. 231; Taylor v. Russell, Which falls within this exception is [1892] App. Cas. 244, 259. '§§771,772 EQUITY JTJRISPSXJDENCE, 1592 § 771. The Rule as Applied in the United States.— Al- though the modes of dealing with real property in the United States are entirely unlike those prevailing in Eng- land, and although the forms and species of the estates created and the circumstances of the transactions coming before the American judges are very different from those passed upon by the English chancellor, yet the courts of this country have recognized and adopted the foregoing doctrines, and have applied them when necessary to analo- gous cases, and under analogous conditions of fact. In- deed, the defense of bona fide purchase has sometimes been pushed to an extent, as it seems, not warranted by the es- tablished doctrines. It has been made to embrace not only those who have purchased equitable estates by means of conveyances purporting to transfer the whole title, but even to those who have intentionally acquired a mere equi- table interest or lien by executory contract or otherwise, knowing that the legal estate was held by another, and who, upon afterwards discovering a prior and conflicting equity in favor of a third person, have taken a conveyance of that legal estate. I have already discussed the subject with some care, have examined American authorities, and have stated those conclusions which seem to be sustained by settled principles. It is unnecessary to repeat the dis- cussion, and I simply refer to those paragraphs.^ § 772. And as Modified by the Recording Acts.— There may be modifications of these results produced by the peculiar language of recording acts. In some of the states the statutes provide for the registration, not only of deeds, mortgages, and assignments, but also of every species of instrument which can affect land titles, or create any equi- table interest in or lien upon land, including executory con- tracts for the sale of land. Such statutes must necessarily modify the operation of equitable doctrines originally ap- plicable to an entirely different condition. If, where these enactments exist, the owner of land gives a contract for § 771, 1 See ante, §§ 740, 741, 756. 1593 coNCEK:!sriN6 bona fide pukchasb. § 773 its sale to A, and afterwards gives a like contract to B, both vendees being equally meritorious, and A's contract is not recorded, while B, without notice, puts his agree- ment upon record, B undoubtedly obtains a precedence by his record; and if he subsequently learns of A's prior claim, he can take a conveyance of the legal estate from the vendor and legal owner, and completely protect him- self by an earliest record thereof.* In like manner, if A, the legal owner of land, gives a contract of sale to B, and this vendee executes a deed purporting to convey the land to C, and afterwards executes a like deed to D, both grantees being equally meritorious, and C's deed is unre- corded, but D, without notice, puts his upon record, then D, although acquiring only an equitable interest by his conveyance, would undoubtedly gain the precedence over C. When D subsequently learns of C 's prior claim, he can take a conveyance of the legal estate from A, and by a first record of that conveyance can place himself in a position of complete protection. These results seem to flow neces- sarily from the statute, but they are due entirely to the peculiar statutory provisions.^ §773. And as Applied in This Country to Purchasers Acquiring the Legal Estate from a Trustee. — The instances of a purchaser's attempting to obtain protection by means of the legal estate acquired from a trustee are much less frequent in this country than in England. There are the two quite distinct cases of the purchaser who acquires the legal estate at the time of his original purchase, and the purchaser of an equitable interest who afterwards gets in the legal estate for his protection. The first of these cases would be presented where a cestui que trust sold and as- signed or conveyed to A and afterwards sold and conveyed the same interest to B, who, at the same time, and as a part of the same transaction, received a conveyance also from the trustee. There are decisions which hold that a pur- § 772, 1 Ohio Life Ins. Co. v. Eoss, 2 Md. Ch. 25 ; U. S. Ins. Co. v. Shriver, 3 Md. Ch. 381; BeUas v. McCarty, 10 Watts, 13. § 773 EQUITY JUKISPBTJDBNCB. 1594 chaser who, like B in the above supposition, intentionally takes a transfer from a cestui que trust of his interest, knowing that he is a cestui que trust, is necessarily charged with notice of any and all defects and infirmities in his grantor's title, and buys subject to any prior outstanding interest in another person, A, which had been created by his grantor, and cannot, at the same time, and as a part of the same transaction, obtain a deed from the trustee, and protect himself thereby. His title would be subject to the prior equities of A, notwithstanding his earliest registra- tion of his own conveyances.^ Other decisions do not ap- ply the doctrine of constructive notice so severely, and would regard the second purchaser, under these circum- stances, as protected by the legal estate obtained from the trustee without notice.^ Passing to the second case, if, under circumstances similar to those supposed above, a cestui que trust has sold and transferred his interest, or part of it, to A, and afterwards makes a like sale and trans- fer to B, who pays value and has no notice of A's rights, but knows that his grantor is a cestui que trust, and inten- tionally purchases his interest as an equitable one, and afterwards, on discovering A's prior claim, procures a con- veyance of the legal estate from the trustee, in accordance with the doctrines as settled by courts of the highest au- thority, he cannot rely upon the legal title as a protection against A. The same must be true, and upon the same principle, independently of peculiar recording acts, of a second vendee, who enters into his contract in good faith, but afterwards discovers that another vendee claims under a prior contract, and thereupon obtains the first convey- ance of the legal estate from their common vendor ; and of a second grantee from the vendee under an executory con- tract, who, upon discovering a prior grant to another per- §773, 1 Sergeant v. Ingersoll, 7 Pa. St. 340; 15 Pa. St. 343; and see Kramer v. Arthurs, 7 Pa. St. 165, per Gibson, C. J. § 773, 2 piagg V. Mann, 2 Sum. 486^ 560; Vattier v. Hinde, 7 Pet. 252, 271. 1595 CONCEENING BONA FIDE PXTBCHASE. § 774 son by the same vendee, procures a deed of the legal estate from the vendor in whom the legal title was vested.^ § 774. Other Instances — Purchaser at Execution Sale — Assignee of Thing in Action. — ^Among the other instances in which the general doctrine has been applied, and the de- fense sustained, by the American courts, the following are some of the most important: Where a person becomes a bona fide purchaser of land at execution sale, and perfects his purchase by receiving the sheriff's deed, he stands in the same position as any other purchaser in good faith without notice who acquires the legal estate; he takes the land free from any unrecorded mortgage or other equi-" table interest or lien not appearing of record which would have affected the land in the hands of the judgment debtor, and of which the judgment creditor might even have had notice.ia. An assignee in good faith of shares of stock, §773, 3 See owie,§§740, 756; Sumner v. Waugh, 56 HI. 531, 539; Flagg V. Mann, 2 Sum. 486, 518; Fed. Cas. No. 4,847; Bellas v. MeCarty, 10 Watts, 13; Zollman v. Moore, 21 Gratt. 313. It is held that a vendee in possession under a land contract, who buys in a title superior to that of his vendors, cannot claim the protection of a bona flde purchaser, but must hold the title for the benefit of his vendor: Lewis V. Boskins, 27 Ark. 61; Peay v. Capps, 27 Ark. 160. §774, 1 See awte, §724; Orth v. Jennings, 8 Blackf. 420; Siemon v. Schurck, 29 N. Y. 598; Jackson v. Chamberlain, 8 Wend. 620, 625; Jack- son V. Post, 15 Wend. 588; 9 Cow. 120; Gouverneur v. Titus, 6 Paige, 347; Den V. Kickman, 13 N. J. L. 43 ; Eodgers v. Gibson, 4 Teates, 111 ; Heister v. Fortner, 2 Binn. 40, 4 Am. Dec. 417; Morrison v. Funk, 23 Pa. St. 421; Stewart v. Freeman, 22 Pa. St. 120, 123; KeUam v. Janson, 17 Pa. St. 467; Mann's Appeal, 1 Pa. St. 24; Wilson v. Shoenberger, 24 Pa. St. 121; Seribner v. Lockwood, 9 Ohio, 184; Paine v. Mooreland, 15 Ohio, 435, 45 Am. Dec. 585; Runyan v. McClellan, 24 Tnd. 165; Ehle v. Brown, 31 Wis. 405; Rogers v. Hussey, 36 Iowa, 664; Draper v. Bryson, 26 Mo. 108, 69 Am. Dec. 483; Harrison v. Cachelin, 23 Mo. 117; Waldo v. Rus- §774, (a) This section is cited in protected, the cases are at variance: Tennant v. Watson, 58 Ark. 252, 24 some holding that he is but the S. W. 495. As to whether the pur- purchaser of an equitable interest, chaser or his assignee, who has re- others that his title is at least an ceived merely the sheriff's certificate "inchoate" legal one; see ante, § 683, of sale, but not the deed, is thus note, and cases cited. § 775 EQUITY JUEISPETJDENCE. 1596 who has perfected his title by a surrender of the certifi- cate, the issue of a new one to himself, and an entry upon the transfer-books of the company, is generally treated as a bona fide purchaser; and the protection has sometimes been extended to a transferee who has not taken these steps for the completion of his legal title. The defense has in like manner been applied to the assignee in good faith of other things in action.^ §775. III. Suits by the Holder of an "Equity."— In all the instances of the preceding subdivision, the plain- tiff has held some equitable estate or interest in or lien sell, 5 Mo. 387; Ohio etc. Co. v. Ledyard, 8 Ala. 866; Cooper v. Blakey, 10 Ga. 263; Miles v. King, 5 S. C. 146; Ayres v. Duprey, 27 Tex. 593, 605, 86 Am. Dec. 657. As to the effect of purchase at execution sale by the judgment creditor himself, see Gower v. Doheny, 33 Iowa, 36, 39; Halloway v. Platner, 20 Iowa, 121, 89 Am. Dec. 517; Tmt, per contra, Arnold v. Patrick, 6 Paige, 310, 316; Diekerson v. Tillinghast, 4 Paige, 215, 25 Am. Dec. 528; Wright v. Douglass, 10 Barb. 97; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Orme v. Roberts, 33 Tex. 768; Ayres v. Duprey, 27 Tex. 593, 86 Am. Dec. 657. §774i 2 See araJe, §§ 698, note, 701, 712, 713, 715. Stocks: Pratt v. Taunton etc. Co., 123 Mass. 110, 112, 25 Am. Rep. 37 ; Loring v. Salisbury Mills, 125 Mass. 138; Pratt v. Boston etc. R. R., 1^6 Mass. 443; Machin- ists' National Bank v. Tield, 126 Mass. 345; SewaU v. Boston Water Works, 4 Allen, 277, 81 Am. Dec. 701; Bank v. Lanier, 11 Wall. 369; Telegraph Co. v. Davenport, 97 U. S. 369; Morris etc. Co. v. Fisher, 9 N. J. Eq. 667, 64 Am. Dec. 423; Mt. Holly Co. v. Ferree, 17 N. J. Eq. 117; Bank of Commerce's Appeal, 73 Pa. St. 59, 64; Craig v. Vicksburg, 31 Miss. 216; Brewster v. Sime, 42 Cal. 139, 147; Thompson v. Toland, 48 Cal. 99; Winter v. Belmont M. Co., 53 Cal.- 428, 432; People v. Elmore, 35 Cal. 653. Where assignee obtains possession : Ancher v. Bank of England, Dough. 637, 639; Wells v. Archer, 10 Serg. & R. 412, 13 Am. Dec. 682; Ellis v. Kreutzinger, 27 Mo. 311, 72 Am. Dec. 270. Where assigTiee of any thing in action perfects his legal title: Fitzsimmons v. Ogden, 7 Cranch, 1, 18; Judson v. Corcoran, 17 How. 612; Downer v. Bank, 39 Vt. 25, 29. And generally that bona fide assignee is protected: Livingston v. Dean, 2 Johns. Ch. 478; Murray v. Lylburn, 2 Johns. Ch. 441; Bloomer v. Hen'derson, 8 Mich. 395, 402, 77 Am. Dec. 453; Croft v. Bunster, 9 Wis. 503, 508 ; Moore v. Holcombe, 3 Leigh, 597, 24 Am. Dec. 683; Ohio Life Ins. Co. v. Boss, 2 Md. Ch. 25, 39; Sleeper v. Chapman, 121 Mass. 404. But see §§ 708, 709, 714, and cases cited. 1597 CONCEKNING BONA FIDE PtTECHASE. § 776 upon the property, wliicli he has sought to establish or en- force against the very subject-matter, either by perfecting his title and ownership, or by subjecting it to his encum- brance. The defense of bona fide piirchase is not confined to such plaintiffs; it avails also against parties who claim to have some "equity" as distinguished from an equitable estate or interest, — parties, that is, who simply claim and are seeking to obtain some peculiar equitable remedy, such as reformation or cancellation, and the like. In this re- spect the defense is a protection alike to defendants who have a legal estate, and those who have purchased an equi- table interest.1* § 776. Suits for Relief Against Accident or Mistake. — Thus, as against a subsequent bona fide purchaser for value, a court of .equity will not relieve a prior party, on the ground of accident or mistake, by granting a remedy otherwise appropriate, such as setting aside a conveyance which had been executed by the plaintiff under a mistake or ignorance of his rights, or correcting an instrument exe- cuted under a mistake of fact.i * § 775, 1 Phillips v. Phillips, 4 De Gex, F. & J. 208, 218, per Lord West- bury ; St. John v. Spalding, 1 Thomp. & C. 483 (a bona fide assignee of a recorded mortgage, who had also recorded his assignment, was held un- affected by a prior unrecorded agreement by which the mortgage was satisfied) . §776, IBell V. Cundall, Amb. 102; Maiden v. Menil, 2 Atk. 8; War- rick V. Warrick, 3 Atk. 291, 293; Harvey v. Woodhouse, Sel. Cas. Ch. 80; Marshall v. CoUett, 1 Younge & C. 232, 238; Penny v. Watts, 2 De Gex & S. 501; 1 Macn. & G. 150 (reversed on the facts, but the law of the decision below not disturbed); jLigon v. Rogers, 12 Ga. 281, 292; Whitman v. Weston, 30 Me. 285; Lowe v. Allen, 68 Ga. 225. §775, (a) The text is cited in St. Eep. 863, 31 S. E. 647 (mutual Farmers & Merchants' Bank v. Citi- mistake in deed) ; Tingley v. Interna- zens' National Bank, 25 S. D. 91, tional Dynelectron Co., 74 N. J. Eq. 125 N. W. 642 (defense against one 538, 70 Atl. 919 (mistake) ; Farmers who claims an "equity" to ref orma- &" Merchants' Bank v. Citizens' Na- tion), tional Bank, 25 S. D. 91, 125 N. W. §776, (a) The text is cited in Sny- 642 (mistake). See, also, Morgan v. der V. GrandstafE, 96 Va. 473, 70 Am. McCuin, 96 Ark. 512, 132 S. W. 459; § 777 EQUITY JTJRISPBUDENCE. 1598 § 777. Suits for Relief Against Fraud Upon Creditors or Between Parties. — The same is true with respect to the remedy of cancellation in suits to set aside conveyances or sales on account of fraud, either as against the creditors of the grantor, or against the grantor himself. In the first case, where a conveyance has been made with intent to de-. fraud creditors of the grantor, so that it would be voidable as against the grantee, but this grantee has in turn con- veyed to a bona fide purchaser for value, the remedial rights of the creditors to have the original and fraudulent transfer set aside are then cut off, and the purchaser has a complete defense against their claims.^* In the second § 777, 1 Bean v. Smith, 2 Mason, 252, 272-282; Wood v. Mann, 1 Sum. 506, Fletcher v. Peek, 6 Craneh, 87, 133, 134; Erskane v,. Decker, 39 Me. 467; Hart v. Bank, 33 Vt. 252; Poor v. Woodburn, 25 Vt. 234, 236; Hub- bell V. Currier, 10 Allen, 333; Eowley v. Bigel'ow, 12 Pick. 307, 23 Am. Dec. 607; Frazer v. Western, 1 Barb. Ch. 220; Ledyard v. Butler, 9 Paige, 132, 37 Am. Dec. 379; Anderson v. Eoberts, 18 Johns. 515, 9 Am. Dec. 235 ; reversing 3 Johns. Ch. 371, 377 ; Phelps v. Morrison, 24 N. J. Eq. 195; Hood v. Fahnestock, 8 Watts, 489, 34 Am. Dec. 489; Price V. Junkin, 4 Watts, 85, 28 Am. Dec. 685; Boyce v. Waller, 2 B. Mon. 91 ; Spicer v. Robinson, 73 111. 519 ; Henderson v. Henderson, 55 Mo. 534 ; Sydnor v. Roberts, 13 Tex. 598, 65 Am. Dec. 84; Reed v. Smith, 14 Ala. 380; CoUins v. Heath, 34 Ga. 443; Coleman v. Cocke, 6 Rand. 618, 18 Am. Dec. 757; Sleeper v. Chapman, 121 Mass. 404 (a chattel mortgage given in fraud of the mortgagor's creditors, but assigned to a bona fide purchaser) . Knobloek v. Mueller, 123 111. 554, 17 rison v. Crowell, 67 Tex. 626, 4 S. W. N. E. 696 (bona fide purchaser from 69 (mistake in boundaries whereby heir to whom, by partition decree, a more conveyed than was intended, certain lot had been awarded as her not corrected) ; and the same rule share, protected against sole devisee applies where relief is sought on the under subsequently discovered will, ground of duress: Eogers v. Adams, seeking to set aside the decree for 66 Ala. 600. mistake of fact) ; Harms v. Coryell, § 777, (a) See, also, Neal v. Greg- 177 111. 496, 53 N. E. 87; Toll v. ory, 19 Fla. 356; Halverson v. Davenport, 74 Mich. 386, 42 N. W. Brown, 75 Iowa, 702, 38 N. W. 123; 63 (mortgage cannot be reformed so Nicholson v. Condon, 71 Md. 620, 18^ as to include property which has Atl. 812; Zoeller v. Eiley, 100 N. come into the hands of a bona fide Y. 108, 53 Am. Eep. 157, 2 N. E. 388 purchaser) ; Brown v. Gwin, 197 Mo. (purchaser on foreclosure of chattel 499, 95 S. W. 208 (mistake); Gar- mortgage given in fraud of mort- 1599 CONCEENING BONA FIDE PURCHASE. § 778 case of fraud between tlie parties, where a conveyance has been obtained by the grantee's fraud, so that it would be set aside at the suit of the defrauded grantor, but the fraudulent grantee has in turn conveyed to a bona fide pur- chaser for value and without notice, the latter will take and hold the property free from all these equities, protected against the equitable remedies of the original defrauded owner.2 b § 778. Fraudulent Sales of Chattels.— The defense has been extended to fraudulent sales of chattels under the following limitations, which it may be proper to state, al- though the rules belong to the law rather than to equity: If the vendor, induced by fraud,' sold and delivered posses- § 777, 2 Sturge v. Starr, 2 Mylne & K. 195; Bowen v. Evans, 1 Jones & L. 178, 263, 264; Gavagan v. Bryant, 83 111. 376; McNab v. Young, 81 111. 11; Dickerson v. Evans, 84 111. 451; Chicago etc. Co. v. Foster, 48 111. 507; Eulton v. Woodman, 54 Miss. 158; Farmers' Nat. Bank v. Fletcher, 44 Iowa, 252; Hurley v. Osier, 44 Iowa, 642; Henderson v. Henderson, 55 Mo. 534; Rowley v. Bigelow, 12 Pick. 307, 23 Am. Dec. 607; William- son v. Russell, 39 Conn. 406; Root v. French, 13 Wend. 570, 28 Am. Dec. 482 ; Mears v. Waples, 3 Houst. 581. gagor's creditors); Saunders v. Lee, Co., 151 N. C. 519, 66 S. E. 603; Mar- 101 N. C. 3, 7 S. B. 590; Bergen v. tin v. Eobinson, 67 Tex. 368, 3 S. W. Producers' Marble Yard, 72 Tex. 53, 550; Dunfee v. Childs, 59 W. Va. 11 S. W. 1027. 225, 53 S. E. 209. So, a judgment § 777, (b) The text is quoted in which, by fraud of the judgment Pish V. Benson, 71 Cal. 429, 12 Pae. plaintiff, included an agreement that 454. See, also, Colorado Coal Co. v. the defendant therein should erect United States, 123 U. S. 313, 8 Sup. a certain improvement on the judg- Ct. 131 (suit to cancel patent for meut plaintiff's, land, was not fraud); United States v. Clark, 138 amended in favor of such defend- Ped. 294, 70 C. C. A. 584 (same); ant against an innocent "assignee of Green v. Clyde, 80 Ark. 391, ^7 S. the judgment and purchaser of the W. 437 (same); Hewlett v. Pilcher, land: Indiana, etc., B. R. Co. v. Bird, 85 Cal. 542, 24 Pac. 781; King v. 116 Ind. 217, 9 Am. St. Eep. 842, 18 Gabaness, 81 Ga. 661, 7 S. E. 620; N. E. 837. For certain exceptional Harris v. Harris, 109 La. 913, 33 forms of fraud, rendering the trans- South. 918; Valentine v. Lunt, 115 action absolutely void, where the N. Y. 496, 22 N. E. 209 (undue in- Txma f.de purchase does not avail fluence); Dixon v. Wilmington Sav. as a defense, see pos*, §§ 915, note, & Tr. Co., 115 N. C. 274, 20 S.E. 918. 464; Phillips v. Buchanan Lumber § 779 EQUITY JUBISPKUDENCE. 1600 sion, and by the contract intended to transfer the property as well as the possession to- the fraudulent vendee, and if this vendee, before the vendor has disaffirmed, should transfer the goods to an innocent purchaser for a valuable consideration and in good faith, the rights of such pur- chaser would be superior to those of the original vendor. If, however, it was not the intention of the original ven- dor to pass the property to the fraudulent vendee, but only the possession, such vendee could not transfer any prop- erty in the goods even to an innocent purchaser, and the original vendor could still assert his title. Finally, if, un- der the circumstances first described, the fraudulent ven- dee should transfer the goods to a third person, who had actual or constructive notice, or who did not pay value, the original vendor could stUl rescind and assert his own- ership, i § 779. Fourth. Affirmative Relief to a Bona Fide Pur- chaser. — The peculiar theory upon which equity acts towards a bona fide purchaser seems of necessity to imply that he should be a defendant. There are a few special § 778, 1 Stevenson v. Newnham, 13 Com. B. 285 ; Kingsf ord v. Merry, 11 Ex. 577; Pease v. Gloahec, L. R. 1 P. C. 219; Oakes v. Turquand, L. R. 2 H. L. 325; Root v. French, 13 Wend. 570, 28 Am. Dec. 482; Cald- well V. Bartlett, 3 Duer, 341 ; Keyser v. Harbeck, 3 Duer, 373 ; Brower v. Peabody, 13 N. Y. 121; Fassett v. Smith, 23 N. Y. 252; Hathome v. Hodges, 28 N. Y. 486; Spraights v. Hawley, 39 N. Y. 441, 100 Am. Dec. 452; Paddon v. Taylor, 44 N. Y. 371; Kinney v. Kiernan, 49 N. Y. 164; Weaver v. Barden, 49 N. Y. 286; Devoe v. Brandt, 53 N. Y. 462; Man- ning V. Keenan, 73 N. Y. 45 ; Stevens v. Brennan, 79 N. Y. 254 ; Robinson V. Dauchy, 3 Barb. 20; Pearse v. Pettis, 47 Barb. 276; Spauldirfg v. Brew- ster, ^0 Barb. 142; Barnard v. Campbell, 65 Barb. 286; Joslin v. Cowee, 60 Barb. 48; Roberts v. Dillon, 3 Daly, 50; Field v. Stearns, 42 Vt. 106; Poor V. Woodbum, 25 Vt. 234; Hodgeden v. Hubbard, 18 Vt. 504, 46 Am. Dec. 167; Decan v. Shipper, 25 Pa. St. 239, 78 Am. Dec. 334; Jack- son V. Summerville, 13 Pa. St. 359; Dean v. Yates, 22 Ohio St. 388; Sar- gent V. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Rison v. Knapp, 1 Dill. 186, 201.« § 778, (a) See, also, Muir v. Jones, 23 Or. 332, 19 L. R. A. 441, 31 Pac. 646, and cases cited. ;1601 CONCERNING BONA FIDE PURCHASE. § 780 circumstances, however, in which the theory, consistently followed out, requires that he should be aided by affirma- tive relief. When these circumstances are carefully ex- amined, it will be found that the fraud, or what equity re- gards as fraud, of the party holding the prior title or interest, and against whom the affirmative relief is granted, is usually, if not always, the ground upon which the court interposes on behalf of the subsequent bona fide purchaser. The following are the important instances of such relief.* § 780. Same. Illustrations. — ^When a person, A, having a prior title to property, and, knowing of such title, actively encourages another person, B, to buy the same property, concealing or not disclosing his own interest, but leading B to suppose that he is obtaining a valid title; or when, under the same circumstances, A being informed of B's intention, and being brought in contact with and made cog- nizant of the transaction, he simply keeps silence and permits B to buy, — ^in either case, B, being a bona fide pur- chaser for value and without notice, can compel a convey- ance or release by A, of whatever estate, title, or interest the latter has; This relief will be granted, even though A was an infant or a married woman, since it does not de- pend upon a capacity to contract, but upon unrighteous conduct. 1 § 780, 1 Savage v. Poster, 9 Mod. 35. In the following cases the doc- trine has been applied to estates in land, trust funds, things in action, and other forms of interest, in some defensively, in others as the ground . of afBrmative relief: Sharpe v. Foy, L. K. 4 Ch. 35 (infant married woman) ; In re Lush's Trusts, L. R. 4 Ch. 591 (married woman) ; Over- ton v. Banister, 3 Hare, 503 (infant cestui que trust) ; Nicholson v. Hooper, 4 Mylne & C. 179, 185, 186 (assignment of things in action) ; Hobbs V. Norton, 1 Vem. 136 ; Watts v. Hailswell, 4 Brown Ch. 507, note ; Berrisf ord v. Milward, 2, Atk. 49 ; Thompson v. Simpson, 2 Jones & L. 110; Wendell v. Van Eensselaer, 1 Johns. Ch. 344; Niven v. Belknap, 2 Johns. 573; Cheeney v. Arnold, 18 Barb. 434; Wells v. Pierce, 27 N. H. 503; Carr v. Wallace, 7 Watts, 394; Vanhom v. Frick, 3 Serg. & R. §779, (a) This paragraph is cited in Lee v. Parker, 171 N. C. 144, 88 S. E. 217. TI— 101 § 781 EQUITY JUBISPKUDENCE. 1602 § 781. Same. Illustrations. — The second important class of cases in which relief may be given to the bona fide purchaser is that of encumbrancers who have misled the purchaser by their words or acts. If a prior encumbrancer, upon being inquired of by one intending to purchase the property, deny the existence of his encumbrance, a court of equity will certainly grant affirmative relief to the bona fide purchaser who has thus been misled, either by postponing or by completely setting aside the encumbrance, as the cir- cumstances may require.^ Mere silence of an encum- brancer does not render him liable, where he has no con- nection with the transaction in which the purchaser is engaged, is not brought into any relations with the parties, and is not placed under any equitable obligation to make disclosure. 2 278; Saunderson v. Ballance, 2 Jones Eq. 322, 67 Am. Dec. 218; Higgins V. Ferguson, 14 111. 269; Godeffroy v. Caldwell, 2 Cal. 489, 56 Am. Dec. 360. If a misrepresentation as to his age is made by an infant to a per-; son who knows his actual age, and cannot be misled thereby, the infant will not become bound in equity with respect to such misstatement : Nelson V. Stocker, 4 De Gex & J. 458. § 781, 1 Ibbottson v. Rhodes, 2 Vem. 554; Hickson v. Aylward, 3 Mol- loy, 1; and see Boyd v. Belton, 1 Jones & L. 730. Of course the denial need not be express and positive; any language which would fairly mis- lead the purchaser, and convince him that there was no lien, would he sufficient to raise this equity. For the same reason, where a trustee who holds the legal title is inquired of by one who intends to purchase from or deal with the cestui que trust, and states that the property is unen- cumbered, he will be held liable to the purchaser with respect to any encumbrance which does exist, provided he had received notice; but the trustee's statements must be clear and unmistakable in their meaning: Burrows v. Lock, 10 Ves. 470, 475; Slim v. Croucher, 1 De Gex, F. & J. 518; 2 GifE. 37 ( f orgetf ulness no excuse);** In re Ward, 31 Beav. 1; Stephens v. Venables, 31 Beav. 124. § 781, 2 Id. ; Osborn v. Lea, 9 Mod. 96, and cases cited under the next paragraph. § 781, (») But in Low v. Bouverie, longer law, and the trustee is liable [1891] 3 Ch. 82, it was held that for misrepresentationa only if they since the change in the legal defi- be fraudulent; while Burrows v. nition of fraud made by Derry v. Lock can be supported only on the Peek, L. K. 14 App. Cas. 337, post, ground of estoppel. § 884, note, Slim v. Croucher is no 1603 CONCERNING BONA FIDE PURCHASE. § 782 § 782. Same. Illustrations. — In the two foregoing classes of cases the one who makes himself subject to an equity in favor of the bona -fide purchaser has knowledge, or at least notice, of the title or encumbrance with respect to which he incurs liability, or against which the purchaser obtains relief; but the doctrine has been carried one step further. Where a person is actually ignorant of his own right in certain property, but under such circumstances that he might have had notice of it, or ought with reason- able care to have known of it, and he makes a representa- tion untrue in fact to one* intending to deal concerning the property, and this party, relying upon the statement, be- comes a bona fide purchaser, equity will relieve such pur- chaser as against the one making the untrue representa- tion, although no liability may be incurred at law.i The § 782, 1 Teasdale v. Teasdale, Sel. Cas. Ch. 59 ; Pearson v. Morgan, 2 Brown Ch. 388; Stiles v. CoVper, 3 Atk. 692; West v. Jones, 1 Sim., N. S., 205, 207, 208. In the last case, Lord Cranworth, V. C, said (p. 207) : "The plaintiff relies on a principle perfectly familiar, not only to courts of equity, but also to courts of law, namely, that where a party has, by words or conduct, made a representation to another leading him to believe in the existence of a particular fact or state of facts, and that other person has acted on the faith of such representation, then the party who made the representation shall not afterwards be heard to say that the facts were not as he represented them to be. This doctrine is not con- fined to cases where the original representation was fraudulent. Where, indeed, that is the case, — ^where a party makes a representation which he knows to be false, in order thereby to induce another to act on the belief that it is true, and that other party does so act, — the whole transaction is, in the strictest and most obvious and popular sense of the word, a fraud. But the doctrine, not only of this court, but also of courts of law, goes much further. Even where a representation is made in the most entire good faith, if it be made in order to induce another to act upon it, or under circumstances in which the party making it may reasonably suppose it will be acted on, then, prima facie, the party making the representation is bound by it, as between himself and those whom he has thus misled." Where there is nothing but mere silence or acquiescence, equity requires that the party should be in such a position or relation to the others that a duty to speak rested upon him, in order to create liability therefrom: Strong V. Ellsworth, 26 Vt. 366 ; Clabough v. Byerly, 7 Gill, 354. Where there is actual procurement, interference, inducement, representations §§ 783, 784 EiQtriTY jtikispkudbn'ob. 1604 justice of this rule is plain, for equity often proceeds upon higher motives of morality than those which sometimes underlie legal rules. An innocent purchaser should not suffer loss from relying upon the untrue statements of another, although not made with, an intent to mislead or 'deceive; in adjusting the loss between the two who are both innocent of an intentional wrong, equity properly lays it upon him who, by his acts or words, has made the loss possible. § 783. Same. Removing a Cloud from a Title.— In ad- dition to the foregoing cases, all based upon an element of fraud, actual or constructive, affirmative relief may be granted to a bona fide purchaser, under some other circum- stances, to remove a cloud upon his title; that is, to set aside judgments, mortgages, and the like, which are ap- parent hens, but in reality inoperative as against him, where the law would furnish no adequate remedy.^ § 784. Fifth. Mode and Form of the Defense.— I shall conclude the discussion of this subject with a very brief consideration of the manner in which the bona fide pur- chaser may avail himself of the defense, the- pleadings by which it may be set up, and the necessary contents of those pleadings. Under the system of procedure and pleading peculiar to a court of chancery, and in whatever tribunals actually untrue, although mistaken and without misleading intent, the principles so admirably explained by Lord Qranworth in the above extract, and stated in the text, must determine the liability : Richardson v. Chicker- ing, 41 N. H. 380, 77 Am. Dec. 769; Wells v. Pierce, 27 N. H. 503; Parker V. Barker, 2 Met. 423; Laurence v. Brown, 5 N. Y. 304; Buchanan v. Moore, 13 Serg. & R. 3C4, 15 Am. Dec. 601; McKelvey v. Truby, 4 Watts & S. 323; Willis v. Swartz, 28 Pa. St. 413; Beaupland v. McKeen, 28 Pa. St. 124, 70 Am. Dec. 115 ; and see the peculiar case of McKelway V. Armour, 10 N. J. Eq. 115, 64 Am. Dec. 445. §783, 1 Setting aside judgments: Martin v. Hewitt, 44 Ala. 418; Sharp V. Hunter, 7 Cold. 389; Filley v. Duncan, 1 Neb. 134, 93 Am. Dec. 337. Setting aside mortgages: Dillon v. Costelloe, 2 MoUoy, 512; Wal- lace V. Lord Donegal, 1 Dru. & Walsh, 461; Gibson v. Fletcher, 1 Ch. Eep. 59. 1605 CONCEENING BONA FIDE PURCHASE. § 784 that system is still preserved, tlie defense may be raised in three different manners. If the fact that the defendant is a bona fide purchaser for value without notice is clearly shown by the bill of complaint, the defendant may resort to a demurrer.i The usual mode of presenting the defense is by a plea; and if it contains the requisite averments, and they are established by, evidence, the suit will be dis- missed without the necessity of an answer on the merits. Instead of resorting to a "plea," the defendant may set out the facts constituting this defense in his answer.^ a If he neglects to put in a plea, and fails to insert the defense in his answer, he cannot raise it or avail himself of it in any subsequent stage of the suit.^ ^ Wherever the re- formed system of procedure prevails, and all remedies, equitable as well as legal, are obtained through the single "civil action," the defense must, of course, be taken ad- vantage of, either by demurrer or by answer. Unless the facts appear on the face of the complaint so as to permit a demurrer, there can be no doubt that in the new system as well as in the old the defense must be pleaded, in order to be available.* "5 § 784, 1 Mitf ord's Eq. PI. 199. § 784, 2 With respect to the differences between a "plea" and an "an- swer," and the advantages of the former, see Att'y-Gen. v. WUkins, 17 Beav. 285, 291; Lord Rancliffe v. Parkyns, 6 Dow. 149, per Lord Eldon; Lancaster v. Evors, 1 Phill. Ch. 349, 352; Ovey v. Leighton, 2 Sim. & St. 234; Earl of Portarlington v. Soulby, 7 Sim. 28. § 784, 3 Phillips V. PhUlips, 4 De Gex, F. & J. 208; Lyne v. Lyne, 8 De Gex, M. & G. 553; 21 Beav. 318. § 784, 4 The defense seems plainly to be "new matter" withia the meaning of the codes, and therefore to be specially pleaded, not being admissible imder an answer of denials general or special. § 784, (a) Daussell v. King, 7 Borer Iron Co. v. Trout, 83 Va. 397, Iieigh (Va.), 393, 401; Eorer Iron 419, 5 Am. St. Kep. 285, 2 S. E. 713; Co. T. Trout, 83 Va. 397, 419, 5 Am. Snyder v. Grandstaff, 96 Va. 473, 70 St. Kep. 285, 2 S. E. 713. Am. St. Rep. 863, 31 S. E. 647. §784, (b) The text is eited in §784, (c) Tlie text is cited and Kelley v. Chandler, 184 Ala. 358, 63 followed in Bossick Min. Go. v. South. 941. See, also. Nelson v. Davis, 11 Colo. 130, 17 Pac. 294; Owen, 113 Ala. 372, 21 South. 75; Arlington State Bank v. Paulseii §785 EQUITY JUEISPBUDENCB. 1606 § 785. Necessary Allegations. — The allegations of tlie plea, or of the answer so far as it relates to this defense, must include all those particulars which, as has been shown, are necessary to constitute a bona fide purchase.^ It fehould state the consideration, which must appear from the averment to be "valuable" within the meaning of the rules upon that subject, and should show that it has actually been paid, and not merely secured.^ ^ It should also deny notice in the fullest and clearest manner, and this denial § 785, 1 See ante, subdivision on valuable consideration, cases cited un- der § § 746-751. In England the pleading must show that the considera- tion has all been paid, etc. In this country the allegations on this subject may vary in different states, according to the particular rules prevailing therein, as shown in former paragraphs; but should conform to the rules as settled in the particular state. (Neb.), 78 N. W. 303; Dersch v. MU- ler, 137 Ky. 89, 122 S. W. 177, 124 S. W. 362; Barnhart v. Anderson, 22 S. D. 395, 118 N. W. 31; see, also, Seymour v. McKinstry, 106 N. Y. 238, 12 N. E. 348, 14 N. E. 94; Lupo V. True, 16 S. C. 580; Bonelli v. Bur- ton, 61 Or. 429, 123 Pae. 37; Carr V. Mouzon, 93 S. C. 161, 76 S. E. 201 (rule applies where defense is set up by plaintiff in answer to a claim of fraud). That the defense must be pleaded as fully as under the former equity practice, see Weber v. Eothchild, 15 Or. 385, 3 Am. St. Eep. 162, 15 Pac. 650. §785, (a) The text is quoted in Upton V. Betts, 59 Neb. 724, 82 N. W. 19; Deskins v. Big Sandy Co., 121 Ky. 601, 89 S. W. 695; Webb V. Hardaway (Ky.), 121 S. W. 669; Southwick V. Keynolds, 99 Neb. 393, 156 N. W. 775. This paragraph is cited in Derseh v. Miller, 137 Ky. 89, 122 S. W. 177, 124, S. W. 362. See, also. Young v. Schofield, 132 Mo. 650, 34 S. W. 497; Graves v. Coutant, 31 N. J. Eq. 763; Cummings V. Coleman, 7 Eieh. Eq. (S. C.) 509, 62 Am. Dec. 402; Everts v. Agnes, 4 Wis. 343, 65 Am. Dec. 314; Bruce V. Overton (Okl.), 154 Pac. 340; Waggy V. Waggy (W. Va.), 87 S. B. 178. §785, (b) The text is quoted in Deskins v. Big Sandy Co., 121 Ky. 601, 89 S. W. 695; Webb v. Hard- away (Ky.), 121 S. W. 669; South- wick V. Eeynolds, 99 Neb. 393, 156 N. W. 775; Upton v. Betts, 59 Neb. 724, 82 N. Wl 19. See, also, Bal- four V. Parkinson, 84 Fed. 855; Eversdon v. Mayhew, 65 Cal. 163, 3 Pae. 641; Petry v. Ambrosher, 100 Ind. 510; American Exch. Nat. Bank V. Foekler, 49 Neb. 713, 68 N. W. 1039; Richards v. Snyder, 11 Or. 501, 6 Pae. 186; Weber v. Eothchild, 15 Or. 385, 3 Am. St. Eep. 162, 15 Pac. 650; Lamar v. Hale, 79 Va. 147; Lohr V. George, 65 W. Va. 241, 64 S. E. 609; Cassiday Pork Boom & Lumber Co. v. Terry, 69 W. Va. 572, 73 S. E. 278; Everts v. Agnes, 4 Wis. 343, 65 Am. Dec. 314. 1607 CONCEENING BONA FIDE PUECHASB. §785 is necessary, whether notice is charged in the complaint or not.o The denial must correspond with the settled rules upon the subject of notice, so as to bring the case within the operation of those rules.2 Concerning the foregoing § 785, 2 See ante, subdivision on notice, cases cited under §§ 752-756. In England the receipt of notice before the payment of the consideration and the execution of the conveyance must be denied, etc. As very differ- ent rules on the subject of notice, the time of giving it, etc., have been adopted in different states, the allegations must, of course, correspond to the rules prevailing in the particular state, as heretofore shown. The English cases on the subject of denying notice and alleging consideration would be misleading in some of the states.* Am. St. Rep. 739, 47 N. W. 402; Sny- der V. Grandstaff, 96 Va. 473, 70 Am. St. Rep. 863, 31 S. E. 647. Con- tra, Garza v. Scott, 5 Tex. Civ. App. 289, 24 S. W. 89. §785, (d) The text is quoted in Deskins v. Big Sandy Co., 121 Ky. 601, 89 S. W. 695. That notice prior to, and down to the time of, pay- ment of the consideration, must be denied, see McDonald v. Belding, 145 U. S. 492, 12 Sup. Ct. 892 (Ar- kansas) ; Balfour v. Parkinson, 84 Fed. 855; Eversdon v. Mayhew, 65 Cal. 163, 3 Pac. 641; Dean v. An- derson, 34 JN". J. Eq. 496; Weber v. Eothehild, 15 Or. 385, 3 Am. St. Rep. 162, 15 Pac. 650; Lamar v. Hale, 79 Va. 147; and prior to, and down to the time of, the conveyance, see Mc- Donald V. Belding, 145 TJ. S." 492, 12 Sup. Ct. 892 (Arkansas: what is a substantial compliance with this rule); Byers v. Fowler, 12 Ark. 218, 54 Am. Dec. 271; Balfour v. Parkin- son, 84 Fed. 855; Dean v. Anderson, 84 N. J. Eq. 496 (not sufficient to deny notice down to time of pur- chase, as that expression is ambigu- ous); Lamar v. Hale, 79 Va. 147. That the denial must be of all the circumstances from which it is claimed that notice can be inferred. § 785, (c) The text is quoted in Deskins v. Big Sandy Co., 121 Ky. 601, 89 S. W. 695; Webb v. Hard- away (Ky.), 121 S. W. 669; South- wick V. Reynolds, 99 Neb. 393, 156 N. W. 775; Upton v. Betts, 59 Neb. 724, 82 N. W. 19; and cited in Gest V. Packwood, 34 Fed. 368; Farmers & Traders' Bank v. Kimball Milling Co., 1 S. D. 388, 36 Am. St. Rep, 739, 47 N. W. 402. See, also, Nel Bon.v. Owen, 113 Ala. 372, 21 South, 75; Taylor v. Fox's Ex'rs, 162 Ky, 804, 173 S. W. 154; Young v. Scho field, 132 Mo. 650, 34 S. W. 497; Bridgewater v. Ocean City Ass'n, 85 N. J. Eq. 379, 96 Atl. 905; Seymour V. McKinstry, 106 N. Y. 238, 12 N. E. 348, 14 N. E. 94; Eorer Iron Co. V. Trout, 83 Va. 397, 5 Am. St. Rep. 285, 419, 2 S. E. 713 (citing Down- man V. Eust, 6 Band. 660; Johnson V. Toulmin, 18 Ala. 50, 52 Am. Dec. 212); Cummings v. Coleman, 7 Ilich. Eq. (S. C.) 509, 62 Am. Dec. 402; Dent V. Pickens, 59 W. Va. 274, 53 S. E. 154; Lohr v. George, 65 W. Va. 241, 64 S. E. 609; Cassiday Fork Boom & Lumber Co. v. Terry, 69 W. Va. 572, 73 S. B. 278. It is not incumbent on the plaintiff to allege notice: Farmers & Traders' Bank v. Kimball Milling Co.,'l S. D. 388, 36 § 785 EQUITY JUEISPEtTDENCB. 1608 averments there has been, and can be, no doubt; there is, however, some confusion, or even conflict, with respect to the allegations concerning the defendant 's estate. There are many English decisions which hold in the most posi- tive manner the following requirements: The defendant must allege that the grantor from whom he immediately took his title was seised, or appeared to be seised, or pre- tended to be seised, of a legal estate at the time of the con- veyance, and also that such grantor was in possession, if the conveyance purported to be, of a present estate in pos- session. Consequently the defendant must allege that by the conveyance in question he either actually obtained a legal freehold estate, or else obtained what purported and appeared to be such an estate, and what he at the time pur- chased as, and supposed and believed to be, such a free- hold legal estate, — that he acquired a legal seizin from' his immediate grantor. From these decisions, it neces- sarily follows that while a defendant who really acquires only an equitable estate, which, however, purported to be a legal estate, and which he in good faith believed to be such, may be a bona fide purchaser withiu the meaning of the doctrine, a defendant who knowingly and intentionally purchases an equitable estate or interest cannot avail him- self of the defense. These English decisions have been fol- lowed by numerous American cases.3 e This is plainly the §785, 3 Story v. Lord Windsor, 2 Atk. 630; Trevanion v.' Mosse, 1 Vern. 246; Hughes v. Garth, Amb. 421; Page v. Lever, 2 Ves. 450; Dob- son V. Leadbeater, 13 Ves. 230; Jackson v. Rowe, 4 Russ. 514; Ogilvie v. Jeaffreson, 2 Giff. 353, 379 ; Lady Lanesborough v. Lord Kilmaine, 2 Molloy, 403; Snelgrove v. Snelgrove, 4 Desaus. Eq. 274 (a very fuU" statement of all the requisites for a good plea, and a review of previous see Gest v. Packwood, 34 Fed. 368; child, 15 Or. 385, 3 Am. St. Eep. 162, Balfour v. Parkinson, 84 Fed. 855; 15 Pac. 650. Johnson v. Toulmin, 18 Ala. 50, 52 §785, (e) The text is quoted in Am. Dec. 212. That the good faith Deskins v. Big Sandy Co., 121 Ky. of the purchase should be averred 601, 89 S. W. 695. See, also, Bal- (ante, § 762), see Connecticut Mut. four v. Parkinson, 84 Ftd. 855; Life Ins. Co. v. Smith, 117 Mo. 261, Bversdou v. Mayhew, 65 Cal. 163, 3 38 Am. St. Eep. 656; Weber v. Both- Pac. 641. 1609 CONOEENIlSfG BONA FIDE PUECHASB. §785 same question, under another form, whicli has been dis- cussed in the preceding subdivisions; how far the subse- quent purchaser of a mere equitable interest is entitled to the defense of a bona fide purchaser. That discussion need not be renewed, and I simply refer to the paragraphs which contain it, and to the cases heretofore cited in which it is involved.* It should be remembered, however, in apply- ing the doctrine, that it has been materially modified by the recording statutes. Whenever, as is commonly the case in this country, the defense of bona fide purchase arises in connection with recording, the true rule would seem to be as follows: The defendant must aver in his plea or answer that he has purchased an estate which comes within the protection of the recording acts; or in other words, that he has purchased an estate or interest, legal or equitable, of such a kind that the conveyance or instru- ment constituting his muniment of title must or may be re- corded, so that by his recording it he can obtain the pro- tection which the statutes give to such a bona fide purchaser who has first put his instrument of title on record.^ ^authorities) ; Blake v. Heyward, 1 Bail. Eq. 208; Bush v. Bush, 3 Strob. Eq. 131; Brown v. Wood, 6 Eich. Eq. 155; Tompkins v. Anthon, 4 Sand. Ch. 97; Baynard v. Norris, 5 Gill, 468, 46 Am. Dec. 647; Naatz v. McPherson, 7 T. B. Mon. 597, 18 Am. Dec. 216; Hunter v. Sumrall, 5 Litt. 62; Blight's Heirs v. Banks, 6 T. B. Mon. 198, 17 Am. Dec. 136; Salstead v. Bank of Kentucky, 4 J. J. Marsh. 554; Larrowe v. Beane, 10 Ohio, 498; Jenkins v. Bodley, 1 Smedes & M. Ch. 338; Wailes v. Cooper, 24 Miss. 208; Boone v. Chiles, 10 Pet. 177; Vattier v. Hinde, 7 Pet. 252, 271; Alexander v. Pendleton, 8 Cranch, 462. § 785, i See ante, §§ 740, 756. . § 785, 5 See ante, §§ 757-761.* §785, (*■) That a judgment credi- at the time when he obtained his tor asserting priority, under the re- judgment, see Laurent v. Lanuing, cording acts, over a prior mortgage 32 Or. 11, 51 Pac. 80. must show that it was unrecorded § 786 BQTJITI JUBISPEUDENCB. 1610 SECTION vin. CONCEENING MERGER. ANALYSIS. Origin and nature of the doctrine. First. Merger of estates. I. The legal doctrine. U. The equitable doctrine. Second. Merger of charges. I. The owner of the property becomes entitled to the charge. Same. Intention prevents a merger. Time and mode of expressing the intention. Conveyance to the mortgagee; assignment to the mortgagor or to his grantee. Merger never prevented when fraud or wrong would result. Life tenant becomes entitled to the charge. II. The owner of the land pays off a charge upon it. Owner in fee personally liable for the debt pays off a charge. Owner who is not liable for the debt pays ofE a charge. Life tenant pays off a charge. Priorities affected by merger. § 786. Origin and Nature of the Doctrine. — The applica- tions of the equitable doctrine concerning merger, although resting upon the same general principle, are various in form, and some of them are of frequent occurrence in this country. The single principle from which the doctrine, in all its modes and forms of application, directly results is the fruitful maxim, that equity, in viewing the transactions of men, and in determining the rights and liabilities aris- ing therefrom, looks at the real intent of the parties as con- stituting the essential substance, and not at the mere ex- ternal form.^ In this method of viewing the affairs of mankind, equity often establishes different rules, T;reating different rights and duties from those which, under the same circumstances, prevail at law.^ The equitable doc- §786, ISee ante, vol. 1, §§378-384. "Equity looks to the intent, rather than to the form." §786, (a) The text is quoted in 101 N. E. 152; cited in Smith v. Merrell v. Garver, 54 Ind. App. 514, Smith,. 149 Mo. App. 309, 188 S. W. §786. §! 787, 788. §787. §788. §§ 78»-800. §790. §791. §792. §793. §794. §795. §796. §797. §798. §799. §800. 1611 CONCEENING MERGER. §787 trine of merger is a striking illustration of this most righleous principle; and the whole discussion in fact con- sists in ascertaining when and how a merger, which would have been inevitable at law, will be prevented or not per- mitted in equity. The subject will be treated of under the two following divisions: 1. Merger of estates in the same land; 2. Merger of charges — liens and encumbrances — on the same land. §787. First. Merger of Estates.— I. The Legal Doc- trine. — The rule of the common law is well established, and of almost universal application, that where a greater and a less legal estate, held in the same right, meet in the same person, without any intermediate estate, a merger neces- sarily takes place. The lesser estate ceases to exist, being merged in the greater, which alone remains; as where a tenant for years acquires the fee, the term is merged.^^ For the purposes of a merger, by the common law, every estate of freehold is greater than any term of years. Both es- tates, however, must be held in the same right, in order that this result may follow.^^ There is a well-settled excep- tion to this general rule in the case of estates-tail; these do not merge in the fee, such result being prevented by §787, 12 Black. Com. 157; 2 Spence's Eq. Jur. 879, 880; White v. Greenish, 11 Com. B., N. S., 209, 233; Jones v. Davies, 7 Hurl. & N. 507; Lady Piatt v. Sleap, Cro. Jac. 275. An estate for years will merge in a reversionary term of years, even though the latter is of less duration : See Hughes V. Robotham, Cro. Eliz. 302; Stephens v. Bridges, 6 Madd. 66. As illustrations of the general rule, see Welsh v. Phillips, 54 Ala. 309, 25 Am. Bep. 679; Cary v. Warner, 63 Me. 571 (life estate and reversion in fee) ; Allen v. Anderson, 44 Ind. 395 (life estate and fee). 1111; Henningsmeyer y. First State Am. St. Kep. 698, 6 S. B. 305; Couch Bank (Tex. Civ. App.), 192 S. W. v. Eastham, 29 W. Va. 784, 3 S. E. 286. 23. §787 (a) The text la quoted in The subject of merger of estates, Highland Park Mfg. Co. v. Steele, at law and in equity, is treated in 232 Fed. 10, 146 C. C. A. 202. the monographic note to Porthman § 787, (b) This section is cited in v. Deters, 206 111. 159, 99 Am. St. Boykiil V. Ancrum, 28 S. C. 486, 13 Eep. 145, 69 N. E. 97. § 788 EQUITY JUEISPEUDENCB. 1612 the operation of the statute de donis? Courts of law, un- der the influence of equitable notions, may now admit of some other exceptions.^ "^ The general doctrine is not con- fined to the union of two legal estates. Wherever, in like manner, a legal .and an equal and co-extensive equitable estate, or a legal and a less equitable estate, meet in the same person, in either instance the equitable estate is merged at law, for the law regards the legal estate as the superior.'* d There is, however, the same exception as above, that an equitable estate-tail will not merge in the legal fee.^ §788. II. The Equitable Doctrine,— Where the legal estate — for example, the fee — and an equal co-extensive equitable estate unite in the same person, the merger^takes place in equity, in the absence of acts showing an inten- tion to prevent it, as certainly and as directly as at the law. Under these circumstances, merger is prima facie the equi- § 787, 2 2. Black. Com. 177. Estates-tail in copyholds, however, will merge >iri the fee, since they are not within the statute : Parker v. Turner, 1 Vern. 458; Dunn v. Green, 3 P. Wms. 9; also an estate-tail, after possi- bility of issue extinct, or when changed into a determinable fee, may merge: See 3 Preston on Conveyancing, 240. § 787, 3 Thus it is held in Malloney v. Horan, 49 N. Y. Ill, 10 Am. Rep. 335, that where the fee has been conveyed to A, by a deed fraudulent as against the creditors of the grantor, and the conveyance has been set aside on that ground, the fact that it was valid as between the immediate parties will not cause it to work a merger of a smaller prior estate held by the grantee, A; to the loss of the fee, the law will not add as a penalty the further loss of the prior estate on the ground of a merger. §787, 4 Selby v. Alston, 3 Ves. 339; Brydges v.Brydges, 3 Ves. 125a; Capel V. Girdler, 9 Ves. 509; Welsh v. Phillips, 54 Ala. 309, 25 Am. Eep. 679. § 787, 5 Merest v. James, 6 Madd. 118; Browne v. Blake, 1 Molloy, 382. § 787, (c) By the Judicature Act, Ann. Cas. 693, 7 L. R. A. (N. S.) 433, 1873, § 25, subs. 4, if the circum- 53 S. E. 978. stances are such that there would § 787, (d) The text is quoted in be no merger in equity, there is now Highland Park Mfg. Co. v. Steele, no merger at law. See, also. Me- 232 Fed. 10, 146 C. C. A. 202. Creary v. Coggeshall, 74 S. C. 42, 1 1613 CONCEBNING MEKGEB. § 788 table as well as legal rule.i * If, however, the holder of an equitable estate obtains the legal fee, and procures it to be conveyed to a trustee with an express declaration that there shall be no merger, then it seems that a court of equity- will not permit a merger in opposition to such a direct intention.2 Where the owner of a legal estate — as, for example, the fee — acquires by purchase or in any other manner a lesser equitable estate not co-extensive and com- mensurate with his legal estate, or a lesser legal estate, a distinction exists; the merger, although taking place at law, does not necessarily take place in equity; indeed, it § 788, 1 Selby v. Alston, 3 Ves. 339; Brydges v. Brydges, 3 Ves. 125a; Wykham v. Wykham, 18 Ves.. 418, per Lord Eldon; James v. Moray, 2 Cow. 246, 14 Am. Dec. 475. In Brydges v. Brydges, 3 Ves. 125a, Lord Alvanley laid down the equitable doctrine in an accurate manner, which received the strong approval of Lord Eldon, and the decision is a leading authority : "I admit that where a person has the same interest in the legal and equitable estate, he ceases to have the equitable estate, and has the legal estate, upon which this court will not act, but leaves it to the rules of law. But it must always be understood with this distinction, that it holds only where the legal and equitable estates are co-extensive and com- mensurate; but I do not by any means admit that where a person has the whole legal estate and a partial equitable estate, the latter sinks into the former, for it would be a disadvantage to him. There is no absurdity in saj'ing that a person may have the whole legal estate, and a limited in- terest in the beneficial interest in that estate, as there is in saying that he has the whole legal fee and a legal remainder." - § 788, 2 Belaney v. Belaney, L. R. 2 Ch. 138; Tiffin v. Tiffin, 1 Vem. 1. The rule in Shelley's ease was so unfavorably regarded by courts of equity that they would not permit a merger of an equitable in a legal estate, in order to render the life interest and the remainder of the same kind, and thus let in the operation of the rule: See Shapland v. Smith, 1 Brown Ch. 76; Lord Say and Seal v. Jones, 3 Brown Pari. C. 113; Venables v. Morris, 7 Term. Rep. 342-i38; Silvester v. Wilson, 2 Term Rep. 444. No merger will take place in equity where the two interests are held by different rights: Chambers v. Kingham, L. R. 10 Ch. Div. 743, 745. § 788, (a) The text is quoted in Merrell v. Garver, 54 Ind. App. 514, Wiedemann v. Crawford, 158 Ky. 101 N. E. 152. See, also. In re 657, 166 S. W. 185; and in Bagley Selous, [1901] 1 Ch. 921 (merger, V.' McCarthy Brog. Co., 95 Minn. 286, though equitable estate is a tenaney- 104 N. W. 7, per Jaggard, J. This in-common and legal estate is a joint paragraph of the tfext is cited in tenancy). §788 EQUITY JUBISPBUDENCB. 1614 may be said that the leaning of equity is then against any merger, and that, prima facie, it does not result. The set- tled rule of equity is, that the intention of the one acquir- ing the two interests then controls. If this intention has been expressed by taking the transfer to a trustee, or by language inserted in the instrument of transfer, it will, of course, be followed. If the intention has not been thus expressed, it will be sought for and ascertained in all the circumstances of the transaction. If it appears from aU these circumstances to be for the benefit of the party ac- quiring both interests that a merger shall not take place, but that the equitable or lesser estate shall be kept alive, then his intention that such a result should follow will be presumed, and equity will carry it into execution by pre- venting a merger, and by treating the equitable or lesser interest as subsisting, and by admitting all the conse- quences, for the protection of the party with respect to other matters, which necessarily result from the fact of the equitable estate being left in existence.^ ^ The same § 788, 3 Brydges v. Brydges, 3 Ves. 125a ; Chambers v. Bangham, L. R. 10 Ch. Div. 743, 745; Thorn v. Newman, 3 Swanst. 603; Adams v. Angell, L. R. 5 Ch. Div. 634, 645, and cases cited; Forbes v. MofEatt, 18 Ves. 384; St. Paul v. Lord Dudley and Ward, 15 Ves. 167, 173; Andrus § 788, (h) The text is quoted in Toder v. Kobinson, 45 Okl. 165, 145 9 Pao. 775. The text is cited to this effect in Fort Scott Building & L. Ass'n V. Palatine Ins. Co., 74 Kan. 272, 86 Pae. 142; Larmon v. Lar- mon, 173 Ky. 477, 191 S. W. 110. See, also, Ingle v. Vaughn Jenkins, [1900] 2 Ch. 368; Thellusson v. Lid- dard, [1900]. 2 Ch. 635; Capital, etc.. Bank, Ltd., v. Rhodes, [1903] 1 Ch. 631; Highland Park Mfg. Co. v. Steele, 232 Fed. 10, 146 C. C. A. 202; Keir v. Keir, 155 Cal! 96, 99 Pac. 487 (will charged a certain payment on remainderman upon receiving the property; life tenant conveyed to remainderman; this did not so merge the estates as to accelerate maturity of obligation); Higgins v. Wash- burn, 11 Cal. App. 735, 106 Pac. 415 (no merger of equitable life estate and legal contingent remainder) ; Wilder v. Holland, 102 Ga. 44, 29 S. E. 134 (intention m favor of merger shown by deed conveying in fee); Sherlock v. Thompson, 167 Iowa, 1, Ann. Cas. 1917A, 1216, 148 N. W. 1035; Swisher v. Swisher, 157 Iowa, 55, 137 N. W. 1076 (merger, where one of trustees is one of beneficiaries); Wettlaufer v. Ames (Mich.), 94 N. W. 950 (dower in- terest not mprged in fee); Hartz v. Hilsendegen, 182 Mich. 129, 148 N. W. 433; Smith v. Eoberts, 91 N. Y. 1615 CONCEENING MEKGEB, § 788 rule may be stated in a negative form. If frbm all the cir- cumstances a merger would be disadvantageous to the party, then his intention that it should not result will be V. Vreeland, 29 N. J. Eq. 394; Welsh v. Phillips, 54 Ala. 309, 25 Am. Rep. 679; Fowler v. Pay, 62 111. 375; Worcester Bank v. Cheeney, 87 HI. 602; Hart V. Chase, 46 Conn. 207; Malloney v. Horan, 49 N. Y. Ill, 10 Am. Rep. 335; Binsse v. Paig:e, 1 Abb. App. 138; Sheehan v. Hamilton, 2 Keyes, 304; 4 Abb. App. 211. This case presents an interesting and most important question with respect to the application of the equitable doctrine in legal actions under the reformed procedure. The action was one to recover possession of land, — simple ejectment, — ^in which the plain- ti£E only alleged and sought to recover upon his legal title in his com- plaint. Livingston, the original owner, had demised the land to one Tay- lor by a perpetual lease, reserving a rent-charge with a clause of re-entry. L. assigned this rent-charge and all his rights to Dr. Clarke, who died in 1846, and the plaintiff is his heir at law. The action is brought to re- cover the land on account of failure to pay the rent. The defense was as follows: Taylor had given a mortgage on the land, which had been fore- closed, and the land was bought in by Dr. Clarke in 1831, and was by him conveyed to one Risley and from him by mesne conveyances to the defendant. The defendant's contention was, that Dr. Clarke being, in 1831, owner both of the land and of the rent-charge, the latter merged and was extinguished. In reply, the plaintiff proved the intention of Dr. Clarke that the rent-charge should not merge, but should be kept alive. The court below held that the doctrine of nonmerger was purely equitable, and could not be invoked by the plaintiff in this legal action. The court of appeals, on the contrary, decided that in such a legal action, brought upon a legal title, and seeking a- purely legal remedy, the plaintiff may still invoke the aid of an equitable right or title which he holds, and is no longer put to the necessity of establishing and enforcing such equitable , right by a separate action in equity." 470; Asehe v. Asehe, 113 N. Y. 232, 580, 44 S. E. 122 (homestead right 21 N. E. 70; Sweet v. Henry, 175 of wife merged in fee); Frank v. N^ Y. 268, 67 N. E. 574 (lease for Guarantee Trust & Safe Deposit Co., years not merged in fee) ; In re An- 216 Pa. St. 40, 8 Ann. Cas. 991, 64 derson, 211 N. Y. 136, 105 N. E. 79 Atl. 894 (as to merger of ground (merger) ; Hudson, etc., Co. v. Glen- rents by purchase of fee) ; Bowlin v. coe, etc., Co., 140 Mb. 103, 62 Am. Ehode Island Hospital Trust Co., 31 St. Rep. 722, 41 S. W. 450 (lease for E. I. 289, 140 Am. St. Eep. 758, 76 years merged in equity of redemp- Atl. 348. tion to carry out intention); Smith §788, (c) By an express provi- V. Smith, 194 Mo. App. 309, 188 S. sion of the Judicature Act, 1873, W. 1111; Joyner v. Sugg, 132 N. C. sec. 25, subsec. 4, if the cireum- § 789 EQUITY JUEISPEUDENCE. 1616 presumed and maintained. The language of some Amer- ican cases seems to state the rule so broadly that it would include an equitable interest co-extensive and commensurate with the legal estate, and would thus fail to recognize the distinction heretofore laid down. This may perhaps re- sult from the fact that instances of a legal and an equi- table fee uniting in the same person have very rarely come before the American courts for adjudication; and the judges, in stating the equitable doctrine correctly ap- plicable to the facts before them, have naturally expressed it in terms somewhat broader than was necessary for the decision.'* § 789. Second. Merger of Charges.^ — Whenever the owner of the legal estate in land becomes also the holder of any charge directly resting upon it, the latter merges at law and disappears in the same manner as a lesser estate merges. The equitable doctrine preventing the merger un- der these circumstances is even stronger and more readily applied than in the case of two estates.^ The "charges" referred to include mortgages, and other liens and encum- brances, and sometimes easements, servitudes, and similar interests which are not rights of property or estates. There are two principal conditions of fact to be considered: 1. Where the legal owner of the property becomes, by be- quest, devolution, or transfer, holder of the charge; 2. § 788, 4 If A, holding the equitable fee as a cestui que trust under a dry, passive trust, should acquire directly to himself the legal fee, there can be no doubt upon the authorities that a merger would take place in equity as well as at law. This case, which is not infrequent in Englsind, where such trusts are common, is very infrequent in the United States. The English authorities seem to hold very distinctly that a mere expressed intention of the party would not prevent the merger. stances are such that a court of §789, (a) This section is cited in equity would have held that there Donk v. Alexander, 117 HI. 330, 7 was no merger in equity, there is N. E. 672. now no merger at law; Capital C. § 789, (b) The text is quoted in Bank v. Ehodes, [1903] 1 Ch. 631, Bagley v. McCarthy Bros. Co., 95, 652 et seq.j Snow v. Boycott, [1892] Minn. 286, 104 N. W. 7, per Jagj 3 Ch. 110. gard, J. 1617 CONCEENING MEEGEB. § 790 Where the owner of the property voluntarily pays off the charge. § 790. I. The Owner of the Property Becomes Entitled to the Charge. — ^When the owner of the fee becomes abso- lutely entitled in his own right to a charge or encumbrance upon the same land, with no intervening interest or lien, the charge will, at law, merge in the ownership and cease to exist. Under like circumstances a merger will take place in equity, where no intention to prevent it has been expressed, and none is implied from the circumstances and the interests of the party; and a presumption in such a case arises in favor of the merger.^ ^ Generally, the same result follows whether a mortgagee assigns a mortgage to the mortgagor, or the mortgagor Conveys the land to the mortgagee.2 1> The merger of a charge or encumbrance §790, 1 Forbes v. Moffatt, 18 Ves. 384; Lord Compton v. Oxenden, 2 Ves. 261, 264; Swinfen v. Swinfen, 29 Beav. 199; Byam v. Sutton, 19 Beav. 556; Swabey v. Swabey, 15 Sim. 106; Tyler v. Lake, 4 Sim. 351, 358; Brown v. Stead, 5 Sim. 535; Grice v. Sbaw, 10 Hare, 76; Smith v. Phillips, 1 Keen, 694; Baldwin v. Sager, 70 lU. 503; Kobins v. Swain, 68 111. 197; Lilly v. Palmer, 51 111. 331; Gardner v. Astor, 3 Johns. Ch. 53, 8 Am. Dec. 465; Starr v. Ellis, 6 Johns. Ch. 393; James v. Johnson, 6 Johns. Ch. 417; James v. Morey, 2 Cow. 246, 286, 300, 313, 14 Am. Dec. 475; Gregory v. Savage, 32 Conn. 250, 264; Bassett v. Mason, 18 Conn. 131; Wilhelmi v. Leonard, 13 Iowa, 330. § 790, 2 Id. Some recent cases draw a distinction as follows : If the mortgagee agsigns the mortgage to the mortgagor, a merger is presumed; but if the mortgagor conveys the land to the mortgagee, especially where there is a subsequent encumbrance, a merger wUl not be presumed, but will depend upon the interest of the mortgagee as showing the intent: Stantons v. Thompson, 49 N. H. 272; Edgerton v. Young, 43 HI. 464.«' §790, (a) This section is cited in ster's Settlements, [1904] 1 Ch. 713; Donk V. Alexander, 117 111. 330, 7 In re Gibbon (Moore v. Gibbon), N. E. 672; Title Guarantee Co. v. [1909] 1 Ch. 367. Wrenn, 35 Or. 62, 76 Am. St. Rep. § 790, (b) Quoted in Agnew v. E. 454, 56 Pac. 271. The text is quoted B. Co., 24 S. C. 18, 58 Am. Kep. 237. in Artz v. Yeager (Ind. App.), 66 §790, (c) See, also, Howard v. N. E. 917; and in Wiedemann v. Clark, 71 Vt. 424, 76 Am. St. Eep. Crawford, 158 Ky. 657, 166 S. W. 782. 185. See, also, In re French-Brew- 11—102 § 791 EQUITY JUBISPETJDENCE. 1618 under these circumstances is, however, in most instances only a presumption, which can generally be overcome, and which sometimes does not even arise. ^ § 791. Same. Intention Prevents a Merger. — The equi- table doctrine concerning the merger, where the owner of the fee becomes entitled to the charge or encumbrance, may be stated as follows, substantially in the language of most eminent judges. Sir William Grant says: "The question is upon the intention, actual or presumed, of the person in whom the interests are united."* Sir George Jessel says: "In a court of equity it has always been held that the mere fact of a charge having been paid off does not decide the question whether it is extinguished. If a charge is paid off by a tenant for life, without any expression of his inten- tion, it is well established that he retains the benefit of it against the inheritance. Although he has not declared his intention of keeping it alive, it is presumed that his inten- tion was to keep it alive, because it is manifestly for his benefit. On the other hand, when the owner of an estate in fee pays off or becomes entitled to a charge, the pre- sumption is the other way, but he can, by expressly de- claring his intention, either keep it alive or destroy it. If there is no reason for keeping it alive, then equity will, § 790, 3 There is some discrepancy between the earlier and more recent decisions. In Toulmin v. Steere, 3 Mer. 210, 224, Sir William Grant said : "The cases of Greswold v. Marsham, 2 Ch« Cas. 170, and Mocatta v. Mur- gatroyd, 1 P. Wms. 393, are express authorities to show that one pur- chasing an equity of redemption cannot set up a prior mortgage of his own, nor, consequently, a mortgage which he has got in, against subse- quent encumbrances of which he had notice"; or in other words, that the mortgage would always merge in equity. This dictum has been repeatedly disapproved by the ablest judges, and must be regarded as completely overthrown by modem decisions: See Adams v. Angell, L. R. 5 Ch. Div. 634, 641, 645, and cases cited.* §790, (d) For further comment Whiteley v. Delaney, [1914] A. C. on Toulmin v. Steere, see Manks v. (H. L.) 132, 144ff. Whiteley, [1911] 2 Ch. 448, 460ff; § '^^^' (*) ^^« *«^t '» V""^^^ ^"^ Miller v. Little (N. D.), 164 N. W. [1912] 1 Ch. 735, 744, 759, 760ff: -,a a- ^- ■ ■ '' ■^ -' ' ' ' ' 19, dissenting opinion. 1619 CONCEBNING MEEGEB. § 791 in the absence of any declaration of his intention, destroy it; but if there is any reason for keeping it alive, such as the existence of another encumbrance, equity will not de- stroy it." In short, where the legal ownership of the land and the absolute ownership of the encumbrance become vested in the same person, the intention governs the merger in eqmty.i* If this intention has been expressed, it con- trols; in the absence of such an expression, the intention will be presumed from what appear to be the best interests of the party as shown by all the circumstances; if his in- terests require the encumbrance to be kept alive, his in- tention to do so will be inferred and followed; if, on the contrary, his best interests are not opposed to a merger, then a merger will take place according to his supposed intention.*! This is the general rule, subject, however, to one important exception, to be mentioned in a subsequent paragraph.! ^ If the person expressly declares his inten- § 791, 1 Forbes v. Moffatt, 18 Ves. 384, per Sir William Grant; Adams V. Angell, L. R. 5 Ch. Div. 634, 645, per Sir George Jessel; Swabey v. Swabey, 15 Sim. 106 ; Grice v. Shaw, 10 Hare, 76 ; Bailey v. Richardson, 9 Hare, 734, 736; Tyrwhitt v. Tyrwhitt, 32 Beav. 244; Swinfen v. Swin- fen, 29 Beav. 199; Davis v. Barrett, 14 Beav. 542; Simonton v. Gray, 34 Me. 50; Given v. Marr, 27 Me. 212; Holden v. Pike, 24 Me. 427; Clark v. Clark, 56 N. H. 105; Stantons v. Thompson, 49 N. H. 272; Hinds v. Ballon, 44 N. H. 619; Moore v. Beasom, 44 N. H. 215; Drew v. Rust, 36 N. H. 335; Bell v. Woodward, 34 N. H. 90; Weld v. Sabin, 20 N. li. 533, 51 Am. Dec. 240; BuUard v. Leach, 27 Vt. 491; Walker v. Barker, 26 Vt. 710; Sloeum v. Catlin, 22 Vt. 137; Evans v. Kimball, 1 Allen, 240, 242; New Eng. J. Co. v. Merriam, 2 Allen, 390; Savage v. Hall, 12 Gray, 363; § 791, (b) Quoted in Agnew v. E. Guarantee Co. v. Wrenn, 35 Or. 62, E. Co.,' 24 S. C. 18, 58 Am. Eep. 237; 76 Am. St. Eep. 454, 56 Pac. 271. and in Wiedemann v. Crawford, 158 § 791, (d) This section is cited in Ky 657, 166 S. W. 185. See the ^^'^'^'^ ^- ^o^^^^y, 109 I°d. 37, 9 , . , ' . . , ™ i . TVT 1 N. E. 782; Fulkersou v. Taylor, 100 admirable opinion of Fletcher Moul- ' „ „ „„, ^ •' ' Va. 426, 41 S. E. 863; Boos v. Mor- ton, L. J., in Manks v. Whiteley, ^^^^ ^g^ j^^ g^g^ g^ ^^ g^ ^^^ [1912] 1 Ch. 735, 747-765, especially 337^ 30 ^ E. 141; Woodside v. Lip- at p. 764. pold, 113 Ga. 877, 84 Am. St. Rep. § 791, (e) Quoted in Eorer v. Fer- 267, 39 S. E. 400. See, also, Thome guson, 96 Va. 411, 31 S. E. 817; Title v. Cann, [1895] App. Cas. 11. § 791 EQUITY JUEISPKUDENCE. 1620 tion that the charge shall be kept on foot, no question can generally arise, for he can, with the single exception men- Grover v. Thatcher, 4 Gray, 526; Loud v. Lane, 8 Met. 517, 518, 519; Brown v. Lapham, 3 Cush. 551; Hunt v. Hunt, 14 Pick. 374, 25 Am. Dec. 400 ; Gibson v. Crehore, 3 Pick. 475 ; 5 Pick. 146 ; Knowles v. Carpenter, 8 R. I. 548; Mallory v. Hitchcock, 29 Conn. 127; Bassett v. Mason, 18 Conn. 131; Loekwood v. Sturdevant, 6 Conn. 373; Campbell v. Vedder, 1 Abb. App. 295; Purdy v. Huntington, 42 N. Y. 334, 1 Am. Hep. 532; Hancock v. Hancock, 22 N. Y. 568; Judd v. Seeking, 62 N. Y. 266; Shel- don V. Edwards, 35 N. Y. 279; Bascom v. Smith, 34 N. Y. 320; Clift v. White, 12 N. Y. 519; Spencer v. Ayrault, 10 N. Y. 202; Vanderkemp v. Shelton, 11 Paige, 28; Skeel v. Spraker, 8 Paige, 182; White v. Knapp, 8 Paige, 173; Millspaugh v. McBride, 7 Paige, 509, 34 Am. Dec. 360; James V. Johnson, 6 Johns. Ch. 417, 423; Starr v. Ellis, 6 Johns. Ch. 393; Gard- ner V. Astor, 3 Johns. Ch. 53, 8 Am^ Dec. 465 ; Loomer v. Wheelwright, 3 Sand. Ch. 135, 157; Angel v. Boner, 38 Barb. 425; McGtiven v. Wheelock, 7 Barb. 22; James v. Morey, 2 Cow. 246, 14 Am. Dec. 475; Hoppoek v. Ramsey, 28 N. J. Eq. 413; Mulford v. Petersen, 35 N. J. L. 127; Duncan V. Smith, 31 N. J. L. 325; Van Wagenen v. Brown, 26 N. J. L. 196; Hinchman v. Emans, 1 N. J. Eq. 100; Duncan v. Drury, 9 Pa. St. 332, 49 Am. Dec. 565; Moore v. Harrisburg Bank, 8 Watts, 138; Wallace v. Blair, 1 Grant Cas. 75; Polk v. Reynolds, 31 Md. 106; Bell v. Tenny, 29 Ohio St. 240; Jordan v. Forlong, 19 Ohio St. 89; Tower v. Divine, 37 Mich. 443; Snyder v. Snyder, 6 Mich. 470; Richardson v. HockenhuU, 85 111. 124; Baldwin v. Sager, 70 HI. 503; Huebseh v. Scheel, 81 111. 281; Robins v. Swain, 68 111. 197; Fowler v. Pay, 62 111. 375; Clark v. Laughlin, 62 lU. 278; Lilly v. Palmer, 51 HI. 331; Edgerton v. Young, 43 111. 464; Aiken V. Milwaukee etc. R. R., 37 Wis. 469 ; Webb v. Meloy, 32 Wis. 319 ; Lyon V. Mcllvaine, 24 Iowa, 9; Welhelmi v. Leonard, 13 Iowa, 330; White v. Hampton, 13 Iowa, 259 ; Davis v. Pierce, 10 Minn. 376 ; Christian v. New- berry, 61 Mo. 446; Grellet v. Heilshom, 4 Nev. 526; Carter v. Taylor, 3 Head, 30; Besser v. Hawthorn, 3 Or. 129; Atkinson v. Morrissy, 3 Or. 332; Knowles v. Lawton, 18 Ga. 476, 63 Am. Dec. 290; Tucker v. Crow- ley, 127 Mass. 400; Delaware etc. Co. v. Bonneli, 46 Conn. 9; Hart v. Chase, 46 Conn. 207; New Jersey Ins. Co. v. Meeker, 40 N. J. L. 18; Aetna Life Ins. Co. v. Com, 89 111. 170; Meacham v. Steele, 93 111. 135; Dunphy v. Riddle, 86 111. 22; Worcester Bank v. Cheeney, 87 111. 602 ; Smith v. Ostermeyer, 68 Ind. 432 ; Shimer v. Hammond, 51 Iowa, 401 ; 1 N. W. 656; Waterloo Bank v. Elmore, 52 Iowa, 541, 3 N. W. 547; Scott v. Webster, 44 Wis. 185. The exception referred to in the text is the case where the owner of land who is primarily bound to pay the debt secured pays off or takes an assignment of the mortgage. See post, § 797. 1621 CONCERNING MEEGEB. § 792 tioned, always prevent a merger in this manner.^ e The presumption of an intent to preserve the encumbrance alive may, on the other hand, be inferred from the circumstances of the case, from the position of the owner's property, and especially from the fact that a merger would let in other charges or encumbrances.^ ^ § 792. Time and Mode of the Intention.^— While the in- tention controls, it must be understood as the intention existing at the time the two interests came together.^ If §791, 2 Bailey v. Richardson, 9 Hare, 734, 736; Tyrwhitt v. Tyrwhitt, 32 Beav. 244. § 791, 3 Swinfen v. Swinfen, 29 Beav. 199; Davis v. Barrett, 14 Beav. 542; Tyrwhitt v. Tyrwhitt, 32 Beav. 244; Stantons v. Thompson, 49 N. H. 272; Warren v. Warren, 30 Vt. 530; Hancock v. Hancock, 22 N. T. 568; Campbell v. Vedder, 1 Abb. App. 295; Hill v. Pixley, 63 Barb. 200; Loud V. Lane, 8 Met. 517. To effect a merger in any case, the person must be owner of the land and of the charge at the same time. If a mortgagee has assigned his mortgage, and afterwards takes a conveyance of the land, there will be no merger, even though the assignment of the mortgage be not recorded: Campbell v. Vedder, 1 Abb. App. 295; Purdy v. Hunting- ton, 42 N. Y. 334, 1 Am. Eep. 532. A mortgage assigned to the wife of the mortgagor will not merge under modem state statutes: Faulks v. Dimock, 27 N. J. Eq. 65 ; Model Lodging H. Ass'n v. Boston, 114 Mass. 133; Bemis v. Call, 10 Allen, 512; Bean v. Boothby, 57 Me. 295; nor will the marriage of the mortgagor and mortgagee produce a merger; Power v. Lester, 23 N. Y. 527; and see Gillig v. Maass, 28 N. Y. 191. Taking a new mortgage on the same land, or other security, for the same debt does not generally merge the old one : s Christian v. Newberry, 61 Mo. 446. §791, (e) In re Gibbon (Moore ton (Pa.), 57 Atl. 758; Hennings- V. Gibbon), [1909] 1 Ch. 367; Agnew meyer v. First State Bank (Tex. V. E. E. Co., 24 S. C. 18, 58 Am. Kep. Civ. App.), 192 S. W. 286; George 237. V. Crim, 66 W. Va. 421, 66 S. E. 526. §791, (f) Anglo-Californian Bank § 791, (s) McElhaney v. Shoe- V. Field, 146 Cal. 644, 80 Pac. 1080; maker, 76 Iowa, 416, 41 N. W. 58; Lowman v. Lowman, 118 111. 582, 9 Hutchinson v. Swartsweller, 31 N. N. E. 245; Moffet v. Farwell, 222 J. Eq. 205. 111. 543, 78 N. E. 925 (presumption §792, (a) This section is cited in not overcome by surrender of the Boos v. Morgan, 130 Ind. 305, 30 notes and mortgage); Ellison v. Am. St. Eep. 237, 30 N. E. 141. Branstrator, 45 Ind. App. 307, 88 N. § 792, (b) The text is quoted in E. 963, 89 N. E. 513; Hospes v. Aim- Merrell v. Garver, 54 Ind. App. 514, Btedt, 83 Mo. 473; Fenton v. Fen- 101 N. E. 152. § 792 EQUITY JTJEISPET7DENCE. 1622 there was then no intention to keep the encumbrance alive, a merger cannot be prevented by an intention afterwards formed and expressed, or from a subsequent change of cir- cumstances from which an intention might be inferred. ^ <= Where the intention is expressed, it may be by the manner in which the encumbrance is transferred, as to a trustee for the owner of the land, or by recitals or other language in the assignment of the security or conveyance of the land ; no particular mode is requisite, provided the intention is sufficiently declared.^ ^ If there is no expression of an in- tention at the time, then all the circumstances will be con- sidered, in order to discover what is for the best interests of the party.e He will be presumed to have intended that the charge should be kept alive or should merge according to the benefit resulting from either. If a merger would lef ia other encumbrances which he ivas not already hound to pay, this is a circumstance almost decisive of an intention not to permit a merger.^ * Parol evidence of all the sur- § 792, 1 Cole V. Edgerly, 48 Me. 108 j Given v. Marr, 27 Me. 212; Hunt V. Hunt, 14 Pick. 374, 383; Gardner v. Astor, 3 Johns. Ch. 53, 8 Am. Dec. 465; Loomer v. Wheelwright, 3 Sand. Ch. 135, 157; Champney v. Coope, 34 Barb. 539; Aiken v. Milwaukee, etc., R. R., 37 Wis. 469. §792, 2 Bailey V. Richardson, 9 Hare, 734; Tyrwhitt v. Tyrwhitt, 32 Beav. 244; Spencer v. Ayrault, 10 N. Y. 202. And see, as to the effect of such recitals, Bean v. Boothby, 57 Me. 295; Campbell v. KJiights, 24 Me. 332; Crosby v. Chase, 17 Me. 369; Crosby v. Taylor, 15 Gray, 64, 77 Am. Dec. 352. § 792, 3 Swinfen v. Swinfen, 29 Beav. 199; Davis v. Barrett, 14 Beav. 542; Hatch v. Skelton, 20 Beav. 453; Earl of Clarendon v. Barham, 1 Younge & C. Ch. 688 ; and cases ante, under § 791. If, after the owner- ship and the charge have become united, the party does any act which §792, (e) Woodside v. Lippold, §792, (d) Gresliam v. Ware, 79 113 Ga. 877, 84 Am. St. Eep. 267, 39 Ala. 132; Dubbels v. Thompson, 49 S. E. 400; Weidner v. Thompson, 69 Mont. 550, 143 Pac. 986. Iowa, 36, 28 N. W. 422. See Nagle §792, (e) The text is quoted in V. Conard, 79 N. J. Eq. 124, 81 Atl. Merrell v. Garver, 54 Ind. App. 514, 841 (a will made six years after igi N. B. 152. owner acquired the mortgage, stat- g^gg^ (fj g^i^h v. Roberta, 91 ing his intention that there should jr y- ._„ be no merger, held evidence against the merger). 1623 CONCEENING MERGER. § 793 rounding circumstances of the transaction and of the prop- erty is therefore admissible, for the purpose of discovering the intention, or to show that a merger must take place,* ** and also to show fraud,^ but not to prove the intention directly. 6 §793. Conveyance to the Mortgagee — Assignment to the Mortgagor or to His Grantee. — Where a mortgagee takes a conveyance of the land from the mortgagor or from a grantee of the mortgagor, if the transaction is fair, the presumption of an intention to keep the security alive is very strong. It is generally for the interests of the party in this position that the mortgage should not merge, but should be preserved to retain a priority over other encum- brances. As the mortgagee acquiring the land is not the debtor party bound to pay off either the mortgage or the other encumbrances on the land, there is nothing to prevent equity from carrying out his presumed intent, by decreeing against a merger.^ * On the other hand, an assignment of clearly shows that he regards the encumbrance as still subsisting, this is strong, even if not conclusive, evidence of an intent that there should be no merger ; « as, for example, he transfers the mortgage : Powell v. Smith- 30 Mich. 451; he bequeaths the encumbrance in specific terms; Blundell v, Stanley, 3 De'Gex & S. 433; and see Wilkes v. Collin, L. R. 8 Eq. 338 or devises the land subject to the charge : Hatch v. Skelton, 20 Beav. 453 but see, for a limitation, Johnson v. Webster, 4 De Gex, M. & Q. 474 Astley V. Milles, 1 Sim. 298. A devise of the land without mentioning the encumbrance is some evidence of an intention that it should merge: Swin- fen V. Swinfen, 29 Beav. 199, 204. §792, 4Fiske v. McGregory, 34 N. H. 414; Miller v. Fichthorn, 31 Pa. St. 252, 259; Trey v. Vanderhoof, 15 Wis. 397. § 792, 5 Astley v. Milles, 1 Sim. 298, 345; Wade v. Howard, 11 Pick. 289; 6 Pick. 492; Howard v. Howard, 3 Met. 548. § 792, 6 MeCabe v. Swape, 14 Allen, 188. § 793, 1 Stantons v. Thompson, 49 N. H. 272; Edgerton v. Young, 43 111. 464; Freeman v. Paul, 3 Me. 260, 14 Am. Dec. 237; Walker v. Barker, 26 Vt. 710; Slocuin v. Catlin, 22 Vt. 137; Mallory v. Hitchcock, 29 Conn. §792, (s) This statement in the §792, (h) Smith v. Eoberts, 91 note is quoted in Clark v. Qlos, 180 N. T. 470. 111. 556, 72 Am. St. Eep. 223, 54 N. § 793, (a) The text is quoted in E. 631. Katz v. Obenchain, 48 Or. 352, 120 §793 EQUITY JUEISPRUDENCE. 1624 the mortgage to the mortgagor himself raises a contrary presumption. At least, the presumption of a merger is much stronger in this case; it is generally the intention, and is often the duty, of the mortgagor to pay off and dis- charge the encumbrance by thus becoming the holder of it, and there is a clear distinction between the two cases.^ An assignment of a mortgage to a grantee of the mortgagor, unless he has expressly assumed to pay it and thus made 127; Mulford v. Peterson, 35 N. J. L. 127; Thompson v. Boyd, 21 N. J. L. 58, 22 N. J. L. 543; Dunean v. Smith, 31 N. J. L. 325; Fithin v. Corwin, 17 Ohio St. 118; Knowles v. Lawton, 18 Ga. 476, 63 Am. Dec. 290; Dun- phy V. Eiddle, 86 111. 22; "Worcester Bank v. Cheeney, 87 HI. 602; Scott V. Webster, 44 Wis. 185; Aetna L. Ins. Co. v. Corn, 89 lU. 170; Meaeham V. Steele, 93 lU. 135. § 793, 2 Id. Am. St. Rep. 821, 85 Pao. 617 (con- veyance to mortgagee through third person does not work merger where there is a subsequent, lien) ; and in Cowling V. Britt, 114 Ark. 175, 169 S. W. 783. This section is cited in Forthman v. Deters, 206 111. 159, 99 Am. St. Rep. 145, 69 N. E. 97; Co- burn V. Stephens, 137 Ind. 683, 45 Am. St. Rep. 218, 36 N. E. 132. See in support of the text Factors', etc., Ins. Co. V. Murphy, 111 U. S. 738, 4 Sup. Ct. 679; Lagrange v. Greer- Wilkinson Lumber Co., 59 Ind. App. ^88, 108 N. E. 373; Raymond v. Whitehouse, 119 Iowa, 132, 93 N. W. 292; Pugh v. Sample, 123 La. 791, 39 li. R. A. (N. S.) 834, and note, 49 South. 526; Feigner's Adm'rs v. Slinglufe, 109 Md. 474, 71 Atl. 978; Ann Arbor Savings Bank v. Webb, 56 Mich. 377, 23 N. W. 51; Baker v. Northwestern Guaranty Loan Co., 36 Minn. 185, 80 N. W. 464; Wead T. Gray, 78 Mo. 59; Dubbels v. Thomp- son, 49 Mont. 550, 143 Pae. 986; Top- liff V. Richardson, 76 Neb. 114, 107 N. W. 114; Mathews v. Jones, 47 Neb. 616, 66 N. W. 622; Harron v. DuBois, 64 N. J. Eq. 657, 54 Atl. 857; May v. Cummings, 21 N. D. 281, 130 N. W. 826; Yoder v. Robin- son, 45 Okl. 165, 145 Pac. 775; Glenn V. Rudd (S. C), 46 S. E. 555; Fruth V. Bolt (S. D.), 164 N. W. 105; Car- penter V. Gleason, 58 Vt. 244, 4 Atl. 706; Howard v. Clark, 71 Vt. 424, 76 Am. St. Rep. 782; Kline v. Mil- ler's Adm'r, 107 Va. 453, 59 S. E. 386; Sullivan v. Saunders, 66 W. Va. 350, 19 Ann. Cas. 480, 42 L. R. A. (N. S.) 1010, 66 S.-E. 497; Stoeckle V. Rosenheim (Del.), 87 Atl. 1006. Compare Gainey v. Anderson, 87 S. C. 47, 31 Ik R. A. (N. S.) 323, 68 S. E. 888, which seems to reverse the presumption. Of course there is no merger when the mortgagee has assigned the mortgage before taking the conveyance: Curtis v. Moore, 152 N. Y. 159, 57 Am. St. Rep. 506, 46 N. E. 168; Lime Ro"ck Nat. Bank v. Mowry, 66 N. H. 598, 13 L. B. A. 294, 22 Atl. 555; Case v. Fant, 53 Fed. 41, 3 0. C. A. 418, 10 V. S. App. 415; Stewart v. Munger & Bennett (N. C), 93 S. E. 927; Cole v. Beale, 89 HI. App. 426. 1625 CONCEBNING MEBGEB. § 794 himself the principal debtor, does not generally create a merger.^ It generally being for the interest of such grantee to keep the mortgage alive, and to maintain by its means a priority over any subsequent encumbrance or title, such an intention will be presumed and carried into effect by a court of equity.^ e "When a mortgage upon the whole land is assigned to one of two or more tenants in common, it is not merged, but may be retained and enforced by him against his co-tenants.* * § 794. Merger Never Prevented When Fraud or Wrong Would Result. — ^Whatever may be the circumstances, or between whatever parties, equity will never allow a merger to be prevented and a mortgage or other security to be kept alive, whei this result would aid in carrying a fraud or other unconscientious wrong into effect, under the color of legal forms. Equity only interposes to prevent a merger, in order thereby to work substantial justice.^ » § 793, 3 Adams v. Angell, L. R. 5 Ch. Div. 634, disapproving of some early decisions; Watts v. Symes, 1 De Gex, M. & Gr. 240; Mobile Branch Bank v. Hunt, 8 Ala. 876; Loud v. Lane, 8 Met. 517; Pitts v. Aldrich, 11 Allen, 39; Savage v. Hall, 12 Gray, 363. § 793, 4 Titsworth v. Stout, 49 111. 78, 95 Am- Dec. 577; Barker v. Flood, 103 Mass. 474; and conversely when the owner of the land becomes devisee of an undivided iuterest in the mortgage: Clark v. Clark, 56 N. H. 105. § 794, 1 Worthington v. Morgan, 16 Sim. 547 ; Hutehins v. Carleton, 19 N. H. 487; McGiveii v. Wheelock, 7 Barb. 22; Hinehman v. Emans, 1 N. J. Eq. 100. §793, (b) This portion of the text sing [1896] 1 Ch. 726; Fellows v. is quoted in Clark v. Glos, 180 HI. Dow, 58 N. H. 21; Green v. Currier, 556, 72 Am. St. Bep. 223, 54 N. E. 63 N. H. 563, 3 Atl. 428; Wonderly 631. The text is cited in Forthman v. Giessler, 118 Mo. App. 708, 93 V. Deters, 206 111. 159, 99 Am. St. S. W. 1130 (merger). Rep. 145, 69 N. E. 97 (merger, where § 793, (d) McDaniel v. Stroud, 106 grantee had expressly assumed to Fed. 486, 45 C. C. A. 446; Saint v. pay the mortgage). Cornwall, 207 Pa. St. 270, 56 Atl. §793, (c) See, also. Liquidation 440. Estates Purchase Co. v. Willoughby, §794 (a) This section is quoted [1898] App. Cas. 321, 67 Law J. Ch. in Forthman v. Deters, 206 III. 159, 251, 78 Law T. (N. S.) 329, rever- 99 Am. St. Eep. 145, 69 N. E. 97; § § 795, 796 EQUITY JUBISPEXJDBNOE. 1626 § 795. Life Tenant Becomes Entitled to the Charge.^— When a life tenant becomes entitled to a mortgage or other charge upon the entire inheritance, no presumption of a merger arises. The transaction is presumed to be for his own benefit. The security does not merge, but remains in his hands a valid encumbrance which he may enforce against the inheritance.^ The same rule applies to every one who has only a partial interest in the land subject to a charge, such as a tenant in common or a lessee. ^ ^ § 796. II. The Owner of the Land Pays Off a Charge upon It.* — The questions now to be considered are quite different from those already discussed. In the preceding subdivision (I.) the ownership of the land and of the charge have become united in any mann'er in the same person, either by the owner of the land acquiring the charge, or by the holder of the charge acquiring title to the land. Assuming it possible that the two interests may be kept distinct, the questions discussed are, whether the charge merges or does not merge; when it is kept alive and when it disappears. In the present division we have § 795, 1 Countess of Shrewsbury v. Earl of Shrewsbury, 1 Ves. 227, 233; Drinkwater v. Combe, 2 Sim. & St. 340, 345; Pitt v. Pitt, 22 Beav. 294; Burrell v. Earl of Egremont, 7 Beav. 205; Morley v. Morley, 5 De Gex, M. & G. 610; Adams v. Angell, L. R. 5 Ch. Div. 634, 645; and see post, cases on mortgages paid off by a doweress or other life tenant, § 799. § 795, 2 Id.; Titsworth v. Stout, 49 HI. 78, 95 Am. Dec. 577; Barker v. Ford, 103 Mass. 474; Clark v. Clark, 56 N. H. 105. in Belk v. Possler, 49 Ind. App. 248, § 795, (a) This section is cited in 96 N. E. 15; in Bagley v. McCarthy Ohmer v. Boyer, 89 Ala. 273, 7 Bros. Co., 95 Minn. 286, 104 N. W. South. 663; Hughes v. Howell, 152 7; and in Summy v. Eamsey, 53 Ala. 295, 44 South. 410. Wash. 93, 101 Pac. 506 (if holder § 795, (b) This paragraph is of mortgage, on acquiring title, eon- quoted in Merrell v. Garver, 54 Ind. veys with full covenants, this is con- App. 514, 101 N. E. 152. elusive in favor of merger); and §796, (a) This section is cited cited in Merrell v. Garver, 54 Ind. in Jones v. Lamar, 34 Fed. 454. App. 514, 101 N. E. 152; Miller v. Sections 796 et seq., are cited in Little (N. D.), 164 N. W. 19, con- Northwestern Improvement Co. v. eurring opinion; Smith v. Cooley Bhoades, 52 Mont. 428, 158 Pac. 832. (Tex. Civ. App.), 164 S. W. 1050. 1627 CONCEBNING MEEGEE. § 796 the single condition of fact, that the owner of the land which is subject to a charge, mortgage, or other encum- brance pays it off; whether upon so doing he takes a formal assignment or not is often immaterial. Under these cir- cumstances the distinctive question to be now examined is, whether it is possible for the party thus paying off a charge to keep it alive as a subsisting encumbrance in any man- ner, by any form of proceeding; or whether the charge must necessarily merge in the ownership, and cease to exist. If it cannot possibly be kept alive, then all further questions of the party's intention, expressed or presumed, are meaningless. If a merger is not necessary, and the charge ccm be kept alive, then the questions concerning the party's intention, expressed or presumed, and of the bene- fit to himself, will, of course, arise, and will be governed by the rules formulated in the preceding subdivision.^ If a merger can be prevented when the owner of the land pays off a charge, the question whether there is a merger or not depends upon his intention, in the manner already ex- plained.*' There are two cases to be considered: 1. When the owner in fee pays off a charge ; 2. When a life tenant or other owner of a partial interest pays off a charge. § 796, (b) The text is quoted in case of payment by a limited owner, Smith V. Cooley (Tex. Civ. App.), are just, I think, other ways of ex- 164 S. W. 1050. pressing the same rule." In that ease § 796, (c) In Whiteley v. Delaney, F. paid off a mortgage held by A. [1914] A. C. (H. L.) 132, 151, the It was the intention of all parties matter is thus summed up, by Lord to preserve the change which by Uunedin: "I think, taking the cases subrogation arose in A.'s favor as cited as a whole, that the general a first lien. On the advice of their view comes to this: Where by ap- solicitor, however, A. deeded to the propriate conveyancing the charge mortgagor, 0., he to L. and L. mort- could be preserved [excluding the gaged to !P. It was held, by the cases described in § 797], then it will House of Lords, reversing the court be for the party alleging the charge of appeal, [1912] 1 Ch. 735, and re- to be dead to show an intention to storing the decision of Parker, J., that effect. What have been called [1911] 1 Ch. 448, that the mistake the presumptions arising from {he in the choice of instruments to continued existence of the charge effectuate the intention prevented being to the benefit of the person any merger so as to let in as a first who has paid it off, as, e. g., in the lien a second mortgage that had § 797 EQUITY JUEISPEUDENCB. 1628 § 797, 1. Owner in Fee Pays Off a Charge. — ^An owner of the fee subject to a charge, who is himself the principal and primary debtor, and is liable personally and primarily for the debt secured, cannot pay off the charge, and in any manner or by any form of transfer keep it alive. Pay- ment by such a person and under such circumstances neces- sarily amounts to a discharge. The encumbrance cannot be prevented from merging by an assignment taken di- rectly to the owner himself, or to a third person as trustee. This rule applies especially to a mortgagor who continues to be the primary and principal debtor.^* The rule also §797, i Johnson v. Webster, 4 De Gex, M. & G. 474; Otter v. Lord Vaux, 6 De Gex, M. & G. 638; Brown v. Lapham, 3 Gust. 551, 554; Wedge V. Moore, 6 Gush. 8 ; Kilbpm v. Robbins, 8 Allen, 466, 471 ; Strong V. Converse, 8 Allen, 557, 85 Am. Dec. 732; Butler v. Seward, 10 Allen, 466; Bemis v. CaU, 10 Allen, 512; Eaton v. Simonds, 14 Pick. 98; Crafts V. Crafts, 13 Gray, 360; Wadsworth v. Williams, 100 Mass. 126; Cherry - V. Monro, 2 Barb. Ch. 618; Robinson v. Urquhart, 12 N. J. Eq. 515; Commonwealth v. Chesapeake ete. Co., 32 Md. 501; Swift v. Kraemer, 13 Cal. 526, 73 Am. Dec. 603. The rule does not necessarily apply_ to every mortgagor. If a mortgagor has conveyed the land to a grantee, who has expressly assumed and promised to pay the mortgage ,as a part of the consideration, such grantee becomes- the principal debtor, primarily liable, and the mortgagor assumes the position of a surety. If the mortgagor then pays off the mortgage,''he may preserve its lien alive as a security against the land for his own reimbursement:* Stillman v. StUlman, 21 N. J. Eq. 126; Jumel v. Jumel, 7 Paige, 591; Cox v. Wheeler, 7 Paige, been given by 0. to M. The opin- St. Bep. 145, 69 N. E. 97; Clark v. ions of Parker, J., and especially of Glos, 180 111. 556, 72 Am. St. Kep. Fletcher Moulton, L. J., in the court 223, 54 N. E. 631; Boos v. Morgan, of appeal, are most instructive on 130 Ind. 305, 30 Am. St. Eep. 237, the whole subject of merger of 30 N. E. 141. See in support of the charges. text Jones v. Lamar, 34 Fed. 454; §797, (a) The text is quoted in Polk County Nat. Bank v. Darrah, Cady V. Barnes, 208 Fed. 361; and 52 Fla. 581, 42 South. 323. in Smith v. Cooley (Tex. Civ. App.), § 797, (b) Birke v. Abbott, 103 164 S. W. 1050. This section is Ind. 1, 53 Am. Eep. 474, 1 N. E. cited in Birke v. Abbott, 103 Ind. 485; Orrick v. Durham, 79 Mo. 174; 1, 53 Am. Eep. 474, 1 N. E. 485; Bensieck v. Cook, 110 Mo. 173, 33 Columbus, S. & H. E. Co. Appeals Am. St. Eep. 422, 19 S. W. 642; Fret- (C. C. A,), 109 Fed. 177, 208; Forth- well v. Branyou (S. C), 45 S. E. man v. Deters, 20'6. 111. 159, 99 Am. 157. 1629 CONCERNING MERGEE. § 797 applies to a grantee of the mortgagor who takes a convey- ance of the land subject to the mortgage, and expressly assumes and promises to pay it as a part of the considera- tion. He is thereby made the principal debtor, and the land is the primary fund for payment. If he pays off the mortgage, it is extinguished.^ o 248, 257; Halsey v. Reed, 9 Paige, 446; Kinnear v. Lowell, 34 Me. 299; Fletcher v. Chase, 16 N. H. 38, 42; Robinson v. Leavitt, 7 N. H. 73, 100; Funk V. McReynold, 33 111. 481, 495; Baker v. Terrill, 8 Minn. 195, 199. § 797, 2 Miekles v. Townsend, 18 N. Y. 575; Russell v. Pistor, 7 N. Y. 171, 57 Am. Dec. 509; Mtch v. Cotheal, 2 Sand. Ch. 29; Lilly v. Palmer, 51 111. 331; Frey v. Vanderhoof, 15 Wis. 397; and cases cited at end of the last preceding note. See, however, Kellogg v. Ames, 41 N. Y. 259. Taking a conveyance subject to the mortgage, or with words simply' to that effect, does not render the grantee the principal debtor, so as to bring him within the operation of this rule: Pike v. Goodnow, 12 Alien, 472; Strong V. Converse, 8 Allen, 557, 85 Amu Dec. 732 ; Campbell v. Knights, 24 Me. 332 ; Weed etc. Co. v. Emerson, 115 Mass. 554 ; Belmont v. Coman, 22 N. Y. 438, 78 Am. Dec. 213; Trotter v. Hughes, 12 N. Y. 74, 62 Am. Dee. 137; Fowler v. Fay, 62 111. 375; Hull v. Alexander, 26 Iowa, 569. If a person who has conveyed land with a covenant warranting against encumbrances afterwards pays ofE or takes an assigpiment of a mortgage upon the premises, the same becomes extinguished; he cannot keep it alive as a subsisting lien, for to do so would be a direct violation §797, (c) The text^is quoted in MeConnell (Okl.), 131 Pao. 682; Lat- Cady V. Barnes, 208 Fed. 361. The ton v. McCarty, 142 Wis. 190, 125 text is cited to this effect in Forth- N. W. 430. And this remains true man v. Deters, 206 111. 159,. 99 Am. although an assignment is taken in St. Kep. 145, 69 N. E. 97; and in the name of another: Kilpatriek v. Belk V. Fossler, 49 Ind. App. 248, Haley, 66 Fed. 133, 13 0. C. A. 480, 96 N. E. 15. See, also, Columbus, 27 U. S. App. 752; Drury v. Holden, S. & H. E. Co. Appeals (C. C. A.), 121 111. 130, 13 N. E. 547. See Ly- 109 Fed. 177, 208; Kilpatriek v. don v. Campbell, 204 Mass. 580, 134 Haley, 66 Fed. 133, 13 C. C. A. 480, Am. St. Rep. 702, 91 N. E. 151 (rule 27 U. S. App. 752; Clark v. Glos, recognized; but it does not prevent 180 111. 556, 72 Am. St. Rep. 223, 54 the grantee-assignee from making, N. E. 631; Lagrange v. Greer-Wil- by will, the amount apparently due kinson Lumber Co., 59 Ind. App. 488, on the note a charge against the 108 N. E. 373; Goodyear v. Good- land). Contra to the rule of the year, 72 Iowa, 329, 33 N. W. 142; By- text, see Capitol Nat. Bank v. ington V. Fountain, 61 Iowa, 512, 14 Holmes, 43 Colo. 154, 127 Am. St. N. W. 220, 16 N. W. 534; Kuhn v. Rep. 108, 16 L. R. A. (N. S.) 470, National Bank, 74 Kan. 456, 118 Am. and cases cited in note, 95 Pac. 314. St. Rep. 332, 87 Pac. 551; Kjhn v. § 798 EQUITY JUEISPBUDENCB. 1630 § 798. Owner Who is not Liable for the Debt Pays Off the Mortgage. — On the other hand, when an owner of the premises who is not personally and primarily liable to pay ^ the debt secured pays off a mortgage or other charge upon it, he may keep the lien alive as a security for himself against other encumbrances or titles, and thus prevent a merger. Whether he does so is a question of intention, governed by the rules laid down in the previous para- graphs.^ When it is evidently for his benefit, the intention will be presumed. He may thus be entitled to preserve the lien, even without a formal assignment of the security to himself. Among those who are thus regarded as equitable assignees are grantees of the mortgagor not having assumed payment of the mortgage, heirs, devisees, and in fact all parties entitled to redeem, and not personally liable as principal debtors.i^ of his own covenant:^ Mickles v. Townsend, 18 N. T. 575; Stoddard v. Rotton, 5 Bosw. 378; Butler v. Seward, 10 AUen, 466; Mickles v. Dillaye, 15 Hun, 296. §798, 1 Parry v. Wright, 1 Sim. & St. 369; 5 Euss. 142; Watts v. Symes, 1 De Gex, M. & G. 240, 244; 16 Sim. 640; Squire v. Ford, 9 Hare, 47, 60; Anderson v. Pignet, L. R. 8 Ch. 180, 187; Gunter v. Gmiter, 23 Beav. 571; Rawiszer v. Hamilton, 51 How. Pr. 297; Binsse v. Paige, 1 Abb. App. 138; Powell v. Smith, 30 Mich. 451; Brown v. Lapham, 3 Gush. 551, 554; Pool •?. Hathaway, 22 Me. 85; Hatch v. Kimball, 16 Me. 146; Aiken v. Gale, 37 N. H. 501, 505; Drew v. Rust, 36 N. H. 335; Spaulding v. Crane, 46 Vt. 292; Walker v. King, 45 Vt. 525, 44 Vt. 601; Wheeler v. Willard, 44 Vt. 640; Warren v. Warren, 30 Vt. 530; Cheese- borough V. Millard, 1 Johns. Ch. 409, 7 Am. Dec. 494; Bell v. Mayor, 10 Paige, 49; Skeel v. Spraker, 8 Paige, 182; Millspaugh v. McBride, 7 Paige, 509, 34 Am, Dec. 360; Abbott v. Kassom 72 Pa. St. 183. §797, (d) Jones v. Lamar, 34 Fed. pays off the mortgage without actual 454. This portion of the author's notice of junior judgment lien), note is quoted in Brosseau v. Lowry §738, (b) This section is cited in (111.), 70 N. E. 901. Estate of Freud, 131 Cal. 667, 82 §798, (a) The text is quoted in Am. St. Rep. 407, 63 Pac. 1080; Mur- Capitol Nat. Bank v. Holmes, 43 ray v. O'Brien, 56 Wash. 361, 105 Colo. 154, 127 Am. St. Eep. 108, 16 Pac. 840; Lagrange v. Greer- Wilkin- L. E. A. (N. S.) 470, 95 Pac. 314 son Lumber Co., 59 Ind. App. 488, (assignee of equity of redemption 108 N. E. 373; Hull v. Mechanics' 1631 CONCEBNING MEKGEB. § 799 § 799. 2. Life Tenant Pays Off a Charge.— The rule is well settled that when a life tenant, or any other person having a pautial interest only in the inheritance or in the land, pays off a charge, mortgage, or encumbrance on the entire premises, he is presumed to do so for his own benefit. The lien is not discharged unless he intentionally release it. He can always keep the encumbrance alive for his own protection and reimbursement. His intention to do so will be presumed even though he has taken no assignment. In fact, his payment constitutes him an equitable assignee. ^ ^ The rule is most frequently applied in this country to widows entitled to dower in premises subject to a mort- gage. If they pay off the mortgage" in order to protect their dower, they become equitable assignees, and may preserve and enforce the lien against the inheritance for reimbursement over and above the proportion of the debt which they are bound to contribute.^ The rule extends in § 799, 1 Shrewsbury v. Shrewsbury, 1 Ves. 233 ; Drinkwater v. Combe, 2 Sim. & St. 340, 345; Burrell v. Earl of Egremont, 7 Beav. 205; Pitt v. Pitt, 22 Beav. 294; Morley v. Morley, 5 De Gex, M. & G. 610. § 799, 2 roster v. Hilliard, 1 Story, 77; Swaine v. Perine, 5 Johns. Ch. 490, 9 Am. Dec. 318 ; Bell v. Mayor etc., 10 Paige, 49 ; Lamson v. Drake, 105 Mass. 567; Newhall v. Savings Bank, 101 Mass. 431, 3 Am. Rep. 387; McCabe v. Swap, 14 Allen, 191; Davis v. Wetherell, 13 Allen, 63, 90 Am. Dec. 177; McCabe v. Bellows, 7 Gray, 148, 66 Am. Dec. 467; Gibson v. Crehore, 3 Pick. 475; Houghton v. Hapgood, 13 Pick. 158; Carll v. Butman, 7 Me. 102, 105; Spencer v. Waterman, 36 Conn. 342. BuildiBg, Loan & Savings Ass'n, 56 667, 82 Am. St. Eep. 407, 63 Pae. Ind. App. 449, 105 N. B. 573. See, 1080; Hughes v. Howell, 152 Ala. also, Wadsworth v. Lyon, 98 N. Y. 295, 44 South. 410; Merrell v. Gar- 201, 45 Am. Eep. 190; Boos v. Mor- ver, 54 Ind. App. 514, 101 N. E. 152; gan, 130 Ind. 305, 30 Am. St. Rep. Goodenough v. Labrie, 206 Mass. 237, 30 N. E. 141; Huffman v. Fudge, 599, 138 Am. St. Eep. 411, 92 N. E. 124 Ark. 208, 187 S. W. 644; Won- 807; and in Murray y. O'Brien, 56 derly v. Giessler, 118 Mo. App. 708, Wash. 361, 105 Pac. 840. See, also, 93 S. W. 1130 (merger) ; Morihg v. In re Harvey, [1896] 1 Ch. 137 (pre- Privott, 146 N. C. 558, 60 S. E. 509. sumption is not rebutted by fact § 799, (a) Quoted in Ohmer v. that tenant for life is the mother Boyer, 89 Ala. 273, 7 South. 663. of the remainderman) ; In re Pride, Cited in Estate of Freud, 131 Cal. [1891] 2 Ch. 135. § 800 EQUITY JUBISPBXJDENCE. 1632 like manner to tenants for years ^ and to tenants in com- mon.* § 800. Priorities Affected by Merger. — ^It is plain from the foregoing discussion that the doctrine of merger, in its application to encumbrances, has an intimate connection with the general subject of priorities. Whether a certain mortgage or other charge is still subsisting, and retains its priority, or whether it is in reality, though not perhaps in form, extinguished, so as to let in subsequent liens, must often be determined by the rules concerning merger. The doctrine has therefore a twofold application, — between the immediate parties, the owner of the land or the debtor on one side, and the holder of the lien on the other, and be- tween the holders of successive encumbrances and partial interests. § 799, 3 Averill v. Taylor, 8 N. Y. .44; Loud v. Lane, 8 Met. 517; Bacon V. Bowdoin, 22 Pick. 401. § 799, 4 See ante^ § 795, and cases cited in note. SECTION IX. CONCERNING EQUITABLE ESTOPPEL. ANALYSIS. § 801. Nature of the riglits created by estoppel. § 802. Origin of equitable estoppel. § 803. How far fraud is essential in equitable estoppels. § 804. Definition. § 805. Essential elements constituting the estoppel. § 806. Theory that a fraudulent intent is essential. § 807. Fraudulent intent necessary in an estoppel affecting tie legal title to land. §§ 808-812. Kequisftes further illustrated. § 808. The conduct of the party estopped. § 809. Knowledge of the truth by the party estopped. § 810. Ignorance of the truth by the other party. § 811. Intention by the party who is estopped. I 812. The conduct must be relied upon, and be an inducement for the other party to act. § 813. Operation and extent of the estoppel. § 814. As applied to married women. § 815. As applied to infants. 1633 CONCERNING EQUITABLE ESTOPPEL. § 801 §§ 816-821. Important applications in equity. § 81'6. Acquiescence. § 817. Same: as preventing remedies. § 818. Same : as an estoppel to rights of property and contract. § 819. As applied to corporations and stockholders. § 820. Other instances of acquiescence. § 821. Owner estopped from asserting his legal title to land. § 801. Nature of the Rights Created by Estoppel. — It has been said by some writers and judges that the doctrine of equitable estoppel is a branch merely of the law of evi- dence. This is, however, an entirely mistaken and by no means harmless view. Nothing can tend to produce more confusion of mind in the correct understanding of legal rules, and in their proper application to the affairs of life, than the exhibition of them under wrong divisions of the law, and the consequent representation of them as con- nected with relations which do not exist. It is undoubtedly true that authors of works on evidence intended for pro- fessional use do often treat of matters which form no legitimate part .of that subject. This maybe convenient, but it is not an accurate and scientific method, and should never be pursued when the purpose is to define and de- scribe the nature of legal doctrines and of the rights and duties which flow therefrom. Eules which determine and regulate primary rights of property and of contract con- stitute a part of the substantive law, and do not belong to the law of evidence, which is simply a branch of the law concerning procedure.^ The rights and corresponding duties created by estoppels are primary, — rights of prop- erty or of contract. This is certainly true of common-law estoppels, and it is no less true of equitable estoppels; the effect of the latter is substantially the same as that of the former, the difference being in the facts from which the estoppel arises, and not in the consequences produced by it. An estoppel determines the right which a person may § 801, 1 This truth is clearly and most conclusively shown by Sir James Fitzjames Stephen, in the introduction to his admirable work entitled a Digest of the Law of Evidence (pp. xiii., xivi). 11—103 § 801 EQUITY JUEISPRUDENCB. 1634 enforce by action or rely on in defense, and not the mere mode and means by which those rights may be proved.^ ^ In fact, the principle which underlies the doctrine of the implied authority of an agent in most of its applications, and which prevents the principal from denying the au- thority which, by his conduct, he has held the agent out to the world as possessing, is identically the same principle which constitutes the essence of all equitable estoppels ; and if the rules concerning these estoppels are merely a part of the law of evidence, we should, for the same reason and to the same extent, regard the rules concerning the nature and effects of implied agency as also belonging to evidence. Many similar illustrations might be selected from various § 801, 2 One or two illustrations will clearly show the correctness of this statement. A tenant is estopped from denying his landlord's title. This is certainly a right of property, enabling the landlord to recover rent, or perhaps the land itself, although he has in fact no title, and no other right of property than that created by the estoppel. An acceptor is es- topped from denying the genuineness of the prior signatures on the bill. This is a right of contract, whereby the holder may be enabled to recover the amoimt of the bill from the acceptor, and it may possibly be the only ground upon which a recovery can be rested. One other illustration of an estoppel, regarded as more distinctively equitable, and having more the appearance of being only a rule of evidence: A is owner of land. He stands by and knowingly permits B to expend money and make improve- ments on the land, under the innocent but mistaken assumption of a right to do so, and interposes no objection, asserts no claim of title. A is then estopped from setting up his title as against B's right to the, improve- ments. This is clearly a right of property in B. In strictness, A has the whole title, and B has no right of property by the ordinary rules of law applicable in the absence of the estoppel. The estoppel creates a right in B, which is as much a right of property as though it had resulted from a conveyance, or from a statutory adverse possession; it is his only right of property; it may not be absolute, but is no less a right of property. One mode of acquiring title is by the common-law estoppel resulting from a covenant of warranty. It is a pure fiction to say that the covenantee does not acquire a title by the estoppel. § 801, (a) The text is quoted in a mere Branch of the law of evi- Geren v. Caldarera, 99 Ark. 260, 138 dence, in South Penn. Oil Co. v. Calf S. W. 335. This paragraph is cited, Creek Oil & Gas Co. (C. C. W. Va.), to the effect that the doctrine is not 140 Fed. 507. 1635 CONCERNING EQUITABLE ESTOPPEL. § 802 departments of the law. Equitable estoppel is, therefore, a particular doctrine, based upon justice and conscience, wbich is the origin, wherever it may be invoked, of primary rights of property or of contract.^ §802. Origin of Equitable Estoppel.* — Estoppel was recognized by the common law at a very early day. The original legal rules concerning it were arbitrary and some- times unjust, and are still, to a certain extent, technical and strict. Lord Coke gave a very harsh definition of estoppel as it existed in his time: "An estoppel is where a man is concluded by his own act or acceptance to say the truth." He added: "Touching estoppels, which are a curious and excellent sort of learning, it is to be observed that there are three kind's of estoppels, viz., by matter of record, by matter in writing, and by matter in pais." His discussion shows clearly that "by matter in writing" he meant only a deed, — a writing under seal. The instances which he gave of estoppels in pais were: "By matter in pais, as by livery, by entry, by acceptance of rent, by parti- tion, and by acceptance of an estate." These instances of legal estoppels in pais are not included within the "equi- table estoppels" which form the subject-matter of the present section. Although the facts from which equitable estoppels arise are all matters in pais as distinguished from records and deeds, yet the whole doctrine is an ex- pansion of and addition to the original legal estoppels in pais, and embraces rules unknown to the law when Lord Coke wrote. Equitable estoppel in the modern sense arises from the conduct of a party, using that word in its broad- est meaning as including his spoken or written words, his positive acts, and his silence or negative omission to do § 801, (b) The text is quoted in 595. This section is cited in Tracy Brusha v. Board of Education, 41 v. Eoberts, 88 Me. 310, 51 Am. St. Okl. 595, 139 Pac. 298.' Rep'. 394, 34 Atl. 68; Hyatt v. Zioii §802, (a) The text, §§ 802-804, is (Va.), 48 S. E. 1; In re Mclntire cited in Wampol v. Kountz, 14 S. D. (D. C. W. Va.), 142 Fed. 593. 334, 86 Am. St. Eep. 765, 85 N. W. § 802 EQX7ITY JUEISPEUDENCE. 1636 anything.^ Its foundation is justice and good conscience. Its object is to prevent the unconscientious and inequitable assertion or enforcement of claims or rights which might have existed or been enforceable by other rules of the law, unless prevented by the estoppel; and its practical effect is, from motives of equity and fair dealing, to create and vest opposing rights in the party who obtains the benefit of the estoppel.i « The doctrine of equitable estoppel is § 802, 1 Horn v. Cole, 51 N. H. 287, 289, 12 Am. Rep. 111. The opin- ion of Parley, C. J., in this case, is such an admirable and accurate pres- entation of the true reasons and grounds of 'the doctrine, pointing out so clearly the distinctions between estoppel from conduct as a creature of equity, and estoppel in pais at law, establishing so firmly, on the solid foundation of justice and good conscience, the equitable conception, and sustaining so completely the various positions of the text, both as to the nature of estoppel as a rule of property, contract, or remedy, tather than a mere rule of evidence, and as to the essential requisites, that I cannot refrain from quoting it at some length. Mr. Chief Justice Perley says: "The groimd on which a party is precluded from proving that his repre- sentations on which another has acted were false is, that to permit it would be contrary to equity and good conscience. ... It thus appears that what has been called an equitable estoppel, and sometimes with less propriety an estoppel in pais, is properly aiid peculiarly a doctrine of equity, originally introduced there to prevent a party from taking a dis- honest and unconscientious advantage of his strict legal rights, though now with us, like many other doctrines of equity, habitually administered at law. ... It would have a tendency to mislead us in the present in- quiry, as there is reason to suspect that it has sometimes misled others, if we should confound this doctrine of equity with the legal estoppel by matter in pais. The equitable estoppel and legal estoppel agree indeed in this, that they both preclude from showing the truth in the individual § 802, (b) This portion of the text can (Tex. Civ. App.), 143 S. W. 644; is quoted in Martin y. Maine Cent. in Franklin v. Havalena Mining Co., R. Co., 93 Me. 100, 21 Atl. 740; in 18 Ariz. 201, 157 Pac. 986; in Bank Franklin v. Havalena Mining Co., 18 of Neelyville v. Lee, 193 Mo. App. Ariz. 201, 157 Pac. 986; in Bank of 537, 182 S. W. 1016. See, also, as Neelyville v. Lee, 193 Mo. App. 537, to the purposes of the doctrine, Con- 182 S. W. 1016. ' way National Bank v. Pease, 76 § 802 (e) This portion of the text N. H. 319, 82 Atl. 1068; Eothschild is quoted in Brusha v. Board of v. Title Guarantee & Trust Co., 204 Education, 41 Old. 595, 139 Pac. 298; N. Y. 458, 41 L. R. A. (N. S.) 740, in Clark & Boiee Lumber Co. v. Dun- 97 N. B. 879. 1637 CONCERNING EQUITABLE ESTOPPEL. § 802 pre-eminently the creature of equity. It lias, however, been incorporated into the law, and is constantly employed case. The grounds, however, on which they do it are not only different, but directly opposite. The legal estoppel shuts out the truth, and also the equity and justice of the individual case, on account of the supposed paramount importance of rigorously enforcing a certain and unvarying maxim of the law. For reasons of general policy, a record is held to import incontrovertible verity; and for the same reason, a party is not permitted to contradict his solemn admission by deed. And the same is equally true of legal estoppels by matter in pais. . . . Legal estoppels exclude evidence of the truth, and the equity of the particular case, to support a strict rule of law on grounds of public policy. Equitable estoppels are admitted on the exactly opposite ground of promoting tlie equity and justice of the individual case by preventing a party from as- serting his rights under a general technical rule of law, when he has so conducted himself that it would be contrary to equity and good conscience for him to allege and prove the truth. The facts upon which equitable estoppels depend are usually proved by oral evidence; and the evidence should doubtless be carefully scrutinized and be full and satisfactory be- fore it should be admitted to estop the party from showing the truth, especially in cases affecting the title to land. But where the facts are clearly proved, the maxim that estoppels are odious — ^which was used in reference to legal estoppels, because they shut out the truth and justice of the case — ^ought not to be applied to these equitable estoppels, as it has sometimes been, inadvertently as I think, from a supposed analogy with the legal estoppel by matter in pais, to which they have, in this respect, no resemblance whatever. ... In this equitable estoppel the party is forbidden to set up his legal title, because he has so conducted himself that to do it would be contrary to equity and good conscience. As in other cases of fraud and dishonesty, the circumstances out of which the question may arise are of infinite variety, and unless courts of law are willing to abdicate the duty of administering the equitable doctrine effectually in the suppression of fraud and dishonesty, the application of it cannot be confined within the limit of any narrow technical definition, such as will relieve courts from looking, as in other cases depending on fraud and dishonesty, to the circumstances of each individual case. Cer- tain general rules will doubtless apply, as in other cases where relief is sought on such grounds. But I find myself unable to agree with the aur thorities, where the old maxim that' legal estoppels are odious has been applied to this equitable estoppel, and where attempts have been made to lay down strict definitions such as would defeat the remedy in a large proportion of the cases that fall within the principle on which the doc- trine is founded. The doctrine having been borrowed from equity, courts at law that have adopted it should obviously look to the practice in equity § 802 EQUITY JUEISPBTJDENCB. 1638 by courts of law at the present day in the decision of legal controversies.'^ Preserving its original character, and de- pending upon equitable principles, it is administered in the same manner, and in conformity with the same rules, by the courts both of law and of equity, so that the decisions of either class of tribunals may be quoted as authorities in the subsequent discussion.^ The particular applications for their guide in the application of it, and in equity the doctrine has been liberally applied to suppress fraud and enforce honesty and fair dealing, without any attempt to confine the doctrine within the limits of a strict definition. For instance, the doctrine has not in equity been limited to cases where there was an actual intention to deceive. The cases are numerous where the party, who was estopped by his declarations or his conduct to set up his legal title, was ignorant of it at the time, and of course could have had no actual intention to deceive by concealing his title. Yet if the circumstances were such that he ought to have informed him- self, it has been held to be contrary to equity and good conscience to set up his title, though he was in fact ignorant of it when he made the repre- sentations. Nor is it necessary in equity that the intention should be to deceive any particular individual or individuals. If the representations are such, and made in such circumstances, that all persons interested in the subject have the right to rely on them as true, their truth cannot be denied by the party that has made them against any one who has trusted to them and acted on them." After citing and commenting on numerous decisions, the chief justice concludes (p. 300) : "Though I do not find that the precise point taken here for the plaintiff has been directly decided § 802, (d) The text is quoted in of enjoining action at law and tak- Bank of Neelyville v. Lee, 193 Mo. ing over the litigation because of App. 537, 182 S. W. 1016. the existence of equitable est'oppel § 802, (e) Doctrine Incorporated as a defense) ; Maeomber v. Kinney, into the Common Law. — The text is 114 Minn. 146, 128 N. W. 1001, 130 cited, to the effect that the doctrine N. W. 851; Kronson v. Lipschitz of equitable estoppel has been in- 68 N. J. Eq. 367, 60 Atl. 819; South corporated into the law, in Men- em Ey., Carolina Division v. Howell mouth County El. Co. v. Eatontown 89 S. C. 391, Ann. Cas. 1913A, 1070 Township, 74 N. J. Eq. 578, 70 Atl. 71 S. E. 972; McDowell v. Me 994 (Stevenson, V. C). See, also, Dowell, 141 Iowa, 286, 133 Am. St. Kimball v. Baker Land & Title Co., Eep. 170, 31 L. E. A. (N. S.) 176 152 Wis. 441, 140 N. W. 47; E. E. 119 N. W. 702; International Paper Taenzer & Co. v. Chicago, B. I. & P. Co. v. Bellows Palls Canal Co., 88 E. Co., 170 Fed. 240, 95 C. C. A. Vt. 93, 90 Atl. 943 (estoppel does 436; Weber v. Hertzell, 230 Fed. not give rise to equitable jurisdic- 965, 145 C. C. A. 159 (no necessity tion). 1639 CONCERNING EQUITABLE ESTOPPEL. § 803 of the doctrine are so various and so numerous, that no at- tempt will be made to discuss them with any fullness. I shall -confine myself simply to an explanation of the gen- eral principles which determine the nature, essential ele- ments, operation, and effect of the equitable estoppel, and to a brief statement of a few important applications which frequently come before courts of equity. For a more ex- haustive discussion the reader is referred to treatises On the law of estoppel. § 803. How Far Fraud is Essential in Equitable Estop- pels.^ — There is a theory which makes the essence of equi- table estoppel to consist of fraud. In accordance with this view, the language used by some courts in defining and describing the general doctrine has been so sweeping and in any of our cases, yet the general current of our decisions on the sub- ject tends to a liberal application of the doctrine for the suppression of fraud and dishonesty, and the promotion of justice and fair dealing. No disposition has been shown ia the courts of this state to treat this equi- table estoppel as odious, and embarrass its application by attempts to confine it within the limits of a narrow technical definition. We are con- tent to follow where the spirit and general tone of these decisions lead ; and they lead plainly to the conclusion, that where a man makes a statement disclaiming his title to property, in a manner and under circumstances such as he must understand those who heard the statement would believe to be true, and if they had an interest in the subject would act on as true, and one, using his own means of knowledge with due diligence, acts on the statement as true, the party who makes the statement cannot show that his representation was false, to the injury of the party who believed it to be true and acted on it as such; that he will be liable for the natural consequences of his representation, and cannot be heard to say that the party actually injured was not the one he meant to deceive, or that his fraud did not take effect in the manner he intended." These views will, in my opinion, reconcile much apparent conflict of judicial decision; they certainly furnish the basis of principle upon which the administration of the doctrine by courts of equity must be rested. See, also, Stevens v. Den- nett, 51 N. H. 324, 333, per Foster, J. ; post, in note under § 805. §803, (a) This section is cited in L. R. A. (N. S.) 1097, 87 Atl. 555. Hyatt V. Zion (Va.), 48 S. E. 1; Sections 803-806 are cited in Le Eoy Moore v. Tearney, 62 W. Va. 72, 57 v. Pasquotank & North River Steam- 8. E. 263; Goldberg v. Parker, 87 boat Co., 165 N. C. 109, 80 S. E. 984. Conn. 99, Ann. Cas. 1914C, 1059, 46 § 803 EQUITY JUEISPBUDENCE. 1640 positive that, taken literally, it does not admit the possi- bility of such an estoppel unless the party has been guilty of actual intentional fraud in law ; and thus the whole doc- trine is represented as virtually a mere instance of legal fraud. This theory is not sustained by principle, and it cannot be made universal.^ There are well-settled cases of equitable estoppel, familiar to courts of equity, which do riot rest upon fraud, and instances are admitted, even by the courts which maintain this theory, which cannot be said to invalve any element of fraud unless by a complete per- version and misuse of language. It is undoubtedly in ac- cordance with the methods long pursued by courts of equity to apply the term "fraudulent" to the party estopped, in the following manner : It is in strict agreement with equi- table notions to say of such party that his repudiation of his own prior conduct which had amoimted to an estoppel, and his assertion of claims notwithstanding his former acts or words, would be fravduLent, — ^would be a fraud upon the rights of the person benefited by the estoppel.^ It is accurate, therefore, to describe equitable estoppel, in general terms, as such conduct by a party that it would be fraudulent, or a fraud upon the rights of another, for him afterwards to repudiate and to set up claims inconsistent with HA This use of the term has long been familiar to courts of equity, which have always treated the word "fraud" in a very elastic manner. The meaning here given to fraud or fraudulent is virtually synonymous with "unconscientious" or "inequitable." In exactly the same manner, and with exactly the same signification given to § 803, (b) The text is quoted in Dist. v. McClure, 170 Iowa, 191, 152 Des Moines Independent School Dia- N. W. 489; Clark & Boioe Lumber trict V. McClure, 170 Iowa, 191, 152 Co. v. • Duncan (Tex. Civ. App.), N. W. 489. 143 S. W. 644; Riliner v. Jacobs, 79 §803, (e) The text is quoted in Neb. 742, 113 N. W. 220. See, also, Westerman v. Corder, 86 Kan. 239, Wright v. Fox, 56 Ind. App. 315, Ann. Cas. 1913C, 60, 39 L. K. A. 103 N. E. 442; Seymour v. Oelrichs, (N. S.) 500, 119 Pac. 868. 156 Cal. 782, 134 Am. St. Rep. 154, §803, (d) The text is quoted in 106 Pac. 88; Helwig v. Fogelsong, Des Moines Independent School 166 Iowa, 715, 148 N. W. 990. 1641 CONCERNING EQUITABLE ESTOPPEL, § 803 the word, the doctrine of specific enforcement of verbal contracts for the sale of land when part performed by the plaintiff has been explained by saying that it would be fraudulent for the defendant to contest his liability by setting up the statute of frauds after he had permitted the plaintiff, without objection, to go on and part perform the verbal agreement. In this explanation courts of equity do not mean that the defendant's conduct in denying the va- lidity of the agreement is actual fraud, — a willful decep- tion, — but simply that it is unconscientious; much less do they assert that there was actual fraud — willful deception ■ — in the act of entering into the verbal contract. In exactly the same manner it is in strict accordance with equitable conceptions and equitable terminology to de- scribe as fraud or fraudulent the act of repudiating con- duct which had constituted an estoppel, and of asserting claims inconsistent therewith; it is entirely another thing to say that the conduct itself — the acts, words, or silence of the party — constituting the estoppel is an actual fraud, done with the actual intention of deceiving. I would ven- ture the suggestion that the theory which regards fraud as the essence of equitable estoppel originated in courts possessing only, a partial and limited jurisdiction. Such courts, administering nearly the whole jurisprudence by means of legal actions, and being able to admit equitable notions only so far as they could be harmonized with legal dogmas and legal procedure, would naturally formulate the doctrine of equitable estoppel in such a manner that it should become a rule of law not inconsistent with the legal system as a whole. This could only be done by giving prominence to the element of fraud, and by making it in fact essential. By this method equitable estoppel was made to be a branch or application of the legal rules con- cerning fraud. The theory, having been thus formulated by tribunals of great ability and high authority, was per- haps adopted by other courts without a careful examina- tion of its occasion and origin. When all the varieties of § 804 EQUITY JUEISPBUDENCE. 1642 equitable estoppel are compared, it will be found, I think, that the doctrine rests upon the following general prin- ciple : When one of two innocent persons — that is, persons each guiltless of an intentional, moral wrong — must suffer a loss, it must be borne by that one of them who by his conduct — acts or omissions — has rendered the injury pos- sible.e This is confessedly the foundation of the rules concerning the implied authority of agents, which are de- clared by judges of the highest ability to be applications of the doctrine of equitable estoppel.^ This most righteous principle is sufficient, and alone sufficient, to ex- plain all instances of such estoppel, and although fraud may be, and often is, an ingredient in the conduct of the party estopped, it is not an essential element, if the word is used in its true legal meaning. § 804. Deflnition, — ^Frbm the foregoing general descrip- tion it will appear, I think, that the following definition is accurate, and covers all phases and applications of the doc- trine : Equitable estoppel is the effect of the voluntary con- duct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might per- haps have otherwise existed, either of property, of con- tract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of prop- erty, of contract, or of remedy. ^ ^ §803, 1 See North River Bank v. Aymar, 3 Hill, 262; Farmers and Mechanics' Bank v. Butchers and Drovers' Bank, 16 N. Y. 125, 69 Am. Dec. 678; Griswold v. Haven, 25 N. Y. 595, 82 Am. Dec. 380; Ex- change Bank v. Monteath, 26 N. Y. 505. § 804, 1 This deflnition, it will be observed, differs somewhat in form from that often, given by text-writers. It is based upon an abandonment of the fiction that estoppel is a mere rule of evidence not affecting the §803, (e) The text is quoted in 111 Va. 468, Ann. Cas. 1912A, 203, Bank of Keelyville v. Lee, 193 Mo. 69 S. E. 359. App. 537, 182 S. W. 1016; and cited §804, (a) Quoted in Miller v. in Cohen v. Big Stone Gap Iron Co., Ahrens (C. C. W. Va.), 163 Fed. 1643 CONCEBNING EQUITABLE ESTOPPEL. §'805 § 805. Essential Elements Constituting the Estoppel. — In conformity with, the principle already stated which lies at the basis of the doctrine, and upon the authority of de- cisions which have recognized and adopted that principle, real rights of parties, and it incorporates the truth that the party es- topped loses, and the party having the benefit of the estoppel obtains, a right, which may be of property, of contract, or sometimes simply of remedy. In his Digest of the Law of Evidence (p. 124), Sir James Fitz- james Stephen thus formulates the doctrine : "When one person, by anything which he does or says, or abstains from doing or saying, in- tentionally causes or permits another person to believe a thing to be true, and to act upon such belief otherwise than but for that belief he would have acted, neither the person first mentioned nor his representative in interest is allowed, in any suit or proceeding between himself and such person or his representative in interest, to deny the truth of that thing. "When any person, under a legal duty to any other person to conduct himself with reasonable caution in the transaction of any business, neglects that duty, and when the person to whom the duty is owing alters his position for the worse because he is misled as to the conduct of the negli- gent person by a fraud, of which such neglect is in the natural course of things the proximate cause, the negligent person is not permitted to deny that he acted in the manner in which the other person was led by such fraud to believe him to act." The first clause states the rule in its ordinary applications, and the author cites, as examples, Pickard v. Sears, 6 Ad. & E . 469, 474 ; Freeman V. Cooke, 2 Ex. 654, 661; Howard v. Hudson, 2 El. & B. 1; Knights v. 870; Zeigler v. Daniel (Ark.),_ 194 (Tex. Civ. App.), 96 S. W. 638, dis- S. W. 246; Fitzpatriek v. Baker, senting opinion; Geren v. Caldarera, 155 Ky. 175, 159 S. W. 675; Jett v. 99 Ark. 260, 138 S. W. 335; Kimball Jett, 171 Ky. 548, 188 S. W. 669; v. Baker Land & Title Co., 152 Wis. Martin v. Maine Cent. E. Co., 93 441, 140 N. W. 47; Union Bank of Me. 100, 21 Atl. 740; Wilkins v. Milwaukee v. Commercial Securities Gibson, 113 Ga. 31, 84 Am. St. Eep. Co., 163 Wis. 470, 157 N. W. 510; 204, 38 S. E'. 374; Porter v. Goudz- and cited in Galbraith v. Lunsford, waard, 162 Mich. 158, 127 N. W. 87 Tenn. 89, 1 L. E. A. 522, 9 S. W. 295; Chambers v. Bessent, 17 N. M. 365; Goldberg v. Parker, 87 Conn. 487, 134 Pac. 237; Vallancey v. 99, 87 Atl. 555; Ann. Cas. 1914C, Hunt, 20 N. D. 579, 34 L. E. A. 1059, 46 L. E. A. (N. S.) 1097; Kop- (N. S.) 473, 129 N. W. 455; Holt v. perl v. Standard Distilling Co. (Tex. Holt, 23 Old. 639, 102 Pac. 187; Civ. App.), 119 S. W. 1167; Inter- Whiteselle v. Texas Loan Agency national Paper Co. v. Bellows Falls (Tex. Civ. App.), 27 S. W. 309; Canal Co., 88 Vt. 93, 90 Atl. 943.^ Lechenger v. Merchants' Nat. Bank § 805 EQUITY JUEISPBUDENCB. 1644 the following are the essential elements which must enter into and form a part of an equitable estoppel in all of its phases and applications. One caution, however, is neces- sary, and yery important. It would be unsafe and mis- leading to rely on these general requisites as applicable to every case, without examining the instances in which they have been modified or limited.^ 1. There must be conduct — acts, language, or silence — amounting to a representa- tion or a concealment of material facts. 2. These facts must be known to the party estopped at the time of his said conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him. 3. The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done, and at the time when it was acted upon hy him. 4. The conduct must be done with the in- tention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon. Wiffen, L. R. 5 Q. B. 660. The second clause states the rule in its ap- plication to the case of a negligent act causing fraud. As examples, he cites Young v. Grote, 4 Bing. 253, where A signed blank checks and gave them to his wife to fill up as she wanted money. She filled up a check for £50 2s. so carelessly that room was left for the insertion of figures before the "50" and of words before the "fifty.'' She gave the check to A's clerk to get it cashed. He inserted a 3 before the 50, and "three hundred and" before the "fifty," and A's banker in good faith paid the check so altered to the clerk. Held, that A was estopped as against the banker to claim that the check was not valid : Swan v. North Br. etc. Co., 2 Hurl. & C. 175, 181, per Blackburn, J. A man carelessly leaves his door unlocked, whereby his goods are stolen. He is not estopped from denying the title of an innocent purchaser from the thief. The author also cites, on .the doctrine generally, Bank of Ireland v. Evans's Chari- ties, 5 H. L. Cas. 389 ; Swan v. British Austr. Co., 7 Com. B., N. S., 400, 448; 7 Hurl. & N. 603; 2 Hurl. & C. 175; Halifax Guardians v. Wheel- wright, L. R. 10 Ex. 183 ; Carr v. London & N. W. R'y, L. R. 10 Com. P. 307, 316, 317. § 805, (a) The text is quoted in generally, in Rhodes v. Cissell, 82 Hilton V. Sloan, 37 TJtali, 359, 108 Ark. 367, 101 S. W. 758. Pac. 689. This paragraph is cited, 1645 CONCERNING EQUITABLE ESTOPPEL. § 805 There are several familiar species in which it is simply impossible to ascribe any intention or even expectation to the party estopped that his conduct will be acted upon by, the one who afterwards claims the benefit of the estoppel. 5. The conduct must be relied upon by the other party, and, thus relying, he must be led to act upon it. 6. He must in fact act upon it in such a manner as to change his position for the worse; in other words, he must so act that he would suffer a loss if he were compelled to sur- render or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it.^ ^ It will be seen § 805, 1 1 shall cite only a few of the leading and ablest decisions which illustrate the text, and especially those wtich do not admit fraud as a necessary element of the conduct by which a party is estopped. Pick- ard V. Sears, 6 Ad. & E. 469, 474, is the leading case. The facts sub- stantially were: A, the owner of chattels in B's possession, which were taken in execution by C, abstained from claiming them for several months, and conversed with C's attorney about them without mentioning his own claim, and thus impressed C with the belief that the goods belonged to B. C sold them, and this was held sufficient to sustain a finding that A was estopped. Tn giving the opinion of the court Lord Denman thus stated the rule : "The rule of the law is clear, that where one, by his words or conduct, willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time." The § 805, (b) This section is cited third elements of the estoppel, iu generally in Great West Min. Co. Estis v. Jackson, 111 N. C. 145, V. Woodman, 12 Colo. 46, 13 Am. St. 32' Am. St. Rep. 784, 16 S. E. 7; Kep. 204, 20 Pac. 771; Martin v. as to the third element, in Ford v. Maine Cent. B. Co., 83 Me. 100, 21 Warner (Tex. Civ. App.), 176 S. W. Atl. 740; quoted, as to the six ele- 885; as to the fifth and sixth ele- ments of estoppel, in Miller Ahrens (C. C. W. Va.), 163 Fed, 870; Chambers v. Bessent, 17 N. M, 487, 134 Pae. 237; Albright v. Al bright, 21 N. M. 606, 157 Pac. 662 Holt V. Holt, 23 Okl. 639, 102 Pac 187; El Paso & S. , W. E. Co. v Eichel & Weikel (Tex. Civ. App.), ment, in Scottish American Mort- 130 S. W. 922; as to the first and gage Co. v. Bunckley, 88 Miss. 641, ments, in Quinn v. Tuliy, 174 Mich. 30, 140 N. W. 492; as to the sixth element, in Eicketson v. Best (Tex. Civ. App.), 134 S. W. 353; cited, as to the first and sixth elements, in Cannon v. Baker, 97 S. C. 116, 81 S. E. 478; as t'o the second ele- 805 EQUITY JUKISPEUDENCE. 1646 tliat fraud is not given as an essential requisite in the fore- going statement. It is not absolutely necessary that the word "willfully," in this statement, might imply that fraud was a neces- sary ingredient in the conduct which creates an estoppel. The word was, however, explained in subsequent decisions, and this interpretation com- pletely abandoned. In Freeman v. Cooke, 2 Ex. 654, Parke, B., said: "The rule laid down in Pickard "v. Sears, 6 Ad. & E. 469, was to be con- sidered as established; but that by the term 'willfully,' in that rule, must be understood, if not that the party represents that to be the truth which he knows to be untrue, at least that he means his representation to be acted upon, and that it is acted upon accordingly; and if, whatever a man's real meaning may he, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it, and did act upon it, as true, the party making , the representation would be equally precluded from contesting its truth; and conduct by negligence or omission, when there is a duty cast upon a person, by usage of trade or otherwise, to disclose the truth, may often have the same effect; as, for instance, a retiring partner, omitting to 117 Am. St. Rep. 763, 41 South. 502; as to the fifth and sixth, in Le Boy V. Pasquotank & North Eiver Steam- boat Co., 165 N. C. 109, 80 S. E. 984; as to silence, in Stockyards Nat. Bank v. Smith, 60 Tex. Civ. App. 503, 128 S. W. 454; cited gen- erally in J. Homer Friteh, Inc., v. United States, 234 Fed. 608, 148' C. C. A. 374; Kimball v. Baker Land & Title Co., 152 Wis. 441, 140 N. W 47; Giberson v. Fink, 28 Cal. App. 25, 151 Pae. 371; Barnes v. Cole (W. Va.), 88 S. E. 184; cited to the effect that fraudulent intent is iot essential in Galbraith v. Lunsford, 87 Tenn. 89, 1 L. E. A. 522, 9 S. W. 365; and to the effect that there must be knowledge when mere silence is relied upon in Dugan v. Lyman (N. J. Eq.), 23 Atl. 657; and to the effect that the conduct must be relied upon as an inducement to act by the party claiming the benefit of the estoppel, in Pocahon- tas Light & Water^ Co. v. Browning, 53 W. Va. 436, 44 S. E. 267. See, also. Chase's Appeal, 57 Conn. 236, 18 Atl. 96, reviewing many cases, and fully, supporting the conclu- sions of the text; Hill v. Black- welder, 113 HI. 283 (fraudulent in- tention not required); Stevens v. Ludlum, 46 Minn. 160, 24 Am. St. Rep. 210, 13 L. E. A. 270 (same), 48 N. W. 771; Wright v. Fox, 56 Ind. App. 315, 103 N. E. 442; Con- way National Bank v. Pease, 76 N. H. 319, 82 Atl. 1068; Musconet- cong Iron Works v. Delaware, L. & W. K. Co., 78 N. J. L. 717, 20 Ann. Cas. 178, 76 Atl. 971; Boddie v. Bond, 154 N. C. 359, 70 S. E. 824; Stevens v. Elliott, 30 Okl. 41, 118 Pac. 407; State v. Portland General Electric Co., 52 Or. 502, 95 Pac. 722, 98 Pac. 160. The change in the legal definition of fraud effected in England by the decision in Derry v. Peek, 14 App. C. (H. L.) 337, has not touched the doctrine of estop- pel: Low V. Bouverie, [1891] 3 Ch. 1647 OONCEBSriNG EQUITABLE ESTOPPEL, i § 805 conduct mentioned in the first subdivision should be done with a fraudulent purpose or intent, or with an actual and inform his customers of the firm, in the usual mode, that the continuiag partners were no longer authorized to act 4S his agents, is bound by all contracts made by them with third persons on the faith of their beiug authorized." In the still later case of Cornish v. Abington, 4 Hurl. & N. 549, Pollock, C. B., said that the term "willfully," as used in Pickard v. Sears, 6 Ad. & E. 469, meant simply "voluntarily," and that this was its established signification. He added the following statement of the gen- eral rule: "If a party uses language which, in the ordinary course of business and the general sense in which words are understood, conveys a certain meaning, he cannot afterwards say that he is not bound, if an- other, so understanding it, has acted upon it. If any person, hy a course of conduct, or hy actual expressions, so conducts himself that another may reasonably infer the existence of an agreement or license, whether the party intends that he should do so or not, it has the effect that the party using that la/nguage, or who has so conducted himself, cannot after- wards gainsay the reasonable inference to be drawn from the words or conduct." This mode of stating the general rule is absolutely necessary to explain numerous well-settled and even familiar applications of the estoppel, where it is not only impossible to impute to the party estopped any actual intention that his conduct should be acted upon by the other party, but even where the conduct was done without any knowledge or ex pectation that it ever would be so acted upon by the person who does afterwards act upon it and thus obtains the benefit of the estoppel. In the quite recent case In re Bahia etc. E'y, L. K. 3 Q. B. 584, the necessity of fraud as an essential ingredient of the conduct was again denied, the court holding that if a representation is made with the intention that it shaU be acted upon by another, and he does so act upon it, there is an estoppel. Finally, in the rule as carefully formulated by Mr. Stephen upon the basis of the latest English decisions, as quoted in the previous note, the element of fraud is clearly omitted. In fact, the second para- graph of his rule includes cases, covered by the foregoing language of Chief Baron Pollock, where there is even no intention on the part of the one estopped that his conduct should be acted upon. American eases of the highest authority are no less explicit. In Conti- nental Bank v. Bank of the Commonwealth, 50 N. Y. 575, 581, 582, Folger, J., said: "Is the plaintiff estopped from maintaining that the certificate was a forgery, and the admission of its teller an innocent mis- take? There is no disagreement as to the general definition of an estop- pel in pais. It is agreed that there must have been some act or declara- tion of the plaintiff or of .its agent to the defendant's assignor which so affected the conduct of the latter to their injury as that it would be un- just now to permit the plaintiff to set up the truth of the case to the § 805 EQUITY JUBISPEUDENCE. 1648 fraudulent intention of deceiving the other party; nor is this meaning implied by any of the language which I have contrary of its mistaken act or declaration. But the plaintiff insists that there are certain limitations to be put upon this generality. The plain- tiff claims that it is necessary that its act or declaration must have heen made with the intent to mislead. [The judge examines the English cases above quoted.] We hold that there need not be, upon the part of the person making a declaration or doing an act, an intention to mislead the one who is induced to rely upon it. There are cases in which parties have been estopped, when their acts or' declarations have been done or made in ignorance of their own rights, not knowing that the law of the land gave them such rights. Here certainly there could be no purpose to mislead others, for there was not the knowledge to inform the purpose, and both parties were equally and innocently misled. Indeed, it would limit the rule much, within the reason of it, if it were restricted to cases where there was an element of fraudulent purpose. In very many of the eases in which the rule has been applied, there was no more than negli- gence on the part of him who was estopped. And it has long been held that when it is a breach of good faith to allow the truth to be known, there an admission will estop : Gaylord v. Van Loan, 15 Wend. 308. There are decisions where the rule has been stated as the plaintiff claims it. We have looked at those cited. It was not necessary to the conclu- sion of the court in them, that such a restriction should be put upon the rule." The court further held that it is not necessary that a party should act affirmatively upon a declaration, in order to claim an estoppel. It is sufficient if he had the means in his possession of protecting his rights or of restoring himself to his' original position, and in reliance upon the declaration, and in consequence of it, he refrains from using those means, and is thereby injured; his claim to the estoppel is good. In Blair v. Wait, 69 N. Y. 113, 116, the court said: "It is not necessary to an equi- table estoppel that the party should design to mislead. It is enough that the act was calculated to mislead and actually did mislead the defendants while acting in good faith and with reasonable care and diligence, and that thereby they might be placed in a position which would compel them to pay a demand which they had every reason to expect was canceled and discharged." To exactly the same effect is Manufacturers and Traders' Bank v. Hazard, 30 N. T. 226, 230, per Johnson, J. ; Barnard v. Campbell, 55 N. Y. 456, 462, 463, where the real owner of chattels is estopped from setting up his own title as against a purchaser from a third person who was in possession and sold them under a claim of ownership. This deci- sion expressly rests the doctrine of equitable estoppel upon the general principle mentioned in a foregoing paragraph (§802). Allen, J., said: "The defendants can only resist the claim of the plaintiffs to the merchan- dise by establishing an equitable estoppel founded upon the acts of the 1649 CONCERNING EQUITABLE ESTOPPEL. § 805 used."* The adoption of such an element as always essen- tial would at once strike out some of the most familiar and plaintiffs, and in application of the rule by which, as between two per- sons equally innocent, a loss resulting from the fraudulent acts of another shall rest upon him by whose act or omission the fraud. has been made possible. ... In such a case, for obvious reasons, the law raises an equi- table estoppel. It is not every parting with the possession of chattels or the doeiunentary evidence of title that will enable the possessor to make good a title to one who may purchase from him. The owner must go further, and do some act of a nature to mislead third persons as to the true nature of the title. Two things must concur to create an estoppel by which an owner may be deprived of his property by the act of a third person without his assent, under the rule now considered: 1. The owner must clothe the person assuming to dispose of the property with the apparent title to or authority to dispose of it ; 2. The person alleging the estoppel must have acted and parted with value upon the faith of such apparent ownership or authority, so that he will be the loser if the ap- pearances to which he trusted are not real. In this respect it does not differ from other estoppels in pais." See, also, in- support of the text and of the general requisites there stated, Waring v. Sombom, 82 N. Y. 604; Kurd V. Kelly, 78 N. Y. 588, 597, 34 Am. Rep. 567; Malloney v. Horan, 49 N. Y. Ill, 115, 10 Am. Rep. 135; Jewett v. Miller, 10 N. Y. 402, 406, 61 Am. Dec. 751 ; Shapley v. Abbott, 42 N. Y. 443, 448, 1 Am. Rep. 548 ;' St. John V. Roberts, 31 N. Y. 441, 88 Am. Dec. 287; Brown v. Bowen, 30 N. Y. 519, 541, 86 Am. Dec. 406; Lawrence v. Brown, 5 N. Y. 394, 401; Frost V. Saratoga Mut. Ins. Co., 5 Denio, 154, 158, 49 Am. Dec. 234; Welland Canal Co. v. Hathaway, 8 Wend. 480, 483, 24 Am. Dec. 51. In this connection, it will be instructive, by way of contrast, to quote a pas- sage from a very recent decision by the New York court of appeals, in- volving a particular application of estoppel in pais in which a fraudulent intent, or what amounts to such an intent, is an essential element of the conduct which creates the estoppel, in pursuance of an equitable princi- ple long settled by such cases as Evans v. Bicknell, 6 Ves. 174, 182, and Slim v. Croucher, 1 De Gex, F. & J. 518, — a principle which has been erroneously, I think, regarded as the foundation of all equitable estoppel, and therefore to be extended to every instance of it. The case is Trenton Banking Co. v. Duncan, 86 N. Y. 221. The estoppel alleged would af- fect the title to land. The action was brought to charge certain land of the defendant with the payment of a judgment. Andrews, J., said: "As a general rule, it would seem to be just that if a person does an act at §805, (c) The text is cited to this Atl. 713; Seymour v. Oelrichs, 156 effect in Rogers v. Portland & B. St. Cal. 782, 134 Am. St. Eep. 154, 106 Ey., 100 Me. 86, 70 L. E. A. 574, 60 Pae. 88. 11—104 § 805 EQUITY JUEISPBUDENCB. 1650 best established instances of equitable estoppel. Undoubt- edly a fraudulent design to mislead is often present as an the suggestion of another, the other shall not be permitted to avoid the act when it turns out to the prejudice of an antecedent right or interest of his own, although the advice on which the other party acted was given innocently and in ignorance of his claim. The authorities establish the doctrine that the owner of land may by an act in pais preclude himself from asserting his legal title. But it is obvious that the doctrine should be carefully and sparingly applied, and only on the disclosure of clear and satisfactory grounds of justice and equity. It is opposed to the let- ter of the statute of frauds, and it would greatly tend to the insecurity of titles if they were allowed to be affected by parol evidence of light or doubtful character. To authorize the finding of an estoppel in pais against ihe legal owner of lands, there must be shown, we think, either actual fraud, or fault or negligence equivalent to fraud, on his part. in concealing his title ; or that he was silent when the circumstances would impel an honest man to speak; or such actual intervention on his part, as in Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316, — so as to render it just that as between .him and the party acting upon his suggestion he should bear the loss. Moreover the party setting up the estoppel must be free from the imputation of laches in acting upon the belief of owner- ship by one who has no right." There is no inconsistence between this view and the decisions before quoted. In the first sentence of the ex- tract, Andrews, J., states the rule .ordinarily applicable in exact con- formity with those authorities; he then passes to the particular case con- trolled by a special equity. Dezell v. Odell, 3 Hill, 215, 38 Am. Dec. 628, is a leading case on the general doctrine. A sheriff levied on goods by execution against A, and delivered them to B, the latter giving a receipt promising to redeliver them to the sheriff by a certain day. Held, that B was estopped from claiming as against the sheriff that the goods be- longed to himself, and not to A. Bronson, J., dissented, not with respect to the law of estoppel, but only as to its application to the facts. ' His opinion contains an accurate resume of some necessary elements belong- ing to the estoppel, and I shall quote some portions. He says (p. 221) : "When a party, either by his declaration or conduct, has induced a third person to act in a particular manner, he will not afterwards be permitted to deny the truth of the admission, if the consequence would be to work an injury to such third person, or to some one claiming under him. Be- fore the party is concluded it must appear, — 1. That he has made an admission which is clearly inconsistent with the evidence he proposes to give, or the title or claim which he proposes to set up; 2. That the other party has acted upon the admission; and 3. That he will be injured by allowing the truth of the admission to be disproved." After quoting sev- eral cases, he proceeds (p. 224) : "The conduct or admission which pre- 1651 CONCEENING EQUITABLE ESTOPPEL. § 805 ingredient of the conduct working an estoppel; but this only renders the result more clearly just, and, if I may eludes the party must be plainly inconsistent and irreconcilable with the right which he afterwards sets up. If the act can be referred to an honest and proper motive, the party will not be concluded: Heane v. Eogers, 9 Bam. & C. 577. So, too, the admission, however unequivocal it may be, will not operate as an estoppel unless the other party has acted upon it; and then it wUl only be conclusive in favor of the party who has so acted, and persons claiming under him, and not in favor of a stranger: Heane v. Eogers, 9 Bam. & C. 577; Wallis v. Truesdell, 6 Pick. 455." The decisions of the Pennsylvania courts have generally leaned strongly in favor of the theory that an actual fraud is the very essence of every such estoppel by conduct. In a very late case, however (BidweU V. Pittsburgh, 85 Pa. St. 412, 417, 27 Am. Rep. 662, per Mercur, J.), it is held : "It may now he declared as a general rule that where an act is done or a statement made by a party, the truth or efficacy of which it would be a fraud on his part to controvert or impair, the character of an es- toppel shall be given to what otherwise would be mere matter of evidence. It is not necessary that the party against whom an estoppel is alleged should have intended to deceive; it is sufficient if he intended that his conduct should induce another to act upon it, and the other, relying on it, did so act." In Stevens v. Dennett, 51 N. H. 324, 330, Poster, J., after reciting the essential elements according to what he calls "the common definitions," and substantially as given above in the text, adds: "The doctrine seems to be established by authority that the conduct and ad- missions of a party operate against him in the nature of an estoppel, wherever, in good conscience and honest dealing, he ought not to be per- mitted to gainsay them. Thus negligence becomes constructive fraud, al- though, strictly speaking, the actual intention to mislead or deceive may be wanting, and the party may be innocent, if innocence and negligence may he deemed compatible. In such cases, the maxim is justly applied to him, that when one of two innocent persons must suffer, he shall suffer who by his own acts occasioned the confidence and loss." In the last sentence the judge has struck the "bedrock" of universal principle, upon which all instances of equitable estoppel must be founded, if they are to stand with any firmness.. See also Horn v. Cole, 51 N. H. 287, 289, 12 Am. Eep. Ill, per Perley, C. J. (quoted ante, note under § 802) ; Mor- gan v. Railroad Co., 96 U. S. 716; Holmes v. Crowell, 73 N. C. 613, 627; Anderson v. Armstead, 69 111. 452, 454; Voorhees v. Olmstead, 3 Hun, 744; Clark v. Coolidge, 8 Kan. 189, 195; Kuhl v. Mayor, etc., 23 N. J. Eq. 84, 85; Rice v. Bunce, 49 Mo. 231, 234, 8 Am. Eep. 129 (in a very instruc- tive opinion, Wagner, J., while using the general expression that fraud is an essential element, explains it by showing that the "fraud," need not be an actual intent to deceive in the representation which creates the estoppel; § 806 EQUITY JUBISPRUDENCB. 1652 use the expression, more conclusive. There is, however, a class of cases, of which an example is given in the foot- note, where fraudulent conduct is essential, — cases in which an owner of loMd is precluded from asserting his legal title by reason of intentionally false representations or concealments, by which another has been induced to deal with the land. These cases are at the present day some- times treated as examples of equitable estoppel. The prin- ciple, however, upon which they depend was well settled by courts of equity long before the doctrine of equitable es- toppel in its modern form was first announced, and goes in its remedial operation far beyond that doctrine, as will more fully appear in subsequent paragraphs. I would again remark that although fraud is not an essential ele- ment of the original conduct working the estoppel, it may with perfect propriety be said that it would be fraudulent for the party to repudiate his conduct, and to assert a right or claim in contravention thereof.'^ Using the term in the sense frequently given to it by courts of equity, and as ex- plained in a preceding paragraph, this statement is not only proper, but furnishes an accurate criterion for deter- mining the existence of an equitable estoppel. § 806. Theory That a Fraudulent Intent is Essential. — There is, as has already been mentioned, a theory ap- proved and adopted by the courts of some states, which makes the very essence of every equitable estoppel or estoppel by conduct to consist of fraud, and affirms that an actual fraudulent intention to deceive or mislead is a neces- the "fraud" may, and generally does, consist in the subsequent attempt to controvert the representation and to get rid of its effects, and thus to injure the one who has relied on it. The same explanation would doubt- less apply to and show the real meaning of many other decisions which have used the general formula that fraud is essential) ; McCabe v. Eaney, 32 Ind. 309; Simpson v. Pearson, 1 Ind. 65; Hartshorn v. Potrofl, 89 111. 509; Talcott v. Brackett, 5 111. App. 60; Michigan etc. Co. v. Parsell, 38 Mich. 475, 480. § 805, (d) The text is quoted in Trebesch v. Trebeseh, 130 Minn. 368, 153 N. W. 754. 1653 CONCEENING EQUITABLE ESTOPPEL. § 806 sary requisite in the conduct of the party, — whether acts, words, or silence, — in order that it may create an equitable estoppel. I cannot better state this theory than in the lan- guage of an eminent and able judge, which has 'frequently been adopted as being an accurate exposition of the gen- eral doctrine.! In order to estop a party by his conduct, § 806, 1 Boggs V. Merced Min. Co., 14 Cal. 279, 367, 368, per Field, J., adopted in Martin v. Zellerbaeh, 38 Cal. 300, 99 Am. Dec. 365, and cases cited. It should be remarked that in the great case of Boggs v. Merced Min. Co., 14 Cal. 279, Mr. Justice Field was not treating of equitable estoppel in general. He was discussing the particular question. When is the owner of land precluded by his conduct from setting up his legal title? In formulating the rules quoted in the text, he did not announce them as governing all cases of equitable estoppel; he expressly confined them to the class of cases under consideration by saying: In order to estop a person by his admissions or declarations from setting up "title to land." The authorities which he quoted were Adams's Equity, 151, and Story's Eq. Jur., sec. 391. The reference to Adams clearly indicates the doctrine which Judge Field was following. The general subject there treated of by Adams is, "the equity of a party who has been misled is superior to his who has willfully misled him." The particular rule re- ferred to is: "If a person interested in an estate knowingly misleads an- other into dealing with the estate as if he were not interested, he will be postponed to the party misled, and compelled to make his representation specifically good." This rule is illustrated by such cases as Evans v. Bicknell, 6 Ves. 174; Philling v. Armitage, 12 Ves. 78, 84; Williams v. Earl of Jersey, 1 Craig & P. 91 ; Martinez v. Cooper, 2 Russ. 198 ; Slim v. Croueher, 1 De Gex, F. & J. 518, 525. This equitable rule has been ex- plained and illustrated in the foregoing sections on priorities, §§ 686, 731, and on hona fide purchase, § § 779-782. In the subsequent case of Martin v. Zellerbaeh, 38 Cal, 300, 99 Am. Dec. 365, the court adopted the exact requisites of Mr. Justice Field, but omitted his restriction of them io cases involving the legal title to land, announced them as governing all instances of equitable estoppel, and applied them to a ease involving the ownership of chattels."' The following are additional examples of decisions which sustain the same theory: Brant v. Virginia Coal Co., 93 U. S. 326, 335, per Field, J. : "It is difficult to see where the doctrine of equitable estoppel comes in here. For the application of that doctrine there must generally be some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence on his part as amounts to construc- tive fraud, by which another has been misled to his injury. [He quotes § 806, (a) See, also, Griffeth v. Brown, 76 Cal. 260, 18 Pac. 372. § 806 EQUITY JUKISPKUDENCB. 1654 admissions, or declarations, the following are essential requisites : It must appear, — 1. That the party making his admission by his declaration or conduct was apprised of the true state of his own title ; 2. That he made the admis- sion with the express intention to deceive, or with such careless or culpable negligence as to amount to constructive fraud; 3. That the other party was not only destitute of all knowledge of the true state of the title, but of all means of acquiring such knowledge; 4. That he relied directly a passage from Story's Eq. Jur., see. 391.] Thus it is said by the su- preme court of Pennsylvania that the primary ground of this doctrine is, that it would be fraud in a party to assert what his previous conduct had denied, when on the faith of that denial others had acted. The element . of fraud is essential either in the intention of the party estopped, or irt the effect of the evidence which he sets up. It would seem that in the en- forcement of an estoppel of this character, with respect to the title of property, such as will prevent a party from asserting his legal rights, and the effect of which will be to transfer the enjoyment of the property to another, the intention to deceive and mislead, or negligence so gross as to be culpable, should be clearly established. There are undoubtedly cases where a party may be concluded from asserting his original rights to property in consequence of his acts or conduct in which the presence of fraud actual or constructive is wanting; as where one of two innocent par- ties must suffer from the negligence of another, he through whose agency the negligence was occasioned will be held to bear the loss; and where one has received the profits of a transaction, he is not permitted to deny its validity while retaining its benefits. But such cases are generally refer- able to other principles than that of equitable estoppel, although the same result is produced." With great deference to the opinion of so able a judge, I think his error in this passage is evident. It consists in taking a special rule, established from motives of policy for a particular condi- tion of fact, and raising it to the position of a universal rule. Where an estoppel by conduct. is alleged to prevent a legal owner of land from as- serting his legal title, courts of equity, in order to avoid the literal requirements of the statute of frauds, were driven to the element of fraud in the conduct as essential: See the text, §§ 805, 807. The passage quoted from Judge Story is dealing with this long-settled rule of equity, and not with the subject of equitable estoppel in general. When this special rule is made universal, its inconsistency with many familiar instances of equi- table estoppel becomes apparent, and Judge Field is forced to escape from the antagonism by denying that these instances do in fact belong to the doctrine. If this conclusion be correct, then some of the most im- 1655 CONOEBNING EQUITABLE ESTOPPEL. § 807 upon sucli admission, and will be injured hj allowing its truth to be disproved.'' § 807. Fraudulent Intent Necessary in an Estoppel Af- fecting the Legal Title to Land.» — The particular case re- ferred to in the foregoing foot-note requires a fuller ex- planation. It is a purely equitable doctrine settled long before the modern rules of equitable estoppel by conduct. It is confined to estates ia land. The general rule is, that if a person interested in an estate knowingly misleads an- other into dealing with the estate as if he were not inter- ested, he will be postponed to the party misled, and com- pelled to make his representation specifically good.^ It applies to one who denies his own title or encumbrance when inquired of By another who is about to purchase the land or to loan money upon its security; to one who know- ingly suffers another to deal with the land as though it were his own; to one who knowingly suffers another to expend money in improvements without giving notice of his own claim, and the like. This equity, being merely an instance of fraud, requires intentional deceit, or at least that gross negligence which is evidence of an intent to portant and well-settled species of the estoppel, uniformly regarded as such by text-writers and courts, must be abandoned, and the beneficent doctrine itself must be curtailed in its operation, to one particular class of cases. This result is in direct opposition to the tendency of judicial decision and of the discussions of text-writers. See also Dorlarque v. Cress, 71 111. 380, 381, 382; McKinzie v. Steele, 18 Ohio St. 38, 41 (a dictum) ; Eldred v. Hazlett's Adm'r, 33 Pa. St. 307; Rhodes v. Childs, 64 Pa. St. 18; White v. Langdon, 30 Vt. 500.»' §806, (b) The latter part of this Civ. App.), 176 S. W. 885; and note is quoted in Galbraith v. Luns- quoted in Childress v. Flynn (Mo. ford, 87 Tenn. S9, 1 L. R. A. 522, 9 App.), 181 S. W. 584. S. W. 365. §807, (a) Sections 807-821 are § 806, (o) This paragraph of the cited in Lee v. Parker, 171 N. C. text is cited in Pocahontas Light & 144, 88 S. E. 217. Water Co. v. Browning, 53 W. Va. § 807, (b) The text is quoted in 436, 44 S. E. 267; in Mullins v. Franklin v., Havalena Mining Co., Shrewsbury, 60 W. Va. 694, 55 S. E. 18 Ariz. 201, 157 Pac. 986. 736; and in Ford v. Warner (Tex. § 807 EQUITY JUKISPRUDENOB. 1656 deceive.^ In tlie language of a most recent decision, to preclude the owner of land from asserting his legal title or interest under such circumstance, ' ' there must be shown either actual fraud, or fault or negligence equivalent to fraud, on his part in concealing his title; or that he was silent when the circumstances would impel an honest man to speak; or such actual intervention on his part, as in Storrs V. Barker, 6 Johns. Ch. 166, — so as to render it just that, as between him and tlie party acting upon his sug- gestion, he should bear the loss." What is the reason of this rule? It is accurately explained in the same decision. While the owner of land may by his acts in pais preclude himself from asserting his legal title, "it is obvious that the doctrine should be carefully and sparingly applied, and only on the disclosure of clear and satisfactory grounds of justice and equity. It is opposed to the letter of the stat- ute of frauds, and it would greatly tend to the insecurity of titles if they were allowed to be affected" by parol evi- dence of light or doubtful character."^ The most im- portant "ground of justice and equity" admitted by courts of equity to uplift and displace the statute of frauds con- cerning legal titles to land, by fastening a liability upon the wrongdoer, is fraud. There are many instances in which equity thus compels the owner of land to forego the benefits of his legal title and to admit the equitable claims of another, in direct contravention of the literal require- ments of the statute, but they all depend upon the same principle.^ The rule under consideration is strictly an- alogous to another familiar rule that a legal owner of land cannot be turned into a trustee ex delicto by any mere words or conduct. A constructive trust ex delicto can §807, (c) The text is quoted in estopped); Franklin v. Havalena Arkansas National Bank v. Boles, Mining Co., 18 Ariz. 201, 157 Pac. 97 Ark. 43, 133 S. W. 195. 986. §807, (d) The text is quoted in §807, (e) The text is quoted in Mnllins v. Shrewsbury, 60 W. Va. Porde v. Libby, 22 Wyo. 464, 143 694, 55 S. B. 736 (party's ignorance Pac. 1190 of his title prevents him from being 1657 CONCEKNING EQUITABLE ESTOPPEL. § 807 never be impressed upon land as against the legal title by any verbal stipulation, however definite, nor by any mere conduct; such trust can only arise where the verbal stipu- lation and conduct together amount to fraud in the con- templation of equity.^ Both the rule under consideration and the rule concerning trusts rest upon the same reasons. The doctrine had its origin, as has been said, prior to and independently of the modern doctrine of equitable estoppel by conduct, and was confined in its operation to courts of equity. Even at the present day, this particular instance of the equitable estoppel by which the owner of land is precluded from asserting his legal title is distinctively equi- table; it is not admitted and enforced at law, except in states where the principles of equity are administered through the means of legal actions and remedies, and in those where legal and equitable rights and reliefs are com- bined in the administration of justice under the reformed procedure.! s § 807, 1 Trenton Banking Co. v. Sherman, 24 Alb. L. J. 390 ; Boggs V. Merced M. Co., 14 Cal. 279, 367, 368; Brant v. Va. Coal Co., 93 U. S. 326, 335; Evans v. Bieknell, 6 Ves. 174; Pilling v. Armitage, 12 Ves. 78, 84; Martinez v. Cooper, 2 Russ. 198; Nicholson v. Hooper, 4 Mylne & C. 179; Williams v. Earl of Jersey, Craig & P. 91; East India Co. v. Vin- cent, 2 Atk. 83; Hungerford v. Earle, 2 Vem. 261; Wendell v. Van Rensselaer, 1 Johns. Ch. 344; Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316 ; actual intent to deceive not always necessary ; gross negli- gence in forgetting a fact contrary to the statement acted upon : Slim §807, (f) The text is quoted in 126 Tenn. 169, 148 S. W. 1042; Caldwell v. Caldwell, 173 Ala. 216, Bender v. Brooks, 61 Tex. Civ. App. 55 South. 515. 464, 130 S. W. 653; Mylius v. § 807, (g) The text is cited in Koontz, 69 W. Va. 621, 73 S. E. 319. Breeze v. Brooks, 71 Cal. 169, 182, See, also, Pitcher v. Dove, 99 Ind. 9 Pac. 670; Lower Latham Ditch 175; Pocahontas Light & Water Co. Co. V. Louden Irrigating Canal Co., v. Browning, 53 W. Va. 436, 44 S. E. 27 Colo. 267, 83 Am. St. Rep. 80, 60 267; Hubbard v. Slavens, 218 Mo. Pac. 629; Parkey v. Ramsey (Tenn.), 59S, 117 S. W. 1104; Dye v. Crary, 76 S. W. 812; Loughran v. Gorman, 13 N. M. 439, 9 L. R. A. (N. S.) 1136, 256 m. 46', 99 N. E. 886; Williams 85 Pac. 1038; Atlantic & C. Air V. Ketcham, 37 I-nd. App. 506, 77 Line Ry. Co. v. Victor Mfg. Co., N. E. 285; Smith v. Cross, 125 Tenn. 79 S. C. 266, 60 S. E. 675. 159, 140 S. W. 1060; Tate v. Tate, § 808 ' EQUITY JUEISPRTJDENCB. 1658 § 808. Requisites Further Illustrated — The Conduct. — My limits of space do not permit a detailed discussion of these general requisites. I can only state them in the brief- est manner, and must refer to the cases cited in the foot- note, and to treatises upon estoppel, for an ampler treat- • ment. In fact, the more specific rules, the varying phases of opinion, and the partial conflict of decision have arisen in actions at law rather than in equity. The treatment of the subject by courts of equity has generally been simple, uniform, and consistent. The conduct creating the estop- pel must be something which amounts either to a repre- sentation or a concealment of the existence of facts; and these facts must be material to the rights or interests of the party affected by the representation or concealment, and who claims the benefit of the estoppel. The conduct may consist of external acts, of language written or spoken, or of silence.i The facts represented or concealed must, in V. Croucher, 1 De Gex, F. & J. 518, 525, 528.'» But see Spencer v. Carr, 45 N. Y. 406, 6 Am. Rep. 112; Sulphine v. Dunbar, 55 Miss. 255; and see Southard v. Sutton, 68 Me. 575; Kirkpatriok v. Brown, 59 Ga. 450; Stewart v. Mix, 30 La. Ann., pt. 2, 1036; Lippmins v. McCranie, 30 La. Ann., pt. 2, 1251; Lamar Co. v. Clements, 49 Tex. 947; Bloomstein v. Clees, 3 Tenn. Ch. 433; Hart v. Giles, 67 Mo. 175; Godfrey v. Thornton, 46 Wis. 677; Gregg v. Von Phul, 1 Wall. 274, per Davis, J.; Breeding V. Stamper, 18 B. Mon. 175; HiU v. Epley, 31 Pa. St. 331, 334. This species of equitable estoppel belongs to the jurisdiction of equity, and is not available at law:* Wimmer v. Meklin, 14 Bush, 193; Kelly v.* Hen- dricks, 57 Ala. 193; Hayes v. Livingston, 34 Mich. 384, 22 Am. Rep. 533. § 808, 1 Examples by acts or by words : Cairncross v. Lorimer, 7 Jur., N. S., 149; Pulsford v. Richards, 17 Beav. 87; Bridger's Case, L. R. 9 Eq. 74; Mitchell's Case, L. R. 9 Eq. 363; Ebbett's Case, L. R. 5 Ch. 302 (cases where a person has allowed his name to appear as a stockholder § 807, (•») In Low v. Bouverie, Derry v. Peek did not affect the law [1891] 3 Ch. 82, it was held that of estoppel. See, also, § 912, note. Slim V. Croucher, supra, was really ^^'^' O Town of Mattoon v. .. . , f A ^-t- Elliott, 259 HI. 72, 102 N. E. 251. an action for damages for deceit, . ' ' , , , ,,- . Equitable estoppel no defense to and hence was overruled by the de- . . . tt -r, , ,-,t ^ ejectment: Harney v. Breeden (Va.), cision of the House of Lords in ^g S. E. 916. See, however, Cheat- Derry v. Peek, L. E. 14 App. Cas. ham v. Edgefield Mfg. Co., 131 Fed. 337; though it is pointed out that 118. 1659 CONCERNING EQUITABLE ESTOPPEL. § 808 general, be either existing or past, or at least represented to be so. A statement concerning future facts would in a company) ; Tilton v. Nelson, 27 Barb. 595; Horn v. Cole, 51 N. H. 287, 290, 12 Am. Rep. Ill; Stevens v. Dennett, 51 N. H. 324; Zuehtmann V. Roberts, 109 Mass. 53, 12 Am. Rep. 663; Continental Bank v. Bank of Commonwealth, 50 N. Y. 575; Barnard v. Campbell, 55 N. Y. 456; Dezell V. Odell, 3 Hill, 215, 38 Am. Dec. 628; Oakland P. Co. v. Rier, 52 Cal. 270; Dresbaeh v. Minnis, 45 Cal. 223; Comstock v. Smith, 26 Mich. 306; Peters v. Jones, 35 Iowa, 512; Thomas v. Pullis, 56 Mo. 211; Rice v. Groffman, 56 Mo. 434, 435; People v. Brown, 67 111. 435; Connihan v. Thompson, 111 Mass. 270 (not estopped) ; McKinzie v. Steele, 18 Ohio St. 38, 41 (not estopped); Eaton v. New England Tel. Co.. 68 Me. 623; Southard v. Sutton, 68 Me. 575; Reed v. Crapo, 127 Mass. 39; Taylor v. Brown, 31 N. J. Eq. 163 (not estopped) ; Board of Trustees etc. v. Ser- rett, 31 La. Ann. 719; Jeffries v. Clark, 23 Kan. 448; Hartshorn v. Pot- roff, 89 111. 509; Taleott v. Braekett, 5 111. App. 60.a Examples by silence: Caimcross v. Lorimer, 7 Jur., N. S., 149; Gregg V. Wells, 10 Ad. & E. 90; Gregg v. Von Phul, 1 "Wall. 274; Railroad Co. V. Dubois, 12 Wall. 47; Rubber Co. v. Goodyear, 9 Wall. 788; Niven v. Belknap, 2 Johns. 573; Hall v. Fisher, 9 Barb. 17, 31; Hope v. Law- rence, 50 Barb. 258; Chapman v. Chapman, 59 Pa. St. 214; Lawrence v. Luhr, 65 Pa. St. 236; Hill v. Epley, 31 Pa. St. 331, 334; Ives v. North Canaan, 33 Conn. 402; Taylor v. Ely, 25 Conn. 250; Guthrie v. Quinn, 43 Ala. 561; Abrams v. Seale, 44 Ala. 297; Young v. Vough, 23 N. J. Eq. 325; Weber v. Weatherby, 34 Md. 656; Silloway v. Neptune Ins. Co., 12 Gray, 73; Society etc. v. Lehigh Valley R. R., 32 N. J. Eq. 329; Viele V. Judson, 82 N. Y. 32, 39; Hamlin v. Sears, 82 N. Y. 327." §808, (a) Examples ty Acts or Lewis, [1904] 2 Ch. 656 (represen- Words. — See Hoene v. PoUak, 118 tation not precise enougli to give Ala. 617, 72 Am. St. Eep. 189, 24 rise to an estoppel) ; Ward v. Ward, South. 349; Mann v. Bergmann, 203 131 Fed. 946, 954 (expression of ni. 406, 67 N. E. 814; Starkey v. opinion as to law does not create Starkey, 166 Ind. 140, 76 N. E. estoppel, when all parties have 876; Hill v. Wand, 47 Kan. 340, 27 knowledge of the facts). Am. St. Eep. 288', 27 Pac. 988; §808, (i>) Examples by Silence.^ Baker v. Seavey, 163 Mass. 522, 47 See, also, In re Lart, [1896] 2 Ch. Am. St. Eep. 475, 40 N. E. 863; 789; Kirk v. Hamilton, 102 U. S. Great Hive of L. of M. v. Supreme 68; Lindsay v. Cooper, 94 Ala. 170, Hive of L. of M. (Mich.), 97 N. "W. 33 Am. St. Eep. 105, 16 L. E. A. 813, 779; Guffey v. O'Eeiley, 88 Mo. 418, 11 South. 325; Farber v. Page & 57 Am. Eep. 424; Borden v. Hutchin- Mott Lumber Co., 20 Idaho, 354, 118 son (N. J.), 49 Atl. 1088; Mattes Pac. 664; Milligan v. Miller, 253 111. v. Prankel, 157 N. T. 603, 68 Am. 511, 47 N. E. 1054; Helwig v. Fogel- St. E«p. 804, 52 N. E. 585; In re song, 165 Iowa, 715, 148 N. W. 990; 809 EQUITY JUBISPBUDENCB. 1660 either be a mere expression of opinion, or would constitute a contract and be governed by rules applicable to con- tracts.2 §809. Same. Knowledge of the Truth by the Party Estopped. — The truth concerning these material facts rep- resented or concealed must be known to the party at th'e time when his conduct, which amounts to a representation or concealment, takes place; or else the circximstances must he such that a knowledge of the truth is necessarily imputed to him.^ ^ The rule has sometimes been stated as though § 808, 2 Jorden v. Money, 5 H. L. Gas. 185; Langdon v. Doud, 10 Al- len, 433; 6 AUen, 423, 83 Am. Dec. 641; White v. Walker, 31 lU. 422, 437; White V. Ashton, 51 N. Y. 280. § 809, 1 Holmes v. Crowell, 73 N. C. 613; Stevens v. Dennett, 51 N. H. 324, 333; Smith v. Hutchinson, 61 Mo. 83; Clarke v. Coolidge, 8 Kan. 189; Second Nat. Bank v. Walbridge, 19 Ohio St. 419, 2 Am. Rep. 408; Carmine v. Bowen, 104 Md. 198, 9 Ann. Cas. 1135, 64 Atl. 932; Carroll V. Manganese Steel Safe Co., Ill Md. 252, 73 Atl. 665; Barton v. Pioneer S. & L. Co., 69 Minn. 85, 65 Am. St. Eep. 549, 71 N. W. 906; Macomber v. Kinney, 114 Minn. 146, 128 N. W. 1001, 130 N. W. 851; McClare v. Loekard, 121 N. Y. 308, 24 N. E. 453; Wampol v. Koiintz, 14 S. D. 334, 86 Am. St. Eep. 765, go N. W. 595; Pond v. Pond's Es- tate, 79 Vt. 352, 8 L. E. A. (N. S.) 212, 65 Atl. 97; H. W. Wright Lum- ber Co. V. McCord, 145' Wis. 93, 34 L. E. A. (N. S.) 762, 128 N. W. 873, and note (estoppel of wife living apart from husband to claim dower). That there must be the occasion and duty to speak, see Geisendorff v. Cobbs, 47 Ind. App. 573, 94 N. E. 236; Shinew v. First Nat. Bank, 84 Ohio St. 297, Ann. Cas. 1912C, 587, 36 L. E. A. (N. S.) 1006, 95 N. E. 881; Bragdon v. McShea, 26 Old. 35, 107 Pac. 916; Pierce v. Texas Kice Development Co., 52 Tex. Civ. App. 205, 114 S. W. 857. § 808, (c) Statements Concerning Future Facts. — The text is quoted in Caldwell v. Caldwell, 173 Ala. 216, 55 South. 515. See, also, Chad- wick V. Manning, [1896] App. Cas. 231; Maddison v. Alderson, 8 App. Cas. (H. L.) 467, 473; Weidemann V. Springfield Breweries Co., 78 Conn. 660, 63 Atl. 162; Scott v. Hub- bard, 67 Or. 498, 136 Pac. 653; Elliott v. Whitmore, 23 Utah, 342, 90 Am. St. Eep. 700, 65 Pac. 70; Attkisson v. Plumb, 50 W. Va. 104, 58 L. E. A. 788, 40 S. E. 587; but see Banning v. Kreiter, 153 Cal. 33, 94 Pac. 246. See, also, §877, last note. §809, (a) The text is cited in Cantley v. Morgan, 51 W. Ta. 304, 41 S. E. 201; and in Bender v. Brooks, 61 Tex. Civ. App. 464, 130 S. W. 653. See McCaskill v. Con- necticut Savings Bank, 60 Conn. 300, 25 Am. St. Eep. 323, 13 L. E. A. 1661 CONCERNING EQUITABLE ESTOPPEL. § 809 it were universal, that an actual knowledge of the truth, is always indispensable. It is, however, subject to so many restrictions and limitations as to lose its character of universality. It applies in its full force only in cases where the conduct creating the estoppel consists of silence or acquiescence.2 ^ It does not apply where the party, al- though ignorant or mistaken as to the real facts, was in such a position that he ought to have known them, so that knowledge will be imputed to him. In such a case, igno- rance or mistake will not prevent an estoppel.^ ° Nor does Adams v. Brown, 16 Ohio St. 75; Bank of Hindustan, L. R. 6 Com. P. 54, 222; Laverty v. Moore, 33 N. Y. 658; Reed v. MeCourt, 41 N. Y. 435; Raynor v. Timerson, 51 Barb. 517; Strong v.. Ellsworth, 26 Vt. 366; Thrall v. Lathrop, 30 Vt. 307, 73 Am. Dec. 306; Whitaker v. Williams, 20 Conn. 98; Liverpool Wharf v. Prescott, 7 Allen, 494, 4 Allen, 22; Kin- caid V. Dormey, 51 Mo. 552; Rutherford v. Tracy, 48 Mo. 325, 8 Am. Rep. 104; Dorlarque v. Cress, 71 111. 380, 382; Graves v. BlondeU, 70 Me. 190. § 809, 2 See cases in last note. §809, 3 Irving Nat. Bank v. Alley, 79 N. Y. 536, 540; Pulsford v. Richards, 17 Beav. 87; Lefever v. Lefever, 30 N. Y. 27; Horn v. Cole, 51 N. H. 287, 12 Am. Rep. Ill, per Perley, C. J.; Mut. Life Ins. Co. v. Norris, 31 N. J. Eq. 583, 585, 586. 737, 22 Atl. 568; Garbutt v. Mayo, been induced by the concealment 128 Ga. 269, 13 L. E. A. (N. S.) 38, of any material fact on the part of 57 S. E. 495; Trimble v. King, 131 those who seek to use them as such: Ky. 1, 22 L. E. A. (N. S.) 880, 114 Porter v. Moore, [1904] 2 Ch. 367; S. W. 317; Smith v. Sprague, 119 George Whiteehurch, Ltd., v. Cav- Mich. 148, 75 Am. St. Kep. 384, 77 anagh, [1902] App. Gas. 117, 145. N. W. 689; Foote v. Hambrick, 70 §809, (b) Must Ije Actual Knowl- Miss. 157, 35 Am. St. Eep. 631, 11 edge of the Truth in cases of estop- South. 567; Tennent v. Union Cent. pel by silence or acquiescence: See Life Ins. Co., 133 Mo. App. 345, 112 § 818, post'; Geisendorff v. Cobbs, S. W. 754; Gregmoore Orchard Co. 47 Ind. App. 573, 94 N. E. 236; v. Gilmour, 159 Mo. App. 204, 140 Scottish-American Mortgage Co. v. S. W. 763; De Lashmutt v. Teetor, Bunckley, 88 Miss. 641, 117 Am. 261 Mo. 412, 169 S. W. 34; Childress St. Eep. 763, 41 South. 502; Ten- V. Flynn (Mo. App.), 181 S. W. 584; nent v. Union Cent. Life Ins. Co., Kenny v. McKenzie, 23 S. D. Ill, 133 Mo. App. 345, 112 S. W. 754; 49 L. E. A. (N. S.) 775, 120 N. W. Starr v. Bartz, 219 Mo. 47, 117 S. W. 781; Pocahontas Light & Water Co. 1125; City of Lincoln v. Mc- v. Browning, 53 W. Va. 436, 44 S. E. Laughlin, 79 Neb. 74, 112 N. W. 363. 267. No representations can be re- § 809, (c) The text is quoted in lied upon as estoppels if they have Hilton v. Sloan, 37 Utah, 359, 108 § 810 EQUITY JURISPRUDENCE. 1662 the rule apply to a party who has not simply acquiesced, but who has actively interfered by acts or words, aid whose affirmative conduct has thus misled another.^d Finally, the rule does not apply, even in cases of mere acquiescence, when the ignorance of the real facts was occasioned by culpable negligence.^ ^ § 810. Same. Ignorance of the Truth by the Other Party. — The truth concerning these material facts must be unknown to the other party claiming the benefit of the estoppel, not only at the time of the conduct which amounts to a representation or concealment, but also at the time when that conduct is acted upon by him. If, at the time when he acted, such party had knowledge of the truth, or had the means by which with reasonable diligence he could acquire the knowledge so that it would be negligence on his § 809, 4 In such a case the party might not only be ignorant or mis- taken, but he might even believe his own statements to be true. This is a plain application of the principle that where one of two innocent per^ sons must suffer, the loss will fall upon him whose conduct made it possi- ble: Hurd V. Kelly, 78 N. Y. 588, 597; Irving Nat. Bank v. Alley, 79 N. Y. 536, 540; Cloud v. "Whiting, 38 Ala. 57; Beaupland v. McKeen, 28 Pa. St. 124, 131, 70 Am. Dec. 115; Millingar v. Sorg, 55 Pa. St. 215, 225. §809, 5 Sweezey v. Collins, 40 Iowa, 540; Rice v. Bunce, 49 Mo. 231, 234, 8 Am. Rep. 129; Calhoun v. Richardson, 30 Conn. 210; Preston v. Mann, 25 Conn. 118; Smith v. Newton, 38 111. 230; Stone v. Gr. West. OU Co., 41 111. 85; Slim v. Croucher, 1 De Gex, F. & J. 518;* and see Adams v. Brown, 16 Ohio St. 75. Pac. 689; H. C. & W. B. Reynolds Minn. 146, 128 N. W. 1001, 130 N. Co. V. Eeynolds, 190 Ala. 468, 67 W. 851. South. 293; cited in Weinstein v. §809, (d) Jett v. Crittenden, 89 ^Tational Bank, 69 Tex. 38, 5 Am. Ark. 349, 116 S. W. 665 (senior St. Eep. 23, 6 S. W. 171; Bausman mortgagee negligently understated V. Kelley, 38 Minn. 197, 8 Am. St. the amount of his claim to junior Kep. 661, 36 N. W. 333. See, also, creditor); Stubbs v. Franklin & M. Chase's Appeal, 57 Conn. 236, 18 E. Co., 101 Me. 355, 64 Atl. 625. Atl. 96; Westerman v. Corder, 86 §809, (e) The text is quoted in Kan. 239, Ann. Cas. 1913C, 60, 39 H. C. & W. B. Eeynolds Co. v. Eey- L. E. A. (N. S.) 500, 119 Pae. 868 nolds, 190 Ala. 468, 67 South. 293. (vendor's representations as to his § 809, (*) See, as to this case, title) ; Macomber v. Kinney, 114 notes, §§ 807, 912. 1663 CONCEENIKG EQUITABLE ESTOPPEL. §810 part to remain ignorant by not using those means, lie can- not claim to have been misled by relying upon the repre- sentation or concealment.! ^ If, therefore, at the time of § 810, 1 Davenport v. Turpin, 52 Cal. 270; Brant v. Virginia Coal etc. Co., 93 U. S. 326; Holmes v. Crowell, 73 N. C. 613; Plummer v. Mold, 22 Minn. 15; Clark v. Coolidge, 8 Kan. 189; Bigelow v. Topliff, 25 Vt. 273, 60 Am. Dec. 264; Odlin v. Gove, 41 N. H. 465, 77 Am. Dec. 773; Wallis V. Truesdell, 6 Pick. 455; Carter v. Champion, 8 Conn. 548, 554, 21 Am. Dec. 695; Rapalee v. Stewart, 27 N. Y. 310; Hill v. Epley, 31 Pa. St. 331; Fisher v. Mossman, 11 Ohio St. 42; Bales v. Perry, 51 Mo. 449; Rennie v. Young, 2 De Gex & J. 136; Wythe v. City of Salem, 4 Saw. 88; Stevens v. Dennett, 51 N. H. 324, 333; Rice v. Bunce, 49 Mo. 231, 234, 8 Am. Rep. 129; Mut. Life Ins. Co. v. Norris, 31 N. J. Eq. 583. §810, (a) The text is quoted in Williama v. Ketcham, 37 Ind. App. 506, 77 N. E. 285; Vineland v. Fowler Waste Mfg. Co., 86 N. J. L. 342, L. E. A. 1915B, 711, 90 Atl. 1054; Ford v. Warner (Tex. Civ. App.), 176 S. W. 885; and cited in Cowans v. Fort Worth & D. C. E. Co., 49 Tex. Civ. App. 463, 109 S. W. 403. See, also, City of Ft. Scott V. W. G. E'ads Brokerage Co. (C. C. A.), 117 Fed. 51; Lux v. Haggin, 69 Cal. 255, 10 Pac. 674; Merchants' Ad-Sign Co. v. Sterling, 124 Cal. 429, 71 Am. St. Eep. 94, 46 L. E. A. 142, 57 Pac. 468'; "Verdugo Canon Water Co. V. Verdugo, 152 Cal. 655, 93 Pac. 1021; Weidemann v. Springfield Breweries Co., -78 Conn. 660, 68 Atl. 162 (party asserting estoppel must show due diligence to learn the truth) ; Stonecipher v. Kear, 131 Ga. 688, 127 Am. St. Eep. 248, 63 S. E. 215; Gray v. Bartlett, 20 Pick. 186, 32 Am. Dec. 208; Underwood v. Oeekard (Ind. App.), 70 N. E. 383; State v. Mutual Life Ins. Co. of New York, 175 Ind. 59, 93 N. E. 213; Geisendorff v. Cobhs, 47 Ind. App. 573, 94 N. E. 236; Steele v. Michigan Buggy Co., 50 Ind, App. 635, 95 N. E. 435; Penn American Plate Glass Co. v. Schwinn, 177 Ind. 645, 98 N. E.. 715; Logan v. Davis, 147 Iowa, 441, 124 N. W. 808; Win- gert V. Snoufeer, 134 Iowa, 97, 108 N. W. 1035, 111 N. W. 432; Schaidt V. Bland, 66 Md. 141, 6 Atl. 669; Sheffield Car Co. v. Constantine Hydraulic Co., 171 Mich. 423, Ann. Cas. 1914B, 984, 137 N. W. 305; Macomber v. Kinney, 114 Minn. 146, 128 N. W. 1001, 130 N. W. 851; Spahr V. Cape, 143 Mo. App. 114, 122 S. W. 379; De Lashmutt v. Teetor, 261 Mo. 412, 169 S. W. 34; Algodones Land & Town Co. v. Frank, 21 N. M. 82, 153 Pac. 1032; Estis V. Jackson, 111 N. C. 145, 32 Am. St. Eep. 784, 16 S. E. 7; Bright V. Allan, 203 Pa. St. 394, 93 Am. St. Eep. 769, 53 Atl. 251; Garvey v. Harbison-Walker Refractories Co., 213 Pa. 177, 62 Atl. 778; Somers v. Somers, 27 S. D. 500, 36 L. E. A. (N. S.) 1024, 131 N. W. 1091; Hilton V. Sloan, 37 Utah, 359, 108 Pac. 689; Pond V. Pond's Estate, 79 Vt. 352, 8 L. E. A. (N. S.) 212, 65 Atl. 97; Attkissou V. Plumb, 50 W. Va. 104, 58' L. E. A. 788, 40 S. E. 587; Poca- hontas Light & Water Co. v. Brown- §810 EQUITY JUEISPRTJDEN-CE. 1664 the representation the party to whom it was made was ig- norant of the real facts, bnt before he acted upon it the statement was contradicted by its author, or he became in- formed of the truth, he could not claim an estoppel.^ It has been said that, in cases of alleged estoppel by conduct affecting the title to land, the record of the real title would furnish a means by which the other party might ascertain the truth, so that he could not claim to be misled, and could not insist upon an estoppel.^ ^ This conclusion, if correct § 810, 2 Freeman v. Cooke, 2 Ex. 654 ; and see Howard v. Hudson, 2 El. & B. 1. § 810, 3 HiU V. Epley, 31 Pa. St. 331; Knoufl v. Thompson, 16 Pa. St. 357; Goundie v. Northampton W. Co., 7 Pa. St. 233; Fisher v. Mossman, 11 Ohio St. 42. ing, 53 W. Va. 436, 44 S. E. 267. If the party claiming the benefit of the estoppel has notice of the true state of facts, hut is mistaken as to the legal rights derived therefrom, there is no estoppel: Estis v. Jack- son, 111 N. C. 145, 32 Am. St. Kep. 784, 16 S. E. 7. § 810, (b) Effect of Record of the Eeal Title. — The text is quoted in Chambers v. Bessent, 17 N. M. 487, 134 Pac. 237; Headley v. Hoopen- garner, 60 W. Va. 626, 55 S. E. 744. See, also, Wiser v. Lawler, 189 TJ. S. 260, 23 Sup. Ct. 624 (mere silence will not estop in such 3 ease) ; Neal V. Gregory, 19 Fla. 356 (silence) ; Thor V. Oleson, 125 HI. 365, 17 N. E. 780; Oberheim v. Eeeside, 116 Md. 265, 81 Atl. 590 (silence as to rights of record does not estop) ; Stewart V. Matheny, 66 Miss. 21, 14 Am. St. Bep. 538, 5 South. 587; Scottish- American Mtg. Co. V. Bunckley, 88 Miss. 641, 117 Am. St. Eep. 763, 41 South. 502; Clark v. Parsons, 69 N. H. 147, 76 Am. St. Eep. 157, 39 Atl. 898 (mere silence will not estop in such a case) ; Brinckerbofi v. Lansing, 4 Johns. Ch. 65, 8 Am. Dec. 538 (silence); Sullivan v. Moore, S4 S. G. 426, 65 S. E. 108, 66 S. E. 561 (owner not being apprised of the buyer's ignorance) ; Pierce v. Texas Eiee Development Co., 52 Tex. Civ. App. 205, 114 S. W. 857. In Gray V. Zelmer, 66 Kan. 514, 72 Pac. 228, the principle stated in the text was extended so as to apply to notice by possession. There was no active misrepresentation. In Sumner v. Seaton, 47 N. J. E'q. 103, 19 Atl. 884, it was held that where the true owner knew or had reason to know that the other was acting in good faith on an erroneous supposi- tion as to the title, the fact that the latter might have ascertained the true state of the title by examina- tion of the records is no excuse for the former's silence. It is pointed out that in the first four cases cited in the author's note the essential ele- ment of knowledge of the second party's motives was absent. This section of the text is cited. In Kingman v. Graham, 51 Wis. 232, 8 N. W. 181, it is said that tie exist- 1665 CONCEENING EQUITABLE ESTOPPEL. § 811 at all, is correct only within very narrow limits, and must be applied with the greatest caution. It must be strictly confined to cases where the conduct creating the alleged estoppel is mere silence. If the real owner resorts to any affirmative acts or words, or makes any representation, it would be in the highest degree inequitable to permit him to say that the other party, who had relied upon his con- duct and had been misled thereby, might have ascertained the falsity of his representations.* "^ § 811. Same. Intention of. the Party Who is Estopped. It has frequently been said, in most general terms, that the conduct amounting to a representation, in order to consti- tute an estoppel, must be done with the intention, by the one § 810, 4 The principle upon which this conclusion depends is fully dis- cussed in the subsequent chapter upon fraud, under the head of. repre- sentations. See Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316; Davis V. Handy, 37 N. H. 65; Hill v. Epley, 31 Pa. St. 331; Proctor v. Keith, 12 B. Mon. 252; Colbert v. Daniel, 32 Ala. 314, 316; Clapham v. Shillito, 7 Beav. 146, 149, 150, per Lord Langdale; Drysdale v. Mace, 2 Smale & G. 225, 230; Price v. Macauley, 2 De Gex, M. & G. 339, 346, per Knight Bruce, L. J.; Wilson v. Short, 6 Hare, 366, 378; Harnett v. Baker, L. R. 20 Eq. 50. Although these cases are not decided upon the doctrine of estoppel, yet they well illustrate the question how far a per- son may avoid the effect of his own positive representations by insisting that the other party should not have relied on them.* ence of the record will ordinarily Hill v. Blaekwelder, 113 HI. 283; prevent an estoppel; but where the Eobbins v. Moore, 129 HI. 30, 21 owner is apprised of the ignorance N. E. 934; Eogers v. Portland & of the buyer he cannot take ad- B. St. Ey., 100 Me. 86, 70 L. R. A. vantage of the principle. 574, 60 Atl. 713; Stubbs v. Franklin § 810, (c) The text is quoted in & M. E. Co., 101 Me. 355, 64 Atl. Headley v. Hoopengarner, 60 W. Va. 625; Thompson v. Borg (Minn.), 95 626, 55 S. E. 744; and cited and fol- N. W. 896; Borden v. Hutchinson lowed in Westerman v. Corder, 86 (N. J.), 49 Atl. 1088 (owner of re- Kan, 239, Ann. Cas. 1913C, 60, 39 corded judgment who, at an auction L. E. A. (N. S.) 500, 119 Pao. 868. sale, states that the only encum- See, also, Gresham Life Assur. brance is a, mortgage, is estopped); Society v. Crowther, [1914] 2 Ch. Farr v. Semmler, 24 S. D. 290, 123 219; Graham v. Thompson, 55 Ark. N. W. 835. 296, 29 Am. St. Eep. 40, 18 S. W. §810, ( This mode of stating the doctrine may in equity apply to every kind of estoppel, even to those by which an owner of land is precluded from asserting his § 811, 2 Horn v. Cole, 51 N. H. 287, 12 Am. Rep. Ill, per Perley, C. J. The same doctrine was laid down in Cornish v. Abington, 4 Hurl. & N. 549, by Pollock, C. B. : "If any person, by a course of conduct or by actual expressions, so conducts himself that another may reasonably infer the existence of an agreement or license, whether the party intends that he should do so or not, it has the effect that the party using that language, or who has so conducted himself, cannot afterwards gainsay the reason- able inference to be drawn from his words or conduct." To the same effect are Freeman v. Cooke, 2 Ex. 654, per Parke, B.; Howard v. Hud- son, 2 El. & B. 1; In re Bahia «& S. P. R'y, L. R. 3 Q. B. 584, per Cock- bum, C. J. As illustrations, see Young v. Grote, 4 Bing. 253; Bank of Ireland v. Evans, 5 H. L. Cas. 389; Swan v. Br. and Austr. Co., 7 Com. B., N. S., 400; 7 Hurl. & N. 603; 2 Hurl. & C. 175; Halifax Guardians V. Wheelwright, L. R. 10 Ex. 183; Carr v. London & N. W. R'y, L. R. 10 Com. P. 307, 316, 317; Anderson v. Armstead, 69 111. 452, 454; Rice V. Bunce, 49 Mo. 231, 234, 8 Am.. Rep. 129, per Wagner, J.; Mut. Life Ins. Co. V. Norris, 31 N. J. Eq. 583, 585; Manufacturers and Traders' Bank v. Hazard, 30 N. Y. 226, 230. § 811, (b) See Trustees, etc. v. Ey., 100 Me. 86, 70 L. E. A. 574, 60 Smith, 118 N. Y. 634, 7 L. B. A. 755, Atl. 713; Macomber v. Kinney, 114 23 N. E. 1002. See, also, Eoyle Min- Minn. 146, 128 N. W. 1001, 130 N. ing Co. V. ^Fidelity & Casualty Co. W. 851; Bender v. Brooks, 61 Tex. of N. Y., 161 Mo. App. 185, 142 S. Civ. App. 464, 130 S. W. 653; Hilton W. 438; Seymour v. Oelrichs, 156 v. Sloai, 37 Utah, 359, 108 Pac. 689. Cal. 782, 134 Am. St. Kep. 154, 106 Compare Bliss v. Waterbury, 33 S. Pac. 88; Eogers v. Portland & B. St. D. 214, 145 N. W. 435. § 811 EQUITY JUEISPKTJDENCE. 1668 legal title. There is, however, a large class in which not only an intention directed towards a particular individual or towards individuals in general is absent, but a contrary intention that the party's representation is not to be acted upon at all may be present. The class includes all those instances where an owner of things in action or of chattels has, either designedly or negligently, clothed a third person with the apparent title and power of disposition, and this person transfers them to a purchaser in good faith who relies upon the apparent power of sale they conferred upon him.<' The original owner is estopped by his conduct from asserting his right of property, and the bona fide purchaser acquires a perfect title by estoppel, in direct contravention of the rules of law which would otherwise control. It is a complete misconception to say that these instances do not depend upon the doctrine of equitable estoppel, but upon that of negligence. On the contrary, they have been uni- formly rested by courts upon the theory of estoppel, and are among the strongest and most distinctive illustrations of the efficacy of that theory. In fact, it is only by means of the doctrine of estoppel that the original owner can be divested of his title in opposition to the rules of the law concerning the transfer and acquisition of property. There is no rule of law or of equity by which an owner, through mere negligence, can, be divested of his legal title to things in action or chattels.^ ^ The cases where the particular ia- § 811, 3 Examples of this rule as applied to certificates of stock and other things in action: McNeil v. Tenth Nat. Bank, 46 N. T. 325, 7 Am. Rep. 341; Moore v. Metropolitan Bank, 55 N. T. 41, 14 Am. Rep. 173 ; Combes v. Chandler, 33 Ohio St. 178 ; and see ante, § 710, where these and other cases are fully stated. As applied to other property: Barnard v. Campbell, 55 N. Y. 456, 462; Manufacturers and Traders' Bank v. Hazard, 30 N. Y. 226, 230; Anderson v. Armstead, 69 111. 452, 454; Hamlin v. Sears, 82 N. Y. 327. This class of estoppels is virtually the same as that described by Sir James Fitzjames Stephen, in the second § 811, (c) This portion of the text § 811, (d) See, also, Longman is quoted in Morris v. Joyce, 63 N. v. Bath Electric Tramways, Ltd., J. Eq. 549, 53 Atl. 139. [1905] 1 Ch. 646. 1669 CONCERNING EQUITABLE ESTOPPEL. § 812 tention mentioned in the general rule seems to be the most essential are those in which an owner or one having an in- terest in property, especially in land, deals concerning it directly with a third person, and by his words, acts, or silence, when he ought to speak, makes representations with respect to his title or interest. In order to be estopped from asserting his title or interest, he must intend that his repi^sentation should be acted upon by the party influenced by his conduct.* § 812. Same. The Conduct Must be Relied upon, and be an Inducement for the Ot|ier Party to Act. — Whatever may be the real intention of the party making the representation, it is absolutely essential that this representation, whether consisting of words, acts, or silence, should be believed and relied upon as the inducement for action by the party who claims the benefit of the estoppel, and that, so relying upon it and induced by it, he should take some action. The cases all agree that there can be no estoppel, unless the party who alleges it relied upon the representation, was induced to act by it, and thus relying and induced, did take some ac- tion. ^ » Finally, this action must be of such a nature that it paragrapli of his general formula quoted ante, in note under § 804, except that negligence of the owner is not always a necessary element. See the English cases there cited, and also in the last preceding note. § 811, 4 See ante, § 807, and eases cited in note. § 812, 1 Howard v. Hudson, 2 El. & B. 1; Cumen v. Mayor, 79 N. Y. .511, 514; Waring v. Sombom, 82 N. Y. 604; Grissler v. Powers, 81 N. Y. 57, 37 Am. Rep. 475; Kent v. Quicksilver M. Co., 78 N. Y. 159, 187; Hurd V. Kelly, 78 N. Y. 588, 597, 34 Am. Eep. 567; Barnard v. Camp- §812, (a) The text is quoted in ham (Mont.), 29 Pac. 277; Bashore Beaufort County Lumber Co. v. v. Parker, 146 Gal. 525, 80 Pac. 707; Price, 144 N. C. 50, 56 S. E. 684; Eoyce v. Carpenter, 80 Vt. 37, 66 Porter v. Goudzwaard, 162 Mich. 158, Atl. 888; Kopperl v. Standard Dis- 127 N. W. 295; Gallagher v. Conner, tilling Co. (Tex. Civ. App.), 119 S. 138 La. 633, 70 South. 539; and cited W. 1169. See, also, Bell v. Marsh, to this effect in Great West Min. [1903] 1 Ch. 528; In re Lewis, Co. V. Woodmas, 12 Colo. 46, 13 Am. [1904] 2 Ch. 656; Porter v. Moore, St. Rep. 204, 20 Pac. 771; Boulder [1904] 2 Ch.' 367; Low v. Bouverie, Val. Ditch Min. & Mill. Co. v. Farn- [1891] 3 Ch. 82, 113 ("where no §812 EQUITY JUEISPEUDENCE. 1670 would have altered the legal position of the party for the worse, unless the estoppel is enforced. He must have placed himself in such a situation that he would suffer a loss as the consequence of his action, if the other party were allowed to deny the truth of his representation, or repudiate the 'bell, 55 N. Y. 456, 462; Malloney v. Horan, 49 N. T. Ill, 115, 10 Am. Rep. 335; Jewett v. Miller, 10 N. Y. 402, 406, 61 Am. Dec. 751; Manufac- turers' etc. Bank v. Hazard, 30 N. Y. 226, 230; Van Deusen v. Swegt, 51 N. Y. 378; Davenport v. Turpin, 43 Cal. 597, 602; Wheeloek v. Town of Hardwick, 48 Vt. 19; St. Jo. Mfg. Co. v. Daggett, 84 111. 556; Dorlarque V. Cress, 71 HI. 380; Anderson v. Armstead, 69 111. 452; Carroll v. Man- chester etc. R. R., Ill Mass. 1; Voorhees v. Olmstead, 3 Hun, 744; Horn V. Cole, 51 N. H. 287, 12 Am. Rep. Ill; Stevens v. Dennett, 51 N. H. 324, 333; Clark v. Coolidge, 8 Kan. 189, 195; Kuhl v. Mayor, 23 N. J. Eq. 84; Rice V. Bunce, 49 Mo. 231, 234, 8 Am. Rep. 129; State v. Laies, 52 Mo. 396; McCabe v. Raney, 32 Ind. 309; Simpson v. Pearson, 31 Ind. 1, 5, 99 Am. Dec. 577; McKinzie v. Steele, 18 Ohio St. 38, 41; Eaton v. N. E. Tel. Co., 68 Me. 63; Southard v. Sutton, 68 Me. 575; Graves v. Blondell, 70 Me. 190; Mut. Life Ins. Co. v. Norris, 31 N. J. Eq. 583; Eitel v. Bracken, 38 N. Y. Sup. Ct. 7. fraud is alleged, it is essential to bIiow that the statement was of such a nature that it would have misled any reasonable man, and, that plain- tiff was in fact misled by it"); Crary v. Dye, 208 XJ. S. 515, 52 L. Ed. 595, 28 Sup. Ct. 360; Boylston v. Eankin, 114 Ala. 408, 62 Am. St. Rep. Ill, 21 South. 995; First Nat. Bank v. Maxwell, 123 Cal. 360, 69 Am. St. Rep. 64, 55 Pae. 980; Ver- dugo Canon Water Co. v. Verdugo, 152 Cal. 65.5, 93 Pac. 1021; Su- preme Tent Knights of Maccabees v. Stensland, 206 111. 124, 99 Am. St. Rep. 137, 68 N. E.- 1098; Evans v. Odom, 30 Ind. App. 207, 65 N. E. 755; Steele v. Michigan Buggy Co., 50 Ind. App. 635, 95 N. E. 435; Wright V. Fox, 56 Ind. App. 315, 103 N. E. 442 (not necessary that the representation be the sole induce- ment to the action) ; Pabst Brew- ing Co. V. Schuster, 55 Ind. App. 375, 103 N. E. 950; Amundson v. Stand- ard Printing & Mfg. Co., 140 Iowa 464, 118 N. W. 789; Wingert v SnouflEer, 134 Iowa, 97, 108 N. W 1035, 111 N. W. 432; Dent v. Smith 76 Kan. 381, 92 Pac. 307; Woods Egan Livestock Commission Co. v Hicks, 92 Kan. 922, L. R. A. 1915A, 1132, 142 Pac. 276; Ford Lumber & Mfg. Co. V. Cress, 132 Ky. 317, 116 S. W. 710; Stubbs v. Franklin & M. E. Co., 101 Me. 355, 64 Atl. 625; Couant V. Evans, 202 Mass. 34, 88 N. E. 438; Scottish American Mtg. Co. V. Bunckley, 88 Miss. 641, 117 Am. St. Rep. 763, 41 South. 502; Northrup v. Colter, 150 Mo. App. 639, 131 S. W. 364; Geiler v. Littlefield, 148 N. T. 603, 43 N. E. 66; Jacobus V. Jamestown Mantel Co., 211 N. Y. 154, 105 N. E. 210; Gjerstadengen v. Van Duzen, 7 N. D. 612, 66 Am. St. Rep. 679, 76 N. W. 233; Holt v. Holt, 23 Okl. 639, 102 Pac. 187; Bragdon 1671 CONCEENIlirG EQUITABLE ESTOPPEL. §812 effects of his conduct-^i) Although this action is -as-aally affirmative, yet such affirmative action is not indispensable. It is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.^ c § 812, 2 Cases cited in last note; also Forsyth v. Day, 46 Me. 176, 197; Cummings v. Webster, 43 Me. 192.; Holden v. Torrey, 31 Vt. 690; Bit- ting's Appeal, 17 Pa. St. 211; Cole v. Bolard, 22 Pa. St. 431; Newman v. Edwards, 34 Pa. St. 32; Truan v. Keiffer, 31 Ala. 136; Railroad Co. v. Dubois, 12 Wall. 47; East v. Dolihite, 72 N. C. 562. § 812, 3 Continental Bank v. Bank of Commonwealtli, 50 N. Y. 575, and cases cited by Eolger, J.; Voorhees v. Olmstead, 3 Hun, 744. V. McShea, 26 Okl. 35, 107 Pac. 916; In re Clark's Estate, 230 Pa. St. 158, 79 Atl. 246; Sullivan v. Moore, 84 S. C. 426, 65 S. E. 108, 66 S. E. 561 (act done after other party^B posi- tion is changed, no estoppel) ; Smith V. Cleaver, 25 S. D. 351, 126 N. W. 589; Smith v. Cross, 125 Tenn. 159, 140 S. W. 1060; Gose v. Coryell, 59 Tex. Civ. App. 504, 126 S. W. 1164; Vermont Accident Ins. Co. v. Fletcher, 87 Vt. 394, 89 Atl. 480; Cleveland v. Band, 90 Vt. 223, 97 Atl. 989; Pocahontas Light & Water Co. V. Browning, 53 W. Va. 436, 44 S. E. 267. § 812, (b) Action Induced must Cause Damage Unless Estoppel Al- lowed. — See Ketchum v. Duncan, 96 U. S. 659; Zeckendorf v. Steinfeld, 12 Ariz. 245, 100 Pac. 784; Stein v. Leeman, 161 Cal. 502, 119 Pae. 663; Supreme Tent Knights of Maccabees V. Stensland, 206 111. 124, 99 Am. St. Kep. 137, 68 N. E. 1098; Koep v. Keep, 146 Iowa, 179, 123 N. W. 174; Nell v. Dayton, 43 Minn. 242, 45 N. W. 229; Macomber v. Kinney, 114 Minn. 146, 128 N. W. 1001, 130 N. W. 851; Pace v. Pace, 107 Miss. 292, ^ 65 South. 273; Barnett v. Kemp, 258 ' Mo. 139, 52 L. B. A. (N". S.) 1185, 167 S. W. 546; Bidwell v. Piercy, 71 N. J. Eq. 83, 63 Atl. 261; Assets Realization Co. v. Clark, 205 N. Y. 105, 41 L. E. A. (N. S.) 462, 98 N. E. 457; Falls City Lumber Co. v. Watkins, 53 Or. 212, 99 Pac. 884; Harmon v. Harmon (S. C), 71 S. E. 815; Stockyards Nat. Bank v. Smith, 60 Tex. Civ. App. 503, 128 S. W. 454; Eicketson v. Best (Tex. Civ. App.), 134 S. W. 353. § 812, (c) See, also, Dixon v. Ken- naway & Co., [1900] 1 Ch. 833; Weinstein v. National Bank, 69 Tex. 38, 5 Am. St. Rep. 23, 6 S. W. 171. Compare Stockyards Nat. Bank v. Smith, 60 Tex. Civ. App. 503, 128 S. W. 454. In Eothschild v. Title Guarantee & Trust Co., 204 N. T. 458, 41 L. E. A. (N. S.) 140, 97 N. B. 879, the rule was carried to the ex- treme: See comments in note, L. K. A. (a mother whose name was forged to a mortgage by her son paid in- terest to the mortgagee; held, thai as this tended to prevent a discovery of the forgery by the mortgagee, she was estopped to set up the forgery), § 813 EQUITY JUEISPEUDENCE. 1672 § 813. Operation and Extent of the Estoppel. — The measure of the operation of an estoppel is the extent of the representation made by one party and acted on by the other. The estoppel is commensurate with the thing represented, and operates to put the party entitled to its benefit in the same position as if the thing represented were true.^ ^ "With respect to the persons who are bound by or who may claim the benefit of the estoppel, it operates between the imme- diate parties and their privies, whether by blood, by estate, or by contract. A stranger, who is not a party nor a privy, can neither be boimd nor aided.2 ^ Since the whole doctrine is a creature of equity and governed by equitable principles, § 813, 1 Grissler v. Powers, 81 N. Y. 57, 37 Am. Rep. 475, per An- drews, J.; Tilton v. Nelson, 27 Barb. 595; Pickett v. Merchants' Nat. Bank, 32 Ark. 346; Murray v. Jones, 50 Ga. 109; Campbell v. Nichols, 33 N. J. L. 81; Philadelphia v. Williamson, 10 Phila. 176; Dunston v, Paterson, 2 Com. B., N. S., 495. § 813, 2 Simpson v. Pearson, 31 Ind. 1, 99 Am. Dec. 577, per Elliott, C. J.; Eaton v. New England Tel. Co., 68 Me. 63; Southard v. Sutton, 68 Me. 575; Wright v. Hazen, 24 Vt. 143; Parker v. Crittenden, 37 Conn. § 813, (a) The text is quoted in Idaho, 459, 109 Am. St. Eep. 214, 69 Grice v. Woodworth, 10 Idaho, 459, L. R. A. 584, 80 Pac. 912; cited in 109 Am. St. Eep. 214, 69 L. K. A. Williamson v. Jones, 43 W. Va. 563, 584, 80 Pac. 912; Marston v. Catter- 64 Am. St. Hep. 891, 38 L. E. A. 694, lin, 239 Mo. 390, 144 S. W. 475 702, 27 S. E. 411; in Smith & Eicker (agent, to efEeet a loan, searched v. Hill Bros., 17 N. M. 415, 134 Pac. title .and gave principal an abstract 243 (estoppel binds privies); Mul- which omitted a prior lien, then lins v. Shrewsbury, 60 W. Va. 694, bought in the lien; estopped to use 55, S. E. 736 (stranger cannot take it against his principal) ; Schweitzer advantage of the estoppel). See, V. Equitable Savings & Loan Assn. also, Hodge v. Ludlum, 45 Minn. 290, (Wash,), 167 Pac. Ill; cited in 47 N. W. 805; Butler v. Supreme Boulder Val. Ditch Min. & Mill Co. Court, I. 0. F., 53 Wash. 118, 26 L. V. Farnham, 21 Mont. 1, 29 Pac. 277. E. A. (N. S.) 293, 101 Pac. 481; See, also, Jett v. Jett, 171 Ky. 548, Huggins v. Price, 96 S. C. 83, 79 S. 188 S. W. 669; Conway Nat. Bank E. 798 (privies by blood); Pond v. V. Pease, 76 N. H. 319, 82 Atl. 1068 Pond's Estate, 79 Vt. 352, 8 L. E. A. (relief is based on the principle of (N. S.) 212, 65 Atl. 97 (privity be- restitution). tween executor and legatee); Palls § 813, (b) Persons Bound or Bene- City Lumber Co. v. Watkins, 53 Or. fited by the Estoppel. — The text is 212, 99 Pac. 884. quoted in Grice v. Woodworth, 10 1673 CONCEENING EQUITABLE ESTOPPEL. § 814 it necessarily follows that the party who claims the benefit of an estoppel must not only have been free from fraud in the transaction, but must have acted with good faith and reasonable diligence; otherwise no equity will arise in his favor.3 c §814. Same. As Applied to Married Women.^ — ^Upon the question how far the doctrine of equitable estoppel by conduct applies to married women, there is some conflict among the decisions. The tendency of modem a,uthority, however, is strongly towards the enforcement of the es- toppel against married women as against persons sui juris, with little or no limitation on account of their disability. This is plainly so in states where the legislation has freed their property from all interest or control of their husbands, and has clothed them with partial or complete capacity to deal with it as though they were single.^ ^ Even inde- 148; McCravey v. Remson, 19 Ala. 430, 54 Am. Dec. 194; Kinnear v. Maekey, 85 111. 96; Murray v. Sells, 53 Cra. 257; Peters v. Jones, 35 Iowa, 512; Thistle v. Buford, 50 Mo. 278; Gould v. West, 32 Tex. 338. §813, 3 Thorne v. Mosher, 20 N. J. Eq. 257; Royce v. Watrous, 73 N. Y. 697; Wilcox v. Howell, 44 N. Y. 398; Moore v. Bowman, 47 N. H. 494. § 814, 1 Wherever statutes have gone further, and enabled married • women to enter into contracts as though single, there is, of course, no reason why the doctrine of estoppel should not apply to them without any limitation: Dingens v. Clancey, 67 Barb. 566; Fryer v. Rishell, 84 §813, (c) Paity Claiming Benefit Va. 694, 55 S. E. 736 (party claim- must have Shown Good Faith and ing estoppel must act promptly). Diligence.— The text is quoted in §814, (a) The text, §§ 814-818, is Grice v. Woodworth, 10 Idaho, 459, cited in Galbraith v. Lumsford, 87 109 Am. St. Rep. 214, 69 L. K. A. Tenn. 89, 1 L. K. A. 522, 9 S. W. 584, 80 Pac. 912; cited in Vermont 365. This paragraph is quoted in Accident Ins. Co. v. Fletcher, 87 Vt. Wilder v. Wilder, 89 Ala. 414, 18 394, 89 Atl. 480. See, also, Porter Am. St. Eep. 130, 9 L. E. A. 97, 7 V. Moore, [1904] 2 Ch. 367; George South. 767; and in Brusha v. Board Whitechureh, Ltd., v. Cavanagh, of Education, 41 Okl. 595, 139 Pac. [1902] App. Gas. 117, 145; Macom- 298. ber V. Kinney, 114 Minn. 146, 128 §814, (b) The text is cited in N. W. 1001, 130 N. W. 851; Urqu- Dobbin v. Cordiner, 41 Minn. 165, hart V. Belloni, 57 Or. 314, 111 Pac. 16 Am. St. Eep. 683, 4 L. E. A. 333, 692; MuUins v. Shrewsbury, 60 W. 42 N. W. 870; Warner v. Watson, 35 §814 EQUITY JUEISPKUDBITCE. 1674 pendently of this legislation there is a decided preponder- ance of authority sustaining the estoppel against her, either when she is attempting to enforce an alleged right or to maintain a defense.^ c There are, however, decisions Pa. St. 521; Towles v. Fisher, 77 N. C. 437; Godfrey v. Thornton, 46 Wis. 677 ; and even she may thus be estopped by the acts of her husband : McCaa v. Woolf, 42 Ala. 389; Bodine v. Killeen, 53 N. Y. 93; Treman V. Allen, 15 Hun, 4; Hockett v. Bailey, 86 HI. 74; but see, for circum- stances in which she has been held not estopped, Oglesby Coal Co. v. Pasco, 79 111. 164; Upshaw v. Gibson, 53 Miss. 341; McBeth v. Trabue, 69 Mo. 642. § 814, 2 This is certainly the effect of modem English decisions : Staf- ford V. Stafford, 1 De Gex & J. 193; Skottowe v. Williams, 7 Jur., N.S., 118; Jones v. Higgens, L. R. 2 Eq. 538, 544; Jones v. Frost, L. R. 7 Ch. 773, 776; Bigelow v. Foss, 59 Me. 162; Frazier v. Gelston, 35 Md. 298; Fla. 402, 17 South. 654; Segal v. Eeiaert, 128 Ky. 117, 107 S. W. 747; Engholm v. Ekrem, 18 N. T>. 185, 119 N. W. 35; Goldberg v. Parker, 87 Conn. 99, Ann. Gas. 1914C, 1059, 87 Atl. 555; H. W. Wright Lumber Co. T. MeCord, 145 Wis. 93, 34 L. E. A. (N. S.) 762, 128 N. W. 873. The text is cited in Williamson v. Jones, 43 W. Va. 563, 64 Am. St. Eep. 891, 38 L. K. A. 694, 27 S. E. 411, hold- ing that, as to her personal estate, being enabled to contract as if single, she is bound by estoppel in pais touching her contracts; quoted in Johnson v. Mutual Life Ins. Co. (Ky.), 69 S. W. 751; and in Griee v. Woodworth, 10 Idaho, 459, 109 Am. St. Eep. 214, 69 L. E. A. 584, 80 Pae. 912. See, also, Noel v. Kinney, 106 N. Y. 74, 60 Am. Eep. 423, 12 N. E. 351; Temples v. Equitable Mortgage Co., 100 Ga. 503, 62 Am. St. Eep. 326, 28 S. E. 232; Webb v. John Hancock Mut. Life Ins. Co. (Ind.), 66 N. E. 470, and cases cited (statute makes married woman bound by estoppel in pais); Trimble V. State, 145 Ind. 154, 57 Am. St. Eep. 163, and note, 44 N. E. 260; Newman v. Moore, 94 Ky. 147, 42 Am. St. Eep. 343, 21 S. W. 759. Ad- ditional cases: Johnson v. Elliott, 64 Fla. 318, 59 South. 944; Ford v. Blaekshear Mfg. Co., 140 Ga. 670, 79 S. E. 576; Eeid v. Singer Mfg. Co., 128 Ky. 50, 107 S. W. 310; Ayre & Lord Tie Co. v. Baker, 138 Ky. 494, 128 S. W. 346; Pool v. Stephen- son, 146 Ky." 784, 143 S. W. 419; Tennent v. Union Life Ins. Co., 133 Mo. App. 345, 112 S. W. 754; John- son County V. Taylor, 87 Neb. 487, 127 N. W. 862; Brusha v. Board of Education, 41 Okl. 595, 139 Pac. 298; Goldberg v. Parker, 87 Conn. 99, Ann. Cas. 1914C, 1059, 87 Atl. 555. § 814, (c) Quoted in Brooks v. Laurent (C. C. A.), 98 Fed. 647, and in Griee v. Woodworth, 10 Idaho, 459, 109 Am. St. Eep. 214, 69 L. E. A. 584, 80 Pac. 912. See, also, Smith V. Willard, 174 HI. 538, 66 Am. St. Eep. 313, 51 N. E. 835; Boyd v. Tur- pin, 94 N. C. 137, 55 Am. Eep. 597; Brown v. Thompson, 31 S. C. 436, 17 Am, St. Eep. 40, 10 S. E. 95. 1675 CONCERNING EQUITABLE ESTOPPEL. § 815 which hold, in effect, that since a married woman cannot be directly bound by her contracts or conveyances, eA^en when accompanied with fraud, so she cannot be indirectly bound through means of an estoppel; and the operation of the estoppel against her must be confined to cases where she is attempting affirmatively to enforce a right inconsist- ent with her previous conduct, upon which the other party has relied.3 d These decisions seem to be in opposition to the general current of authority. § 815. Same. As Applied to Infants. — The disability of infancy seems to have limited the operation of the equitable estoppel more than that of coverture. Since an infant is not directly bound by his ordinary contracts, unless rati- fied after he becomes of age, so obligations in the nature of contract will not be indirectly enforced against him by means of an estoppel created by his conduct while still a minor. On the other hand, an equitable estoppel arising from his conduct may be interposed, with the same effect as though he were adult, to prevent him from affirmatively asserting a right of property or of contract in contraven- Brinkerhoff v. Brinkerhoff, 23 N. J. Eq. 477, 483; Carpenter v. Carpen- ter, 25 N. J. Eq. 194; Drake v. Glover, 30 Ala. 382; Connolly v. Branst- ler, 3 Bush, 702, 96 Am. Dec. 278; Couch v. Sutton, 1 Grant Cas. 114; MeCuUough v. Wilson, 21 Pa. St. 436; and see the cases cited in the last note. § 814, 3 Lowell v. Daniels, 2 Gray, 161, 61 Am. Dec. 448 ; Merriam v. Boston R. R., 117 Mass. 241; Bemis v. Call, 10 Allen, 512; Oglesby Coal Co. V. Pasco, 79 111. 164; Kane Co. v. Herrington, 50 111. 232; Williams v. Baker, 71 Pa. St. 476; Glidden v. Strupler, 52 Pa. St. 400; Rumfelt v. Clemens, 46 Pa. St. 455; Keen v. Hartman, 48 Pa. St. 497, 86 Am. Dec. 606, 88 Am. Dec. 472. In Lowell v. Daniels, 2 Gray, 161, 61 Am. Dec. 448, this view was maintained with great force and ability. § 814, (d) The text is cited in in Bank of America v. Banks, 101 Williamson v. Jones, 43 W. Va. 563; U. S. 247; Innis v. Templeton, 95 64 Am. St. Eep. 891, 38 L. R. A. 694, Pa. St. 262, 40 Am. Eep. 643; Mc- 27 S. E. 411, holding that as respects Neeley v. South Penn. Oil Co. (W. title to land, she cannot be barred Va.), 44 S. E. 508 (mere. silence will even by fraudulent conduct. Mar- not estop), ried women were held not estopped § 816 EQUITY JUKISPBUDBNCE. 1676 tion of his conduct upon which the other party has relied and been induced to act.^ * § 816. Important Applications in Equity — Acquiescence. In addition to the foregoing discussion of principles, I shall state very briefly some of the applications which have most frequently been made by courts of equity. Ac- quiescence is an important factor in determining equitable rights and remedies, in obedience to the maxims, He who seeks equity must do equity, and He who comes into equity must come with clean hands. Even when it does not work a true estoppel upon rights of property or of contract, it may operate in analogy to estoppel — ^may produce a qiMsi estoppel — upon the rights of remedy. These two effects will be described separately.* § 815, 1 Dorlarque v. Cress, 71 111. 380; McBeth v. Trabue, 69 Mo. 642; Montgomery v. Gordon, 51 Ala. 377; Upshaw v. Gibson, 53 Miss. 341; Handy v. Noonan, 51 Miss. 166; Padfleld v. Pierce, 72 111. 500; Wilkin- son V. Pilby, 24 Wis. 441; Wilie v. Brooks, 45 Miss. 542; Drake v. Wise, 36 Iowa, 476; Tantum v. Coleman, 26 N. J. Eq. 128; Overton v. Banister, 3 Hare, 503; Ex parte Unity etc. Ass'n, 3 De Gex & J. 63; Nelson v. Stoeker, 4 De Gex & J. 458; Esron v. Nicholas, 1 De Gex & S. 118; Stike- man v. Dawson, 1 De Gex & S. 90; Wright v. Snowe, 2 De Gex & S. 321.; Thompson v. Simpson, 2 Jones & L. 110. §815, (a) The text is cited in Ky. 441, 42 L. E. A. (N. S.) 643, Wilder v. Wilder, 89 Ala. 414, 18 144 S. W. 63 (estoppel) ; Headley v. Am. St. Eep. 130, 9 L. K. A. 97, 7 Hoopengarner, 60 W. Va. 626, 55 S. South. 767; Hayes v. Parker, 41 N. E. 744; Cowie v. Strohmeyer, 150 J. Eq. 632, 7 Atl. 511; Williamson Wis. 401, 136 N. W. 956, 137 N. W. V. Jones, 43 W. Va. 563, 64 Am. St. 778. Rep. 891, 38 L. R. A. 694, 703, 27 §816, (a) The text is cited in S. E. 411. See, also, Sims v. Ever- Gunnison v. Chicago M. & St. P. Ey. hardt, 102 TJ. S. 300; Wieland v. Co., 117 Fed. 629; Minter v. Haw- Kobick, 110 ni. 16, 51 Am. Rep. 676; kins, 54 Tex. Civ. App. 228, 117 S. Kastner v. Pibilinski, 96 Ind. 229; W. 172; and quoted in Naylor v. Bundle v. Spencer, 67 Mich. 89, 34 Foreman-Blades Lumber Co., 230 N. W. 548; Burke v. Adams, 80 Mo. . i'ed. 658. Sections 816-821 are cited 504, 50 Am. Rep. 510. Additional in Eothschild v. Title Guarantee & cases: Eowe v. Allison, 87 Ark. 206, Trust Co., 204 N. Y. 458, 41 L. E. A. 112 S. W. 395 (no estoppel) ; County (N. S.) 740, 97 N. E. 879. Board of Education v. Hensley, 147 1677 CONCEENING EQUITABLE ESTOPPEL. § 817 § 817. Acquiescence as Preventing Rights of Remedy. — Acquiescence in the wrongful conduct of another by which one's rights are invaded may often operate, upon the prin- ciples of and in analogy to estoppel, to preclude the in- jured party from obtaining many distinctively equitable remedies to which he would otherwise be entitled.^ This form of quasi estoppel does not cut off the party's title, nor his remedy at law; it simply bars his right to equi- table relief, and leaves him to his legal actions alone. In order that this effect may be produced, the acquiescence must be with knowledge of the wrongful acts themselves, and of their injurious consequences ; ^ it must be voluntary, not the result of accident, nor of causes renderings it a physical, legal, or moral necessity, and it must last for an unreasonable length of time, so that it will be inequi- table even to the wrong-doer to enforce the peculiar rem- edies of equity against him, after he has been suffered to go on unmolested, and his conduct apparently acquiesced in. It follows that what will amount to a sufficient acqui- escence in any particular case must largely depend upon its own special circumstances." The equitable remedy to which this qucisi estoppel by acquiescence most frequently applies is that of injunction, preliminary o"r final, when sought by a proprietor to restrain a defendant from in- terference with easements, from committing nuisances, §817, (a) The text is quoted in 457, 45 South. 891. The text is Condrou v. Pennsylvania E. Co., 233 cited to this point in Mullen v. Wal- Pa. St. 197, 82 Atl. 64; Eeitzer v. ton, 142 Ala. 166, 39 South. 97 (to Medina Valley Irr. Co. (Tex. Civ. constitute laches in enforcement of App.), 153 S. W. 380; Naylor v. an express trust, there must be Foreman-Blades Lumber Co., 230 knowledge of its existence) ; Eoyce Fed. 658; Adams v. Birmingham v. Carpenter, 80 Vt. 87, 66 Atl. 888 Eealty Co., 154 Ala. 45'7, 45 South. (nuisance). 891. §817, (c) The text is quoted in §817, (b) Must be Knowledge of Adams v. Birmingham Eealty Co., the wrongful acts and of their in- 154 Ala. 457, 45 South. 891; Cham- jurious consequences. The text is berlain v. Chamberlain, 7 Cal. App. quoted in Naylor v. Foreman-Blades 634, 95 Pac. 659; Condron v. Penn- Lumber Co., 230 Fed. 6j8; Adams v. sylvania E. Co., 233 Pa. St. 197, 82 Birmingh'Am Eealty Co., 154 Ala. Atl. 64. §817 EQUITY JUKISPETJDENOB. 1678 from trespasses, or other like acts in derogation of the plaintiff's proprietary rights.id This effect of delay is subject to the important limitation that it is properly con- fined to claims for purely equitable remedies to which the § 817, 1 See vol. 1, §§ 418, 419, and cases there eited.e The foUowing cases furnish illustrations of the rule and of its limitations, when it does or does not operate : Coles v. Sims, 5 De Gex, M. & G. 1 ; Great Western E'y V. Oxford etc. R'y, 3 De Gex, M. & G. 341; Attorney-General v. Shefileld Gas Co., 3 De Gex, M. «& G. 304; Child v. Douglas, 5 De Gtex, M. & G. 739; Graham v. Birkenhead etc. R'y, 2 Maen. & G. 146; Buxton V. James, 5 De Gex & S. 80; Attorney-General v. Eastlake, 11 Hare, 205, 228; 17 Jur. 801; Wood v. Suteliffe, 2 Sim., N. S., 163; Rochdale Canal Co. V. King, 2 Sim., N. S., 78; Cooper v. Hubbuck, 30 Beav. 160; 7 Jur., N. S., 457; Bankart v. Houghton, 27 Beav. 425; Gordon v. Cheltenham R'y, 5 Beav. 229, 237; Mitchell v. Steward, L. R. 1 Eq. 451; Western v. McDermott, L. R. 1 Eq. 499; 2 Ch. 72; Senior v. Pawson, L. R. 3 Eq. §817, (d) The text is quoted in St. Louis S. D. & S. Bank v. Ken- nett Estate (Mo. App.), 74 S. W. 474; Eigney v. Tacoma Light & Water Co., 9 Wash. 576, 2G L. E. A. 425, 429, 38 Pac. 147; Adams v. Birmingham Eealty Co., 154 Ala. 457, 45 South. 891; Condron v. Pennsylvania B. Co., 233 Pa. St. 197, 82 Atl. 64 (aequieseenee in validity of ordinance; plaintiff with- out objection stands by while de- fendant spends $50,000 relying upon the ordinance) ; and cited in Kessler v. Ensley Co., 123 Fed. 546; Lower Latham Ditch Co. v. Louden Irri- gating Canal Co., 27 Colo. 267, 83 Am. St. Rep. 80, 60 Pac. 629; Holt V. Parsons (Ga.), 45 S. E. 690; Voorhees v. Cragun, 61 Ind. App. 690, 112 N. E. 826 (defense not sound, suit being brought within the period of the statute of limita- tions, and rights of innocent third parties not being affected); Morri- son V. Queen City El. Light & Power Co., 181 Mich. 624, 148 N. W. 354 (defense to injunction against flood- ing land); Hayes v. Carroll (Minn.), 76 N. W. 1017 (laches not imputed to one in peaceable possession under an equitable title for failure to resort to equity for protection against the legal title); Bausmau V. Kelley, 38 Minn. 197, 8 Am. St. Eep. 661, 36 N. W. 333; Wolf v. Great Falls Water Power etc. Co. (Mont.), 38 Pac. 115 (suit for specific performance) ; Dennis v. Jones, 44 N. J. Eq. 513, 6 Am. St. Rep. 899, 14 Atl. 913; Trout v. Lucas, 54 N. J. Eq. 361, 35 Atl. 153; Lozier v. Hill (N. J. Eq.), 59 Atl. 234 (suit for specific performance) ; Moorman v. Arthur, 90 Va. 455, 18 S. E. 869 (must be actual knowledge of the wrongful act and its injurious consequences) ; Hecksher v. Blanton (Va.), 66 S' E. 859. Sections 817- 819 are cited in Washington v. Opie, 145 U. S. 214, 12 Sup. Ct. 822. See, also, Beardsley v. Cram, 137 Cal. 328, 70 Pac. 175; Powers's Appeal, 125 Pa. St. 175, 11 Am. St. Rep. 882, 17 Atl. 254. § 817, (e) See, also, § 1359. 1679 CONCEENING EQUITABLE ESTOPPEL. § 817 party lias no strict legal right. Where an injunction is asked in support of a strict legal right, the party is entitled to it if his legal right is established ; mere delay and acqui- escence will not, therefore, defeat the remedy, unless it has continued so long as to defeat the right itself.^ * The same rule applies, and for the same reasons, to a party seeking purely equitable relief against fraud, such as the surrender or cancellation of securities, the annulling of a transaction, and the like. Upon obtaining knowledge of the facts, he should commence the proceedings for relief as soon as reasonably possible. Acquiescence consisting of unnecessary delay after such knowledge will defeat the equi- table relief .3 s 330; Smith v. Smith, L. E. 20 Eq. 500; Attorney-General v. Lunatic Asylum, L. R. 4 Ch. 146; Lee v. Haley, L. R. 5 Ch. 155; Gaunt v. Fynney, L. R. 8 Ch. 8; Bassett v. Salisbury Mfg. Co., 47 N. H. 426, 439; Odiin V Gove, 41 N. H. 465, 77 Am. Dec. 773; Peabody v. Flint, 6 Allen, 52, 57; Fuller v. Melrose, 1 Allen, 166; Tash v. Adams, 10 Gush. 252; Briggs V. Smith, 5 R. I. 213; Grey v. Ohio etc. R. R., 1 Grant Cas. 412; Little V. Price, 1 Md. Ch. 182; Burden v. Stein, 27 Ala. 104, 62 Am. Dec. 758; Pillow V. Thompson, 20 Tex. 206; Borland v. Thornton, 12 Cal. 440; Phelps V. Peabody, 7 Cal. 50; Wilson v. Cobb, 28 N. J. Eq. 177. §817, 2Fullwood V. Fullwood, L. R. 9 Ch. Div. 176; and see Gaunt V. Fynney, L. R. 8 Ch. 8. § 817, 3 Jennings v. Broughton, 5 De Gex, M. & G. 126; Farebrother V. Gibson, 1 De G^x & J. 602; Kempson v. Ashbee, L. R. 10 Ch. 15; Turner v. Collins, L. R. 7 Ch. 329; Payne v. Evens, L. R. 18 Eq. 356; Peek V. Gurney, L. R. 13 Eq. 79; Kent v. Freehold etc. Co., L. R. 3 Ch. § 817, (f ) The text is quoted and § 817, (g) This portion of the text followed in Kigney v. Tacoma L. & is quotedin Evans v. Ihike, 140 Cal. W. Co., 9 Wash. 576, 26 L. E. A. 22, 73 Pac. 732; Van Beck v. Mil- 425, 38 Pac. 147; Brush v. Man- brath, 118 Wis. 42, 94 N. W. 657; hattan Ey. Co. (C. P. N. T.), 13 Adams v. Birmingham Eealty Co., N. y. Supp. 908; Adams v. Birming- 154 Ala. 457, 45 South. 891; and in ham Eealty Co., 154 Ala. 457, 45 Cross v. Mayo, 167 Cal. 594, 140 South. 891, and cited in Paxton v. Pac. 283; and cited in National Fix (Mo.), 190 S. W. 328. See, also, Mut. B. & L. Ass'n v. Blair, 98 Va, Paterson v. Kast Jersey Water Co., 490, 36 S. E. 513; Calhoun v. Millard, 74 N. J. Eq. 49, 70 Atl. 472; Stout 121 N. Y. 69, 8 LJl. A. 248, 24 N. E. V. Portland Cement Co., 76 N. J. Eq. 27; and in Minter v. Hawkins, 54 518, 74 Atl. 966. Tex. Civ. App. 228, 117 S. W. 172; § 818 EQUITY JUBISPBUDENCE. 1680 § 818. Acquiescence as an Estoppel to Rights of Property or of Contract. — Acquiescence consisting of mere silence may also operate as a true estoppel in equity to preclude a party from asserting legal title and rights of property, real or personal, or rights of contract. The requisites of such estoppel have been described. A fraudulent intention to de- ceive or mislead is not essential. All instances of this class, in equity, rest upon the principle: If one maintain silence when in conscience he ought to speak, equity will debar him from speaking when in conscience he ought to remain silent.i ^ A most important application includes all cases where an owner of property. A, stands by and knowingly permits another person, B, to deal with the property as though it were his, or as though he were rightfully deal- ing with it, without interposing any objection, as by ex- pending money upon it, making improvements, erecting buildings, and the like. Of course, it is essential that B should be acting in ignorance of the real condition of the title, and in the supposition that he was rightful in his own dealing.2 ^ 493; Oakes v. Turquand, L. R. 2 H. L. 325; Parks v. Evansville R. R., 23 Ind. 567; Gatling v. Newell, 9 Ind. 572. The same rule may be ap- plied to other equitable remedies under analogous circumstances : See Reimers v. Druce, 23 Beav. 145 ; Hicks v. Hunt, Johns. 372 ; Chapman v. Railroad Co., 6 Ohio St. 119; Hathaway v. Noble, 55 N. H. 508; and see cases cited post, under § 819. § 818, 1 Mich. etc. Co. v. Parcell, 38 Mich. 475, 480, per Cooley, J. §818, 2 Crook v. Corporation of Seaford, L. R. 6 Ch. 551; L. R. 10 Eq. 678; Thornton v. Ramsden, 4 Giffi. 519; Nunn v. Fabian, 11 Jur., In re Warner's Estate, 168 Cal. 771, v. Board of Education, 41 Okl. 595, 145 Pac. 504; Loud v. Pederal Ins. 139 Pae. 298; Heckir.an v. Davis Co. (Mieh.), 161 N. W. 928. See (Okl.), 155 Pac. 1170; Currens v. §§ 897, 917, 965, 1376, note. Lauderdale, 118 Tenn. 496, 101 S. W. § 818, (a) The text is quoted in 431. Verdugo Canon Water Co. v. Ver- § 818, (b) Owner of Property dugo, 152 Cal. 655, 93 Pae. 1021; "Standing by."— The text is quoted Loughran v. Gorman, 256 HI. 46, 99 in Verdugo Canon Water Co. v. Ver- N. E. 886 (knowingly suffering an- dugo, 152 Cal. 655, 93 Pat;. 1021; other to make improvements with- Brusha v. Board of Education 41 out giving notice of claim); Brusha Okl. 595, 139 Pac. 298; Heckman v.- 1681 CONCEENING EQUITABLE ESTOPPEL. §819" § 819. Estoppel as Applied to Corporations and Stock- holders. — This species of estoppel, as well as other kinds which consist of affirmative acts or representations, applies to corporations in their dealings with third persons, and N. S., 868; Eennie v. Young, 2 De Gex & J. 136; Bankart v. Tennant, L. E. 10 Eq. 141; Davies v. Sear, L. R. 7 Eq. 427; Davies v. Davies, 6 Jur., N. S., 1320; Somersetshire etc. Co. v. Harcourt, 2 De Gex & J. 596; Duke of Beaufort v. Patrick, 17 Beav. 60 ; Schaef er v. Gildea, 3 Col. 15 ; Mich. etc. Co. v. Parcell, 38 Mich. 475; Cumberland V. R. R. v. McLana- han, 59 Pa. St. 23; Martin v. Righter, 10 N. J. Eq. 510; Blackwood v. Jones, 4 Jones Eq. 54; Donovan v. Fireman's Ins. Co., 30 Md. 155; Evansville v. Pfisterer, 34 Ind. 36, 7 Am. Rep. 214; Millingar v. Sorg, 61 Pa. St. 471; Raritan Water P. Co. v. Veghte, 21 N. J. Eq. 463; Brooks V. Curtis, 4 Lans. 283; Vicksburg etc. R. R. v. Ragsdale, 54 Miss. 200; Broyles v. Nowlen, 59 Tenn. 191; Hart v. Giles, 67 Mo. 175; Hayes v. Livingston, 34 Mich. 384, 22 Am. Rep. 533; Ford v. Loomis, 33 Mich. 121. Davis (Okl.), 155 Pac. 1170; Currena cipher v. Kear, 131 Ga. 688, 127 V. Lauderdale, 118 Tenn. 496, 101 S. W. 431; cited in Hanner v. Moul- ton, 138 TJ. S. 486, 11 Sup. Gt. 408; Kessler v. E'nsley Co., 123 Fed. 546; Hogan V. Ellis, 39 Fla. 463, 63 Am. St. Bep. 167, 22 South. 727. See, also, Atlanta Nat. B. & L. Ass'n v. Gilmer, 128 Fed. 293; Duggan v. Wetmore, 221 Fed. 916, 137 C. C. A. 486 (delay of twenty-nine years by A, improvements by B greatly in- creasing value of property); Ala- bama etc. B. B. Co. V. 8. & N. A. B. B. Co., 84 Ala. 570, 5 Am. St. Rep 401, 3 South. 2S6; Lindsay v. Cooper, 94 Ala. 170, 33 Am. St. Kep. 105, 16 L. R. A. 813, 11 South. 325; Hen- drix V. Southern E. Co., 130 Atl. 305, 89 Am. St. Rep. 27, 30 South. 596; Southern By. Co. v. Hood, 126 Ala. 312, 85 Am. St. Rep. 32, 28 South. 662; Adams v. Birmingham Bealty Co., 154 Ala. 457, 45 South. 891; Beardsley v. Clem, 137 Cal. 328, 70 Pac. 175; Verdugo Caiion Water Co. v. Verdugo, 152 Cal. 655, 93 Pac. 1021 (passive acquiescence when no duty to speak, no estoppel); Stone- 11—106 Am. St. Rep. 248, 63 S. B. 215 (no estoppel against purchaser with notice); Milligan v. Miller, 253 111. 511, 97 N. E. 1054; Penn American Plate Glass Co. v. Sehwinn, 177 Ind. 645^ 98 N. E. 715 (means of knowl- edge equal, no estoppel; Schafer V. Wilson, 113 Iowa, 4f5, 85 N. W. 789; Helwig v. Fogelsong, 166 Iowa, 715, 148 N. W. 990; Penn v. Ehoades, 124 Ky., 798, 100 S. W. 288 (no estoppel); Trimble v. King, 131 Ky. 1, 22 L. R. A. (N. S.) 880, 114 S. W. 317; Ayre & Lord Tie Co. v. Baker, 138 Ky. 494, 128 S. W. 346; Tracy v. Eoberts, 88 Me. 310, 51 Am. St. Rep. 394, 34 Atl. 68; Ma- comber v. Kinney, 114 Minn. 146, 128 N. W. 1001, 130 N. W. 851 (owner who knows that a deed has been placed of record purporting to convey his interest in the land has a duty of taking afSrmative action whereby warning would be given possible purchasers) ; Purcell v. Thornton, 128 Minn. 255, 150 N. W. 899; Barchent v. Selleck, 89 Minn. 513, 95 N. W. 455; Thompson t. §819 EQUITY JUBISPBtTDENOB. 1682 with their own stockholders.^ * Thus a corporation may be estopped by statements contained in a prospectus or circu- lar, on behalf of a stockholder .who has purchased shares upon the faith of such statements.^ Conversely, stockhold- ers may be estopped by their acquiescence from objecting to the acts of the corporation which are not illegal nor mala prohibita, but ultra vires, when the rights of innocent third § 819, 1 Curnen v. Mayor etc., 79 N. Y. 511, 514; Continental Bank v. Bank of the Commonwealth, 50 N. Y. 575; Wilson v. West Hartlepool R'y, 11 Jur., N. S., 124; Hill v. South Stafford R'y, 11 Jur., N. S., 192; Ins. Co. V. Eggleston, 96 U. S. 572. § 819, 2 New Brunswick etc. Co. v. Muggeridge, 7 Jur., N. S., 132. And it is not necessary that the officers of the company should have known the falsity of the statements, or disbelieved them. Borg (Minn.), 95 N. W. 896; Ten- Pawtucket Institution for Savings, nent v. Union Cent. Life Ins. Co., 133 Mo. App. 345, 112 S. W. 734 (person estopped must have knowl- edge of facts); Withers v. Kansas City Suburban Belt B. Co., 226 Mo. 373, 126 S. W. 432; Blake v. Meadows, 225 Mo. 1, 30 L. E. A. (N. S.) 1, and note, 123 S. W. 868 (estoppel of one claiming resulting trust against the creditors of the person holding the legal title); Gregmoore Orchard Co. v. Gilmour, 159 Mo. App. 204, 140 S. W. 763 ("standing by" at judicial sale); Lewis V. -Patton, 42 Mont. 528, 113 Pae. 745; Morris Canal & Banking Co. V. Diamond Mills Paper Co., 71 N. J. Eq. 481, 64 Atl. 746; Minton V. New York El. E. Co., 130 N. Y. 332,29 N.E. 319; Johnson v. Erland- son, 14 N. D. 518, 105 N. W. 722; Brusha v. Board of Education, 41 Okl. 595, 139 Pac. 29S; Brown v. Gold Coin Min. Co., 48 Or. 277, 86 Pac. 361 (no acquiescence); Haun V. Martin, 48 Or. 304, 86 Pac. 371; Ashley v. Peek, 53 Or. 410, 100 Pac. 1103 ; Kedmond v. Excelsior Sav. etc. Assn., 194 Pa. St. 643, 75 Am. St. Eep. 714, 45 Atl. 422; Gaddes v. 33 R. I. 177, Ann. Cas. 1913B, 407, 88 Atl. 415; Sullivan v. Moore, 84 S. C. 426, 65 S. E. 108, 66 S. E. 561 (im- provements by life tenant too slight to put remainderman on notice); Atlanta & C. A. E. Co. v. Victor Mfg. Co., 93 S. C. 397, 76 S. E. 1091; Boynton v. Hunt, 88 Vt. 187, 92 Atl. 153; Champ v. Nicholas County Court, 72 W. Va. 475, 78 S. E. 361; H. W. Wright Lumber Co. v. Mc- Cord, 145 Wis. 93, 34 L. R. A. (N. S.) 762, and note, 128 N. W. 873 (es- toppel of wife living apart from husband to claim dower). Compare Kemp V. Hammock, 144 Ga. 717, 87 S. E. 1030 (not estopped from claim- ing ownership merely by acquies- cence in the making of improve- ments). See, also, § § 731, 1241, note. §819, (a) The text is quoted in Brockenbrough v. Mutual Reserve Life Ins. Co., 145 N. C. 354, 59 S. E. 118. See Breslin v. Fries-Breslin Co. (N. J. Eq.), 58 Atl. 313; West Seattle Land & Imp. Co. v. Novelty Mill Co., 31 Wash. 435, 72 Pac. 69; Coolidge v. Schering, 32 Wash. 557, 73 Pac. 682 (delay in suing to set aside unauthorized conveyance). 1683 COHCEENING EQUITABLE ESTOPPEL. § 820 persons have intervened. Express assent is not necessary to estop the stockholders; "when they neglect to promptly and actively condemn the unauthorized act, and to seek judicial relief after knowledge of its being done, they will be deemed to have acquiesced, and will be estopped as against innocent third persons. " ^ t § 820. Other Instances of Acquiescence. — It is in con- formity with the same principle that parties who have long acquiesced in settlements of accounts or of other mutual dealings are not permitted to reopen or disturb them ; and this is true, even though the parties stood in confidential relations towards each other, as trustee and cestui que trust, principal and agent, and the like, and the settlement em- braced matters growing out of such relations.^ ^ Another familiar instance of the estoppel arises from the conduct of the debtor party towards the intended assignee of a thing in action. If a mortgagor, obligor, or other debtor, by keep- ing silence under circumstances when he ought to speak, leads the intended assignee to believe that there is no de- fense, he will be estopped from afterwards setting up any § 819, 3 Kent v. Quicksilver Min. Co., 78 N. T. 159, 187, 188, and cases cited: Zabriskie v. Cleveland R. R., 23 How. 381, 395, 398; Parks v. Evansville R. R., 23 Ind. 567; Evans v. Smallcombe, L. R. 3 H. L. 249; L. R. 3 Eq. 769; Brotherhood's Case, 31 Beav. 365; In re Magdalena etc. Co., 6 Jur., N. S., 975; and see Sharpley v. Louth etc. R'y, L. R. 2 Ch. Div. 663, 681; Scholey v. Central etc. Co., L. R. 9 Eq. 266, note; Ashley's Case, L R. 9 Eq. 263; Denton v. Macniel, L. R. 2 Eq. 352; Hallows v. Femie, L. R. 3 Ch. 467. § 820, 1 Bright v. Legerton, 6 Jur., N. S., 1179; Clarke v. Hart, 5 Jur., N. S., 447. See the remarks of Lord Chelmsford in this case upon the different effects of delay and acquiescence upon executed and executory interests. §819, (b) The text is quoted in phis, etc., E. E. Co. v. Grayson, 88 Brockenbrough v. Mutual Eeserve Ala. 572, 16 Am. St. Rep. 69, 7 South. Life Ins. Co., 145 N. C. 354, 59 S. E. 122; Sheldon H. B. Co. v. Eicke- 118. The text is cited in Kessler meyer H. B. Co., 90 N. Y. 607. V. Ensley Co., 123 Fed. 546, and §820, (a) The text is cited in in Gordon v. Business Men's Eacing Heckscher v. Blanton (Va.), 66 S. E. Ass'n, 141 La. 819, L. K. A. 1917P, 859. 700, 75 South. 735. See, also, Mem- § 821 EQUITY JUEISPRUDENCE. 1684 defense which might otherwise be available as against the assignee who has thus been induced to purchase the demand. The estoppel will be even more obvious when the debtor, instead of simply keeping silent, resorts to aflSrmative and misleading acts or representations.^ § 821. Owner Estopped from Asserting His Legal Title to Land. — The most striking instance of the estoppel recog- nized by courts of equity is that already described in a former paragraph, wherein by intentional misrepresen- tation, misleading conduct, or wrongful concealment a party may preclude himself from asserting his legal title to land, or from enforcing an encumbrance on or maintain- ing an interest in real estate.^ This doctrine was estab- lished in equity long before the modem rules concerning equitable estoppel by conduct had been developed ; and its operation is somewhat more extensive than the effects pro- duced by the ordinary forms of estoppel. A person may not only be prevented from asserting his title or interest, he may even be compelled, at the suit of an innocent purchaser, to make good and specifically perform his representations. Fraud, actual or constructive, is the essential and central element. § 820, 2 Lee v. Kirkpatrick, 14 N. J. Eq. 264; Grissler v. Powers, 81 N. T. 57, 37 Am. Rep. 475 ; and see eases cited ante, § 704. § 821, 1 See ante, § 807, and cases cited; Vieksburg etc. R. R. Co. v. Ragsdale, 54 Miss. 200; Sulphine v. Dunbar, 55 Miss. 255; Wilber v. Goodricb, 34 Mich. 84; Sherrill v. SherriU, 73 N. C. 8; Mayor v. Ram- sey, 46 Tex. 371; Hayes v. Livingston, 34 Mich. 384, 22 Am. Bep. 533; Willmott V. Barber,' L. B. 15 Cb. Div. 96, 106. 1685 CERTAIN FACTS AND EVENTS. § 822 CHAPTER THIRD. CERTAIN PACTS AND EVENTS WHICH ARE THE OCCASIONS OF EQUITABLE PRIMARY OR REMEDIAL RIGHTS. § 822. Introductory. — In tlie first volume, while speak- ing of the jurisdiction, I stated that certain facts and events were most im'portant occasions of equitable rights and duties.! Since these same facts are also recognized by courts of law as giving rise to legal rights and duti:es within a limited extent, it has sometimes been said that they form a part of the concurrent jurisdiction of equity. The er- roneous character of this theory has been shown in earlier sections.^ The rights and duties of which they are the oc- casions, whether of property, of contract, or of remedy, belong partly to the exclusive and partly to the concurrent jurisdiction. The facts and events referred to, and which form the subject-matter of this chapter, are accident, mis- take, and fraud. In the present discussion I shall not de- scribe in an exhaustive manner all their consequences and effects, for this would produce needless confusion. I shall, in the first place, define them as they are conceived of by equity, and explain with some care the equitable notions concerning their nature, and the equitable doctrines con- cerning their essential elements and attributes. In the sec- ond place, I shall enumerate their effects, the instances of equitable jurisdiction of which they are the occasions, and the equitable rights and duties which are maintained and enforced by these phases of the jurisdiction. The doctrines which determine and govern the most important of these rights will be more fully discussed under subsequent and appropriate heads. 2 §822, ISee a»ie, §§359, 362. § 822, 2 For example, many instances of trusts by operation of law spring from fraud; their full discussion will be found in the sections on trusts. All the distinctive remedies, such as cancellation, reformation, etc., will be examined in the division which deals with remedies. § 822, (a) See §§ 138', 140, note, 175, note, 188. 823 EQUITY JUEISPRUDEN-OB. 1686 SECTION I. ACCIDENT. § 823. Definition. § 824. Bationale of the jurisdiction. § 825. General limitations on the jurisdiction. §§ 826-829. Instances in which the jurisdiction does not exist. § 826. Non-performance of contracts. § 827. Supplying lost or destroyed records. § 828. Other special instances. § 829. Parties against whom the jurisdiction is not exercised. §§ 830-837. Particular instances of the jurisdiction. § 831. 1. Suits on lost instruments. § 832. Same; instruments not under seal. § 833. 2. Accidental forfeitures. § 834. 3. Defective execution of powers. § 835. Powers held in trust will be enforced. § 836. 4. Eelief against judgments at law. § 837. 5. Other special instances. § 823. Definition. — I,t is confessedly difficult to define ac- cident so as to include all the elements essential to the equitable conception, and to exclude all others; and many writers have not attempted to give a definition. The fol- lowing expresses, I think, the true meaning given by equity to the term as an occasion for the exercise of jurisdiction : Accident is an unforeseen and unexpected event, occurring external to the party affected by it, and of which his own agency is not the proximate cause, whereby, contrary to his own intention and wish, he loses some legal right or be- comes subjected to some legal liability, and another per- son acquires a corresponding legal right, which it would be a violation of good conscience for the latter person, under the circumstances, to retain.i^ If the party's own § 823, 1 Jeremy, in his Equity Jurisdiction, defines accident as "an occurrence in relation to a contract which was not anticipated by the par- §823, (a) Quoted in Kopper v. 1168; in Jackson v. Chestnut, 151 Dyer, 59 Vt. 477, 59 Am. Eep. 742, Mo. App. 275, 131 S. W. 747; and 9 Atl. 4; in State ex rel. Hartley v. cited in Whitely v. St. Louis, E. R. Innes, 137 Mo. App. 420, US S. W. & W. B. Co., 29 Okl. 63, 116 Pac. 165. 1687 ACCIDENT. § 824 agency is the proximate cause of the event, it is a mistake rather than an accident. This definition purposely excludes all fortuitous occurrences which do not occasion any exer- cise of jurisdiction, since they are not "accidents" within the equitable conception. § 824. Rationale of the Jurisdiction. » — ^Accident is one of the oldest heads of equity jurisdiction. There is reason to believe that, at an early day, this jurisdiction was much more undefined and comprehensive than it is at present; but for a long time it has been, and is now, settled within certain and somewhat narrow limits. Its existence and exercise involve two essential requisites. The first and principal requisite is, that, by the event not expected nor foreseen, one party, A, has without fault and undesignedly undergone some legal loss or liability, and the other party, B, has acquired a corresponding legal right, which it is con- trary to good conscience for him to retain and enforce ties when the same was entered into, and which gives an undue advantage to one of them over the other in a court of law" : Bk. 3, pt. 2. Judge Story justly objects to this definition as defective and too narrow. He gives the following: "By the term 'accident' is intended, not merely in- evitable casualty, or the act of Providence, or what is technically called vis major, or irresistible force; but such imforeseen events, misfortunes, losses, acts, or omissions, as are not the result of any negligence or mis- conduct of the party" : Story's Eq. Jur., sec. 78. This definition is more inaccurate than that of Mr. Jeremy. It not only includes cases which are not accidents at all, but mistakes, hut it omits the very central ele- ment of the equitable conception. So far as it is a definition, it is one of the word in its popular and not its technical sense. Another author, with a nearer approach to its true signification in equity, calls it "an unfore- seen and injurious occurrence not attributable to mistake, neglect, or misconduct" : Smith's Manual of Eq. Jur. 36. Few judges have at- tempted any definition. In Earl of Bath v. Sherwin, 10 Mod. 1, 3, Lord Chancellor Cowper said: "By accident is meant, when a case is distin- guished from others of a like nature by usual circumstances." This statement as a definition is so imperfect and inaccurate as to be entirely worthless. §^24, (a) This section is cited in Louis, »E. R. & W. E. Co., 29 OH. Kopper V. Dyer, 59 Vt. 477, 59 Am. 63, 116 Pac. 165. Eep. 742, 9 Atl. 4; Whitely v. St. § 824 EQUITY JTJKISPBUDENCE. 1688 against A. In other words, because of the unexpected char- acter of the occurrence by which A's legal relations towards B have been unintentionally changed, A is in good con- science entitled to relief which shall restore those relations to their original character, and replace him in his former position. In the second place, this relief, to which A is con- scientiously entitled, must be such as cannot be adequately conferred by courts of law. Upon these two essential requisites the jurisdiction was based: the party's conscien- tious right to relief ; and the impossibility of obtaining ade- quate remedy at law. If the party, although clearly entitled to relief, can obtain adequate and certain remedy at law, then, in accordance with the fundamental principles of equi- table jurisdiction, the concurrent jurisdiction does not exist, and the exclusive jurisdiction is not exercised. ^ This doc- trine, it should be remembered, refers to the origin of the equity jurisdiction, and not to its subsequent and present condition. Its 'operation is controlled and modified by the other most important principle, fully discussed heretofore, that when the equitable jurisdiction, either concurrent or exclusive, has once been established with respect to any subject-matter, it is not destroyed or abridged by a juris- diction subsequently acquired by the courts of law to give the same or other adequate relief under the same circum- stances. The jurisdiction of equity originally existing and exercised on the occasion of accident has not, therefore, been theoretically affected by the powers given to or as- sumed by the courts of law to confer complete remedy in many cases which formerly belonged to the cognizance of equity alone.^ §824, ISee vol. 1, §§216-222. As Sir William Blackstone shows, courts of law could always give adequate relief in certain instances of accident, viz., in cases of "loss of deeds, mistakes ia receipts and pay- ments, wrong payments, deaths which make it impossible to perform a condition literally, and a multitude of other contingencies" : 3 Black. Com. 431; the equitable jurisdiction has never extended to such cases. § 824, 2 See vol. 1, §§ 276-281, where this doctrine is fully considered: People V. Houghtaling, 7 Cal. 348, 351. 1689 ACCIDENT. §§ 825, 826 § 825. Limitations. — While the jurisdiction occasioned by accident is clearly limited, and the instances in which it is and is not exercised are well defined, it is difficult to formu- late any general criterion which shall consistently express the extent of the -limitation, and account for all these in- stances. It must be conceded, I think, that the conclusions of the equity courts on this subject are somewhat arbitrary. In the very earliest period of equity jurisprudence, before doctrines had been fully developed and defined, the juris- diction was undoubtedly understood as embracing every kind of case in which an unexpected result had been pro- duced by accident, — every kind of misfortune ; and the rule is even laid down in this manner by Lord Coke.^ It is now the firmly settled doctrine, with respect to many legal obli- gations, that there is no equitable jurisdiction to relieve parties from their non-performance caused by accident in its ordinary and popular meaning. The following are the important instances in which the jurisdiction does not exist or will not be exercised. § 826. Contracts. — ^As a general rule, where the obliga- tion arises from an express contract created by the stipula- tions of the parties, and a non-performance is wholly the result of accident, or a party without fault has been acci- dentally prevented from completing the execution of the agreement, and deriving full benefits therefrom, in either § 825, 1 4 Inst. 84 : "Accident, as when a servant of an obligor, mort- gagor, etc., is sent to pay the money on the day, and he is robbed, remedy is to be had in this court against the forfeiture." This statement by Lord Coke is probably due, in great measure, to his ignorance of equity. A case in the Introduction to the Calendars of Proceedings in Chancery (vol. 1, p. cxlii.) illustrates the early view of the jurisdiction. A B had entered into a bond, with a heavy penalty, to repair certain river banks near the town of Stratford-at-Bow within a specified time. He had been prevented from completing the contract within the required time by sud- den and unexpected floods; and the obligee in the bond had sued him at law to recover the penalty. He thereupon filed a bill in chancery to re- strain the action at law, and to be relieved from the consequences of the accident. § 827 EQUITY JTJBISPBUDENOE. 1690 ease equity does not exercise its jurisdiction to give him any relief, whether by way of defense against the enforcement of the obligation, or by way of affirmative remedy. The ex- ception is confined to agreements providing for a penalty or a forfeiture, in which the jurisdiction to relieve is settled within defined and narrow limits. ^ § 827. Supplying Lost Records. — ^It has been held that there is no jurisdiction in equity to supply or establish the records of a court of law which have been lost or acci- § 826, 1 This doctrine may be illustrated by a simple supposed ease, if A bas contracted to build a bouse by a certain day named, and in the course of completing the agreement has collected a quantity of materials' all prepared and necessary for the building, and all these materials are, without A's fault, by a mere accident, — a stroke of lightning and conse- quent fire, — destroyed, so that it becomes physically impossible to replace them and to finish the house within the specified time, there is no juris- diction in equity to relieve A in any manner from the liability caused by the non-performance of his contract. Courts of equity, as well as courts of law, say that parties must guard against the possible effect of such misfortunes by express stipulations inserted in their agreements. Among the illustrations of this doctrine, the most frequent are covenants by lessees to pay rent, to keep the buildings in repair, and the like; if the premises are consumed by accidental fire, or destroyed by other inevitable accident, the lessee is not relieved from the obligation of his covenant at law or in equity: Bullock v. Dommitt, 6 Term Rep. 650; Brecknock Can. Co. V. Pritchard, 6 Term Rep. 750; Belfour v. Weston, 1 Term Rep. 310; Pym V. Blackboum, 3 Ves. 34, 38; Fowler v. Bott, 6 Mass. 63; Hallett v. Wylie, 3 Johns. 44, 3 Am. Dec. 457; Wood v. Hubbell, 10 N. T. 479, 5 Barb. 601. This does not at all interfere with the jurisdiction which may exist to relieve the lessee from a forfeiture of his estate by the nonper- formance of his covenant. See ante, vol. 1, § § 453, 454. The same doc- trine applies to other kinds of contracts, although both parties may be wholly and equally free from blame. Illustrations: Agreements for the sale and purchase of land, where buildings thereon had been accidentally burned : Brewer v. Herbert, 30 Md. 301, 96 Am. Dec. 582 ; McKeeknie v. Sterling, 48 Barb. 330, 335; but see Smith v. McCluskey, 45 Barb. 610, 613 ; agreements the performance of which is prevented by the death of a person upon whose act the performance depended: Blundell v. Brettargh, 17 Ves. 232, 240; White v. Nutts, 1 P. Wms. 61; Mortimer v. Capper, 1 Brown Ch. 156. 1691 ACCIDENT. §§ 828, 829 dentally destroyed, i ^^ It seems, however, that a court of equity may, by a suit between the persons interested, con- firm the title of a party, vest it in him by decree, and grant him all needed relief, when the records of a court ordering a judicial sale upon which that title depends have been lost.^ § 828. Other Instances in Which the Jurisdiction is not Exercised. — The jurisdiction will not be exercised on behalf of a party when the accident is the result of his own culpa- ble negligence or fault, i Nor will the jurisdiction ever be exercised on behalf of a person who has not a vested right, but whose only claim is a mere expectancy or hope resting upon the volition or discretion of another. As, for ex- ample, if a testator was prevented by pure accident from making an intended bequest in favor of A, equity has no jurisdiction to relieve A from the disappointment.^ § 829. Parties Against Whom the Jurisdiction is not Ex- ercised. — There are also limitations with respect to the situ- § 827, 1 Keen v. Jordan, 13 Fla. 327, 333-335; Cliiigman v. Hopkie, 78 111.152 (records of a justice's court). § 827, 2 Garrett v. Lynch, 45 Ala. 204. §828, 1 Ex parte Greenway, 6 Ves. 812; Penny v. Martin, 4 Johns. Ch. 566, 569; Marine Ins. Co. v. Hodgson, 7 Cranch, 336; Barnet v. Turnp. Co., 15 Vt. 757. Tor cases where the courts refuse to relieve from forfeiture caused by the negligence or fault of the party himself, see vol. 1, § 452. See, however, Chase v. Barrett, 4 Paige, 148, with re- spect to an agreement the fulfillment of which, according to the intention of the parties, is prevented by the act of God. § 828, 2 Whitton v. Russell, 1 Atk. 448. Tor the same reason a court of equity cannot relieve by supplying the total non-execution of an ordi- nary power, no matter how accidental : ^ Toilet v. Toilet, 2 P. Wms. 489 ; Pierson v. Garnet, 2 Brown Ch. 38, 226; Harding v. Glyn, 1 Atk. 469; Brown v. Higgs, 8 Ves. 561. If the power is accompanied with a trust, so that its execution is a matter of obligation, equity may relieve against its non-execution, as in the case of- any other obligatory trust.'* § 827, (a) This section is cited to 85; Sharon v. Tueker, 144 U. S. 542, this effect in Welch v. Smith, 65 12 Sup. Ct. 720. Miss. 394, 4 South. 340. This sec- §828, (a) See, also, §590. tion is also cited in Bohart v. § 828, (b) See § 1002. Chamberlain, 99 Mo. 622, 13 S. W. §§ 830, 831 EQUITY JUEISPRUDENCB. 1692 ation of the parties against whom the jurisdiction is in- voked. It will not be exercised in behalf of any person against a bona fide purchaser for a valuable consideration and without notice. ^ And generally, the jurisdiction will not be exercised against a party who has an equal equity, and is equally entitled to protection with the one who seeks to be relieved from the effects of an accident.^ § 830. Particular Instances of the Jurisdiction. — I pass now to the affirmative side of the subject, and briefly de- scribe those cases in which a jurisdiction occasioned by acci- dent exists and is exercised. It will be found by examin- ing and comparing these instances, that in all of them the party in whose behalf the jurisdiction is exercised has an unmistakable right to relief, an equity intrinsically sut perior to that of his adversary, and unaffected by his own negligence or other fault, and that the relief to which he was entitled could not be adequately conferred by courts of law, at the time when the equitable jurisdiction was first established. The following are the important examples of this jurisdiction. § 831. 1. Suits on Lost Instruments. — ^It has long been settled that courts of equity have jurisdiction of suits brought to recover the amount due on lost bonds and other sealed instruments. The original grounds of this jurisdic- tion were two. In the first place, by the common-law plead- ing and procedure, profert of the sealed instrument was necessary in an action at law thereon; and as no profert was possible when the writing was lost, the action could not be maintained. Profert was never necessary in a suit in equity. In the second place, the court of equity could require an indemnity from the plaintiff, and could by its decree adjust the rights of the two litigants, by securing and indemnifying the defendant against all further liabil- § 829, 1 See ante, § 776, and cases cited. § 829, 2 Weal v. Lower, 1 Eq. Cas. Abr. 266; Powell v. Powell, Prec. Ch. 278; Jenkins v. Kemis, 1 Ch. 103; 1 Fonblanque's Equity, bk. 1, c. 4, sec. 25, and notes. 1693 ACCIDENT. § 832 ity and harm, — a power which was not possessed by the courts of law. In order to protect the defendant in this manner, the rule became settled that in all suits praying for relief, and not merely for a discovery, — that is, in all suits where a recovery of the amount due was sought, — the plaintiff must make an affidavit of the loss accompany- ing his bill of complaint, and must offer indemnity. . The fact that the common-law requisite of a profert has long been abolished, and that actions at law may now be main- tained on sealed instruments, has not theoretically affected the equitable jurisdiction.^ ^ § 832. On Lost Unsealed Instruments.^^-Where a nego- tiable bill, note, or check, whether payable to bearer, in- dorsed in blank, or not indorsed, is lost before maturity, it is held in England that no action at law can be maintained §831, IWalmsley v. Child, 1 Ves. Sr. 341, 344; Kemp v. Pryor, 7 Ves. 237, 249, 250; East India Co. v. Boddam, 9 Ves. 464, 466-469; Ex parte Greenway, 6 Ves. 812, SIS; Toulmin v. Price, 5 Ves. 235, 238; Atkinson v. Leonard, 3 Brown Ch. 218, 224; England v. Tredegar, L. R. 1 Eq. 344; Patton v. Campbell, 70 111. 72; Howe v. Taylor, 6 Or. 284, 291; Allen v. Smith, 29 Ark. 74; Hickman v. Painter, 11 W. Va. 386; Force v. City of Elizabeth, 27 N. J. Eq. 408; Donaldson v. Williams, 50 Mo. 407; Livingston v. Livingston, 4 Johns. Ch. 294, 8 Am. Dec. 562; Thornton v. Stewart, 7 Leigh, 128; and see Hudspeth v. Thomason, 46 Ala. 470; Lawrence v. Lawrence, 42 N. H. 109. § 831, (a) This section is cited in land v. Supreme Council Eoyal Ar- Boliart V. Chamberlain, 99 Mo. 622, carnim, 70 N. J. Eq. 607, 61 Atl. 982 13 S. W. 85; Security Sav. & Loan (instrument which has eom,e into Asa'n V. Buchanan, 66 Fed. 799, 14 the possession of defendant); Kab- C. C. A. 97, 31 XJ. S. App. 244; ler v. Spencer's Adm'r, 114 Va. 589, cited, also, in German National 77 S. E. 504; Lyttle v. Cozad, 21 Bank v. Moore, 116 Ark. 490, 173 "W. Va. 183; Clark v. Niekell, 73 S. W. 401. See, also, Prescott v. W. Va. 69, Ann. Cas. 1917A, 1286, Williamsport & N. B. B. Co., 159 79 S. E. 1020 (lost surety bond). Fed. 244 . (bill to recover on lost § 832, (a) This section is cited in bonds); Griffin v. Fries, 23 Fla! 173, Security Sav. & Loan Ass'n v. Bu- ll Am. St. Rep. 351, 2 South. 266; ehanan, 66 Fed. 799, 14 C. C. A. 97, Mullens v. McCoy, 170 Ky. 547, 186 31 XJ. S. App. 244; Moore v. Durnam, S. W. 137; Beeves v. Morgan, 48 63 N. J. Eq. 96, 51 Atl. 449. N. J. Eq. 415, 21 Atl. 1040; Hoag- § 832 EQUITY JUBISPBUDEBrCB. 1694 upon it by the real owner, and that his remedy is in equity.^ According to these decisions, the only jurisdiction in such case was that in equity prior to the modem legislation which permitted actions in courts of law. Without inquir- ing whether this view of the jurisdiction at law be correct, the jurisdiction in equity of suits brought by the real owner to recover the amount due on lost negotiable instruments has been long and firmly settled upon the ground of the in- demnity which can be given by a court of equity to the de- fendant, and which is a necessary feature of such suits. An offer of indemnity by the plaintiff is therefore required, as the general rule; but even without it a recovery may be had, since the defendant can always be protected by the pro- visions of the decree making a recovery conditional upon his being fully indemnified.^ ^ Able judges have denied that the equitable jurisdiction extends to suits upon non-nego- tiable instruments and other unsealed contracts, since an action at law could always be maintained, and no indemnity was necessary.3 The jurisdiction is sustained, however, by the decided weight of authority in suits upon lost non-nego- tiable instruments and simple contracts,<= as well as in suits upon negotiable and sealed instruments. The reason seems § 832, 1 Hansard v. Kobinson, 7 Bam. & C. 90 ; Crowe v. Clay, 9 Ex. 604; Eamuz v. Crowe, 1 Ex. 167. § 832, 2 Walmsley v. Child, 1 Ves. Sr. 341, 344, 345; Glynn v. Bank of England, 2 Ves. Sr. 281; Bromley v. Holland, 7 Ves. 3, 19-21; Mossop v. Eadon, 16 Ves. 430, 433, 434; Savannah Nat. Bank v. Haskins, 101 Mass. 370, 3 Am. Rep. 373. § 832, 3 See Mossop v. Eadon, 16 Ves. 430, 433, 434. § 832, (b) City of Bloomington v. though statute has given courts of Smith, 123 Ind. 41, 18 Am. St. Rep. law jurisdiction). 310, 23 N. E. 972; Smith v. Nelson, §832, (c) The doctrine cannot be 83 S. C. 294, 137 Am. St. Eep. 808, extended to authorize a suit to set 24 L. E. A. (N. S.) 644, 65 S. E. 261 ""P ^"^^ establish a mere lost piece ,, ^ , ^ -J. V ■ J \ rni. °^ written evidence upon which, (lost check, suit by indorser). The -^1, ti. * ^i. . . with other proof, the complainant text is cited in German National ^^^j^^ ^^ ^^^^^^ ^^^ defendant with Bank v. Moore, 116 Ark. 490, 173 ^ tort: Security Sav. & Loan Ass'n S. W. 401 (lost certificate of de- v. Buchanan, 66 Fed. 799, 14 C. C. posit; court of equity proper forum, A. 97, 31 U. S. App. 244. 1695 • ACCIDENT. §832 to be that the remedy at law is not adequate; a court of equity alone can fully protect the defendant by its decree from all liabilities which may arise.'* ^ It has been held that the equitable jurisdiction does not extend to destroyed bills, notes, and other contracts, because the remedy at law was always adequate.^ All these instances of suits upon lost contracts plainly belong to the concurrent jurisdiction of equity, because the plaintiff's primary right of contract which is the foundation of his cause of action is purely legal, and his remedy is legal, being the ordinary judgment for the recovery of money.^ Although this particular juris- § 832, 4 Macartney v. Graham, 2 Sim. 285 ; Hardeman v. Battersby, 53 Ga. 36, 38 (suit on a lost warehouseman's receipt) ; Hickman v. Painter, 11 W. Va. 386; Allen v. Smith, 29 Ark. 74; Force v. City of Elizabeth, 27 N. J. Eq. 408. § 832, 5- Wright v. Lord Maidstone, 1 Kay & J. 701, 708, per Page Wood, V. C. It may be doubted whether the American courts have gen- erally followed this distinction: See the American cases cited ante, under this paragraph.® § 832, 6 Equity does not acquire jurisdiction merely because a deed of land has been lost, since in a legal action the deed and its contents could always be proved. To give rise to the equitable jurisdiction on the occa- sion of a lost deed, it must appear that there is no remedy at all, or else no adequate remedy at law : Whitfield v. Fausset, 1 Ves. Sr. 387, 392. If the owner of land is in possession, and has lost his title deed, there is no remedy at all at law, for ejectment clearly will not lie. Equity, then, has jurisdiction by a suit in the nature- of an action to quiet title, and can establish the owner's title and possession:* Dalston v. Goatsworth, 1 § 832, (d) This section cited to is unable to surrender it in accord- tliis effect in Moore v. Durnam, 63 ance with the condition therein con- N. J. Eq. 96, 51 Atl. 449. The text tained: Wilcox v. Equitable Life is quoted in Hart-Parr Co. v. Keeth, Assur. Soe., 173 N. Y. 50, 93 Am. 62 Wash. 464, Ann. Cas. 1912D, 243, St. Kep. 579, 65 N. E. 857. 114 Pae. 169. See, also, Reeves v. §832, (e) See, also, Motley v. Morgan, 48 N. J. Eq. 415, 21 Atl. Darling, 86 N. J. Eq. 185, 98 Atl. 1040; Moore v. Durnam, 69 N. J. Eq. 384, where the jurisdiction was exer- 828, 115 Am. St. Eep. 635, 65 Atl. cised. 463 (non-negotiable check). It has §832, (*) Simmons Creek Coal Co. been held that equity will compel v. Doran, 142 U. S. 417, 12 Sup. Ct. the issuance of a paid-up life insur- 239; Lancy v. Eandlett, 80 Me. 169, ance policy,^ although the original 6 Am. St. Kep. 169, 13 Atl. 686 (but policy has been stolen, and insured the bill must show that the loss was § 833 EQUITY JT7EISPEUDENCE. • 1696 diction is theoretically unchanged, yet the cases under it are very few. Actions on lost negotiable instruments and other contracts are ordinarily brought at law, in pursuance of modern permissive statutes. This is especially true in the states which have adopted the reformed procedure; since the action, even if not prof essing to be based upon the stat- ute, would be subject to the rules which govern all legal actions for the recovery of money ; it would not in any way be distinguished from actions confessedly legal. § 833, 2. Accidental Forfeitures. — It was shown in a former chapter that the jurisdiction to relieve from pecu- niary penalties is well settled and general ; ^ and that it also extends to some, though not to all, cases of forfeiture as dis- tinguished from penalties. It is, however, well settled, as a branch of the jurisdiction occasioned by accident, that, although the agreement is not wholly pecuniary, and is not one measured by pecuniary compensation, still if the party bound by it has been prevented from an exact fulfillment, so that a forfeiture is thereby incurred, by unavoidable acei- P. Wms. 731. The same kind of suit seems to be proper, and for the same reasons, when the records of the owner's title are lost: See Garrett V. Lynch, 45 Ala. 204. When the owner is out of possession, the action of ejectment will ordinarily furnish an adequate remedy. There may, however, be special circumstances, and other equities besides that arising from the loss of a title deed, which furnish a sufficient ground for the cognizance of a court of equity in establishing the title and decreeing pos- session. Something more than a loss of deeds would be necessary: Dor- mer V. Fortescue, 3 Atk. 124, 132; Whitfield v. Fausset, 1 Ves. Sr. 387, 392. § 833, 1 See vol. 1, §§ 432-460. It has sometimes been said by writers that this entire jurisdiction over penalties and forfeitures is based upon accident. It may be true that, in the earliest period of equity, the chan- cellors referred cases of relief against penalties to the general head of accident; but to explain the whole jurisdiction as now administered, by treating it as based on accident, is to disregard the plain facts and mean- ing of words. without plaintiff's fault). See, also, 70 W. Va. 507, Ann. Cas. 1914A, 578, Shugars v. Shugars, 105 Md. 336, 68 74 S. E. 655 (lost deed restored at Atl. 273j Cartwright v. Cartwright, suit of remainderman). 1697 / ACCIDENT. §833 dent, without Ms own negligence or fault, a court of equity will interpose and relieve him from the forfeiture so caused, upon his making compensation, if necessary, or doing every- thing else within his power to satisfy the equitable rights of the other party.^ a This jurisdiction may be exercised in any manner, by any form of suit, and by granting any kind of relief made necessary by the circumstances of the partic- ular case. Thus the relief may be conferred by a suit to en- join the prosecution of an action at law brought to enforce the forfeiture, or to enjoin proceedings on the judgment re- covered in such an action, or to set aside the forfeiture it- self, or to redeem from it, or to obtain several of these reme- dies in combination. In all those states which have adopted the reformed procedure, the jurisdiction may be exercised and the relief obtained, as it seems to me upon every sound principle of construction, by means of an equitable defense § 833, 2 See vol. 1, § 451; Hill v. Barclay, 18 Ves. 56, 58, 62, per Lord Eldonj Eaton v. Lyon, 3 Ves. 690, 693, per Lord Alvanley; Hannam v. South London W. Co., 2 Mer. 61; Bamford v. Creasy, 3 GifE. 675; "Wing V. Harvey, 5 De Gex, M. & G. 265 ; Duke of Beaufort v. Neeld, 12 Clarke & r. 248; Bridges v. Longman, 24 Beav. 27; Meek v. Carter, 6 Week. Rep. 852; Wheeler v. Conn. Mutual L. Ins. Co., 82 N. Y. 543, 559, 37 Am. Rep. 594; Giles v. Austin, 62 N. Y. 486; Witbeck v. Van Rensselaer, 64 N. y. 27, 2 Hun, 55, 4 Thomp. & C. 282; Palmer v. Ford, 70 111. 369; Orr V. Zimmerman, 63 Mo. 72; Eveleth v. Little, 16 Me. 374, 377; Atkins v. Rison, 25 Ark. 138; Bostwick v. Stiles, 35 Conn. 195. In Whelan v. Reilly, 61 Mo. 565, a deed of trust, given in place of a mortgage to secure a debt, provided that if the interest was not punctually paid as it became due, the whole principal should be due and payable, and the trustee might sell. The debtor made default in paying a portion of the interest when it fell due, and the trustee thereupon took the proper steps to sell, and did sell in the regular manner. Before the sale, the debtor tendered the amount af interest due and costs, which the trustee refused to accept, but went on with the sale. Held, upon these facts, that the debtor could maintain a suit in equity to be relieved from the forfeiture, and to set aside the sale. This decision should be considered in connection with the dis- cussion in § 439 (vol. 1), and the cases there cited. It seems to be op- posed to the general tendency of those cases. §833, (a) This section is cited in Kopper v. Dyer, 59 Vt. 477, 59 Am. Sep. 742, 9 Atl. 4. 11—107 § 834 EQUITY JTJBISPEUDENCB. • 1698 interposed in a legal action brought to enforce the for- feiture.3 § 834. 3. Defective Execution of Powers. — This subject has already been treated of, and the grounds, extent, and limitations of the peculiar doctrine have been explained, i^ It is unnecessary to repeat the observations there made. It is well settled, as a general rule, that the non-execution^— the entire failure to execute — of a mere power not a trust will not be aided iu equity.^ a When, however, the party clothed with such a mere power, by a deed, settlement, or will, has attempted and begun to execute it, and the execu- tion is defective through accident or mistake, or where he has made an agreement to execute it which is regarded as a kind of defective execution, equity may interpose its aid by decreeing a complete and perfect execution.^ As has already been explained, this extraordinary jurisdiction is only exercised on behalf of classes of persons who are con- sidered as possessing a certain meritorious or moral con- § 833, 3 See Giles v. Austin, 62 N. Y. 486 ; and other American cases cited in the last note ; also see MieseU v. Globe Ins. Co., 76 N. Y. 115, 120, and Shaw v. Republic Ins. Co., 69 N. Y. 286, which hold that when a life policy becomes accidentally forfeited, the holder need not at once bring an equity suit for the purpose of re-establishing it; but may tender the premiums as they fall due, and then sue on it at law when the person whose life is assured dies. § 834, 1 See ante, §§ 589, 590. § 834, 2 Toilet v. Tojlet, 2 P. Wms. 489; 1 Lead. Cas. Eq. 4th Am. ed., 365, and notes; Arundell v. Phillpot, 2 Vem. 69; Bull v. Vardy, 1 Ves. 270; Johnson v. Cushing, 15 N. H. 298, 41 Am. Dec. 694; Lippencott v. Stokes, 6 N. J. Eq. 122; Howard v. Carpenter, 11 Md. 259; Lines v. Dar- den, 5 Fla. 51; Mitchell v. Denson, 29 Ala. 327, 65 Am. Dec. 403; Wilkin- son V. Getty, 13 Iowa, 157, 81 Am. Dec. 428. § 834, 3 Toilet v. Toilet, 2 P. Wms. 489; 1 Lead. Cas. Eq., 4th Am. ed., 365, and notes; Chapman v. Gibson, 3 Brown Ch. 229; Shannon v. Brad- street, 1 Schoales & L. 52, 63; Sayer v. Sayer, 7 Hare, 377; and see ante, §§589,590. § 834, (a) The text is cited in aid of equity does not apply to a In re Beeves (Del.), 92 Atl. 246, property right held by a person of holding that the rule denying the unsound mind. 1699 AOcmsNT. §834 sideration, and against a party who has no equally mer- itorious equity. Its operation is confined to purchasers, including mortgagees, lessees, and creditors, wives, legiti- mate children, and those to whom the party executing stands in loco parentis, and charities ; it does not include husbands, illegitimate children, distant relatives, nor volunteers.*^ As to the defects in the execution of a power which equity will thus aid and complete in proper cases, they must be in matters of form, and not of the very substance and essence of the power, — such as the want of a sea;l, or of witnesses, or of signatures, or omissions and imperfections in the limitations of the property. ^ The doctrine is confined to § 834, 4 See ante, § 589 ; Toilet v. Toilet, 1 Lead. Cas. Eq. 365, and notes; Fothergill v. Potbergill, Freem. Ch. 256; Barker v. Hill, 2 Ch. Rep. 113; Reid v. Shergold, 10 Ves. 370; Pollard v. Greenvil, 1 Cas. Ch. 10; Wilkes V. Holmes, 9 Mod. 485; Clifford v. Burlington, 2 Vem. 379; Sneed V. Sneed, Amb. 64 ; Bruce v. Bruce, L. R. 11 Eq. 371 ; Hervey v. Hervey, 1 Atk. 561; Innes v. Sayer, 7 Hare, 377; 3 Macn. & G- 606; Attorney- General V. Sibthorp, 2 Russ. & M. 107; Ellison v. Ellison, 6 Ves. 656; Watt V. Watt, 3 Ves. 244; Tudor v. Anson, 2 Ves. Sr. 582; Watts v. BuUas, 1 P. Wms. 60; Affleck v. Affleck, 3 Smale & G. 394; In re Dyke's Estate, L. R. 7 Eq. 337; Dowell v. Dew, 1 Younge & C. 345; Hughes v. Wells, 9 Hare, 749; Shannon v. Bradstreet, 1 Schoales & L. 52; Taylor V. Wheeler, 2 Vem. 564; Campbell v. Leach, Amb. 740; Bixbey v. Eley, 2 Brown Ch. 325; Medwin v. Sandham, 3 Swanst. 685; Proby v. Landor, 28 Beav. 504; Beatty v. Clark, 20 Cal. 11; Love v. Sierra etc. Co., 32 Cal. 639, 653; Thorp v. McCullum, 1 Gilm. 614; Hout v. Hout, 20 Ohio St. 119; Schenck v. EUingwood, 3 Edw. Ch. 175; Pepper's Will, 1 Pars. Cas. 436, 446; Porter v. Turner, 3 Serg. & R. 108, 114; Dennison v. Goehring, 7 Pa. St. 175, 47 Am. Dec. 505; Huss v. Morris, 63 Pa. St. 367, § 834, 5 Toilet v. Toilet, 1 Lead. Cas. Eq. 365, and notes. Where a power was required to be executed by means of a deed or other instrument inter vivos, an execution of it by a wUl is a defect which equity will aid : Toilet V. Toilet, 1 Lead. Cas. Eq. 365, and notes ; but, conversely, when it was required to be executed only by a will, a'n execution by an absolute deed will not be aided:" Reid v. Shergold, 10 Ves. 370; Adney v. Eield, Amb. 654. The defects which equity may aid consist either of the use § 834, (b) This section is cited in See, also, Freeman v. Eacho, 79 Va. American Freehold L. M. Co. v. 43, Walker, 31 Fed. 103; Ellison v. Bran- §834,' (c) In re Lawley, [1902] 2 Btator, 153 Ind. 146, 54 N. E. 433. Cli. 673, 7i99. § 835 EQUITY JTJEISPEtrDBNCB. 1700 powers created by the voluntary act of persons in wills, deeds, and settlements ; it does not extend to those created and regulated by statute. The defective execution of stat- utory powers, in the failure to comply with the prescribed requisites, cannot be aided by equity.^ ® § 835. Powers in Trust will be Enforced. — The general rule that equity refuses to aid the non-execution of powers, and only corrects their defective execution, relates only to bare, naked, or mere powers ; it does not apply to powers coupled with a trust.* Mere powers create no obligation resting on the donee, nor any right in a person who may be benefited by their execution. Powers in trust, or coupled of an inappropriate instrument, although it is duly executed, as in Toilet V. Toilet, 1 Lead. Cas. Eq. 365, and notes j In re Dyke's Estate, L. E. 7 Eq. 337; Garth v. Townsend, L. K. 7 Eq. 220; or in the improper and in- sufficient mode of executing an appropriate kind of instrument, — as for example, omitting a seal: Morse v. Martin, 34 Beav. 500. See Piatt v. McCuUough, 1 McLean, 69, where relief was refused on the ground that the defect was inherent, and not merely formal. In order to admit the exercise of the jurisdiction and to grant relief, there must be something more than a mere verbal promise to execute the power; there must always be some writing attempting or showing an intention to execute:* Carter Y. Carter, Mos. 365; Shannon v. Bradstreet, 1 Schoales & L. 52; Innes v. Sayer, 7 Hare, 377; Dowell v. Dew, 1 Younge & C. 345; Vernon v. Ver- non, Amb. 3; Campbell v. Leach, Amb. 740; Wilson v. Piggott, 2 Ves. 351; Mitchell v. Denson, 29 Ala. 327, 65 Am. Dec. 403; Barr v. Hatch, 3 Ohio, 527. See, also, on the general doctrine, Bradish v. Gibbs, 3 Johns. Ch. 523, 550; Long v. Hewitt, 44 Iowa, 363; Porter v. Turner, 3 Serg. & K. 108, 111, 114; Bakewell v. Ogden, 2 Bush, 265; Stewart v. Stokes, 33 Ala. 494, 73 Am. Dec. 429 ; Kearney v. Vaughan, 50 Mo. 284. § 834, 6 Smith v. Bowes, 38 Md. 463 ; Earl of Darlington v. Pulteney, Cowp. 260; and see Stewart v. Stokes, 33 Ala. 494, 73 Am. Dec. 429; Gridley's Heirs v. Phillips, 5 Kan. 349; Kearney v. Vaughan, 50 Mo. 284. § 834, (d) American Freehold Land § 835, (a) This sentence of the Mortgage Co. v. Walker, 31 Fed. text is quoted in Vonderhide v. Easy 103; Freeman v. Eacho, 79 Va. 43. Payment Property Co., 123 Ky. 352, § 834, (e) The text is quoted in 96 S. W. 449 (where power in trust Williams v. Cudd, 26 S. C. 213, 4 is given jointly, it survives the Am. St. Rep. 714, 2 S. E. 14. The death of one donee). This para- text is cited in Watkins v. Watkius, graph is cited in Stoughtou v. Lis- 82 N. J. Eq. 483, 89 Atl. 253. comb (E. I.), 98 Atl. 183. 1701 ACCIDENT. § 836 with, a trust, like any other trust, are imperative ; they cre- ate a duty in the trustee, and a right ia the beneficiary. Equity will not suffer this right of the beneficiary to be defeated, either by accident or by designs of the trustee, and will therefore carry into effect the intention of the donor, and give all needed relief to the beneficiary, when- ever there has been a total or a partial failure to execute the power according to the terms of the trust.^ ^ § 836. 4. Judgments at Law. — ^Accident is also one of the grounds for the exercise of the most important jurisdic- tion with respect to actions and judgments at law. Where the defendant in an action at law has a good defense on the merits, which he is prevented by accident from setting up or making available without any negligence or inattention on his part, and a judgment is recovered against him, equity will exercise its jurisdiction on his behalf by enjoining fur- ther proceedings to enforce the judgment, or by setting it aside so that a new trial can be had on the merits. ^ * In many states, especially in those which have adopted the reformed procedure, this particular relief is usually ob- tained by means of a motion for a new trial, and the neces- sary occasions for a resort to equity have been lessened; § 835, 1 Wamef ord v. Thompson, 3 Ves. 513 ; Brown v. Higgs, 8 Ves. 561, 574; Gibbs v. Marsh, 2 Met. 243, 251; Withers v. Teadon, 1 Rich. Eq. 324, 329; Norcum v. D'CEnch, 17 Mo. 98; Thorp v. McCullum, 1 Gilm. 614, 625, 630. § 836, 1 Cairo etc. R. R. v. Titus, 27 N. J. Eq. 102; Darling v. Balti- more, 51 Md. 1; Alford v. Moore, 15 W. Va. 597; Barber v. Rukeyser, 39 Wis. 590; Thomason v. Fannin, 54 Ga. 361; Grubb v. Kolb, 55 Ga. 630 Robinson v. Wheeler, 51 N. H. 384; Craft v. Thompson, 51 N. H. 536 Holland v. Trotter, 22 Gratt. 136; N. Y. etc. R. R. v. Haws, 56 N. Y. 175 Richmond Enquirer v. Robinson, 24 Gratt. 548; Shields v. McClung, 6 W. Va. 79. See Earl of Oxford's Case, 1 Ch. Rep. 1; 2 Lead. Cas. Eq., 4th Am. ed., 1291, and notes. § 835, (b) See, also, § 1002. also, Buchanan v. Griggs, 18 Neb. § 836, (a) This section is cited in 121, 24 N. W. 452 (defense aban- Hayes v. U. S. Phonograph Co. (N. doned by mistake). See, also, vost, J. Eq.), 55 Atl. 84; Lothrop v. Duf- § 1364. field (Mich.), 96 N. W. 577. See, § §37 EQTJITY JUEISPBUDENOB. 1702 the equitable jurisdiction, however, has not been abrogated even in those states, and it is constantly invoked in the other commonwealths. § 837. 5. Other Special Instances.^ — There are other specific instances of the jurisdiction which must be referred to accident as their occasion. It will be sufficient to men- tion them in the briefest manner, and it will be seen that they all fall under the general principle stated in the intro- ductory paragraphs of this section. An executor or admin- istrator will be relieved in equity from many liabilities aris- ing from unforeseen and unexpected circumstances in the nature of accidents, where he has acted in good faith and with reasonable care, although no remedy was given by the common law. Thus where an executor or administrator has paid debts or legacies in full, supposing the assets were sufficient, and it turns out that there is a deficiency of assets, equity will grant the remedies necessary to relieve him from the legal liability.^ ^ In another class of cases, where the consideration contracted to be rendered in return for § 837, 1 Edwards v. Freeman, 2 P. "Wms. 435, 447; Hawkins v. Day, Amb. 160. See also, as further illustrations, Jones v. Lewis, 2 Ves. Sr. 240; Clough v. Bond, 3 Mylne & C. 490; Pooley v. Ray, 1 P. Wms. 355. As to the relief given by equity to an unpaid legatee against other legatees who have been paid in full, when there was an original deficiency of as- sets, see Orr v. Kaines, 2 Ves. Sr. 194; Moore v. Moore, 2 Ves. Sr. 596, 600; Noel v. Robinson, 1 Vern. 90, 94; Edwards v. Freeman, 2 P. Wms. 435, 447; Walcot v. Hall, 2 Brown Ch. 305. The specific instances men- tioned in the text and note have certainly become obsolete or been abro- gated in very many of the states. The whole subject of administration has, to a great extent, been regulated by statute and committed to the control' of probate courts. These statutes differ in their details, but most, if not all, of them define the rights and liabilities of administrators, execu- tors, legatees, and creditors, and prescribe modes of proceeding, under the circumstances above mentioned in the text, viz., where some legatees or creditors have been paid in full, or more than their just proportion, and there turns out to be a deficiency 61 assets. §837, (a) This section is cited in §837, (b) The text is cited in liOthrop V. Duffield (Mich.), 96 N. State ex rel. Hartley v. Innes, 137 W. 577. Mo. App. 420, 118 S. W. H68. 1703 ACCIDENT. §837 the payment of a large sum of money entirely fails from accident, and where the dispositions of the principal or in- come of public securities directed by will to be made among successive beneficiaries become impossible from accident, equity has interposed for the purpose of working substan- tial justiee.2 Again, if a party to a suit in equity is obliged to make a tender, and, through accident or mistake, he ten- ders less than the required amount, the relief to which he is entitled will still be conferred; the decree will be so shaped as to be conditional upon his paying the proper sum.3 Other instances which are partly referable to acci- dent are mentioned in the foot-note.^ § 837, 2 As an illustration of the first case : If a minor is bound as an apprentice, and pays or agrees to pay a large premium, and the master becomes bankrupt before the apprenticeship has expired, equity will re- lieve the disappointed apprentice by apportioning the premium: Hale v. Webb, 2 Brown Ch. 78. As illustrations of the second case: If an an- nuity is directed by a will to be secured by an investment in public stock, and an investment is made sufficient at the time for the income to produce the amount of the annuity, and afterwards the stock is reduced by statute so that its income becomes insufficient, equity will relieve the annuitant by directing the deficiency to be made up by the residuary legatees : Davis v. Wattier, 1 Sim. & St. 463; May v. Bennett, 1 Russ. 370; for another illus- tration, see Haehett v. Battle, 6 Madd. 4. § 837, 3 Clark v. Drake, 63 Me. 354. § 837, 4 The weU-settled jurisdiction for the adjustment of disputed boundaries between adjoining proprietors rests partly upon the occasion of accident; Wake v. Conyers, 1 Eden, 331; 2 Cos, 360; Miller v. War- mington, 1 Jacob & W. 484 ; Perry v. Pratt, 31 Conn. 433 ; De Veney v. Gallagher, 20 N. J. Eq. 33; Norris's Appeal, 64 Pa. St. 275; Tilhnes v. Marsh, 67 Pa. St. 507; Wetherbee v. Dunn, 36 Cal. 249. This subject is discussed in a subsequent chapter. Where a note or bill of exchange is transferred and intended to be indorsed, but through accident or mistake the indorsement is omitted, equity will compel the transferrer, or, in case of his death, his executor or administrator, to affix his indorsement, at the suit of the holder. This is in fact a simple case of reformation and re- execution. The holder is an equitable assignee, and is entitled to obtain a full legal right and title : Watkins v. Maule, 2 Jacob & W. 237, 242. EQUITY JUEISPBUDENCE, 1704 SECTION n. MISTAKE, ANALYSIS. § 838. Origin and purpose of this jurisdiction. § 839. I. Definition. §§ 840-856. II. Various kinds of mistakes which furnish an occasion for relief. §§841-851. First. Mistakes of law. § 842. The general rule and its limitations. § 843. Mistake as to the legal import or effect of a transaction. §§ 844-851. Particular instances in which relief will or will not be granted. § 845. Reformation of an instrument on account of a mistake of law. § 846. Mistake common to all the parties: mistake of a plain rule. § 847. Mistake of law accompanied with inequitable conduct of the other party. § 848. Same : between parties in relations of trust. § 849. Eelief where a party is mistaken as to Ms own existing legal rights, interests, or relations. § 850. Compromises and voluntary settlements made upon a mistake as to legal rights. § 851. Payments of money under a mistake of law. §§ 852-856. Second. Mistakes of fact. § 853. How mistakes of facts may occur. § 854. In what mistakes of fact may consist. § 855. Compromises and speculative conttacts. § 856. Requisites to relief; mistake must be material and free from culpable negligence. § § 857-867. III. How mistake may be shown : when by parol evidence. § 858. Parol evidence in general in cases of mistake, fraud, or surprise. § 859. In suits for a reformation or cancellation : character and effect of the evidence. § 860. Parol evidence in defense in suits for a specific performance. § 861. Parol evidence of mistake on the plaintiff's part in suits for a specific performance: English rule. §862. Same: American rule: evidence admissible. § 863. Evidence of a parol variation which has been part performed. §§ 864-867. Effect of the statute of frauds upon the use of parol evidence in equitable suits. § 865. Two classes of cases in which the use of parol evidence may be affected by the statute. § 866. General doctrine : parol evidence of mistake or fraud admissible in both these classes of cases. §867. Glass v. Hulbert: examination of proposed limitations upon this general doctrine. 1705 MISTAKE. § 838 §§ 868-871. rv. Instances of equitable jurisdiction occasioned by mistake. § 868. When exercised by way of defense. § 869. By way of afdrmative relief: recovery of money paid by mistake. § 870. AfErmative relief : reformation and cancellation. ' § 871. Conditions of fact which are occasions for affirmative relief. § 838. Origin and Purpose of This Jurisdiction. ^^ — From the time when jurisdiction was first formally delegated to the chancellor by the crown, mistake has played a most im- portant part as the occasion of equitable rights and duties, and for the exercise of the jurisdiction in awarding equi- table remedies. In the earlier periods, when the domains of the law courts and of the court of chancery were sharply discriminated, when the common-law judges were not in- fluenced by equitable notions, this branch of equitable juris- prudence and jurisdiction consisted entirely in the means by which certain parties were prevented from holding and enjoying legal rights, and certain other parties were re- lieved from the burden of legal duties and liabilities, which had originatejd under a mistake, and which were complete and unassailable at law. In the progress of time, as the common law became more and more conformed to equitable principles, the legal tribunals assumed a partial cognizance and gave a partial relief in cases involving mistake. All the possible modes m which the remedial jurisdiction occa- sioned by mistake can be exercised are the following: 1. Negatively, as a ground of defense either in actions at law or in suits in equity, to defeat an enforcement of and re- covery upon either legal or equitable rights of action; 2. Affirmatively, as a ground for rescinding a transaction, and restoring the mistaken party to his original position by means of an appropriate legal action and a recovery therein of money or property ; 3. Affirmatively, as a ground for the equitable relief of rescinding a transaction, or canceling an agreement or other written instrument; 4. Affirmatively, as a ground for the equitable relief of reforming or re-execut- ing a written instrument. The final object of the present § 838, (a) This paragraph is cited in Dickey v. Forrester (Tex. Civ. App.), 148 S. W. 1181. § 839 EQUITY JTJBISPETJDENCE. 1706 discussion is to ascertain when these various remedies may be obtained in equity; and incidentally to ascertain when and to what extent some of them may be conferred by courts of law. The discussion itself will be conducted under the following divisions: 1. Definition; 2. A statement of the various kinds of mistakes both of law and of fact which do or do not furnish an occasion for relief, with an exami- nation of the equitable conception and the essential ele- ments of a mistake in order that it may be a ground for the exercise of jurisdiction ; 3. The mode of showing a mistake, and especially how far may parol evidence be resorted to for the purpose of showing mistakes in written instru- ments; 4. An enumeration of the instances and forms of equitable jurisdiction and reliefs occasioned by mistake. § 839. I. Definition. — ^It is very difficult to formulate a definition which shall contain the essential elements of the conception as distinguished from its effects, and which shall accurately discriminate between mistake and accident on the one side, and fraud and negligence on tEe other. The definitions given by some American and English text-writ- ers describe the effects of mistake, — the consequences re- sulting from it, — rather than its essential f eatures.^ It was § 839, 1 Thus Judge Story says : Mistake "is some unintentional act, or omission, or error, arising from ignorance, surprise, imposition, or mis- placed confidence" : Eq. Jur., see. 110. His language is copied by SneU: Principles of Equity, 370 ; and by Kerr : Fraud and Mistake, 396. This definition is erroneous, as it seems to me, in two most important particu- lars: 1. It substitutes the consequences of the thing in place of the thing itself, — the act or .omission done through mistake ; 2. The language is so broad that it not only embraces in its very terms acts and omissions which are the results of fraud, but it fails to exclude those which are occasioned through negligence. The modern commentators upon the Roman law, who have generally investigated the nature of legal relations much more ac- curately and profoundly than the conunon-law writers, do not fall into this error. They correctly describe mistake as essentially a mental or ia- tellectual condition interfering with the free operation of the will, and not as the acts or omissions produced by that condition. Mr. Haynes, in his lectures on equity, gives a definition which much more nearly embodies the true conception. He says (p. 80) : "Mistake may be said to exist, in a 1707 MISTAKE. §839 shown in the preceding section that accident is an unexpected occurrence external to the party affected by it ; and its op- eration is ordinarily to prevent that party from doing some act whereby he becomes subjected to a liability which would not otherwise have arisen. Mistake, on the other hand, is internal; it is a mental condition, a conception, a conviction of the understanding, — erroneous, indeed, but none the less a conviction, — which influences the will and leads to some outward physical manifestation. Its operation is ordi-i narily, though not always, affirmative, — the doing of some act which would not have been done in the absence of the particular conception or conviction which influenced the free action of the will.^ Its essential prerequisite is ignO'\ ranee. It is distinguished from fraud, fraudulent repre- sentations, or fraudulent concealments by the absence of knowledge and intention, which in legal fraud are actually present, and in constructive fraud are theoretically present, as necessary elements.- It is also distinguished from that inattention or absence of thought which are inherent in negligence. The erroneous conception or conviction of the \ understanding which constitutes the equitable notion of mistake has nothing in common with negligence; equity r. will not relieve a person from his erroneous acts or omis-j sions resulting from his own negligence.^ a Mistake there- legal sense, where a person, acting upon some erroneous conviction, either of law or of fact, executes some instrument or does some act which but for that erroneous conviction he would not have executed or done." He here correctly apprehends that the mental condition — the "erroneous convic- tion" — constitutes the mistake, and not the act done in pursuance of it. § 839, 2 This analysis is not a mere matter of words. Upon the accu- rate notion of what is essential to the legal conception of mistake depends the answer to the question, When may a person be relieved from the con- sequences of his mistakes of law? § 839, 3 Leuty v. Hillas, 2 De Gex & J. 110, 121; Duke of Beaufort v. Neeld, 12 Clark & F. 248, 286; Wild v. HUlas, 28 L. J. Ch. 170; Gregory § 839, (a) The text is cited to this 937 (mistake as a basis for refund- effeet in Shenango Furnace Co. v. ing taxes). See pos*, § 856. ■; •■ - Fairfield Tp., 229 Pa. St. 357, 78 Atl. § 839 EQUITY JTJEISPKUDENCB. 1708 fore, within tlie meaning of equity, and as the occasion of jurisdiction, is an erroneous mental condition, conception, or conviction, induced by ignorance, misapprehension, or misunderstandiug of the truth, but without negligence, and resulting ia some act or omission done or suffered erro- neously by one or both the parties to a transaction, but without its erroneous character being intended or known at the time.^ I add the two following definitions, which originally appeared in the proposed Civil Code of New York, and were thence adopted by the existing Civil Code of California, because they embody the essential notions which I have attempted to explain, and are both accurate and comprehensive: "Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in, — 1. An un- conscious ignorance or forgetfulness of a fact, past or present, material to the contract ; '^ or 2. Belief in the pres- ent existence of a thing material to the contract which does not exist, or in the past existence of such a thing which has V. Wilson, 9 Hare, 683, 689; Drewry v. Barnes, 3 Russ. 94; Bateman v. Willoe, 1 Schoales & L. 201; Ware v. Harwood, 14 Ves. 28, 31; Stevens V. Praed, 2 Ves. 519; Stephenson v. Wilson, 2 Vem. 325; Trigge v. Lavallee, 15 Moore P. C. C. 270; Marquis of Breadalbane v. Marquis of Chandos, 2 Mylne & C. 711, 719; Henderson v. Cook, 4 Drew. 306; Diman v. Providence etc. R. R. Co., 5 R. I. 130; Western R. R. Co. v. Babcock, 6 Met. 346; Wood v. Patterson, 4 Md. Ch. 335; Kite v. Lump- kin, 40 Ga. 506; Lamb v. Harris, 8 Ga. 546; Capebart v. Mboon, 5 Jones Eq. 178. § 839, (b) This definition is quoted that it could be supplied by parol; in Pearson v. Dancer, 144 Ala. 427, held, not entitled to reformation for 39 South. 474; and cited with ap- mistake of law), proval in Moehlenpah v. Mayhew, § 839, (e) This portion of the text 138 Wis. 561, 119 N. W. 826. This is quoted in Kowalke v. Milwaukee paragraph is cited in Luckenbach v. E. K. & L. Co., 103 Wis. 472, 74 Am. Thomas (Tex. Civ. App.), 166 S. W. St. Eep. 877, 79 N. W. 762, and 99 (both parties consent to omission quoted, in substance, in Steinfeld v. of a stipulation from written con- Zeckendorf, 10 Ariz. 221, 86 Pac. 7. tract on the assurance of attorney 1709 MISTAKE. § 839 not existed. " * "Mistake of law constitutes a mistake only when it arises from, — 1. A misapprehension of the law by all parties, all supposing that they knew and understood it, ' and all making substantially the same mistake as to the law; or 2. A misapprehension of the law by one party, of which the others are aware at the time of contracting, but §839, 4N. Y. Civil Code (proposed), sec. 762; Cal. Civil Code, see. 1577. The authors of the New York code cite the following authorities in support of the material items of their definition : Introductory part. Ab- sence of neglect: U. S. Bank v. Bank of Georgia, 10 Wheat. 333. Subd. 1. Unconscious: Kelly v. Solari, 9 Mees. & W. 54; McDaniels v. Bank of Rutland, 29 Vt. 230, 238, 70 Am. Dec. 406; Elwell v. Chamberlain, 4 Bosw. 320. Ignorance: Bell v. Gardiner, 4 Man. & G. 11; 4 Scott N. R. 621; Hore v. Becher, 12 Sim. 465; East India Co. v. Donald, 9 Ves. 275 East India Co. v. Neave, 5 Ves. 173; Cocking v. Pratt, 1 Ves. Sr. 400 Briggs V. Vanderbilt, 19 Barb. 222. Forgetfulness : Kelly v. Solari, 9 Mees. & W. 54; Lucas v. Worswick, 1 Moody & R. 293. Fact past: Mc- Carthy V. Decais, 2 Russ. & M. 614; Willan v. Willan, 16 Ves. 72; East I. Co. V. Donald, 9 Ves. 275; East I. Co. v. Neave, 5 Ves. 173; Durkin v. Cranston, 7 Johns. 442. Fact present: Broughton v. Hutt, 3 De Gex & J. 501; Colyer v. Clay, 7 Beav. 188; Hore v. Becher, 12 Sim. 465; Cocking v. Pratt, 1 Ves. Sr. 400; Huthmacher v. Harris's Adm'r, 38 Pa. St. 491. Subd. 2. Thing which does not exist: Hitchcock v. Giddings, 4 Price, 135; Hastie v. Couturier, 9 Ex. 102; 5 H. L. Cas. 673; Strick- land V. Turner, 7 Ex. 208; Cochrane v. Willis, L. R. 1 Ch. 58; Rheel v. Hicks, 25 N. Y. 289; Ketehum v. Bank of Commerce, 19 N. Y. 499, 502; Belknap v. Sealey, 14 N. Y. 143, 67 Am. Dec. 120; Martin v. McCormick, 8 N. Y. 331, 335; Kip v. Monroe, 29 Barb. 579; Briggs v. Vanderbilt, 19 Barb. 222, 239 ; Gardner v. Mayor etc., 26 Barb. 423 ; Wheadon v. Olds, 20 Wend. 174; Mowatt v. Wright, 1 Wend. 355, 360, 19 Am. Dec. 508; Allen V. Mayor etc., 4 E. D. Smith, 404. Thing which has not existed: Martin v. McCormick, 8 N. Y. 331, 335.. The same authors add: "The dicta found in some cases to the effect that a mistake in respect of mat- ters as to which the party had 'means of knowledge' does not avoid a con- tract: See Mut. L. Ins. Co. v. Wager, 27 Barb. 354; Clarke v. Dutcher, 9 Cow. 674; Milnes v. Duncan, 6 Bam. & C. 671; are not sustained by the decisions: See Allen v. Mayor, 4 E. D. Smith, 404; Kelly v. Solari, 9 Mees. & W. 54; and have been finally overruled: Townsend v. Crowdy, 8 Com. B., N. S., 477; Bell v. Gardiner, 4 Man. & G. 11; DaUs v. Lloyd, 12 Q. B. 531." § 840 EQUITY JTTBISPBXJDENCE. 1710 ■vsrhicb they do not rectify." ^ "Mistake of foreign law is a mistake of facf^d § 840. II. Various Kinds of Mistakes Which Furnish an Occasion for Relief. — ^Under this most important head I purpose to examine more in detail the equitable concep- tion of mistake ; to ascertain its essential elements, in order that it may be the ground of any equitable interposition; and to describe the various kinds of mistakes, both of la-w- and of fact, which do or do not furnish an occasion for re- lief. We are met at the outset by a natural line of division. A party may enter into a transaction altering his legal rela- tions for the better or the worse, with full knowledge of all the facts connected therewith, but ignorant or mistaken con- cerning either the general law of the land governing the case, or concerning his own personal legal rights affected by or resulting from the transaction. On the other hand, he may be cognizant of the general law and of his own legal §839, 5N. Y. Civ. Code, sec. 763; Cal. Civ. Code, sec. 1588. The authors of the New York code cite, in support of this definition, — Subd. 1 : Many v. Beekman Iron Co., 9 Paige, 188 ; Hall v. Reed, 2 Barb. Ch. 500; Pitcher v. Turin Plank Road Co., 10 Barb. 436; Wake v. Har- rop, 6 Hurl. & N. 768. Subd. 2: Cooke v. Nathan, 16 Barb. 342. On the general subject of relief in equity from mistakes in law, they refer, in addition, to Stone v. Godfrey, 5 De Gex, M. & G. 76, 90 ; Broughton v. Hutt, 3 De Gex & J. 501; Evants v. Strode, 11 Ohio, 480. 38 Am. Dec. 744; Wheeler v. Smith, 9 How. 55; Champlin v. Laytin, 18 Wend. 407, 422, 31 Am. Dec. 382. § 839, 6 N. Y. Civ. Code, sec. 764; Cal. Civ. Code, sec. 1579; citing Mc- Cormick v. Gamett, 5 De Gex, M. & G. 278 ; Leslie v. BaUlie, 2 Younge & C. Ch. 91; Patterson v. Bloomer, 35 Conn. 57, 95 Am. Dec. 218; Haven V. Foster, 9 Pick. 112, 19 Am. Dec. 353 ; Bank of Chillicothe v. Dodge, 8 Barb. 233; Merchants' Bank v. Spalding, 12 Barb. 302. It should be added that the three definitions given in the text occur in the chapter of the codes which treats of the consent necessary to the completion of a con- tract, so that they primarily relate to mistakes in contracts; they may be readily applied, however, to mistakes in any other transaction. §839, (d) Ellison v. Branstator, 83 Kan. 223, 109 Pae. 1086; Osincup 158 Ind. 146, 54 N. E. 433; Schlos- v. Henthorn, 89 Kan. 58, Ana. Cas. ser V. Nicholson, 184 Ind. 283, 111 1914C, 1262, 46 L. E. A. (N. S.) 174, N. E. 13; Nicholson v. Nicholson, 130 Pac. 652. See post, § 854. 1711 MISTAKE. § 841 rights, but be ignorant or mistaken as to some material fact of the transaction which forms an important factor in determining his action. All possible mistakes are therefore separated into those of law and those of fact, although it is sometimes very difficult to ascertain in a particular instance whether the mistake is purely one of law, or is of law and of fact in combination. As the cases in which persons are relieved from their mistakes of law are somewhat excep- tional, it will be convenient to examine them first in order. § 841. First. Mistakes of Law.* — ^It is very important to form an accurate notion of the various conditions in- cluded within this general term; much confusion and ap- parent conflict of opinion have resulted from a failure to recognize these distinctions. Mistake of law may be an ignorance or error with respect to some general rules of the municipal law applicable to all persons, which regulate human conduct, determine rights of property, of contract, and the like ; such as the rules making certain acts criminal, and those controlling the devolution, acquisition, and trans- fer of estates, and those prescribing the modes of entering into agreements. On the other hand, the term may mean- the ignorance or error of a particular person with respect to his own legal rights and interests which are affected by or which result from a certain transaction in which he en- gages.^ This application of the term may present two en- tirely different conditions. - The person about to enter into the transaction may be ignorant of or mistaken about his own antecedent existing legal rights and interests which are to be affected by what he does, although he correctly appre- § 841, (a) Sections 841 et seq. are § 841, (b) The text is quoted in cited in Hoy v. Hoy, 93 Miss. 732, Alabama & Vicksburg Ey. Co. v. 136 Am. St. Rep. 548, 17 Ann. Cas. Jones, 73 Miss. 110, 55 Am. St. Eep. 1137, 25 L. E. A. (N. S.) 182, 48 488, 19 South. 105; in Houston v. South. 903; Burton v. Haden, 108 Northern Pac. E. Co., 109 Minn. 273, Va. 51, 15 L. E. A. (N. S.) 1038, 60 18 Ann. Cas. 325, 123 N. W. 922; S. E. 736. This section is cited in cited in Drake v. Wild, 70 Vt. 52, Crippen v. Chappel, 35 Kan. 495, 57 39 Atl. 248; and in Smith v. Jones Am. Rep. 187, 11 Pac. 453. (Tex. Civ. App.), 192 S. W. 795. § 841 EQUITY JUEISPEUDEN-CE. 1712 hends and fully understands the legal import of the trans- action itself and its true effects upon his supposed legal rights ; i or the person may be correctly informed as to his existing legal rights, interests, or relations, and may be ignorant or mistaken with respect to the legal import of the transaction in which he engages, and its legal effect upon those rights, interests, or relations. Finally, in any one of the foregoing instances the ignorance or error may be con- fined to one party, or it may extend to both parties ; all the parties may alike enter into the transaction under a com- rnon ignorance or error concerning the general rules of the law, or concerning the individual legal interests affected by or resulting from it. An ancient and familiar maxim of the common law is, Ignorawtia juris non excusat. This maxim confessedly has its primary application to cases of the first class above described, — ignorance or error concerning the general rules of law controlling human conduct, and espe- cially in criminal prosecutions.^ c The real question for discussion is. How far does it apply to the two species con- tained in the second class, — mistakes as to individual legal rights ? The principle embodied in the maxim was derived from the Eoman law; little aid, however, can be derived § 841, 1 For example, a person about to give a release might erro- neously suppose that he held only a life estate, while in fact he was the owner in fee; and might know that the legal operation of the conveyance was to release all the interest which he had. Compromises are the most common illustration of this sjiecies, when the parties correctly understand the legal effect of the agreement itself which they make, and of the in- struments which they execute, and the mistake consists of their ignorance or error as to the nature of the prior legal rights which they possessed, and which they surrender by means of the compromise. It will be found, I think, that a great majority of the cases in which mistakes of law have been relieved belong to this species. § 841, 2 See 1 Plowd. 342, per Manwood, J. : "It is to be presumed that no subject of this realm is miscognizant of the law whereby he is governed. Ignorance of the law exeuseth none.'' § 841, (c) The text, § 841 et seq., is cited to this effect in Mclntyre V. Casey (Mo.), 182 S. W. 966. 1713 MISTAKE. § 841 from the uncertain and conflicting opinions of the Roman law jurists and commentators.^ § 841, 3 In the digest, title De juris et facti ignorantia, the general rule is stated: "Begula est, juris quidem ignorantiam cuique nocere, facti vero ignorantiam non nocere": Dig., xxii., tit. vi., 1, 9. The following illus- tration is given : "If a man be ignorant of the death of a kinsman whose estate is to be administered, time shall not run against him and bar his claim to inherit; otherwise if he be aware of the death and of his own relationship, but ignorant of his own right to inherit, time will bar his claim, because the error is one of law." The digest admitted certain classes of persons to whom relief would be allowed from the consequences of igno- rance or error of law, — Quibus permissum est jus ignorare," — namely, women, soldiers, and persons under the age of twenty-five. It was pre- sumed that they had not had opportunities to become acquainted with the law. This permission was not universal; they were not allowed to al- lege their ignorance as defense for acts in violation of rules based upon the jus gentium, since these rules were founded upon natural reason and equity, and were apprehended naturali ratione, and did not require any special knowledge or study : Dig., uhi supra. The question how far relief may be given for a mistake of law has given rise to a great conflict of opinion among the modern commentators upon the Roman law. It was a settled doctrine that where one, through error, had paid what was not due, he might recover it back by an action called condictio indebiti. The importance of this action is shown by the fact that a whole title is devoted to it in the digest ^d also in the code. A text of the code seems to deny restitution where the money has been paid under an error of law : "Quum quis jus ignorans indebitam pecuniam solverit, cessat repetitio. Per ignorantiam enim facti tantum repetitionem indebiti soluti competere tibi notum est" : Code, lib. I., tit. 18, 1. 10. Upon this text and some others, certain jurists, including Cujas, Donellus, Voet, and Pothier, maintain that no action ever lies to recover back money paid by mistake of law. Another class of writers, equally eminent among whom are Vinnius, Ulric, Huber, Miihlenbruch, and D'Aguesseau, hold that the action can be main- tained in all cases of error, whether of fact or of law. They contend that the actiop is eminently equitable, and can be defeated only by a defense which is equally equitable; that in the whole title on condictio in- debiti in the digest, there is no text confining the action to error of fact, but the language everywhere speaks of "error" generally; and that the passages in the code which seem to confine the remedy to errors of fact are not general rules, but are all taken from imperial "rescripts" appli- cable only to special cases in which a natural, though not a legal, obliga- tion to make the payment existed, so as to afford an equitable ground for retaining the money. Tiis reasoning is, certainly very powerful. A simi- 11—108 § 842 EQUITY JTJRISPEXTDENCB. 1714 §842. The General Rule, and Its Limitations.*— The doctrine is settled that, in general, a mistake of law, pure and simple, is not adequate ground for relief. Where a party with knowledge of all the material facts, and without any other special circumstances giving rise to an equity in his behalf, enters into a transaction affecting his interests, rights, and liabilities, under an ignorance or error with respect to the rules of law controlling the case, courts will not, in general, relieve him from the consequences of his mistake.^ ^ The reasons are obvious. The administration lar opinion, based entirely upon a comparison of texts in the digest and code, is maintained by a recent French writer, Professor Demangeat, in his Cours Elementaire du Droit Romaia (vol. 2, pp. 370-372). Savigny, in his great work on the Roman law, reaches the conclusion that money paid by a mistake of law cannot be recovered back, unless it can be proved that the ignorance was excusable under the circumstances, and not the re- sult of gross negligence: 3 Traite de Droit Remain, Append. 8, sec. 35, p. 415. The modem European codes based upon the Roman law exhibit the same diversity. The French and the Austrian codes permit a recov- ery of money paid under a mistake either of law or of fact ; the Prussian code permits it only when paid through a mistake of fact: See Studies in Roman Law, by Lord Mackenzie, 338-340; 2 Austin's Lectures on Juris- prudence, 168-170. The foregoing resume shows that the question is one of great and inherent difllculty. § 842, 1 The leading case of BUbie v. Lumley, 2 East, 469, furnishes a good illustration of the general rule and of its reasons. An insurer, with knowledge of all the facts which destroyed his liability on a policy of in- surance which he had signed, but in ignorance of the legal rights result- §842, (a) The text, §§ 842-847, is 548, 48 L. E. A. (N. S.) 481, 134 cited in Benson v. Markoe, 37 Minn. Pac. 285; Clark v. Lehigh & Wilkes- 30, 5 Am. St. Eep. 816, 33 N. W.'38. Barre Coal Co., 250 Pa. St. 304, 95 Sections 842 et seq. are cited in Atl. 462; and cited in Northwestern Houston V. Northern Pac. B. Co., 109 Lumber Co. v. Gfays Harbor & P. Minn. 273, 18 Ann. Cas. 325, 123 N. S. E. Co., 208 Fed. 624; Harrigan v. W. 922. Peoria County, 262 HI. 36, 104 N. E. § 842, (b) Quoted in Loekhart v. 172 (bill of review does not lie on Leeds (N. M.), 76 Pac. 312; Din- ground that party to suit did not widdie v. Self, 145 111. 290, 33 N. E. know that the decree was contrary 892; Drake v. Wild, 70 Vt. 52, 39 to State and Federal Constitutions); Atl. 248; Marshall v. Westrope, 98 Tilton v. Pairmount Lodge, 244 111. Iowa, 324, 67 N. W. 257; Copper 617, 91 N. E. 644. See, also, Allen Belle Mining Co. v. Gleeson, 14 Ariz. v. Galloway, 30 Fed. 466; HambUu 1715 MISTAKE. § 842 of justice, tie law itself as a practical system for \he regu- lation of human conduct, require that some fundamental assumptions should be made as postulates. The most im- portant, perhaps, of all these, is the assumption that all ing from those facts, paid the amount he had assured; and afterwards he brought an action to recover back the money as paid under a mistake. The court held that the action could not be maintained. Lord Ellen- borough said: "Every man must be taken to be cognizant of the law; otherwise there is no saying to what extent the ignorance might not be carried. It would be urged in almost every case." If a legal question could be settled by numbers of judicial dicta expressed ia the most gen- eral terms, there could be no doubt of the universality of the doctrine stated ia the text. The following are some of the cases by which it is sustained: Snell v. Atlantic Ins. Co., 98 U. S. 85; De Give v. Healey, 60 Ga. 391; Ottenheimer v. Cook, 10 Heisk. 309; Jenkins v. German Luth. Cong., 58 Ga. 125; Hardigree v. Mitehum, 51 Ala. 151; Heavenridge v. Mondy, 49 Ind. 434; Gebb v. Rose, 40 Md. 387; Thurmond vi Clark, 47 Ga. 500; Bledsoe v. Nixon, 68 N. C. 521; Smith v. Penn, 22 Gratt. 402; Jacobs V. Morange, 47 N. Y. 57; Zolhnan v. Moore, 21 Gratt. 313; Goltra V. Sanasack, 53 lU. 456; Bryant v. Mansfield, 22 Me. 360; MelUsh v. Robertson, 25 Vt. 603; Proctor v. Thrall, 22 Vt. 262; Shotwell v. Murray, 1 Johns. Ch. 512; Lyon v. Richmond, 2 Johns. Ch. 51, 60; Storrs v. Bar- ker, 6 Johns. Ch. 166, 10 Am. Dec. 316; Gilbert v. Gilbert. 9 Barb. 532; Garnar v. Bird, 57 Barb. 277; Stoddard v. Hart, 23 F. Y. 556; Hinchman V. Emans, 1 N. J. Eq. 100 ; Wintermute v. Snyder, 3 N. J. Eq. 489 ; Peters V. Florence, 38 Pa. St. 194; Good v. Herr, 7 "Watts & S. 253; State v. Reigart, 1 Gill, 1; Davis v. Bagley, 40 Ga. 181, 2 Am. Rep. 570; Dill v. V. Bishop, 41 Ped. 74; Heath v. Al- apprehension as to eflfeet of reseis- hrook (Iowa), 98 N. W. 619; Lane sion of agreement) ; Daniels v. Dean, V. Holmes, 55 Minn. 379, 43 Am. St. 2 Cal. App. 421, 84 Pac. 332; Burke Kep. 508, 57 N. W. 132; Gjerstaden- v. Mackenzie, 124 Ga. 248, 52 S. E. gen V. Van Duzen, 7 N. D. 612, 66 653 (ignorance of statutory duties Am. St. Eep. 679, 76 N. W. 233; of guardian) ; Kitchen v. Chantland, Norris v. Crowe, 206 Pa. St. 438, 98 ISO Iowa, 618, 8 Ann. Cas. 81, 105 Am. St. Rep. 783, 55 Atl. 1125; 01- N. W. 367; Campbell v. Newman ney v. Weaver, 24 E. I. 408, 53 Atl. (Okl), 151 Pac. 602; Palmer v. 287; Keenan v. Daniels (S. D.), 99 Cully (Okl.), 153 Pac. 154; Appeal N. W. 853; Deavitt v. Eing (Vt.), of Pennsylvania Stave Co., 225 Pa. 56 Atl. 978; Kleimann v. Giesel- St. 178, 133 Am. St. Eep. 875, 73 mann, 114 Mo. 437, 35 Am. St. Rep. Atl. 1107; Texas & N. O. E. Co. t. 761, 21 S. W. 796. See, further, Sabine Tram Co., 61 Tex. Civ. App. Nichols V. Waukesha Canning Co., 353, 121 S. W. 256, 258 (will not re- 195 Fed. 807; Steinfeld v. Zeeken- lieve carrier from statutory penal- dorf, 10 Ariz. 221, 86 Pac. 7 (mi«- ties). § 842 EQUITY JTJKISPEUDENCB. 1716 persons of sound and mature mind are presumed to know the law. If ignorance of the law were generally allowed to be pleaded, there could be no security in legal rights, no certainty in judicial investigations, no finality in litiga- tions.'^ While this general doctrine prevails in equity as well as at law, its operation is not there universal; it is subject to modifications and limitations; equity does some- times exercise its jurisdiction on the occasion of mistakes of law. If the mistake of law is not pure and simple, but is induced or accompanied by other special facts giving rise to an independent equity on behalf of the mistaken person, such as inequitable conduct of the other party, there can be no doubt that a court of equity will interpose its aid.'i Even when the mistake of law is pure and simple, equity may interfere. The difficulty is to ascertain any gen- eral criterion which shall determine and include all such cases. Many judges have attempted to formulate a cri- terion for all rustanees of pure mistakes of law which will be relieved in equity, but their conclusions are conflicting, and none is sustained by the authority of judicial decisions. It has been said by judges of the highest ability that the general doctrine heretofore stated, and embodied in the maxim, Ignorantia juris non excusat, is confined to mistakes Shahan, 25 Ala. 694, 60 Am. Dec. 540; Gwynn v. Hamilton, 29 Ala. 233; Lyon V. Sanders, 23 Miss. 530; State v. Paup, 13 Ark. 129, 56 Am. Dec. 303; McMurray v. St. Louis etc. Co., 33 Mo. 377; Rochester v. Alfred Bank, 13 Wis. 432, 80 Am. Dec. 746; Smith v. McDougal, 2 Cal. 586; Kenyon v. Welty, 20 Cal. 637, 81 Am. Dec. 137; Bank of United States V. Daniel, 12 Pet. 32; Hunt v. Rousmanier, 8 "Wheat. 174; 1 Pet. 1; 2 Mason, 342; Maiden v. Menil, 2 Atk. 8; Cann v. Cann, 1 P. Wms. 723, 727; Currie v. Goold, 2 Madd. 163; Smith v. Jackson, 1 Madd. 618; Good- man V. Sayers, 2 Jacoh & W. 249, 263; MarshaU v. CoUett, 1 Younge & C. 232; Denys v. Shuckburgh, 4 Younge & C. 42; Mellers v. Duke of Devon- shire, 16 Beav. 252; Midland Gr. W. Co. v. Johnson, 6 H. L. Cas. 798. § 842, (c) The text is quoted in in Copper Belle Mining Co. v. Glee- Clark V. Lehigh & Wilkes-Barre Coal son, 14 Ariz. 548, 48 L. R. A. (N. S.) Co., 250 Pa. St. 304, 95 Atl. 462. 481, 134 Pac. 283; and in Tolley v. §842, (d) Quoted in Spurlook v. Poteet, 62 W. Va. 231, 57 S. E. 811. Brown, 91 Tenn. 241, 18 S. W. 868; 1717 MISTAKE. § 842 of the general rules of law, — the first class of mistakes de- scribed in the preceding paragraph ; that it has no applica- tion to the mistakes of persons as to their own private legal rights and interests,^ — the second class before described; that "jus," in the maxim, denotes the general law, the law of the country, and never means private legal rights.^ § 842, 2 This view is supported by the authority of Lord Westbury, certainly one of the ablest judges that ever sat in the English court of chancery, and distinguished for the remarkable grasp and clear enuncia- tion of principles in all his opinions. In Cooper v. Phibbs, L. R. 2 H. L. 149, 170, he said: "In such a state of things there can be no doubt of the rule of a court of equity with regard to the dealing with that agree- ment. It is said ignorantia juris haud exeusat; but in that maxim the word 'jus" is used in the sense of denoting general law, — the ordinary law of the country. But when the word 'jus' is used in the sense of denoting a private right, that maxim has no application. Private right of owner- ship is a matter of fact; it may be the result also of matter of law; but if parties contract under a mutual mistake and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake. Now, that was the case with these parties; the respondents believed themselves to be entitled to the property, the petitioner believed that he was a stranger to it, the mistake is discovered, and the agreement cannot stand." It is proper to observe that although Lord Westbury's general language is broad enough to cover both species embraced in my second class as described in the preceding paragraph, where the mistake is concerning a private legal right, yet the facts to which he applies his language fall ex- clusively under the first species of that class, namely, where the party is mistaken concerning his antecedent existing legal right which is to be affected by the agreement which he makes, and not concerning the legal import of the agreement itself. The same view will completely explain Lord King's decision in the celebrated case of Lansdowne v. Lansdowne, 2 Jacob & W. 205; Mos. 364, 365; although the grounds were not so accurately stated by him as by Lord Westbury. The facts of this often- quoted case briefly were: The plaintiff was the only son of the eldest brother of a deceased intestate. He had a dispute with his uncle, a younger brother of the deceased, concerning their respective rights to inherit the land of the deceased. It was agreed by them to consult a §842, (e) Quoted in Alabama & 52, 39 Atl. 248; Moore v. Shook, 276 Vicksburg Ey. Co. v. Jones, 73 Miss. HI. 47, 114 N. E. 592, Burton v. 110, 55 Am. St. Rep. 488, 19 South. Haden, 108 Va. 51, 15 L. K. A. 105; cited in Drake v. "Wild, 70 Vt. (N. S.) 1038, 60 S. E. 736. § 843 EQUITY JURISPEUDENCB. 1718 § 843. Mistake as to the Legal Import or Effect of a Transaction.^ — That this rule, as suggested by Lord West- bury, would furnish a clear, definite, and in some respects a desirable criterion cannot be doubted; but it is not, in its full extent, sustained by authority; indeed, a portion of its conclusions is directly opposed to the overwhelming weight of judicial decisions. The rule is well settled that a simple mistake by a party as to the legal effect of an agreement which he executes, or as to the legal result of an act which he performs, is no ground for either defensive or affirmative relief. If there were no elements of fraud, concealment, misrepresentation, undue influence, violation of confidence reposed, or of other inequitable conduct in the transaction, the party who knew, or had an opportunity to know, the contents of an agreement or other instrument cannot defeat its performance or obtain its cancellation or reformation because he mistook the legal meaning and ef- sdioolmaster, one Hughes. Hughes went for instruction to a book called the Clerk's Remembrancer, and there found the law laid down that "land could not ascend, but always descended," and he thereupon informed the parties that the land went to the younger brother, the plaintiff's uncle. Upon this decision, the plaintiff and his uncle agreed to share the land between them, and conveyances were executed carrying out this arrange- ment. The result was, of course, that the plaintiff, through a mistake of law, conveyed away land which clearly belonged to himself. Discovering his error subsequently, he filed a bill to be relieved. Lord Chancellor King held that the conveyances were made through a mistake and mis- representation of the law, and decreed that they should be surrendered up and canceled. He is reported to have said: "The maxim of law, Igno- rantia juris non excusat, was, in regard to the public, that ignorance can- not be pleaded in excuse of crimes, but did not hold in civil cases." This dictum, when taken literally, is much too broad, and is clearly incorrect; but the real doctrine lying beneath it, and what the chancellor plainly had in his mind, is identical with the view expressed by Lord Westbury. This case, as it seems to me, has created a great deal of unnecessary diffi- culty and criticism. It falls directly within the first species of my second class of mistakes, and is a striking example of that species. See also Blakeman v. Blakeman, 39 Conn. 320. § 843, (a) Sections 843-845 are cited in Jacobs v. Parodi, 50 Ma. 541, 39 South. 833. 1719 MISTAKE. 843 feet of tlie whole or of any of its provisions.^ Where the parties, with knowledge of the facts, and without any in- equitable incidents, have naade an agreement or other in- strument as they intended it should be, and the writing ex- presses the transaction as it was understood and designed to be made, then the above rule uniformly applies ; equity will not allow a defense, or grant a reformation or rescission, although one of the parties — and as many cases hold, both of them — ^may have mistaken or misconceived its legal meaning, scope, and effect.^ •> The principle underlying § 843, 1 The circumstances mentioned in the text are the same as the second species of the second class described before in § 841, where a per- son knowing correctly his existing legal rights and relations is mistaken as to the legal import of the transaction in which he engages, and of its legal effect upon those rights or relations. In Powell v. Smith, L. R. 14 Eq. 85, 90, Lord Romilly accurately states the doctrine of the text, and its reasons. The defendant endeavored to defeat the enforcement of an agreement to give a lease, on the ground that he was mistaken as to the legal meaning and effect of an important provision. The master of rolls. § 843, (b) The text is quoted in Euler V. Sehroeder, 112 Md. 155, 76 Atl. 164.- §843, (c) The text is quoted in Eldridge v. Dexter & P. R. E. Co., 88 Me. 191, 33 Atl. 974; Marshall v, Westrope, 98 Iowa, 324, 67 _N. W. 257. This section is cited in Wilson V. McLoughlin, 11 Colo. 465, 18 Pae. 739; Eyder v. Eyder, 19 E. I. 188, 32 Atl. 919; and in Hubbert v. Fagan, 99 Ark. 480, 138 S. W. 1001. Sections 843-847 are cited in Gris- wold V. Hazard, 141 TJ. S. 260, 11 Sup. Ct. 972, 999. See, also, Wild- ing V. Sanderson, [1897] 2 Ch. 534; Kelly V. Turner, 74 Ala. 513; Eeetor V. Collins, 46 Ark. 167, 55 Am. Kep. 571; Hieks v. Coody, 49 Ark. 429, 5 S. W. 714; Atlanta Trust & Bkg. Co. V. Nelms, 116 Ga. 915, 43 S. E. 380; Fowler v. Black, 136 111. 363, 26 N. E. 596; Tilton v. Fairmount liodge, 244 111. 617, 91 N". E. 644; Bobbins v. Bobbins, 225 HI. 333, 9 L. E. A. (N. S.) 953, 80 N. E. 326 (belief of intending wife that will of husband will not be revoked by marriage, not ground for cancella- tion of antenuptial contract); Cald- well V. Depew, 40 Minn. 528, 42 N. W. 479; American Fruit Product Co. V. Barrett & Barrett (Minn.), 128 N. W. 1009; Errett v. Wheeler, 109 Minn. 157, 26 L. E. A. (N. S.) 816, 123 N. W. 414, and note (mort- gage satisfied under mistake as to effect of satisfaction); Corrigan v. Tiernay, 100 Mo. 276, 13 S. W. 401; Shields v. Hitchman, 251 Pa. St. 455, 96 Atl. 1039 (unilateral mis- take). But see, under Georgia Code 1895, § 3979; Dolvin v. Ameri- can Harrow Co., 125 Ga. 699, 28 L. E. A. (N. S.) 785, 54 S. E. 706; Eichardson v. Perrin, 137 Ga. 432, 73 S. E. 649. § 843 EQUITY JTJRISPKUDENCE. 1720 this rule is, that equity will not interfere for the purpose of carrying out an intention which the parties did not have when they entered into a transaction, but which they might or even would have had if they had been more correctly informed as to the law, — if they had not been mistaken as to the legal scope and effect of their transaetion.d If an in overruling the defense, said: "All those cases which have been cited on the argument are cases where there was either a dispute or doubt as to the thing sold, or where the words of the agreement expressed certain things in an ambiguous manner, which might be misunderstood by one of the parties. [In such cases a decree for performance might be re- fused, because it did not appear with sufficient certainty what the parties had agreed.] But here the words of the agreement are quite certain, and the only thing that was not understood was the legal effect of certain words which it contained. Now, that is no ground of mistake at all. It is a question upon the construction of an agreement agreed to by every- body concerned." Hunt v. Rousmanier, 8 Wheat. 174, 1 Pet. 1, is the leading American case upon this phase of the doctrine, in which the rule and its limitations are most carefully examined; and the decision has been regarded as one of the highest authority. See also Gerald v. Elley, 45 Iowa, 322; Glenn v. Statler, 42 Iowa, 107; Nelson v. Davis, 40 Ind. 366; Fellows v. Heermans, 4 Lans. 230; Moorman v. Collier, 32 Iowa, 138; Hoover v. Reilly, 2 Abb. 471; Norris v. Laberee, 58 Me. 260; Ken- nard v. George, 44 N. H. 440; Mellish v. Robertson, 25 Vt. 603; Pettes V. Bank of Whitehall, 17 Vt. 435; Goodell v. Field, 15 Vt. 448; Molony v. Rourke, 100 Mass. 190; Haven v. Foster, 9 Pick. 112, 19 Am. Dec. 353; Wheaton v. Wheaton, 9 Conn. 96; Leavitt v. Palmer, 3 N. Y. 19, 51 Am. Dec. 333 ; Lanning v. Carpenter, 48 N. T. 408 ; Pitcher v. Hennessey, 48 N. Y. 415; Story v. Conger, 36 N. Y. 673, 93 Am. Dec. 546; O'Donnell V. Harmon, 3 Daly, 424; Champlin v. Laytin, 18 Wend. 407, 31 Am. Dec. 382; Crosier v. Acer, 7 Paige, 137; Hall v. Reed, 2 Barb. Ch. 500; Dupre v. Thompson, 4 Barb. 279; Bentley v. Whittemore, 18 N. J. Eq. 366; Hawralty v. Warren, 18 N. J. Eq. 124, 90 Am. Dec. 613; Durant v. Bacot, 13 N. J. Eq. 201; Garwood v. Eldridge, 2 N. J. Eq. 145, 34 Am. Dec. 195; AVintermute v. Snyder, 3 N. J. Eq. 489; Light v. Light, 21 Pa. St. 407; Rankin v. Mortimere, 7 Watts, 372; McElderry v. Shipley, 2 Md. 25, 56 Am. Dec. 703; Showman v. Miller, 6 Md. 479; Watkins v. Stockett, 6 Har. & J. 435; Alexander v. Newton, 2 Gratt. 266; Dill v. Shahan, 25 Ala. §843, (d) Quoted in Kector v. Westrope, 98 Iowa, 324, 67 N. W. Collins, 46 Ark. 167, 55 Am. Bep. 257; Williamson v. Brown, 195 Mo. 571; Corrigan v. Tiernay, 100 Mo. 313, 93 S. W. 791. 276, 13 S. W. 401; Marshall v. 1721 MISTAKE. § 844 agreement or written instrument or other transaction ex- presses the thought and intention which the parties had at the time and in the act of concluding it, no relief, aflSrma- tive or defensive, will be granted with respect to it, upon the assumption that their thought and intention would have been different if they had not been mistaken as to the legal meaning and effect of the terms and provisions by which such intention is embodied or expressed, even though it should be incontestably proved that their intention would have been different if they had been correctly informed as to the law.^ These rules are settled with perfect unanimity where one party has been mistaken in such a manner ; they are also applied by very niany cases where the same mis- take is common to both the parties. § 844. Particular Instances in Which Relief will or will not be Granted. — Firmly settled as are the foregoing gen- eral rules, it is equally well settled that there are particular instances in which equity will grant defensive or affirmative relief from mistakes of law pure and simple, as well as from those accompanied by other inequitable incidents. The only difficulty consists, as has already been mentioned, in drawing any sharply defined lines by which all these in- 694, 702, 60 Am. Dec. 540; Clayton v. Freet, 10 Ohio St. 544; Evants v. Strode, 11 Ohio, 480, 38 Am. Dec. 744; McNaughten v. Partridge, 11 Ohio, 223, 38 Am. Dec. 731; Martin v. Hamlin, 18 Mich. 354, 100 Am. Dec. 181 ; Barnes v. Bartlett, 47 Ind. 98 ; Heavenridge v. Mondy, 49 Ind. 434; Wood v. Price, 46 111. 439; Adams v. Eohertson, 37 111. 45; Montgomery v. Shockey, 37 Iowa, 107; Heaton v. Fryberger, 38 Iowa, 185, 190, 201; Hearst v. Pujol, 44 Gal. 230; Great West. R'y v. Cripps, 5 Hare, 91 ; Croome v. Lediard, 2 Mylne & K. 251 ; Cockerell v. Chohneley, 1 Russ. & M. 418; Marshall v. Collett, 1 Younge & C. 232, 238; Pullen v. Ready, 2 Atk. 587, 591; Stoekley v. Stockley, 1 Ves. & B. 23, 30; Mildmay V. Hungerford, 2 Vern. 243; Irnham v. Child, 1 Brown Ch. 92; Gibbons V. Caunt, 4 Ves. 840, 849; Marquis of Townshend v. Stangroom, 6 Ves. 328, 332; Price v. Dyer, 17 Ves. 356. § 843, (e) Quoted in Dinwiddle v. N. W. 20; Tantis v. Jones (Tex. Civ. Self, 145 111. 290, 33 N. E. 892; Mc- App.), 184 S. W. 572. Graw V. Muma, 164 Mich. 117, 129 § 845 EQUITY JUBISPETTDENCE. 1722 stances may be accurately determined. ^ I shall endeavor to state those conclusions which seem to be based upon prin- ciple as well as sustained by authority; although it must be conceded that no results can be reached which shall represent the unanimous concurrence of decisions and dicta. It is certain, however, that no mistake of law will be re- lieved from unless it is material, and the court is certain that the conduct of the parties has been determined by it.^ § 845. Reformation of an Instrument on Account of a Mistake of Law. — The first instance which I shall mention is closely connected with the doctrine stated in the last paragraph but one. It was there shown that if an agree- ment is what it was intended to be, equity would not inter- fere with it because the parties had mistaken its legal im- I port and effect. If, on the other hand, after making an , agreement, in the process of reducing it to a written form ■j the instrument, by mecms of a mistake of law, fails to ex- 1 press the contract which the parties actually entered into, I equity will interfere with the appropriate relief, either by I way of defense to its enforcement, or by cancellation, or by reformation, to the same extent as if the failure of the writing to express the real contract was caused by a mistake of fact. In this instance there is no mistake as to the legal import of the contract actually made; but the mistake of law prevents the real contract from being embodied in the written instrument.^ In short, if a written instrument fails § 844, 1 Rogers v. Ingham, L. R. 3 Ch. Div. 351, 355, 356, per James, L. J.; p. 358, per Mellish, L. J.; Ex parte James, L. R. 9 Ch. 609; Bul- lock V. Downes, 9 H. L. Cas. 1; Stone v. Godfrey, 5 De Gex, M. & G. 76, 90, per Turner, L. J.; Broughton v. Hutt, 3 De Gex & J. 501, 504. § 844, 2 Stone v. Godfrey, 5 De Gex, M. & G. 76, 90, per Turner, L. J. §845, (a) Quoted in Lansing v. Co. v. Green, 114 Fed. 676; Carrell Commercial Union Assur. Co. (Neb.), v. McMurray, 136 Fed. 661; Allen 93 N. W. 756; Dinwiddie v. Self, v. Bollenbacher, 49 Ind. App. 589, 145 HI. 290, 33 N. E. 892; Lee v. 97 N. E. 817; McGraw v. Muma, 164 Percival, 85 Iowa, 135, 52 N. W. Mieh. 117, 129 N. W. 20; Barataria 543; Marshall v. Westrope, 98 Iowa, Canning Co. v. Ott, 88 Miss. 771, 41 324, 67 N. W. 257; Chicago & A. E. South. 378; Blair v. Kingman Im- 1723 MISTAKE. § 845 to express the intention whicli the parties had in making the contract which it purports to contain, equity will grant its relief, affirmative or defensive, although the failure may have resulted from a mistake as to the legal meaning and operation of the terms or language employed in the writ- ing.^ Among the ordinary examples of such errors are those as to the legal effect of a description of the subject- matter, and as to the import of technical words and^ phrases; but the. rule is not confined to these instances.^ '^ § 845, 1 Hunt v. Rousmanier, 8 Wheat. 174; 1 Pet. 1; Pitcher v. Hen- nessey, 48 N. Y. 415; Lanning v. Carpenter, 48 N. Y. 408; O'Donnell v. Harmon, 3 Daly, 424; Gillespie v. Moon, 2 Johns. Ch. 585, 596, 7 Am. Dec. 559; Canedy v. Marcy, 13 Gray, 373-377; Stedwell v. Anderson, 21 Conn. 139; Huss v. Morris, 63 Pa. St. 367; Moser v. Libenguth, 2 Rawle, 428; Cooke V. Husbands, 11 Md. 492; Springs v. Harven, 3 Jones Eq. 96; Larkins v. Biddle, 21 Ala. 252; Stone v. Hale, 17 Ala. 557, 52 Am. Dec. 185; Clopton v. Martin, 11 Ala. 187; Clayton v. Freet, 10 Ohio St. 544; Young V. Miller, 10 Ohio, 85; McNaughten v. Partridge, 11 Ohio, 223, 38 Am. Dec. 731 ; Worley v. Tuggle, 4 Bush, 168 ; Smith v. Jordan, 13 Minn. 264, 97 Am. Dec. 232,; Sparks v. Pittman, 51 Miss. 511; Stockbridge Iron Co. V. Hudson Iron Co., 107 Mass. 290; Oliver v. Mut. etc. Ins. Co., 2 Curt. 277. plement Co., 82 Neb. 344, 117 N. W. Miss. 771, 41 South. 378; William- 773; Baird v. Erie B. Co., 210 N. T. son v. Brown, 195 Mo. 313, 93 S. W. 225, 104 N. E. 614; Gross Construe- 791 (deed intended to give a life tion Co. V. Hales, 37 Okl. 131, 129 estate to husband with remainder to Pae. 28; Tossini v. Donahue, 22 wife and her heirs); Baird v. Erie S. D. 277, 117 N. W. 148; Korte v. E. Co., 210 N. Y. 225, 104 N. E. 614; CNeill, 34 S. D. 241, 148 N. W. 12; Gross Construction Co. v. Hales, 37 Sanford v. Weller (Tex. Civ. App.), Okl. 131, 129 Pao. 28; Korte v. 189 S. W. 1011. O'Neill, 34 S. D. 241, 148 N. W. 12; § 845, (b) Quoted in Corrigan v. Sanford v. Weller (Tex. Civ. App.), Tiernay, 100 Mo.' 276, 13 S. W. 401; 189 S. W. 1011. Minot V. Tilton, 64 N. H. 371, 10 § 845, (c) Quoted in Dinwiddle v. Atl. 682; Wall v. Meilke, 89 Minn. Self, 145 111. 290, 33 N. E. 892, a 232, 94 N. W. 688; Richmond 'v. simple and striking illustration of Ogden St. Ey. Co. (Or.), 74 Pae. the principle of the text; in House 333; Dinwiddle v. Self, 145 HI. 290, v. McMullen, 9 Cal. App. 664, IflO 33 N. E. 892; Carrell v. McMur- Pae. 344; in Gross Construction Co. ray, 136 Fed. 661; Chicago & A. E. v. Hales, 37 Okl. 131, 129 Pae. 28; Co. V. Green, 114 Fed. 676; House v. in Korte v. O'Neill, 34 S. D. 241, 148 McMullen, 9 Cal. App. 664, 100 Pae. N. W. 12; and in Sanford v. Weller 344; Barataria Canning Co. V. Ott,. 88 (Tex. Civ. App.), 189 S. W. 1011. §846 EQUITY JUEISPEUDENOE. 1724 § 846. Mistakes Common to All the Parties — ^Mistake of a Plain Rule. — It has been said that whenever a mistake of law is common to all the parties, where they all act under the same misapprehension of the law, and make substan- tially the same mistake concerning it, this is a sufficient ground, without any other-incidents, for the interposition of This section is cited in Hausbrandt V. Hofler, 117 Iowa, 103, 94 Am. St. Bep. 289, 90 N. W. 494; Eyder v. Eyder, 19 E. I. 188, 32 Atl. 919 (reformation); Kelley v. Ward, 94 Tex. 289, 60 S. W. 311; Citizens' Nat. Bank of Attica v. Judy, 146 Ind. 322, 43 N. E. 259; Park Bros. & Co. V. Blodgett & Clapp Co., 64 Conn. 28, 29 Atl. 133; Hataway v. Carnley (Ala.), 73 South. 382; Mc- Cord V. Bright, 44 Ind. App. 275, 87 N. E. 654 (ignorance of rule that a conveyance from wife to husband must be through intervention of a. trustee) ; Barnum v. White, 128 Minn. 58, 150 N. W. 227, 151 N". W. 147. See, also, Griswold v. Hazard, 141 U. S. 260, 11 Sup. Ct. 972, 999, citing §§ 843-847 of the text; Skid- more V. Stewart (Ala.), 75 South. 1; Knight V. Glasscock, 51 Ark. 390, 11 S. W. 580; Denver Brick, etc., Mfg. Co. V. McAllister, 6 Colo. 261; Cake V. Peet, 49 Conn. 591; Jacobs v. Parodi, 50 Fla. 541, 39 South. 833; Wyohe v. Greene, 16 Ga. 49, 2 Ames Cas. Eq. Jur. 289; Teel v. Dimmihoo, 230 HI. 476, 120 Am. St. Kep. 319, 82 N. E. 8'44; Eadebaugh v. Scanlan, 41 Ind. App. 109, 82 N. E. 544; Bon- bright V. Bonbright (Iowa), 98 N. W. 784; Stafford v. Fetters, 55 Iowa, 484, 8 N. W. 322; Brown v. Ward, 119 Iowa, 604, 93 N. W. 587; Hopwood V. McCansland, 120 Iowa, 218, 94 N. W. 469; Bottorf v. Lewis (Iowa), 95 N. W. 262 (cancella- tion); Nourse v. Weitz (Iowa), 95 N. W. 251 (reformation of superse- deas bond); Marine Savings Bank V. Norton, 160 Mich. 614, 125 N. W. 754; Benson v. Markoe, 37 Minn. 30, 5 Am. St. Eep. 816, 33 N. W. 38; WaU V. Meilke, 89 Minn. 232, 94 N. W. 688; Lockwood v. Geier, 98 Minn. 317, 108 N. W. 877, 109 N. W. 245 (rule did not apply to facts of this ease) ; Forest Lake State Bank V. Elkstrand, 112 Minn. 412, 12S N. W. 455 (conveyances intended as security for debt, made in ignorance of statute requiring such intention to be expressed therein, reformed); Corrigan v. Tierney, 100 Mo. 276, 13 S. W. 401; Lansing v. Commercial Union Assur. Co. (Neb.), 93 N. W. 756; Minot v. Tilton, 64 N. H. 371, 10 Atl. 682; Shaw v. Williams, 100 N. C. 272, 6 S. E. 196; Condor v. Secrest, 149 N. C. 201, 62 S. E. 921; Pelletier v. Interstate Cooperage Co., 158 N. C. 403, 74 S. E. 112; Eich- mond V. Oeden St. Ev. Co. (Or.), 74 Pac. 333; Lant's Appeal, 95 Pa. St. 279, 40 Am. Eep. 646; Dietrich V. Hutchinson, 73 Vt. 134, 87 Am. St. Rep. 703, 50 Atl. 810 (cancella- tion) ; but see Hicks v. Coody, 49 Ark. 425, 5 S. W. 714; Luckenbach V. Thomas (Tex. Civ. App.), 166 S. W. 99 (no reformation to insert a stipulation intentionally omitted from the written contract on the assurance of attorney that it could be supplied by parol). 1725 MISTAKE. § 846 equity.i No sucli general rule, in my opinion, can be re-f garded as established, or even suggested, by the weight of authority; and it is certainly contradicted by well-consid- ered decisions of most able courts.^ It will be found, I think, that the instances of relief where the mistake of law was mutual fall under the particular rule stated in the last preceding paragraph. It has also been asserted, as a gen- eral criterion, that where the mistake is concerning a clear, unquestioned, unequivocal rule of the law, a court of equity will relieve the party from its consequences ; but where the mistake is concerning a doubtful, obscure, or unsettled rule, no relief will be granted. In the first place, this proposi- tion, if taken as a general rule, is directly opposed to the fundamental principle upon which the entire doctrine con- cerning mistakes of law is based. The presumption that every person knows the law must necessarily extend to all rules of the law alike. To permit a distinction between rules said to be clear and those claimed to be doubtful would * § 846, I The authors of the New York Civil Code lay down this rule as the leading element in their definition of "mistake of law," claiming it to he declaratory merely, and not new legislation : See ante, § 839. In sup- . port of it they cite Many v. Beekman Iron Co., 9 Paige, 188; Hall v. Reed, 2 Barb. Ch. 500. Mr. Kerr also states the same rule in a some- what more limited form, and cites in its support only Cooper v. Phibbs, L. R. 2 H. L. 149. This case utterly fails to sustain any such conclusion. The decision of the court was based solely upon an assumed mistake of fact. The head-note correctly states the rule on which the decision was placed: "Where two parties under a mistake of fact, enter into an agree- ment," equity may set it aside. See also opinion of Lord Cranworth (p. 1G4). Lord Westbury's opinion dealt with the mistake as one of law, but he did not even hint at any such rule, and reached a very differ- ent conclusion, as already explained : See ante, § 842. § 846, 2 In the recent case of Eaglesfleld v. Marquis of Londonderry, L. R. 4 Ch. Div. 693, 709, the court of appeal, so far from recognizing any such rule, placed their decision entirely upon the ground that both parties acted under a common misapprehension and mistake of the law, and therefore, without other circumstances, equity could not relieve. Un- doubtedly, in^ many cases where equity has interfered there has been a mutual mistake; but the interference must be referred to some other cause than the mere existence of that fact. § 846 EQTJITT JTJBISPEUDEITCE. 1726 at once open the door for all the evils in the adminiatration of justice, which the presumption itself is intended to ex- elude. In the second place, the proposition finds no sup- ^port, as a general rule, from the decisions of authority. All the cases in which such language was originally used by the judges, either as a dictum or as the ratio decidendi, were cases arising upon family compromises and settle- ments, which, as will appear hereafter, are governed by special considerations, whether they involve mistakes of law or of fact. The rule, so far as it may be called a rule, has a very restricted application, and cannot be raised to the position of a general criterion.^ ^ There are undoubt- § 846, 3 Judge Story seems to lay down this rule as one of the most prominent and important means for determining whether equity will or will not grant relief: Story's Eq. Jur., sees. 121-126. He is followed by Mr. Snell : SneU's Equity, 371, 372. Mr. Adams states the proposition in a guarded, and in my opinion accurate, miSliner, confining it to cases of ^ family compromises : Adams's Equity, 190. The important case of Stone V. Godfrey, 5 De Gex, M. & G. 76, cited in the notes to the American edition of Adams (pp. 386, 387) in support of this rule, does not even allude to it. It will be found that the cases referred to — at least the Original authorities — as sustaining such a general proposition are either cases arising upon family compromises, in which judges have used lan- guage applicable only to the particular facts before them, and explaining why the settlement in controversy should or should not be allowed to stand, or else they were cases decided upon entirely different grounds, and not involving the alleged general rule, — cases in which the ratio decidendi as stated by the court did not in the least turn upon the question whether the misapprehended rule of law was clear or doubtful. Of the first class, Naylor v. Winch, 1 Sim. & St. 555, 564, is a leading and striking example. It was a suit upon a family compromise which had been entered into in settlement of a family controversy as to the construction and meaning of a will. Sir John Leach, V. C, said : "If a party, acting in ignorance of a plain and settled principle of law, is induced to give up a portion of his indisputable property to another under the name of compromise, a court of equity will relieve him from the effect of his mistake. But where a doubtful question arises, such as this question of construction upon the will of the testator, it is extremely reasonable that parties should ter- §846, (a) The text is quoted in cited in McCord v. Bright, 44 Ind. Norwood V. Louisville & N. E. Co., App. 275, 87 N. E. 654, 149 Ala. 151, 42 South. 683; and 1727 MISTAKE. § 847 edly cases, not arising out of family compromises, in which parties ignorant or mistaken concerning their oiim dear legal rights have been relieved; but these will all find an- other explanation more consonant with principle than the foregoing alleged general rule. § 847. Mistake of Law Accompanied With Inequitable Conduct of the Other Party. — ^Whatever be the effect of a ] mistake pure and simple, there is no doubt that equitable re- lief, affirmative or defensive, will be granted when the igno- rance or misapprehension of a party concerning the legal effect of a transaction in which he engages, or concerning his own legal rights which are to be affected, is induced, procured, aided, or accompanied by inequitable conduct of the other parties. It is not necessary that such inequitable conduct should be iatentionally misleading, much less that it should be actual fraud; it is enough that the misconcep- tion of the law. was the result of, or even aided or accom- . panied by, incorrect or misleading statements, or acts of the other party.* When the mistake of law is pure and simple, minate their differences by dividing the stake between them, in the pro- portions which may be agreed upon." The vice-chancellor is clearly referring, in this language, to family compromises, and is not la3ring down a general rule for all forms of mistakes of law. See also Clifton v. Coekbum, 3 Mylne & K. 76. See also, on the subject of doubtful rules, Freeman v. Curtis, 51 Me, 140, 81 Am. Dec. 564; Jordan v. Stevens, 51 Me. 78, 81 Am. Dec. 556 ; Reservoir Co. v. Chase, 14 Conn. 123 ; Champ- lin v. Laytin, 18 Wend. 407, 31 Am. Dec. 382; 6 Paige, 189; 1 Edw. Ch. 467; Cooke v. Nathan, 16 Barb. 342; Green v. Morris etc. R. R., 12 N. J. Bq. 165; Cumberland Coal Co. v. Sherman, 20 Md. 117; Lammott V. Maulsby, 8 Md. 5; Garner v. Gamer, 1 Desaus. Eq. 437; Lowndes v. Chisolm, 2 McCord Eq. 455, 16 Am. Dec. 667; Mortimer v. Pritchard, 1 Bail. Eq. 505; Hadon v. Ware, 15 Ala. 149; Moreland v. Atchison, 19 Tex. 303. § 847, (a) Quoted in Merchants & Ark. 41, 90 S. W. 284 (reliance on Farmers' Bank v. Cleland, 25 Ky. representations of insurance agent Law Rep. 1169, 77 S. W. 176, 719; as to legal effect of policy); Bara- Medieal Society of South Carolina taria Canning Co. v. Ott, 88 Miss. V. Gilbreth, 208 Fed. 899; Phoenix 771, 41 South. 378; Blair v.' King- Assur. Co. o£ London v. Boyette, 77 man Implement Co. (Neb.), 117 § 847 EQUITY JUBISPEUDBNCB. 1728 the balance held by justice hangs even; but when the ertor is accompanied by any inequitable conduct of the other party, it inclines in favpr of the one who is mistaken. The scope and limitations of this doctrine may be summed up in the proposition that a misapprehension of the law by one party, of which the others are aware at the time of entering into the transaction, but which they do not rectify, is a suffi- cient ground for equitable relief. A court of equity will not permit one party to take advantage and enjoy the bene- fit of an ignorance or mistake of law by the other, which he knew of and did not correct.'' While equity interposes under such circumstances, it follows a fortiori that when the mistake of law by one party is induced, aided, or accom- panied by conduct of the other more positively inequitable, and containing elements of wrongful intent, such as mis- representation,* imposition, concealment, undue influence, breach of confidence reposed, mental weakness, or surprise, ' a court of equity will lend its aid and relieve from the con- sequences of the error. The decisions illustrating this gen- eral rule are numerous, and it will be found that many of the cases in which relief has been granted contained, either openly or implicitly, some elements of such inequitable con- duct.i § 847, 1 Fane v. Fane, L. R. 20 Eq. 698; Gee v. Spencer, 1 Vem. 32; Mildmay v. Hungerford, 2 Vem. 243; Willan v. Willan, 16 Ves. 72, 82; Ramsden v. Hylton, 2 Ves. Sr. 304; Cocking v. Pratt, 1 Ves. Sr. 400; Mc- N. W. 773; Hicks v. Grimley, 213 other party." Wilding v. Sander- N. Y. 447, 107 N. E. 1037, dissenting son, [1897] 2 Ch. 534. opinion: Altgelt v. Gerbic (Tex. §847, (b) Quoted in Merchants & Civ. App.), 149 S. W. 233; Eowe v. Farmers' Bank v. Cleland, 25 Ky. James, 71 Wash. 267, 128 Pao. 539. Law Eep. 1169, 77 S. W. 176, 719; "A written contract cannot be set Medical Society of South Carolina aside merely because one of the par- v. Gilbreth, 208 Fed. 899; Faxon v. ties to it put an erroneous construe- Baldwin, 136 Iowa, 519, 114 N. W. tion on the words in which it was 40; Kowe v. James, 71 Wash. 267, expressed; but this principle does 128 Pae. 539. The text is cited to not apply to a case where a mistake this effect in Sanford v. Weller by one of the parties as to the mean- (Tex. Civ. App.), 189 S. W. 1011. ing of the words used has been in- §847, (c) This, entire section is duced, however innocently, by the quoted in Lawrence Co. Bank v. 1729 MISTAKE. § 848 § 848. Same. Between Parties in Relations of Trust, — A particular application of the foregoing rule requires a special mention. Where an ignorance or misapprehension Carthy v.. Decaix, 2 Russ. & M. 614; Scholefleld v. Templer, Johns. 155, 166; Coward v. Hughes, 1 Eay & J. 443; Sturge v. Sturge, 12 Beav. 229; Broughton v. Hutt, 3 De Gex & J. 501; In re Saxon etc. Co., 1 De Gex, J.'& S. 29; 2 Johns. & H. 408; Jordan v. Stevens, 51 Me. 78, 81 Am. Dec. 556; Freeman v. Curtis, 51 Me. 140, 81 Am. Dec. 564; Spurr v. Benedict, 99 Mass. 463; Chestnut Hill etc. Co; v. Chase, 14 Conn. 123; "Woodbury etc. Bankv. Charter Oak Ins. Co., 31 Conii. 517; Champlin v. Laytin, 18 Wend. 407, 422, 31 Am. Dec. 382; Rider v. Powell, 28 N. Y. 310; Green V. Morris etc. R. R. Co., 12 N. J. Eq. 165 ; Whelen's Appeal, 70 Pa. St. 410, 425; Light v. Light, 21 Pa. St.'407, 412; Snyder v. May, 19 Pa. St. 235; Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181; Watts v. Cum- mins, 59 Pa; St. 84; Phillips v. Hollister, 2 Cold. 269; Bryan v. Master- son, 4 J. J. Marsh, 225 ; Hardigree v. Mitchum, 51 Ala. 151 ; Metropolitan Bank v. Godfrey, 23 111. 579; Cathcart v. Robinson, 5 Pet. 264, 276; Wheeler v. Smith, 9 How. 55. Cases of surprise: Evans v. Llewellyn, 2 Brown Ch. 150; 1 Cox, 333; Pusey V. Desbouvrie, 3 P. Wms. 315 ; Willan v. Willan, 16 Ves. 72, 81 ; Ormond v. Hutchinson, 13 Ves. 47; Marquis of Townshend v. Stangroom, 6 Ves. 328, 333, 338; Clowes v. Higginson, 1 Ves. & B. 524, 527; Faj-ewell V. Coker, 2 Mer. 353; Cochrane v. Willis, L. R. 1 Ch. 58; Tyson v. Tyson, 31 Md. 134; Jones v. Munroe, 32 Ga. 181; Harney v. Charles, 45 Mo. 157; Carley v. Lewis, 24 Ind. 23. Some of these cases, which are commonly referred to the effect of surprise, are much more naturally and correctly explained, in my opinion, by the doctrine stated in § 849 of the text. Arndt, 69 Ark. 406, 65 S. W. 1052. surance policy surrendered on ao- This section is cited in Insurance count of false representations of Companies v. Eaden, 87 Ala. 311, 13 insurance agent, believed by him to Am. St. Eep. 36, 5 South. 876; be true, that the policy was void: Keister v. Myers, 115 Ind. 312, 17 surrender set aside). See, also, N. E. 161; Heath v. Albrook (Iowa), Hartwig v. Clark, 138 Cal. 668, 72 98 N. W. 619. Cited, also, in Holt Pac. 149; Sands v. Sands, 112 111. V. Gordon (Tex. Civ. App.), 176 225; Titus v. Eoehester G. Ins. Co., S. W. 902 (mistake and misrepre- 97 Ky. 567, 53 Am. St. Eep. 427, sentation); American Nat. Ins. Co; 31 3. W. 127; Eamey v. Allison, 64 V. Schlosberg, 117 Ark. 655, 174 Tex. 697; Kyle v. Pehley, 81 Wis. S. W. 1158 (same). Sections 847- 67, 29 Am. St. Rep. 866, 51 N. W. 849 are cited in Berry v. American 257; Williams v. Hamilton, 104 Central Ins. Co., 132 N. T. 49, 28' Iowa, 423, 65 Am. St. Eep. 475, 73 Am. St. Eep. 548, 30 N. E. 254 (in- N. W. 1029; Haviland v. Willetts, 11—109 848 EQUITY JUEISPEUDENCB. 1730 of the law, even without any positive, incorrect, or mislead- ing words or incidental acts, occurs in a transaction con- cerning the trust between two parties holding close rela- tions of trust and confidence, injuriously affecting the one who reposes the confidence, equity will, in general, relieve the one who has thus been injured.* The relations of trustee and cestui que trust, guardian and ward, and the like, are examples. The relief is here based upon the close confi- dence reposed, — upon the duty of the trustee to act in the most perfect good faith, to consult the interests of the beneficiary, not to mislead him, and not even to suffer him to be misled, when such a result can be prevented by rea- sonable diligence and prudence.^ ^ § 848, 1 Langstaffe v. Fenwick, 10 Ves. 405 ; and see Cooke v. Nathan, 16 Barb. 342; Dill v. Shahan, 25 Ala. 694, 60 Am. Dec. 540; Moreland v. Atchison, 19 Tex. 303; Ex parte James, L. R. 9 Ch. 609, 614; Davis v. Morier, 2 Coll. C. C. 303, and cases cited under last paragraph. 141 N. Y. 35, 35 N. E. 958 (an in- structive ease). See, further, Car- rell V. MeMurray, 136 Fed. 661; Bronson v. Leibold, 87, Conn. 293, 87 Atl. 979; Busiere v. Beilly, 189 Mass. 518, 75 N. K 958; Ward v. Baker (Tex. Civ. App.), 135 S. W. 620; American Fruit Product Co. v. Barrett & Barrett, 113 Minn. 22, 128 N. W. 1009 (statement of a party's agent, on which other party relied, that the contract would not be en- forced in a certain respect, not in- equitable conduct) ; Carpenter v. Detroit Forging Co., 191 Mich. 45, 157 N. W. 374 (injured workman gave release on being told by ad- juster that it would not bar a further claim if injuries became more serious). See, also, § 877. §848, (a) The text is quoted in Altgelt V. Gerbie (Tex. Civ. App.), 149 S. W. 233 (layman and attor- ney); Prince de Beam v. Winans (Galard v. Winans), 111 Md. 434, 74 Atl. 626 (money paid under mis- take of law). . §848, (b) Quoted in Voltz v. Voltz, 75 Ala. 555; Prince de Beam V. Winans (Galard v. Winans), 111 Md. 434, 74 Atl. 626; cited in Lud- ington V. Patton, 111 Wis. 208, 86 N. W. 571 (an instructive and im- portant case); Ehrmann v. Stitzel, 121 Ky. 751, 123 Am. St. Rep. 224, 90 S. W. 275 (partners dealing with each other in settling up the part- nership business). See, also, Tomp- kins V. Hollister, 60 Mich. 470, 27 N. W. 651; Hall v. Otterson, 52 N. J. Eq. 522, 28 Atl. 907 (an im- portant case) ; Schneider v. Schneider (Iowa), 98 N. W. 159. See, further, Parks V. Brooks, 188 Mich. 645, 155 N. W. 450 (devisee, in ignorance of his rights, sells to administrator. 1731 MISTAKE. § 849 § 849. Relief Where a Party is Mistaken as to His Own Existing Legal Rights, Interests, or Relations.^ — ^Is it pos- sible to formulate any general rule which shall be a cri- terion for all eases of relief from mistakes of law pure and simple, and without other incidental circumstances, which shall be sustained by judicial authority, and which shall furnish a principle as guide for future decisions? In my opinion, it is possible. It has been shown that where the general law of the land — the common jv^ — is involved, a pure and simple mistake in any kind of transaction cannot be relieved. Also, where a person correctly apprehends his own legaf rights, interests, and relations, a simple mis- take as to the legal /effect of a transaction into which he enters, in the absence of other determining incidents, is not ground for relief. There is, as shown in a former para- graph (§ 841), a third condition. A person may be igno- rant or mistaken as to his own antecedent existing legal rights, interests, duties, liabilities, or other relations, while he accurately understands the legal scope of a transaction into which he enters, and its legal effect upon his rights and liabilities. It will be found that the great majority, if not indeed all, of the well-considered decisions in which relief has been extended to mistakes pure and simple fall within this class ; and also, that whenever cases of this kind have arisen, relief has almost always been granted, although not always on this ground. Courts have felt the imperative demands of justice, and have aided the mistaken parties, although they have often assigned as the reason for doing so some inequitable conduct of the other party which they have inferred or assumed. The real reason for this judi- cial tendency is obvious, although it has not always been assigned. A private legal right, title, estate, interest, duty, §849, (a) This section is cited in Law Eep. 1619, 44 S. W. 96; Wooster Geib V. Eeynolds, 35 Minn. 331, 28 v. Cavender, 54 Ark. 153, 2C Am. N. W. 923; Gerdine v. Menage, 41 St. Eep. 31, 15 S. W. 192; Eenavd Minn. 417, 43 N. W. 91; Greeley v. v. Clink, 91 Mich. 1, 30 Am. St. Eep. De Cottes, 24 Fla. 475, 5 South. 239; 458, 51 N. W. 692; Livingston v. Blakemore v. Blakemore, 19 Ky. Murray (Mass.), 72 N. E. 1012. § 849 EQUITY JXJEISPEUDENCE. 1732 or liability is always a very complex conception. It neces- sarily depends so much upon conditions of fact, that it is difficult, if not impossible, to form a distinct notion of a private legal right, interest, or liability, separated from the facts in which it is involved and upon which it depends. Mistakes, therefore, of a person with respect to his own private legal rights and liabilities may be properly re- garded,^as in great measure they really are, — and may be dealt with as mistakes of fact.^ Courts have constantly felt and acted upon this view, though not always avowedly. I Lord Westbury openly declares that such misconceptions are truly mistakes of fact. Some very instructive remarks of Sir George Jessel, which I have plkced in the foot-note, will, with a slight modification of his language, apply to all instances involving this kind of error or ignorance. ^ A § 849, 1 Eaglesfield v. Marquis of Londonderry, L. K. 4 Ch. Div. 693, 702, 703. The master of rolls is speaking of a misrepresentation of the law affecting a person's private rights, but his language, with slight change, will apply to all cases of ignorance or error concerning one's own private legal interests. In my opinion, it suggests the true principle upon which to rest the action of the courts in all such instances. "It was put to me that this was a misrepresentation of law, and not of fact. . . . Was it a misrepresentation of law? A misrepresentation of law is this : when you state the facts, and state a conclusion of law, so as to dis- tinguish between facts and law. The man who knows the facts is taken to know the law; but when you state that as a fact which no doubt in- volves, as most facts do, a conclusion of law, that is still a statement of fact, and not a statement of law. Suppose a man is asked by a trades- man whether he can give credit to a lady, and the answer is, 'You may; she is a single woman of large fortune.' It turns out that the man who gave that answer knew that the lady had gone through the ceremony of marriage with a man who was believed to be a married man, and that she had been advised that the marriage ceremony was null and void, though it had not been declared so by any court, and it afterwards turned out they were all mistaken, — that the first marriage of the man was void, so that the lady was married. He does not tell the tradesman all these facts, §849, (b) Quoted in Order of 48&, 19 South. 105; Griffing v. Gisla- TJnited Commercial Travelers v. son, 21 S. D. 56, 109 N. W. 646; M'Adam (C. C. A.), 125 Fed. 358; Stahl v. Schwartz, 67 Wash. 25, 120 Alabama & Vieksbiirg Ry. Co. v. Pae. 856. Jones, 73 Miss. 110, 55 Am. St. Eep. 1733 MISTAKE. § 849 general rule permitting the jurisdiction of equity to relieve from mistakes of the law pure and simple, in all cases be- longing to this species, and confining its operation to them, would at once reduce to clearness, order, and certainty a subject which has hitherto been confessedly uncertain and confused. It would work justice, for these kinds of errors stand upon a different footing from all others, and justice and good conscience demand their relief; it would conform to sound principle, for these mistakes are in part essen- tially errors of fact ; and finally, it would explain and har- monize many decisions of the ablest courts which have hitherto seemed almost inexplicable except by violent and unnatural assumptions. I therefore venture to formulate but states that she is single. That is a statement of fact. If he had told him the whole stoi^, and all the facts, and said, 'Now, you see the lady is single,' that would have been a misrepresentation of law. But the single fact he states — that the lady is unmarried — is a statement of fact, neither more nor less; and it is not the less a statement of fact that in order to arrive at it you must know more or less of the law. There is not a single fact connected with personal status that does not, more or less, involve a question of law." If you state that a man is the eldest son of a marriage, you state a question of law, because you must know that there has been a valid marriage, and that that man was the first-born son after the marriage, or, in some countries, before. Therefore, to say it is not a representation of fact seems to arise from a confusion of ideas. It is not the less a fact because that fact involves some knowledge or relation of law. There is hardly any fact which does not involve it. If you say that a man is in possession of an estate of ten thousand pounds a year, the notion of possession is g, legal notion, and involves knowledge of law; nor can any other fact in connection with property be stated which does not involve such knowledge of law. To state that a man is entitled to ten thousand pounds consols involves all sorts of law." The decision of the master of rolls in this case was reversed by the court of appeal, but only upon a different view of the evidence from that which he took, and without in the least affecting the correctness of the observa- tions which I have quoted. § 849, (e) So, in the interesting than a year from the entry of the case of Moore v. Shook, 276 111. 47, written decree but more than a year 114 N. E. 592, the mistake of a di- after the oral decision, is treated as vorced person as to his status, by a mistake of fact, reason of which he remarried, less § 849 EQUITY JtrEISPKTJDENCE. 1734 the following general rule as being eminently just and based on principle, and furnishing a simple criterion defining the extent of the jurisdiction. The number of decisions which support it, and which it explains, is very great. Wherever a person is ignorant or mistaken with respect to his own antecedent and existing private legal rights, in- terests, estates, duties, liabilities, or other relation, either of property or contract or personal status, and enters into some transaction the legal scope and operation of which he correctly apprehends and understands, for the purpose of affecting such assumed rights, interests, or relations, or of carrying out such assumed duties or liabilities, equity will grant its relief, defensive or affirmative, treating the mistake as analogous to, if not identical with, a mistake of fact.2 d It should be carefully observed that this rule has § 849, 2 It is not claimed that all these cases were avowedly decided upon the above rule, although many of them seem to distinctly recognize it. In all of them the error was of the kind described in the text, and the rule wiU furnish a simple reason why relief was granted, which the judges sometimes failed to do : Cooper v. Phibbs, L. R. 2 H. L. 149 (A, being ignorant that certain property belonged to himself, and supposing that it belonged to B, agreed to take a lease of it from B at a certsiin rent. There was no fraud, no unfair conduct, all the parties equally knew the facts. The house of lords set aside the agreement on account of the mistake. A majority of the judges called it a mistake of fact. Lord Westbury boldly acknowledged it to be what is ordinarily called a mistake of law, but held that it was really a mistake of fact, and to be dealt with as such. The mistake was clearly one to which the term "mistake of law" has ordinarily been applied ; but it a^ clearly possessed the elements of a mistake of fact. The decision is a direct authority in support of the text) ; Bingham v. Bingham, 1 Ves. Sr. 126-; Landsdowne v. Landsdowrie, §849, (d) Quoted in Baldock v. tracts or releases): Jeakins v. Johnson, 14 Or. 542, 13 Pac. 434; Frazier, 64 Kan. 267, 67 Pac. 864; Order of United Commercial Trav- In re McFarlin, 9 Del. Ch. 430, 75 Atl. elers v. M'Adam (C. C. A.), 125 281; Moore v. Shook, 276 111. 47, 114 Fed. 358; Drake v. Wild, 70 Vt. 52, N. E. 592 (a striking ease; mistake 39 Atl. 248 (opinion apparently of law as to when a decree of di- limits the principle to cases where voree takes effect treated as a mis- the mistaken party was led into take of fact; divorced person error by the action of the other remarried more than a year after party to a transaction, as in con- the oral decision but less than a 1735 MISTAKE. § 849 no application to cases of compromise, where doubts have arisen as to the rights of parties, and they have inten- 2 Jacob & W. 205; Mos. 364; Cocking v. Pratt, 1 Ves. Sr. 400; Pusey v. Desbouvrie, 3 P. Wms. 315, 320; Cann v. Cann, 1 P. Wms. 723, 727; Marquis of Townshend v. Stangroom, 6 Ves. 328, 332 ; Broughton v. Hutt, 3 De Gex & J. 501, 504 (the heir of a stockholder in a company, the shares in which were personal estate, supposing himself liable in respect of his ancestor's shares, gave a deed of indemnity to the company. This deed was ordered to be canceled on the ground of the mistake, which was treated as one of fact as well as law) ; In re Saxon L. Ins. Co., 1 De Gex, J. & S. 29; 2 Johns. & H. 408; McCarthy v. Decaix, 2 Russ. & M. 614; Clifton V. Cockbum, 3 Mylne & K. 76, 99; Coward v. Hughes, 1 Kay & J. 443; Sturge v. Sturge, 12 Beav. 229; Davis v. Morier, 2 Coll. C. C. 303; Denys v. Shnckburgh, 4 Younge & C. 42; Reynell v. Sprye, 8 Hare, 222, 255; Ramsden v. Hylton, 2 Ves. Sr. 304; Gee v. Spencer, 1 Vjem. 32; Mildmay v. Hungerford, 2 Vem. 243; Naylor v. Winch, 1 Sim. & St. 555; Farewell v. Coker, cited 2 Mer. 353. In Reynell v. Sprye, 8 Hare, 222, Wigram, V. C, laid down the rule in complete harmony with the positions maintained in the text: "I will not attempt to define the oases in which relief is given on the ground of ignorance or mistake. They may, however, safely be distinguished from eases in which, doubts having arisen as to the rights of parties, an arrangement is made for compromis- ing those doubts. But if parties are ignorant of facts on which their rights depend, or erroneously assume that they know those rights, and year from the entry of the writ- own, subrogated to the lien); Holt ten decree in the divorce case); v. Gordon (Tex. Civ. App.), 176 Healy V. Healy, 76 N. H. 504, S. W. 902. See, also, Standard Oil 85 Atl. 156; Smith v. Jones (Tex. Co. v. Hawkins, 74 Fed. 395, 33 Civ. App.), 192 S. W. 795; Bnrton L. E. A. 739, 20 C. C. A. 468, 46 V. Haden, 108 Va. 51, 15 L. E. A. U. S. App. 115; Eenard v. Clink, 91 (N. S.) 1038, 60 S. E. 736 (see eases Mich. 1, 30 Am. St. Eep. 458, 51 collected in note) ; Stoeekle V. Kosen- N. W. 692; Swedesboro L. & B. teim (Del. Ch.), 87 Atl. 1006. This Ass'n v. Gaus (N. J. Eq.), 55 Atl. paragraph is cited and followed in 82; Hutchinson v. Fuller (S. C), 45 Eeggio V. Warren, 207 Mass. 525, 20 S. E. 164; Benson v. Bunting, 127 Am. St. Eep. 1244, 32 L. E. A. Cal. 532, 78 Am. St. Eep. 81, 59 Pae. (N. S.) 340, 93 N. E. 805; Eustis 991; Livingstone v. Murphy (Mass.), Mfg. Co. V. Saeo Brick Co., 198 72 N. E. 1012 (citing this section Mass. 212, 84 N. E. 449; Eauen v. of the text, and quoting from Prudential Ins. Co., 129 Iowa, 725, Cooper v. Phibbs: mistake as to 106 N. W. 198'; Lee v. Newell, 96 ownership is mistake of fact, ai- Neb. 209, 147 N. W. 684 (party pay- though it arises from an erroneous ing money by mistake to discharge view of the legal effect of a deed a lien on property which he did not in the claim of title); Goff v. Gott, § 849 EQUITY JUEISPKUDENCE. 1736 tionally entered into an arrangement for tlie purpose of compromising and settling those doubts. Such com- promises, whether involving mistakes of law or of fact, are governed by special considerations.^ desil with their property accordingly, not upon the principle of com- promising doubts, this court will relieve against such transactions"; citing Stockley v. Stockley, 1 Ves. & B. 23; Harvey v. Cooke, 4 Russ. 34. Blakeman v. Blakeman, 39 Conn. 320, is directly in point, and is a strik- ing illustration. A right of way had become extinguished by the pur- chase of the servient estate by A, the owner of the dominant estate. A afterwards conveyed the dominant estate to B by a deed which granted the land "with its privileges and appurtenances," but did not in express terms mention the right of way. A and B were both ignorant of the legal rule under which the right of way had become extinguished, and sup- posed it. still existed; and the price paid by B was sufficient to cover the right of way. Held, that a court of equity would relieve B by correcting the mistake. The court expressly held that there was no mistake as to the legal scope and effect of the deed, since its terms were sufficient to have conveyed the way if it had existed. It wUl be noticed that there was no ignorance nor error as to the external facts. The mistake was solely as to the legal interest, the right of property held by A, and to be affected by the conveyance. This mistake was clearly one to which the term "mistake of law" is ordinarily applied, and yet the court correctly held it to be essentially a mistake of fact, and dealt with it as such. 5 Sneed (Tenn.), 562, 2 Ames Cas. v. Joslin, 20 Okl. 200, 94 Pac. 518; Eq. Jur. 281. See, further, Lee v. New York & Cleveland Gas Coal Co. Foushee, 91 Ark. 468, 120 S. W. v. Graham, 226 Pa. St. 348, 73 Atl. 160; Butte Creek Consol. Dredging 657; Altgelt v. Gerbic (Tex. Civ. Co. V. Olney, 173 Cal. 697, 161 Pac. App.), 149 S. W. 233. Apparently, 260 (parties abandon contract under contra, are Daniels v. Dean, 2 Cal. mistaken belief that time was of App. 421, 84 Pac. 332; CampBell v. the essence); Bronson v. Leihold, 87 Newman (Old.), 151 Pac. 602; Pal- Conn. 293, 87 Atl. 979; Lewis v. mer v. Cully (Okl.), 153 Pac. 154; Mote, 140 Iowa, 698. 119 N. W. 152; Clark v. Lehigh & Wilkes-Barre Parks V. Brooks, 188 Mich. 645, 155 Coal Co., 250 Pa. St. 304, 95 Atl. N. W. 450; Houston v. , Northern 462. Pac. R. Co., 109 Minn. 273, IS Ann. § 849, (e) The text is quoted in Cas. 325, 123 N. W. 922 (party pur- New York Life Ins. Co. v. Chitten- ehases property which he already den, 134 Iowa, 613, 120 Am. St. Eep. owns); Hoy v. Hoy, 93 Miss. 732, 444, 13 Ann. Cas. 408, 11 L. R. A. 136 Am. St. Eep. 548, 17 Ann. Cas. (N. S.) 233, 112 N. W. 96; Burton 1137, 4S South. 903; Melntyre v. v. Haden, 107 Va. 51, 15, L. E. A. Casey (Mo.), 182 S. W. 966; Leak (N. S.) 1038, 60 S. E. 736. 1737 MISTAKE. § 850 §850. Compromises and Voluntary Settlements Made upon a Mistake as to Legal Rights.^ — Compromises, where doubts with respect to individual rights, especially among members of the same family, have arisen, and where all the parties,'instead of ascertaining and enforcing their mutual rights and obligations which are yet undetermined and un- certain, intentionally put an end to all controversy by a voluntary transaction in the way of a compromise, are highly favored by courts of equity. They will not be dis-1 turbed for any ordinary mistake, either of law or of fact, in the absence of conduct otherwise inequitable, since their' very object is to settle all such possible errors without a/ judicial controversy.^ There are, indeed, dicta, to the effect that a party will be relieved from a compromise in which he has surrendered property or other rights unquestionably his own, through a misconception of a clear legal rule, or an erroneous supposition that a legal duty rested upon him, whereas plainly no such duty existed; but the decisions show that these dicta must be confined to circumstances which render the compromise itself a virtual surprise, or to cases in which it was induced by positive inequitable con- There could be no more admirable an illustration of the remarks of Sir G. Jessel, quoted in a preceding note. See also Whelen's Appeal, 70 Pa. St. 410; Hearst v. Pujol, 44 Cal. 230; Morgan v. Dod, 3 Col. 551,' ZoUman v. Moore, 21 Gratt. 313, is directly conflicting. If the position of the text is correct, it cannot be sustained; and on any view it seems opposed to the weight of authority, English and American. §849, (f) Daniel! v. Sinclair, 6 Appeal of Ward (Coim.), 54 Atl. App. Cas. (Priv. Coun.) 181; Blake- 731. more v. Blakemore, 19 Ky. Law § 850, (b) The text is quoted in Eep. 1619, 44 S. W. 96; Geib v. Eey- Burnes v. Burnes, 132 Fed. 485, nolds, 35 Minn. 331, 28 N. W. 923; 494; Andrews v. Connolly, 145 Fed. Gerdine v. Menage, 41 Minn. 417, 43 43; Dalpine v. LHime, 145 Mo. App. N. W. 91; Blair v. Chicago etc. R. E. 549, 122 S. W. 776; Swiger v. Co., 89 Mo. 383, 1 S. W. 350; Bal- Swiger, 58 W. Va. .119, 52 S. E. 23; dock V. Johnson, 14 Or. 542, 13 Pac. and cited in Bree v. Wheeler, 4 Cal. 434. App. 109, S7 Pac. 255; Huggins v. § 850, (a) This section is cited in Price, 96 S. C. 83, 79 S. E. 798. § 850 EQUITY JTJEISPKUDENCE. 1738 duct of the other parties.^ ^ Voluntary settlements are so favored that if a doubt or dispute exists between parties with respect to their rights, and all have the same knowl- edge, or means of obtaining knowledge, concerning the cir- cumstances involving these rights, and there is no fraud, misrepresentation, concealment, or other misleading inci- dent, a compromise into which they thus voluntarily enter must stand and be enforced, although the final issue may be different from that which was anticipated, and although the disposition made by the parties in their agreement may not be that which the court would have decreed had the controversy been brought before it for decision.^ d Of §850, INaylor v. Winch, 1 Sim. & St. 555, 564; Bingham v. Bing- ham, 1 Ves. Sr. 126; and see Willan v. WiUan, 16 Ves. 72; Gross v. Leber, 47 Pa. St. 520; Light v. Light, 21 Pa. St. 407, 412; Cabot v. Has- kins, 3 Pick. 83; Larkins v. Biddle, 21 Ala. 252, 256. § 850, 2 Stapilton v. StapUton, 1 Atk. 2; 2 Lead. Cas. Eq., and notes, 1675, 4th Am. ed.,; Naylor v. Wineh, 1 Sim. & St. 555; Ex parte Lucy, 4 De Gex, M. & G. 356; Brooke v. Lord Mostyn, 2 De Gex, J. & S. 373; Bullock V. Downes, 9 H. L. Cas. 1; Stewart v. Stewart, 6 Clark & F. 911, 969; Trigge v. Lavallee, 15 Moore P. C. C. 27.0; Parker v. Palmer, 1 Cas. Ch. 42; Baxendale v. Seale, 19 Beav. 601; Pickering v. Pickering, 2 Beav. § 850, (c) The text ia quoted in Mclsaac v. MeMurray, 77 N. H. 466, Dalpine v. Lume, 145 Mo. App. 93 Atl. 115. The text is cited and 549, 122 S. W. 776. See, also, followed in Kiefer Oil & Gas Co. v. Hinckman v. Berens, [1895] 2 Ch. McDougal, 229 Fed. 933, Ann. Cas. 638 (compromise of counsel set aside 1916D, 343, 144 C. C. A. 215; Butson where counsel consented under a v. Misz, 81 Or. 607, 160 Pac. '580. misapprehension, such as where, in- See, also, Martin v. Martin, 98 Ark. tending to concede one thing he 93, 135 S. W. 348 (family settle- inadvertently concedes another, or ment) ; Coolin v. Anderson, 26 Idaho, where the counsel on both sides are 47, 140 Pac. 969 (purchaser took his not ad idem) ; and Ee Roberts, chances on question of title, known [1905] 1 Ch. 704 (solicitor misin- to be doubtful) ; HaD v. 'Wheeler, 37 formed parties as to the purport of Minn. 522, 35 N. W. 377; BeU v, the opinion by counsel, whose ad- White, 76 N. J. Eq. 49, 73 Atl. 861 vice had been asked). Wells v. Neff, 14 Or. 66, 12 Pac §850, (d) This portion of the text 84, 88; Gormly v. Gormly, 130 Pa, is quoted in Gilliam v. Alford, 69 St. 467, 18 Atl. 727; Smith v. Tan- Tex. 267, 6 S. W. 757; Dalpine v. ner, 32 S. C. 259, 10 S. E. 1008; Lume, 145 Mo. App. 549, 122 S. W. Gilliam v. Alford, 69 Tex. 267, 6 776 (compromise not disturbed); S. W. 757. 1739 MISTAKE. § 851 course, there must not only be no representation, im- position, or concealment; there must also be a full dis- closure of all material facts within the knowledge of the parties, whether demanded or not by the others.^ In the words of a distinguished judge: "There must not only be good faith and honest intention, but full disclosure; and without full disclosure, honest intention is not sufficient." If these requisites of good faith exist, it is not necessary that the dispute should be concerning a question really doubtful, if the parties bona fide consider it so ; it is enough that there is a question between them to be settled by their compromise.3 * The foregoing I'ules apply to all cases of compromise, whether the doubtful questions to be settled relate to matters of law or of fact.'* § 851. Payments of Money Under a Mistake of Law.^ — The general rule stated in the paragraph before the last, 31, 56; Lawton v. Campion, 18 Beav. 87; Heap v. Tonge, 9 Hare, 90; Reynell v. Sprye, 8 Hare, 222, 254; Gordon v. Gordon, 3 Swanst. 400, 463; Westby v. Westby, 2 Dru. & War. 502; Leonard v. Leonard, 2 Ball & B. 176, 179; Neale v. Neale, 1 Keen, 672; Greenwood v. Greenwood, 2 De Gex, J. & S. 28, 42, per Turner, L. J.; Harvey v. Cooke, 4 Russ. 34; Attwood V. , 5 Russ. 149; Clifton v. Cockbum, 3 Mylne & K. 76; Good V. Herr, 7 Watts & S. 253; Stub v. Leis, 7 Watts, 43; Shartel's Appeal, 64 Pa. St. 25; Wistar's Appeal, 80 Pa. St. 484; Brandon v. Med- ley, 1 Jones Eq. 313; Bell v. Lawrence, 51 Ala. 160. The requirement of complete frankness and full disclosure applies with especial force when the parties stand toward each other in any prior existing relation of trust and confidence: See Pusey v. Desbouvrie, 3 P. Wms. 315; Sturge V. Sturge, 12 Beav. 229. §850, 3 Ex p".rte Lucy, 4 De Gex, M. & G. 356; Neale v. Neale, 1 Keen, 672. §^50, 4 Neale v. Neale, 1 Keen, 672; Westby v. Westby, 2 Dru. & War. 502 ; and see post, § 855, and cases there cited. § 850, (e) The text is cited in John Wilson Estate Co. v. Dammeier Multnomah County v. Dekum, 51 Inv. Co., 83 Or. 283, 163 Pac. 590. Or. 83, 16 Ann. Cas. 933, 93 Pae. § 851, (a) This section is cited in 821, limiting the duty of full dis- Gilliam v. Alford, 69 Tex. 267, 6 closure to cases where there is some S. W. 757; Crippen v. Chappel, 35 fiduciary relation between the par- Kan. 495, 57 Am. Eep. 187, 11 Pac. ties. See pos*, §§ 900-907. 453; Scott v. Slaughter (Tex. Civ, §850, (f) The text is quoted in App.), 80 S. W. 643. § 851 EQUITY JUEISPEUDENOE. 1740 concerning mistakes as to one's own private legal rights and duties, is also subject to another important limitation. It is settled at law, and the rule has been followed in equity, that money paid under a mistake of law with respect to the liability to make payment, but with full knowledge, or with means of obtaining knowledge, of all the circumstances, can- not be recovered back.^ ^ There is an exception, as in the § 851, 1 Bilbie v. Lumley, 2 East, 469; Rogers v. Ingham, L. E. 3 Ch. Div. 351, 356, 357; Bate v. Hooper, 5 De Gex, M. & G. 338; Stafford v. Stafford, 1 De Gex & J. 193, 197; Great Western R'y v. Cripps, 5 Hare, 91; Drewry v. Barnes, 3 Russ. 94; Goodman v. Sayers, 2 Jacob & W. 249, 263; Currie y. Goold, 2 Madd. 163; Railroad Co. v. Soutter, 13 WaU. 517, 524; Bank of United States v. Daniel, 12 Pet. 32; Elliott v. Swart- out, 10 Pet. 137; Haven v. Poster, 9 Pick. 112, 19 Am. Dec. 353; Clarke v. Dutcher, 9 Cow. 674; Ege v. Koontz, 3 Pa. St. 109; ShotweU v. Murray, 1 Johns. Ch. 512, 516; Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316 ; Livermore v. Peru, 55 Me. 469. If the doctrine formulated in § 849 be correct, then it seems that this particular rule forbidding the recovery back of money paid under a mistake of law is based upon an. erroneous conception of the principle which should govern such cases, and the opinions of those jurists which uphold the right of recovery, quoted ante, in the note under § 841, appear to be correct in principle. This rule it- self is an illustration of the disinclination of equity courts to depart from a doctrine, settled at law, when the rights and the remedies are the same in both jurisdictions. § 851, (b) Painter v. Polk County, otherwise, both at law and in 81 Iowa, 242, 25 Am. St. Eep. 489, equity; the doctrine statefl in § 849 47 N. W. 65; Alton v. First Kat. applies: Mansfield v. Lynch, 59 Bank, 157 Mass. 341, 34 Am. St. Conn. 320, 12 L. E. A. 285, 22 Atl. Eep. 285, IS L. E. A. 144, 32 N. E. 313, citing Northrop v. Graves, 19 228; Erkens V. Nieolin, 39 Minn. 461, Conn. 548, 50 Am. Dec. 264. Ken- 40 N. W. 567; Gilliam v. Alford, 69 tucky appears to follow Couneeti- Tex. 267, 6 S. W. 757; Beard v. cut: Scott v. Board of Trustees, 132 Beard, 25 W. Va. 486, 52 Am. Eep. Ky. 616, 21 L. E. A. (N. S.) 11?, 116 219; Shriver v. Garrison, 30 W. Va. S. W. 788. 456, 4 S. E. 660; Scott v. Slaughter In Daniell v. Sinclair, 6 App. Cas. (Tex. Civ. App.), 80 S. W. 643.- See, (Priv. Coun.) 181, it was held that also, Scott V. Ford, 52 Or. 288, 97 giving credit in an account under a Pac. 99; Leach v. Cowan, 125 Tenn. mistake of law does not prevent the 182, Ann. Cas. 19-13C, 188, 140 S. W. reopening of the account in equity, 1070; Peacock Mill Co. v. Honey- though under some circumstances cutt, 55 Wash. 18, 103 Pac. 1112. giving such credit may at law be In Connecticut the rule seems to be treated as equivalent to payment. 1741 MISTAKE. § 852 ease of compromises, when the erroneous payment is in- duced or accompanied by a violation of confidence reposed, lack of full disclosure, misrepresentation as to liability, or other similar inequitable conduct.^ c § 852, Second. Mistakes of Facts.^ — The general doc- trine is firmly settled as one of the elementary principles of the equitable jurisdiction, that a court of equity will grant its affirmative or defensive relief, as may be required by the circumstances, from the consequences of any mistake of fact which is a material element of the transaction, and which is not the result of the mistaken party's own violation of some legal duty, provided that no adequate remedy can be had at law.^ It has been said, "No person can be pre- sumed to be acquainted with all matters of fact connected with a transaction in which he engages." This general doctrine is applied in a great variety of forms and under a great variety of circumstances. It presents but few tlieo- § 851, 2 Bingham v. Bingham, 1 Ves. Sr. 126 ; Davis v. Morier, 2 Coll. C. C. 303; Ex parte James, L. R. 9 Ch. 609; Rogers v. Ingham, L. R. 3 Ch. Div. 351, 356 ; Pusey v. Desbouvrie, 3 P. Wms. 315. § 851, (c) See ante, § 848, where App. 532, 64 N. E. 901. Sections parties are in relation of trust; 852-855 are cited in Abbott v. Prince de Beam v. Winans (Galard Flint's Adm'r, 78 Vt. 274, 62 Atl. V. Winans), 111 Md. 434, 74 Atl. 721. Sections 852-870 are cited in 626. Also, the rule applicable to Miles v. Miles (Miss.), 37 South, private litigants does not apply to a 112. case where money is by mistake of §852, (b) Quoted in Farrell v. law paid to an officer of the court; Bouck, 60 Neb. 771, 84 N. W. 260, the court will not allow him to take and in Sehirraer v. Union Brewing advantage of the mistake, but will- & Malting Co., 26 Cal. App. 169, 146 order the money to be refunded: Ex Pac. 194. This section is cited in parte Simmonds, L. E. 16 Q. B. D. Silbar v. Eyder, 63 Wis. 106, 23 308; In re Opera, Limited, [1891] 2 n. W. 106; Barker v. Fitzgerald Ch. 154; Gillig v. Grant, 49 N. Y. (HI.), 68 N. E. 430; State v. Illinois Suppl. 78, 23 App. Div. 596; Car- Central E. Co., 246 HI. 188, 92 N. E. penter v. Southworth, 165 Fed. 428, 814; Allen v. Luekett, 94 ^iss. ?68, 91 C. C. A. 378 (trustee in bank- isg Am. St. Eep. 605, 48 South. 186; ruptcy). Ehrmann v Stitzel, 121 Ky. 751, 123 § 852, (a) Sections 852-854 are Am. St. Eep. 224, 90 S. W. 275. cited in Earl v. Van Natta, 29 Ind. § 853 EQUITY JTJKISPBTJDENCB. 1742 retical difficulties; its practical difficulties arise from its application to particular instances of relief, and this ap- plication must be largely controlled by the circumstances of each case. § 853. How MistaJses of Fact may Occur.-^All mistakes of fact in agreements executed or executory, express or im- plied, must be concerning either the subject-matter or the terms. In the first case, the terms .are stated, according to the intent of both the parties, but there is an error of one i or both in respect of the thing to which these terms apply, — ) its identity, situation, boundaries, title, amount, value, and the like.a Such a mistake may relate to any kind of subject- matter, and may occur in a verbal as well as in a written agreement. In the second case, the mistake may arise after the parties have verbally concluded their agreement, and may occur in reducing that agreement to writing, by errone- ously adding, omitting, or altering some term ; ^ or it may arise in the very process of making the agreement, during the negotiation itself, one or both the parties misconceiving, misunderstanding, or even being entirely ignorant of some term or provision; so that, although they appear to have made an agreement, yet in fact their minds never met upon the same matters.^ While this latter species of error is not infrequent, it generally consists in a mistake or ignorance as to the legal effect of the provision, rather than as to the language in which the provision is expressed. The same description will plainly apply to all forms of mistakes of fact in transactions which are not agreements. § 853, (a) The text is quoted in tracted to be sold) ; Eing v. May- Allen V. Luekett, 94 Miss. 868, 136 berry, 168 N. C. 563, 84 S. E. 846, Am. St. Eep. 605, 48 South. 186. citing the text. The text is quoted § 853, (b) See Citizens' Nat. Bank in Schirmer v. Union Brewing & of Attica V. Judy, 146 Ind. 322, 43 Malting Co., 26 Cal. App. 169, 146 N. E. 259, citing this paragraph of Pac. 194. the text; Abbott v. Dow, 133 Wis. §853, (e) See Crookston Imp. Co. 533, 113 N. W. 960, also citing the v. Marshall, 57 Minn. 333, 47 Am. text (written instrument described St. Rep. 612, 59 N. W. 294, citing a different parcel from that con- this paragraph of the text. 1743 MISTAKE. § 854 § 854. In What Mistakes of Fact may Consist.^— It would be impossible, within any reasonable limits, to enu- merate the various forms in which mistakes of fact may appear; and such an enumeration is not at all necessary; some important illustrations will be given in subsequent chapters which treat of reformation and cancellation. A general description of all the possible phases will be suffi- cient. It will be remembered that the essential element of mistake was defined to be a mental condition or conception or conviction of the understanding. This mental condition may be either a passive state or an active conviction. When merely passive, it may consist of an unconsciousness, an ig- norance, or a forgetfulness ; when active, it must be a belief. In the first of these two conditions, the unconsciousness, ignorance, or forgetfulness may be either of a fact which is present and now existing, or of a fact which is past and has existed; they must always concern a fact material to the transaction. In the second condition, the belief may be either that a certain matter or thing exists at the present time, which really does not exist; or that a certain matter or thing existed at some past time, which did not really exist. All possible forms of mistakes of fact are embraced within this description ; and all particular errors which fall under any of these conditions are mistakes of fact which furnish an occasion for equitable relief.^ The law of a foreign country or of another state is always regarded as a "fact," within the meaning of the term as used in the foregoing description; an error or ignorance concerning such law is therefore a mistake of f act.^ ^ It necessarily § 854, 1 See ante, cases under § 839. § 854, 2 McCormick v. Garnett, 5 De Gex, M. & G. 278 ; Leslie v. Bail- lie, 2 Younge & C. 91; Haven v. Foster, 9 Pick. Ill, 112, 19 Am. Dec. § 854, (a) This section is cited in L. K. A. 319, 53 N. E. 154; Pearson Stacey v. Walter, 125 Ala. 291, 82 v. Dancer, 144 Ala. 427, 39 South. Am. St. Kep. 235, 28 South. 89; 474. Barker V. Fitzgerald (111.), 68 N. E. §854, (b) Mistake of Foreign 430; Hall v. First Nat. Bank, 173 Law. — Ellison v. Branstator, 153 Mass. 16, 73 Am. St. Eep. 255, 44 Ind. 146, 54 N. E. 433; Nicholson v. § 854 EQUITY JtmiSPEUDENCE. 1744 follows from this description that where an act is done in- tentionally and with knowledge, the doing the act cannot be treated as a mistake. Thus if parties knowingly and intentionally add to or omit from their written agreement • a certain provision, such adding to or omission cannot con- stitute a mistake, so as to be a ground for relief.^ e 353; Bank of Chillicothe v. Dodge, 8 Barb. 233; Merchants' Bank v. Spalding, 12 Barb. 302; Patterson v. Bloomer, 35 Conn. 57, 95 Am. Dec. 218. § 854, 3 The exact import of this rule should not be misapprehended. The parties may be in error as to the legal effect of the addition or omis- sion; this would be a mistake of law which, as has been shown, would not be relieved. They might also be mistaken as to the subject-matter of the provision added or omitted, or possibly as to its lang^uage, and such an error might be a mistake of fact. The rule of the text simply declares that when an act is done intentionally and knowingly, the very doing it- self cannot be treated as a mistake entitled to relief; the elements of knowledge and intention contradict the essential conception of mistake; See Marquis of Townshend v. Stangroom, 6 Ves. 328, 332; Lord Imham V. Child, 1 Brown Ch. 92; Lord Portmore v. Morris, 2 Brown Ch. 219; Hare v. Shearwood, 3 Brown Ch. 168; Cripps v. Jee, 4 Brown Ch. 472; Pitcairn v. Ogboume, 2 Ves. Sr. 375; Betts v. Gunn, 31 Ala. 219. Where a verbal stipulation is made at the same time as the written con- tract, and is omitted intentionally on the faith of an assurance that it shall be as binding as though incorporated into the writing, the rule as generally settled does not permit such provision to be proved and en- forced. It is said that, there being no fraud or mistake, to aUow the verbal term to be proved by parol evidence, and the written agreement to be thereby varied, would be a violation of the statute of frauds, and would introduce aU the evils which the statute was designed to prevent. The relief given in cases of fraud and mistake stands upon different grounds; although appearing to conflict with the statute, it is really carrying out the ultimate purposes of the legislature by preventing in- Nicholson, 83 Kan. 223, 109 Pac. 60 S. E. 455. The text is cited in 1086; Osineup v. Henthorn, 89 Kan. Meaeham Contracting Co. v. City of 58, Ann. Cas. 1914C, 1262, 130 Pac. Hopkinsville, 164 Ky. 703, 176 S. W. 652. See, also, ante, § 839, end. 187; Miles v. Shreve, 179 Mich., § 854, (c) Intentional Addition to, 671, 146 N. W. 374; Schwartzmau v. Or Omission from, a Written Agree- Creveling, 85 N. J. Eq. 402, 96 Atl. ment. — Hall v. First Nat. Bank, 173 896; Luckenbach v. Thomas (Tex. Mass. 16, 73 Am. St. Kep. 255, 44 Civ. App.), 166 S. W. 99; White t. L. R. A. 319, 53 N. B. 154. See, Hall, 113 Va. 427, 74 S. E. 212. also, Cappa v. Edwards, 130 Ga. 146, 1745 MISTAKE, § 855 § 855. Compromises and Speculative Contracts. — When parties have entered into a contract or arrangement based upon uncertain or contingent events, purposely as a com- promise of doubtful claims arising from them, and where parties have knowingly entered into a speculative contract or transaction, — one in which they intentionally speculated as to the result, — and there is in either case an absence of bad faith, violation of confidence, misrepresentation, con- jnstice. No such grounds, it is said, exist where parties have intentionally omitted provisions from their written agreements : See cases cited above ; also Stevens v. Cooper, 1 Johns. Ch. 425, 7 Am. Dec. 499; Dwight v. Pomeroy, 17 Mass. 303, 9 Am. Dec. 148 ; Towner v. Lucas, 13 Gratt. 705 ; Broughton v. Coffer, 18 Gratt. 184; Knight v. Bunn, 7 Ired. Eq. 77; Westbrook v. Harbeson, 2 McCord Eq. 112 ; Ware v. Cowles, 24 Ala. 446, 60 Am. Dec. 482. There are cases, however, which seem to reject this conclusion, and allow the verbal stipulation to be proved and enforced, and the written agreement to be reformed, on the ground that the refusal to abide by the whole agreement, and the attempt to enforce that portion only which is written, constitute a fraud which equity ought to prohibit: See Murray v. Dake, 46 Cal. 644; Taylor v. Gilman, 25 Vt. 411; Coger's Ex'rs V. McGee, 2 Bibb, 321, 5 Am. Dec. 610 ; Rearich v. Swinehart, 11 Pa. St. 233, 51 Am. Dec. 540; Eenshaw v. Gans, 7 Pa. St. 119; Clark v. Partridge, 2 Pa. St. 13, 4 Pa. St. 166; Oliver v. Oliver, 4 Rawle, 141, 26 Am. Dec. 123; Miller v. Henderson, 10 Serg. & R. 290; Campbell v. Mc- Clenachan, 6 Serg. & E. 171.'* Whether affirmative relief be permitted or not, the omitted verbal portion of the entire agreement may be set up by way of defense in equity, when an attempt is made to enforce the written part alone: Jaryis v. Berridge, L. E. 8 Ch. 351 (a very important case); and see Quinn v. Roath, 37 Conn. 16; Murray v. Dake, 46 Cal. 644.« § 854, (d) The author's note is § 854, (e) See, also, the instruc- quoted in Pickrell & Craig Co. v. tive opinion of Pitney, V. C, in Castleman Blakeman Co., 174 Ky. 1, O'Brien v. Paterson Brewing etc. 191 S. W. 680. See, also, Meactam Co., 69 N. J. Eq. 117, 61 Atl. 437 Contracting Co. v. City of Hop- (note and mortgage made on oral kinsville, 164 Ky. 703, 176 S. W. agreement that they should not be 187 (reformation, where a separate enforced, on the mortgagee's repre- agreement is proved that a certain sentation that they were required clause in a written contract should as a convenience of bookkeeping; have a different meaning from that parol evidence of the agreement ad- expressed), mitted in suit to enjoin collection). 11—110 § 855 EQUITY JURISPETJDEITCB. 1746 cealment, and other inequitable conduct mentioned in a former paragraph, if the facts upon which such agreement or transaction was founded, or the event of the agreement itself, turn out very different from what was expected or anticipated, this error, miscalculation, or disappointment, ! although relating to matters of fact, and not of law, is not \sueh a mistake, within the meaning of the equitable doc- trine, as entitles the disappointed party to any relief either by way of canceling the contract and rescinding the trans- action, or of defense to a suit brought for its enforcement. In such classes of agreements and transactions, the parties are supposed to calculate the chances, and they certaialy assume the risks, where there is no element of bad faith, breach of confidence, misrepresentation, culpable conceal- ment, or other like conduct amounting to actual or con- structive fraud.i* § 855, 1 Stapilton v. Stapilton, 1 Atk. 2; 2 Lead. Cas. Eq., 4th Am. ed., 1676, and notes ; Jefferys v. Fairs, L. R. 4 Ch. D. 448 ; Pickering v. Pick- ering, 2 Beav. 31, 56; Lawton v. Champion, 18 Beav. 87; Baxendale v. Scale, 19 Beav. 601; Ha3rwood v. Cope, 25 Beav. 140; Colby v. Gadsden, 34 Beav. 416; Jennings v. Broughton, 17 Beav. 234; Mellers v. Duke of Devonshire, 16 Beav. 252; Stanton v. Tattersall, 1 Smale & G. 529; Ridg- way V. Sneyd, Kay, 627; Parker v. Palmer, 1 Cas. Ch. 42; Anonjmious, cited in Cooth v. Jackson, 6 Ves. 24 ; Ex parte Peake, 1 Madd. 346, 355 ; Cann v. Cann, 1 P. Wms. 722, 727; Stoekley v. Stockley, 1 Ves. & B. 23, 29, 31; Naylor v. Winch, 1 Sim. & St. 555; Goodman v. Sayers, 2 Jacob & W. 249, 263; Dunnage v. White, 1 Swanst. 137, 151, 152; Gordon v. Gordon, 3 Swanst. 400, 470; Harvey, v. Cooke, 4 Russ. 34; Leonard v. § 855, (a) This entire section is E. E. & L. Co., 103 Wis. 472, 74 Am. quoted in Colton v. Stanford, 82 St. Rep. 877, 79 N. W. 762. See, Cal. 389, 16 Am. St. Eep. 137, 23 also. Cooper v. Austin, 58 Tex. 494; Pac. 16; and in New York Life Ins. Ancient Order of United Workmen Co. V. Chittenden, 134 Iowa, 613, 120 v. Mooney, 230 Pa. St. 16, 79 Atl. Am. St. Eep. 444, 13 Ann. Cas. 408, 233. As to the requisite of good 11 L. E. A. (N. S.) 233, 112 N. W. faith, see Anthony v. Boyd, 15 E. I. 96. The text is quoted, also, in 495, 8 Atl. 701, 10 Atl. 657; Mc- Taber v. Piedmont Heights Building Harry v. Irvin, 85 Ky. 322, 3 S. W. Co., 25 Cal. App. 222, 143 Pac. 319. 374, 4 S. W. 800. See, also, White This section is cited in Chicago & v. Hewitt, 87 S. C. 576, 68 S. E. 820 N. W. E. Co. V. Wilcox (C. C. A.), (unfair concealment of material fact 116 Fed. 913; Kowalke v. Milwaukee ground for relief from compromise). 1747 MISTAKE. ' § 856 §856. Requisites to Relief — Mistake must be Material and Free from Culpable Negligence. — There are two requi- sites essential to the exercise of the. equitable jurisdiction in giving any relief defensive or affirmative. The fact con- cerning which the mistake is made must be material to the transaction, affecting its substance, and not merely its in- cidents; and the mistake itself must be so important that it determines the conduct of the mistaken party or par- ties.* If a mistake is made by one or both parties in refer- ence to some fact which, though connected with the transac- tion, is merely incidental, and not a part of the very subject-matter, or essential to any of its terms, or if the complaining party fails to show that his conduct was in reality determined by it, in either case the mistake will not be ground for any relief affirmative or defensive.^^ As Leonard, 2 Ball & B. 171, 179, 180; Stewart v. Stewart, 6 Clark & F. 911,' 969; Shotwell v. Murray, 1 Johns. Ch. 512, 516; Good v. Herr, 7 "Watts & S. 253; Brandon v. Medley, 1 Jones Eq. 313; Durham v. Wad- lington, 2 Strob. Eq. 258; Williams v. Sneed, 3 Coldw. 533; Stover v. Mitchell, 45 111. 213 ; Bell v. Lawrence, 51 Ala. 160 ; and see ante, § 850, and cases cited. It is to this kind of agreements and transactions that the rules properly apply which have sometimes been incorrectly laid down as requisite to relief in all species of mistakes (see 1 Story Eq. Jur., sees. 146-149; Snell's Equity, p. 376), viz., that if the party could by reason- able diligence have obtained knowledge of the facts, equity will not re- lieve; also when means of information are equally open to both parties, and no confidence is reposed, and there is no violation of a duty to dis- close, equity will not relieve: See Pickering v. Pickering, 2 Beav. 31, 56, per Lord Langdale; and Clapham v. ShUlito, 7 Beav. 146, 149, 150. § 856, 1 Stone v. Godfrey, 5 De Gex, M. & G. 76, 90, per Turner, L. J.; Okill v. Whittaker, 1 De Gex & S. 83; 2 Phill. Ch. 338; Trigge v. § 856, (a) Quoted in Pearee v. This section is cited in Buckley v. Suggs, 85 Tenn. 724, 4 S. W. 526; Patterson, 39 Minn. 250, 39 N. W. Murray v. Paquin, 173 Fed. 319; 490; Barker v. Fitzgerald (111.), 68 Lamoreaux & Peterson v. Phelan, N. B. 430; Ehrmann v. Stitzel, 121 Shirley & Callaghan, 89 Neb. 47, 130 Ky. 751, 123 Am. St. Eep. 224, 90 N. W. 988; Schirmer v. Union Brew- S. W. 275; Edwards v. Trinity & B. ing & Malting Co., 26 Cal. App. 169, V. B. Co., 54 Tex. Civ. App. 334, 146 Pao. 194; Edwards v. Trinity & 118 S. W. 572. B. V. R. Co., 54 Tex. Civ. App. 334, § 856, (b) Mistake must be Mate- 118 S. W. 572; Cogswell v. Boston rial. — Quoted in Kowalke v. Milwau- & M. E. E. (N. H.), 101 Atl. 145. kee E. E. & L. Co., 103 Wis. 472, 74 §856 EQUITY JUKISPKUDENCB. 1748 a second requisite, it has sometimes been said in very general terms that a mistake resulting from the complain- ing party's own negligence will never be relieved. This proposition is not sustained by the authorities. It would be more accurate to say that where the mistake is wholly caused by the want of that care and diligence in the trans- action which should be used by every person of reason- able prudence, and the absence of which would be a vio- lation of legal duty, a court of equity will not interpose its relief ; but even with this more guarded mode of state- ment, each instance of negligence must depend to a great extent upon its own circumstances.^ « It is not every negli- Lavallee, 15 Moore P. C. C. 270, -276; Carpmael v. Powis, 10 Beav. 36, 39; Penny v. Martin, 4 Johns. Ch. 566; Segur v. Tingley, 11 Conn. 134; Weaver v. Carter, 10 Leigh, 37; Txigg v. Read, 5 Humph. 529, 42 Am. Dec. 447; McFerran v. Taylor, 3 Craneh, 270; Henderson v. Diekey, 35 Mo. 120; Paulison v. Van Iderstine, 28 N. J. Eq. 306; Dambmann v. Schulting, 75 N. T. 65, 63; Stettheimer v. KiUip, 75 N. Y. 282. § 856, 2 Duke of Beaufort v. Neeld, 12 Clark & F. 248, 286; Leuty v. Hillas, 2 De Gex & J. 110; Wild v. Hillas, 28 L. J. Ch. 170; Besley v. Besley, L. E. 9 Ch. Div. 103; West. R. R. v. Babcoek, 6 Met. 346; Diman V. Providence R. R., 5 R. I. 130; Voorhis v. Murphy, 26 N. J. Eq. 434; Dillett V. Kemble, 25 N. J. Eq. 66; Haggerty v. McCanna, 25 N. J. Eq. 48; Wood v. Patterson, 4 Md. Ch. 335; Capehart v. Mhoon, 5 Jones Eq. Am. St. E,ep. 877, 79 N. W. 762; Sim- mons v. Palmer, 93 Va. 389, 25 S. B. 6; Murray v. Paquin, 173 Fed. 319; Lamoreaux & Peterson v. Phelan, SMrley & Callaghan, 89 Neb. 47, 130 N. W. 988; Cogswell v. Boston & M. E. E. (N. H.), 101 Atl. 145; Schir- mer v. Union Brewing & Malting Co., 26 Cal. App. 169, 146 Pae. 194 (mistake held material); Edwards v. Trinity & B. V. E. Co., 54 Tex. Civ. App. 334, 118 S. W. 572; cited to this point in Pacific Mut. Life Ins. Co. of California v. Glaser, 245 Mo. 377, 45 L. R. A. (N. S.) 222, 150 S. W. 549. See, also, Daggett v. Ayer, 65 N. H. 82, 18 Atl. 169; Hannah v. Steinman, 159 Cal. 142, 112 Pac. 1094 (that lot leased has been placed within fire limits is material) ; Stew- art v. Tieonic Nat. Bank, 104 Me. 578, 72 Atl. 741; Northwest Thresher Co. V. McNinch, 42 Okl. 155, 140 Pae. 1170; Finch v. Causey, 107 Va. 124, 57 S. E. 562; Cole v. Hunter Tract Improvement Co., 61 Wash. 365, Ann. Cas. 1912C, 749, 32 L. R. A. (N. S.) 125, 112 Pac. 368 (vendor sells to a negro, supposing purchaser to be a white man). §856, (c) Effect of Negligence.— Quoted in Kinney v. Ensmenger, 87 Ala. 340, 6 South. 72; San Antonio Nat. Bank v. McLane (Tex.), 70 S. W. 201; quoted, also, in Bank of Union v. Eedwine, 171 N. C. 559, 88 1749 MISTAKE. § 856 gence that will stay the hand of the court. The conclusion j from the best authorities seems to be, that the neglect 1 must amount to the violation of a positive legal duty. ( 178; Lewis v. Lewis, 5 Or. 169; Ferson v. Sanger, 1 Wood. & M. 138; and see cases ante, under § 839. As examples : Under the original form of the two jurisdictions, a party who had a good defense or cause of ac- tion at law, and through negligence failed to set it up or enforce it, could not obtain relief in equity : •* Stephenson v. Wilson, 2 Vern. 325 ; Ware v. Horwood, 14 Ves. 29, 31; Drewry v. Barnes, 3 Russ. 94; Bateman v. WUloe, 1 Schoales & L. 201. The purchaser of an estate, who had been compelled to give it up from a defect in the title which his attorney had carelessly overlooked, could not recover back the purchase price which he had paid : Urmston v. Pate, 3 Ves. 235, note ; and see Gator v. Lord Pem- broke, 1 Brown Ch. 301; 2 Brown Ch. 282; Thomas v. Powell, 2 Cox, 394. When a person neglects to perform some legal obligation, and thereby incurs a forfeiture, equity will not relieve therefrom: Gregory V. Wilson, 9 Hare, 683, 689 ; and see ante, § 452. And if a person exe- cutes an instrument carelessly, without even reading it, equity may re- fuse to relieve him from the consequences of errors in its contents:* Glenn v. Statler, 42 Iowa, 107, 110; and see Butman v. Hussey, 30 Me. 263; Juzan v. Toulmin, 9 Ala. 662, 44 Am. Dec. 448; Hill v. Bush, 19 Ark. 522. S. E. 878; Edwards v. Trinity & B. Eep. 303, 63.Atl. 303; Solenberger V. E. Co., 54 Tex. Civ. App. 334, 118 v. Striekler's Adm'r, 110 Va. 273, S. W. 572; cited in Greil v. Tillis, 65 S. E. 566. 170 Ala. 391, 54 South. 524. See, § 856, (d) See § 1361, note, also, Champion v. Woods, 79 Cal. 17, § 856, (e) Failure to Read Instru- 12 Am. St. Bep. 126, 21 Pae. 534; ment. — Metropolitan Loan Ass'n v. Boulden v. Wood, 96 Md. 332, 53 Esche, 75 Cal. 513, 17 Pac. 675; Atl. 911; Powell v. Heisler, 16 Or. Eoundy v. Kent, 75 Iowa, 662, 37 412, 19 Pac. 109; Seeley v. Bacon N. W. 146; Thompson v. Ela, 58 N. (N. J. Eq.), 34 Atl. 139; Southern P. H. 490; Kennerty v. Phosphate Co., & W. Co. V. Ozment, 132 N. C. 839, 21 S. C. 226, 53 Am. Rep. 669; Cape 44 S. E. 681; Pearce v. Suggs, 85 Pear Lumber Co. v. Matheson (S. Tenn. 724, 4 S. W. 526; Durkee v. C), 48 S. E. Ill; Perrell v. Perrell, Durkee, 59 Vt. 70, 8 Atl. 490. See, 53 W. Va. 515, 44 S. E. 187. See, further, Bailey v. Lisle Mfg. Co., also, Greil v. Tillis, 170 Ala. 391, 54 238 Fed. 257, 152 C. C. A. 3; Stein- South. 524 (reformation); Wooddy meyer v. Schroeppel, 226 111. 9, 117 v. Matthews, 194 Ala. 390, 69 South. Am. St. Rep. 224, 10 L. R. A. (N. 607 (there being no fraud) ; Weaver S.) 114, 80 N. E. 564 (offer based v. Eoberson, 134 Ga. 149, 67 S. E. on careless computation); Bidder v. 662 (though defendant made false Carville, 101 Me. 59, 115 Am. St. representations as to contents of in- §856 EQUITY JITEISPEUDENOE. 1750 The highest possible care is not demanded. Even a clearly established negligence may not of itself be a suflScient ground for refusing relief, if it appears that the other strument); Hennessy v. Holmes, 46 Mont. 89, 125 Pae. 132; Waslee v. Eossman, 231 Pa. St. 219, SO Atl. 643 (reformation) ; Hubenthal v. Spokane & I. E. Co., 43 Wash. 677, 86 Pac. 955; Grieve v. Grieve, 15 Wyo. 358, 11 Ann. Cas. 1162, 9 L. R. A. (N. S.) 1211, 89 Pac. 569 (reformation) ; Weltner v. Thur- mond, 17 "Wyo. 268, 129 Am. St. E€p. 1113, 98 Pae. 590, 99 Pac. 1128 (reformation) ; Blake v. Black Bear Coal Co., 145 Ky. 788, 141 S. W. 403 (reformation). But failure to read an instrument before executing it is not always such negligence as will bar relief: Albany City Savings Inst. V. Burdick, 87 N. Y. 39; Andrews v. Gillespie, 47 N. Y. 487; San Antonio Nat. Bank v. McLane (Tex.), 70 S. W. 201; Story v. Gammell (Iowa), 94 N. W. 982; Taylor v. Glens Palls Ins. Co. (Fla.), 32 South. 887; Smel- ser V. Pugh (Ind.), 64 N. E. 943; Loyd V. Phillips (Wis.), 101 N. W. 1092. See, also, Leonard v. Eoe- buck, 152 Ala. 312, 44 South. 390 (party induced to sign by fraud); St. Louis, Iron Mountain & Southern E. Co. V. McConnell, 110 Ark. 306, 161 S. W. 496 (fraiid) ; Los Angeles & K. E. Co. V. New Liverpool Salt Co., 150 Cal. 21, 87 Pac. 1029 (refor- mation) ; Togni v. Taminelli, 11 Cal. App. 7, 103 Pac. 899 (fraud); Colo- rado Inv. Loan Co. v. Beuchat, 48 Colo. 494, 111 Pac. 61 (fraud) ; Nich- ols & Shepard Co. v. Berning, 37 Ind. App. 109, 76 N. E. 776 (refor- mation) ; Kemery v. Zeigler, 176 Ind. 660, 96 N. E. 950 (rescission by gran- tor for fraudulent representations as to contents of deed); Cox v. Hall (Mont.), 168 Pae. 519 (scrivener's error) ; Lloyd v. Hulick, 69 N. J. Eq. 784, 115 Am. St. Eep. 624, 63 Atl. 616 (reformation for fraud) ; Gray v. Jenkins, 151 N. C. 80, 65 S. E. 644 (reformation) ; Bradshaw v. Provi- dent Trust Co., 81 Or. 55, 158 Pae. 274 (reformation); Herreid v. Chi- cago, M. & St. P. E. Co., 38 S. D. 68, 159 N. W. 1064 (reformation for grantor's misrepresentation of con- tents of deed); Mutual Life Ins. Co. V. Hargus (Tex. Civ. App.), 99 S. W. 580 (fraud) ; Harry v. Hamilton (Tex. Civ. App.), 154 S. W. 637 (reformation); Stone v. Moody, 41 Wash. 680, 5 L. E. A. (N. S.) 799, and note, 84 Pac. 617 (rescission) ; Hale y. Hale, 62 W. Va. 609, 14 L. E. A. (N. S.) 221, 59 S. E. 1056 (fraud). See, also, post, § 877, n. (b), cases on fraudulent alteration of agreement in reducing it to writ- ing. Thus in Palmer v. Hartford Ins. Co., 54 Conn. 488, 9 Atl. 248, an insurance policy was reformed at the suit of the insured, although he had not read the stipulations of the policy, in order to ascertain whether they corresponded with the terms of the agreement which he had already made. Illiteracy may excuse care- lessness in executing an instrument: Kinney v. Ensmenger, 87 Ala. 340, 6 South. 72; Williams v. Hamilton, 104 Iowa, 423, 65 Am. St. Eep. 475, 73 TST. W. 1029; Bay v. Baker, 165 Ind. 74, 74 N. E. 619. 1751 MISTAKE. 856 party has not been prejudiced thereby .^ ' In addition to the two foregoing requisites, it has been said that equity would never give any relief from a mistake, if the party could by reasonable diligence have ascertained the real facts; nor where the means of information are open to both par- ties and no confidence is reposed ;g nor unless the other § 856, 3 U. S. Bank v. Bank of Georgia, 10 "Wheat. 333, 343; Mayer v. Mayor etc., 63 N. Y. 455; Snyder v. Ives, 42 Iowa, 157, 162; and see cases at the commencement of last note. In this connection, there are dicta, followed by some of the text-writers, that a mistake concerning matters as to which the party had "means of knowledge," or "might have ascertained the truth," etc., will not be relieved from : See Mutual Life Ins. Co: v. Wager, 27 Barb. 354; Clarke v. Butcher, 9 Cow. 674. These dicta cannot be accepted as correct. They are inconsistent with decisions, and have been expressly overruled: See Kelly v. Solari, 9 Mees. & W. 54; Townsend v. Crowdy, 8 Com. B., N. S., 477; Bell v. Gardiner, 4 Man. & G. 11; Bails v. Lloyd, 12 Q. B. 531; Allen v. Mayor etc., 4 E. B. Smith, 404. These are decisions at law, but the same would a fortiori be true in equity. §856, (f) When Negligence not a Defense. — Quoted in Kinney v. Ens- menger, 87 Ala. 340, 6 South. 72; in Union Ice Co. v. Doyle, 6 Cal. App. 284, 92 Pac. 112; Troll v. Sauer- brun, 114 Mo. App. 323, 89 S. W. 364; Perkins v. -Kirby (E. I.), 97 Atl. 884; Taylor v. Godfrey, 62 W. Va. 677, 59 S. E. 631; Bank of Union V. Eedwine, 171 N. C. 559, 88 S. E. 878; Edwards v. Trinity & B. V. E. Co., 54 Tex. Civ. App. 334, 118 S. W. 572. Cited to this effect in Bush v. Bush, 33 Kan. 556, 6 Pac. 794; Col- lignon V. Collignon, 52 N. J. Eq. 516, 28 Atl. 794; cited, also, in National Metal Co. v. Greene Consol. Copper Co., 11 Ariz. 108, 5 L. K. A. (N. S.) 1062, 89 Pac. 535; Crosby v. An- drews, 61 Fla. 554, Ann. Cas. 1913A, 420, 55 South. 57; Eeggio v. War- ren, 207 Mass. 525, 20 Ann. Cas. 1244, 32 L. K. A. (N. S.) 340, 93 N. E. 805; Institute Building & Loan Ass'n V. Edwards, 81 N. J. Eq. 359, 86 Atl. 962; Pickering v. Palmer, 18 N. M. 473, 50 L. K. A. (N. S.) 1055, 138 Pac. 198; Barber-Pasehall Lum- ber Co. V. Boushall, 168 N. C. 501, 84 S. E. 800; Howard v. Tettelbaum, 61 Or. 144, 120 Pac. 373. See, also. Long V. Inhabitants of Athol, 196 Mass. 497, 17 L. E. A. (N. S.) 96, 82 N. E. 665; Troll v. Sauerbruu, 114 Mo. App. 323, 89 S. W. 364 (in- advertent release of senior lien no prejudice to holder of junior lien); Goerke Co. v. Diskon (N. J. Eq.), 75 Atl. 780; Panhandle Lumber Co. V. Rancour, 24 Idaho, 603, 135 Pac. 558; Chicago, St. P. M. & 0. Ey. Co. V. Washburn Land Co., 165 Wis. 125, 161 N. W. 358. § 856, (g) As in the extreme ease of Murray v. Paquin, 173 Fed. 319 (vendee relied on fact that a build- ing, used by the vendor, was appar- ently within the lot; he might have § 856 EQtriTY JTJEISPKUDENCE. 1752 party was under some obligation to disclose the facts known to himself, and concealed them.'* A moment's reflection will clearly show that these rules cannot possibly apply to all instances of mistake, and furnish the prerequisites for all species of relief.^ Their operation is, indeed, quite narrow; it is confined to the single relief of cancellation, and even then it is restricted to certain special kinds of agreements.^ i § 856, 4 In Story's Equity Jurisprudence these rules are laid down in most general terms, without limitation, as though they belonged to every kind of mistake and form of relief: Sees. 146-148. Mr. Snell adopts them in the same unreserved manner: P. 376. The utter impossibility of applying such requisites in all instanfees of a common mistake by both the parties, and in granting the most important remedy of reformation, is evident; there is a contradiction in terms between these requirements and the very conception of a common mistake.'' Even where only one party is mistaken, and alleges the error as ground of defense or of rescission, to make these requisites ordinarily applicable would contradict the deci- sions concerning negligence cited in the last note, and would curtail the relief far within the well-established limits. § 856, 5 See note under the preceding paragraph (§ 855), and eases at the end of the last note but one. caused a survey to be made, which 318, L. E. A. 1917A, 731, 98 Atl. 497 would have disclosed the fact that (failure of a person paying off a lien the true boundary excluded the by request, to search the records for building). a subsequent mortgage, does not pre- §856, (•») Cox V. Hall (Mont.), vent subrogation). 168 Pae. 519 (a sui^ for reformation § 856, (j) The text is quoted in on the ground of mistake always in- Taylor v. Godfrey, 62 W. Va. 677, volves the idea of negligence, which 59 S. E. 631; Perkins v. Kirby (E. may or may not be excusable in that I.), 97 Atl. 884; Bank of Union v. particular ease). Eedwine, 171 N. C. 559, 88 S. E. 878; §856, (i) Quoted in Powell v. Edwards v. Trinity & B. V. B. Co., Heisler, 16 Or. .412, 19 Pac. 109; 54 Tex. Civ. App. 334, 118 S. W. 572. Pearee v. Suggs, 85 Tenn. 724, 4 S. A very large proportion of the cases W. 526; Perkins v. Kirby (R. I.), in which the defense of negligence 97 Atl. 884; Taylor v. Godfrey, 62 is discussed in general terms are W. Va. 677, 59 S. E. 631; Bank of found, on examination, to be cases Union v. Redwine, 171 N. C. 559, 88 of mere unilateral mistake, which is S. E. 878; Edwards v. Trinity & B. rarely a ground for equitable relief V. R. Co., 54 Tex. Civ. App. 334, (see Pom. Eq. Remedies); such dis- 118 S. W. 572; cited in Benesh v. cussions, therefore, are obiter dicta. Travelers' Ins. Co., 14 N. D. 39, 103 and have no relevance to the general N. W. 405; Hill v. Ritchie, 90 Vt. subject. 1753 MISTAKE. §§857,858 § 857. III. How Mistake may be Shown — When by Parol Evidence. — The next important matter to be consid- ered is the mode of showing any mistake which may furnish an occasion for the exercise of equitable jurisdiction and the granting of equitable relief; and practically this is re- duced to the question, When is extrinsic parol evidence ad-i missible to establish a mistake in written instruments, and obtain the appropriate remedy? "Whenever any suit or defense arises from a mistake in some transaction, not in the body of a written instrument, and not controlled by the statute of frauds nor by the settled rules concerning written evidence, — as, for example, a suit to recover back money paid through mistake, — since the entire transac- tion may be parol, there can be no doubt that the mistake may be proved by parol evidence. The whole right of ac- tion or of defense in such case may depend upon verbal proofs. It is only in cases of mistakes in writings that any difficulty is possible. The following comprise all the modes in which the question can be presented, and furnish a natural order of discussion : 1. In suits expressly brought to reform or to cancel written instruments on account of mis- take; 2. Where the mistake is set up as a defense in suits brought to specifically enforce written instruments; 3. When the plaintiff alleges mistake in a written instrument, and seeks to have it enforced as corrected. There will be added, — 4. An examination of the question, how far the ad- mission of parol evidence is limited in general by the statute of frauds.* § 858. Parol Evidence in Cases of Mistake, Fraud, or Surprise.* — ^It is an elementary doctrine that parol evidence § 857 (a) This paragraph is quoted § 858, (a) This section is cited in in Thraves v. Greenlees, 42 Okl. 764, Harding v. Long, 103 N. C. 1, 14 Am. 142 Pac. 1021; and cited in Edwards St. Eep. 775, 9 S. E. 445; Smith v. V. Trinity & B. V. E. Co., 54 Tex. Butler, 11 Or. 46, 4 Pac. 517; San- Civ. App. 334, 118 S. W. 572; Ring guinelti v. Bossen, 12 Cal. App. 623, V. Mayberry, 168 N. C. 563, 84 S. E. 107 Pac. 560; Dillard v. Jones, 229 846. 111. 119, 11 Ann. Cas. 82, 82 N. E. § 858 EQUITY JUBISPBUDENCE. 1754 is not, in general, admissible between the parties to vary a written instrument, whether the same has been voluntarily adopted, or made in pursuance of a legal necessity.^ ^ It is equally well settled that mistake, fraud, surprise, and accident furnish exceptions to this otherwise universal doctrine. Parol evidence may, in proper modes and within proper limits, be admitted to vary written instruments, upon the ground of mistake, fraud, surprise, and accident. This exception rests upon the highest motives of policy and expediency ; for otherwise an injured party would generally be without remedy.^ Even the statute of frauds cannot, by shutting out parol evidence, be converted into an instru- ment of fraud or wrong.2 § 858, 1 Croome v. Lediard, 2 Mylne & K 251. § 858, 2 See, per Lord Westbury, in McCormick v. Grogan, L. E. 4 H. L. 82, 97, quoted ante, in §431; Clarke v. Grant, 14 Ves. 519; Mar- quis of Townshend v. Stangroom, 6 Ves. 328, 333, per Lord Eldon ; Clinan V. Cooke, 1 Sehoales & L. 22, 39, per Lord Redesdale ; Murray v. Parker, 19 Beav. 305, 308. As to the effect of surprise, see WUlan v. "Willan, 16 Ves. 72; 19 Ves. 590; 2 Cow. 274; Twining v. Morrice, 2 Brown CM. 326; Mason V. Armitage, 13 Ves. 25. The following American cases illustrate the exception by which parol evidence may be admitted to vary written in- struments on the ground of mistake, in different forms and modes of proceeding:*' Peterson v. Grover, 20 Me. 363; Bradbury v. White, 4 Greenl. 391; Rogers v. Saunders, 16 Me. 92, 33 Am. Dec. 635; Goodell v. Field, 15 Vt. 448; Lawrence v. Staigg, 8 R. I. 256; Quinn v. Roath, 37 Conn. 16; Canterbury Aq. Co. v. Ensworth, 22 Conn. 608; Patterson v. Bloomer, 35 Conn. 57, 95 Am. Dec. 218; Margrafl v. Muir, 57 N. Y. 155; Best V. Stow, 2 Sand. Ch. 298; White v. Williams, 48 Barb. 222; Morgan- thau V. White, 1 Sweeny, 395; Ryno v. Darby, 20 N. J. Eq. 231; Conover V. Warden, 20 N. J. Eq. 266; Chamness v. Crutehfleld, 2 Ired. Eq. 148; Harrison v. Howard, 1 Ired. Eq. 407; Perry v. Pearson, 1 Humph. 431; 206; Eustis Mfg. Co. v. Saeo Briek §858, (c) The text is quoted in Co., 198 Mass. 212, 84 N. E. 449; Mclsaac v. McMurray, 77 N. H. 466, Archer v. McClure, 166 N. C. 140, L. R. A. 1916B, 769, 93 Atl. 115. Ann. Cas. 1916C, 180, 81 S. E. 1081. § 858, (a) Walden v. Skinner, 101 §858, (Jo) The text is cited in V. S. 577; Harding v. Long, 103 Pearson v. Dancer, 144 Ala. 427, 39 N, G. 1, 14 Am. St. Kep. 775, 9 S. E. South. 474; and quoted in Mclsaac 445; Smith v. Butler, 11 Or. 46, 4 V. McMurray, 77 N. H. 466, L. E. A. Pae. 517. 1916B, 769, 93 Atl. 115. 1755 MISTAKE. § 85y § 859. Parol Evidence in Suits for a Reformation or Can- cellation.^ — The foregoing exception embraces all suits brought expressly upon the mistake for the purpose of obtaining affirmative relief from its consequences. It is therefore settled that in the suits, whenever permitted, to reform a written instrument on the ground of a mutual mistake, parol evidence is always admissible to establish' the fact of the mistake, and in what it consisted; and to show how the writing should be corrected in order to con- form to the agreement which the parties actually made. Although in such eases there is often some ancillary writ- ing to aid the court, such as a rough draught of the agree- ment, written instructions, and the like, yet, in the absence of these helps, the court may grant relief upon the strength of the verbal evidence alone.^ The same is true in suits brought to rescind and cancel a written agreement on the Blanehard v. Moore, 4 J. J. Marsh. 471 ; Chambers v. Livermore, 15 Mich. 381; Van Ness v. City of Washington, 4 Pet. 232. In the California Code of Civil Procedure the general doctrine and the exceptions are formulated as follows: "Sec. 1856. When the terms of an agreement have been reduced to writing by the parties, it is to be con- sidered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement, other than the contents of the writing, except in the following cases : 1. Where a mistake or imperfection of the writing is put in issue by the pleadings; 2. Where the validity of the agreement is the fact in dispute. But this section does not exclude other evidence of the circumstances under which the agreement was made, or to . . . explain an extrinsic ambiguity, or to establish illegality or fraud. The term 'agreement' includes deeds and wills, as well as contracts between parties." §859, (a) This section is cited in Attica v. Judy, 146 Ind. 322, 43 N. Harding v. Long, 103 N. C. 1, 14 Am. E. 259; cited, also, in Pastorino v. St. Rep. 775, 9 S. E. 445; Koontz v. Palmer, 163 Mich. 265, 128 N. W. Owens (Mo.), 18 S. W. 928; Ber- 188; Abbott v. Dow, 133 Wis. 533, geron v. Pamlico Ins. & B. Co., Ill 113 N. W. 960; Ison v. Sanders, 163 N. C. 45, 15 S. E. 883; Wieneke v. Ky. 605, 174 S. W. 505; Ring v. May- Deputy (Ind. App.), 68 N. B. 921; berry, 168 N. C. 563, 84 S. E. 846. McGuigan v. Gaines (Ark.), 77 S. W. § 859, (b) The text is quoted in 52; Treat v. Russell (C. C. A.), 128 Bott v. Campbell, 82 Or. 468, 161 Eed. 847: Citizens' Nat. Bank of Pac. 955. § 859 EQUITY JURISPKUDENCE. 1756 ground of a mistake by one of tlie parties, whereby their minds were prevented from meeting upon the same mat- ter, and no agreement was really made; and a fortiori when the ground of the relief is fraud. Parol evidence must be admitted in these classes of cases, in order to a due administration of justice. If the general doctrine of the law or the statute of frauds was regarded as closing the door against such evidence, the injured party would be without any certain remedy, and fraud and injustice would be successful.! '^ The authorities all require that the § 859, 1 Lady Shelbume v. Lord Inchiquin, 1 Brown Ch. 338, per Lord Thurlow; Calverly v. Williams, 1 Ves. 210; Willan v. Willan, 16 Ves. 72; Davis V. Symonds, 1 Cox, 402; Druiff v. Parker, L. K. 5 Eq. 131, 137; Fowler v. Fowler, 4 De Gex & J. 250, 273 ; Garrard v. Frankel, 30 Beav. 445, 451; Barrow v. Barrow, 18 Beav. 529; Malmesbury v. Malmesbury, 31 Beav. 407; Murray v. Parker, 19 Beav. 305, 308; Scholefield v. Lock- wood, 32 Beav. 436; Ashurst v. Mill, 7 Hare, 502; Bentley v. Mackay, 31 L. J. Ch. 697; Lackersteen v. Lackersteen, 6 Jur., N. S., 1111; Tom- lison v. Leigh, 11 Jur., N. S., 962; Beaumont v. Bramley, Turn. & R. 41; Mortimer v. Shortall, 2 Dru. & War. 363 ; Alexander v. Crosbie, Lloyd & G. 145; Peterson v. Grover, 20 Me. 363; Bellows v. Stone, 14 N. H. 175; Langdon v. Keith, 9 Vt. 299; Chamberlain v. Thompson, 10 Conn. 243, 26 Am. Dec. 390; Wooden v. Haviland, 18 Conn. 101; Many v. Beekman Iron Co., 9 Paige, 188; Firmstone v. De Camp, 17 N. J. Eq. 317; Wal- dron V. Letson, 15 N. J. Eq. 126; Blair v. McDonnell, 5 N. J. Eq. 327; Gump's Appeal, 65 Pa. St. 476; Chew v. GiUespie, 56 Pa. St. 308; Lauchner v. Rex, 20 Pa. St. 464; Gower v. Sterner, 2 Whart. 75; Bay- nard v. Norris, 5 Gill, 468, 46 Am. Dec. 647; Newcomer v. Kline, 11 Gill & J. 457, 37 Am. Dec. 74; Irick v. Fulton, 3 Gratt. 193; Keyton v. Braw- ford, 5 Gratt. 39; Larkins v. Biddle, 21 Ala. 252; Hale v. Stone, 14 Ala. 803 ; Lauderdale v. Hallock, 7 Smedes & M. 622 ; Wurzburger v. Meric, 20 La. Ann. 415; Mattingly v. Speak, 4 Bush, 316; Graves v. Mattingly, 6 Bush, 361 ; McCann v. Letcher, 8 B. Mon. 320 ; MeCIoskey v. McCormick, 44 111. 336; MUls v. Lockwood, 42 111. Ill; Cleary v. Babcock, 41 111. 271; Shively v. Welsh, 2 Or. 288; Bradford v. Union Bank, 13 How. 57, 66; and see cases in next note. § 859, (c) The text is cited to this of that kind not being one seeking point in Kfe v. Gate, 85 Vt. 418, "to ch&rge any person upon any 82 Atl. 741. Parol evidence is ad- agreement made upon consideration missible to rectify a mistake in a of marriage," within the meaning marriage settlement, notwithstand- of the statute: Johnson v. Bragge, ing the statute of frauds, an action [1901] 1 Ch. 28. 1757 MISTAKE. §859 parol evidence of the mistake and of the alleged modifica- tion must be most clear and convincing, — in the language of some judges, "the strongest possible," — or else the mistake must be admitted by the opposite party; the re- sulting proof must be established beyond a reasonable doubt. Courts of equity do not grant the high remedy of reformation upon a probability, nor even upon a mere pre- ponderance of evidence, but only upon a certainty of the error.2 d §859, 2Henkle v. Royal Exch. Co., 1 Ves. Sr. 317; Pitcairn v. Og- boume, 2 Ves. Sr. 375, 379; Willan v. Willan, 16 Ves. 72; Marquis of Townshend v. Stangroom, 6 Ves. 328, 333; Fowler v. Fowler, 4 De Gex & J. 250, 265; Walker v. Armstrong, 8 De Gex, M. & G. 531; Bold v. Hutchinson, 5 De Gex, M. & G. 558 ; Bentley v. Mackay, 4 De Gex, F. & J. 279; 31 L. J. Ch. 7C9; Harris v. Pepperell, L. R. 5 Eq. 1; Earl of Bradford v. Earl of Romney, 30 Beav. 431; Garrard v. Frankel, 30 Beav. 445; Eaton v. Bennett, 34 Beav. 196; Lloyd v. Coeker, 19 Beav. 140; Rooke V. Lord Kensington, 2 Kay & J. 753; Sells v. Sells, 1 Dru. & Sm. 42; Mortimer v. Shortall, 2 Dru. & War. 363, 372, 374; Beaumont v. § 859, (d) Evidence of Mistake must te Clear and Convincing. — This portion of the text is quoted in Hupsch v. Eesch, 45 N. J. Eq. 657, 18 Atl. 372; Harding v. Long, 103 N. C. 1, 14 Am. St. Rep. 775, 9 S. B. 445; Anderson v. Anderson Food Co. (N. J. Eq.), 57 Atl. 489; Southard V. Curley, 134 N. Y. 148, 30 Am. St. Eep. 642, 16 L. R. A. 561, 31 N. E. 330; Marsh v. Marsh, 74 Ala. 418; quoted, further, in Hammer v. Lange, 174 Ala. 337, 56 South. 573; Holland Blow Stave Co. v. Barclay, 193 Ala. 200, 69 South. 118; Killen v. Purdy (Del. Ch.), 95 Atl. 908; Lines v. Willey, 253 111. 440, 97 N. E. 843; Miles v. Shreve, 179 Mich. 671,^46 N. W. 374; Bott v. Camp- bell, 82 Or. 468, 161 Pac. 955; Weight V. Bailey, 45 Utah, 584, 147 Pac. 899; Hapeman v. McNeal, 48 Wash. 527, 93 Pac. 1076; Moore t. Parker, 83 Wash. 399, 145 Pae. 440; and cited in Wooddy v. Matthews, 194 Ala. 390, 69 South. 607; Jones V. Dappen, 27 Colo. App. 21, 146 Pac. 118; Gibbs v. Wallace, 58 Colo. 364, 147 Pae. 686; Anderson v. Sandy Valley & E. Ey. Co., 171 Ky. 740, 188 S. W. 772; Richmond Cedar Works V. John L. Roper Lumber Co., 168 N. C. 391, 84 S. E. 521 (espe- cially in case of death of parties and lapse of time); Stoll v. Nagle, 15 Wyo. 86, 86 Pac. 26. See, also, Max- well Land Grant Case, 121 U; S. 325, 122 U. S. 365, 7 Sup. Ct. 1015, 1271; Chicago & N. W. E. Co. v. Wilcox (C. C. A.), 116 Fed. 913; Griswold V. Hazard, 26 Fed. 135; Western Loan & Savings Co. v. Thibodeau, 159 Fed. 370, 86 C. C. A. 370; Bailey v. Lisle Mfg. Co., 238 Fed. 257, 152 C. C. A. 3; Patterson v. Hannan, 150 Ala. 189, 43 South. 192 (proof suffi- cient); Page V. Whatley, 162 Ala. 473, 50 South. 116; Hand v. Cox, §860 EQUITY JURISPKUDENOE. 1758 § 860. Parol Evidence in Defense in Suits for a Specific Performance.^ — The second class of cases embraces those in Bramley, Turn. & R. 41, 50 ; Marquis of Breadalbane v. Marquis of Chan- dos, 2 Mylne & C. 711, 740; United States v. Munroe, 5 Mason, 572; An- drews V. Essex Ins. Co., 3 Mason, 6; Tucker v. Madden, 44 Me. 206; Parley v. Bryant, 32 Me. 474; Brown v. Lamphear, 35 Vt. 252; Lyman V. Little, 15 Vt. 576; Preston v. Whiteomb, 17 Vt. 183; Stockbridge Iron Co. V. Hudson E. Iron Co., 102 Mass. 45; Sawyer v. Hovey, 3 Allen, 331, 81 Am. Dec. 659; Andrew v. Spurr, 8 Allen, 412; Canedy v. Marey, 13 Gray, 373 ; Nevins v. Dunlap, 33 N. Y. 676 ; Mead v., Westchester Ins. Co., 64 N. Y. 453; White v. Williams, 48 Barb. 222; Smith v. Mackin, 4 Lans. 41; Lyman v. U. S. Ins. Co., 2 Johns. Ch. 630; 17 Johns. 373; 164 Ala. 348, 51 South. 519 (proof sufficient) ; White v. Henderson-Boyd Lumber Co., 165 Ala. 218, 51 South. 764; Greil v. Tillis, 170 Ala. 391, 54 South. 524; McGuigan v. Gaines (Ark.), 77 S. W. 52; Davenport v. Hudspeth, 81 Ark. 166, 98 S. W. 699; Marquette Timber Co. v. Charles T. Abeles & Co., 81 Ark. 420, 99 S. W. 685 (contradicted testimony of a single witness insufScient) ; Arkan- sas Mut. Mre Ins. Co. v. Witham, 82 Ark. 226, 101 S. W. 721; Mitchell Mfg. Co. V. Ike Kempner & Brc, 84 Ark. 349, 105 S. W. 880; Turner v. Todd, 85 Ark. 62, 107 S. W. 181; Ty- ler V. Merchants & Planters' Bank, 89 Ark. 612, 116, S. W. 213 (proof sufficient); Cherry v. Brizzolara, 89 Ark. 309, 21 L. B. A. (N. S.) 508, 116 S. W. 668; Ezell v. Humphrey, 90 Ark. 24, 117 S. W. 758; Parker V. Carter, 91 Ark. 162, 134 Am. St. Eep. 60, 120 S. W. 836; Johnson v. Steuart, 97 Ark. 635, 135 S. W. 354; Martin v. Hempstead County Levee District No. 1, 98 Ark. 23, 135 S. W. 453 (proof sufficient) ; Goodrum v. Merchants & Planters' Bank, 102 A^k. 326, Ann. Cas. 1914A, 511, 144 S. "W. 198; American Nat. Ins. Co. V. Sehlosberg, 117 Ark. 655, 174 S. W. 1158; Hutchinson v. Ainsworth, 73 Cal. 458, 2 Am. St. Eep. 823, 15 Pac. 82; Home & Farm Co. of Cali- fornia v. Freitas, 153 Cal. 680, 96 Pac. 308 (a mere conflict of testi- mony does not require a denial of re- lief); Newell V. Hartman & Fehren- baeh Brewing Co., 9 Del. Ch. 240, 80 Atl. 672; Jackson v. Magbee, 21 Fla. 622; Jacobs v. Parodi, 50 Fla. 541, 39 South. 833; Eobinson Point Lum- ber Co. V. Johnson, 63 Fla. 562, 58 South. 841; Fidelity Phenix Fire Ins. Co. of N. Y. V. Hilliard, 65 Fla. 443, 62 South. 585; Panhandle Lum- ber Co. V. Eancour, 24 Idaho, 603, 135 Pac. 558; Stanley v. Marshall, 206 m. 20, 69 N. K. 58; Ander- son V. Stewart (111.), 117 N. E. 743; Wieneke v. Deputy (Ind. App.), 68 N. E. 921; First Presbyterian Church V. Logan, 77 Iowa, 328, 42 N. W. 310; Sauer v. Nehls (Iowa), 96 N. W. 759; Bowman v. Besley (Iowa), 97 N. W. 60; Bushert v. A. W. Stevenson Co. (Iowa), 113 N. W. 916; Salzman v. Machinery Mut. Ins. Ass'n, 142 Iowa, 99, 120 N. W. 697; Noble V. Trump, 174 Iowa, 320^ 156 N. W. 376 (proof must be beyond § 860, (a) This section is cited in Eeynolds v. Hooker (Vt.), 56 Atl. 1759 MISTAKE. 860 wMcli parol evidence of mistake is offered defensively. The equitable remedy of the specific enforcement of con- Conover v. Wardell, 22 N. J. Eq. 492; Burgin v. Giberson, 26 N. J. Eq. 72; Green v. Morris, 12 N.^ J. Eq. 165, 170; Durant v. Bacot, 13 N. J. Eq. 201, 15 N. J. Eq. 411; Hall v. Clagett, 2 Md. Ch. 151; Philpott v. Elliott, 4 Md. Ch. 273; Showman v. MiUer, 6 Md. 479; Brantley v. West, 27 Ala. 542; Mosby v. Wall, 23 Miss. 81, 55 Am. Dec. 71; Tesson v. Atlantic Ins. Co., 40 Mo. 33, 36, 93 Am. Dec. 293; Beebe v. Young, 14 Mich. 136; Shay V. Pettes, 35 111. 360 ; Edmonds's Appeal, 59 Pa. St. 220 ; Potter v. Pot- ter, 27 Ohio St. 84; Heavenridge v. Mondy, 49 Ind. 434; Miner v. Hess, 47 111. 170; Newton v. HoUey, 6 Wis. 564; State v. Frank, 51 Mo. 98; Lestrade v. Barth, 19 Cal. 660, 675; Hathaway v. Brady, 23 Cal. 122; fair or reasonable controversy); Bodwell V. Heaton, 40 Kan. 36, 18 Pac. 901; Sehaefer v. Mills (Kan.), 76 Pac. 436; Andrews v. Andrews, 81 Me. 337, 17 All. 166; Brunswick & Topsham Water District ■». Inhabi- tants of Topsham, 109 Me. 334, 84 Atl. 644 (testimony need not be free from contradiction) ; Miller v. Stu- art, 107 Md. 23, 68 Atl. 273; Hesson V. Hesson, 121 Md. 626, 89 Atl. 107 (proof sufficient); Kinyon v. Cun- ningham, 146 Mich. 430, 109 N. W. 675; Dillie v. Longwell, 163 Mich. 439, 128 N. W. 782; Mikiska v. Mi- kiska (Minn.), 95 N. W. 910; Mas- sey V. Lindeni, 98 Minn. 133, 107 N. W. 146 (mistake may be estab- lished by evidence of the circum- stances and nature of the transac- tion, and conduct and relation of the parties); Barnum v. White, 128 Minn. 58, 150 N. W. 227, 151 N. W. 147 (contract drawn by one of the parties now asking for reforma- tion) ; Meredith v. Holmes (Mo. App.), 80 S. W. 61; Koontz v. Owens (Mo.), 18 S. W. 928; Brown v. Gwin, 197 Mo. 499, 95 S. W. 208; Dough- erty V. Dougherty, 204 Mo. 228, 102 S. W. 1099 ; Bedding v. Badger Lum- ber Co., 127 Mp. App. 625, 106 S. W. 557 (proof sufficient); Moran Bolt & Nut Mfg. Co. V. St. Louis Car Co., 210 Mo. 715, 109 S. W. 47; Zeilda Porsee Inv. Co. v. Ozenberger, 132 Mo. App. 409, 112 S. W. 22; Robin- son V. Korns, 250 Mo. 663, 157 S. W. 790; Melsaac v. McMurray, 77 N. H. 466, 93 Atl. 115; Allen v. Crouter (N. J. Eq.), 54 Atl. 426; Green v. Stone, 54 N. J. Eq. 387, 55 Am. St. Kep. 577, 34 Atl. 1099; Lesser v. Demarest (N. J. Eq.), 72 Atl. 14; Goerke Co. v. Diskon (N. J. Eq.), 75 Atl. 780; Birch v. Baker, 81 N. J. Eq. 264, 86 Atl. 932; First Nat. Bank v. Hartford Eire Ins. Co., 17 N. M. 334, 127 Pac. 1115; Harding V. Long, 103 N. C. 1, 14 Am. St. Rep. 775, 9 S. E. 445; Gray v. Jenkins, 80 N. C. 151, 65 S. E. 644; Clements V. Life Ins. Co. of Virginia, 155 N. C. 57, 70 S. E. 1076; Highsmith v. Page, 158 N. C. 226, 73 S. E. 998; Forester v. Van Auken (N. D.), 96 N. W. 301; Hope v. Bourland, 21 Okl. 864, 98 Pac. ,580; Dockstader V. Gibbs, 34 Okl. 497, 126 Pac. 229; Cleveland v. Eankin, 48 Okl. 99, 149 Pac. 1131 (proof must establish facts " to moral certainty and take ease out of any reasonable controversy) ; Da- vidson V. Bailey (Okl.), 155 Pac. 511 (evidence sufficient) ; Sayre v. Moir, 68 Or. 381, 137 Pac. 215; Bird v. §860 EQUITY JUKISPEUDENCE. 1760 tracts, even when they are valid and binding at law, is not a matter of course; it is so completely governed by equi- Shively v. Welch, 2 Or. 288. In Stockbridge etc. Co. v. Hudson R. Iron Co., 102 Mass. 45, Chapman, J., said: "The ordinary rule of evidence in civU actions, that the fact must be proved by a preponderance of evi- dence, does not apply to such a case as this. The proof that both par- ties intended to have the precise agreement set forth inserted in the deed, and omitted to do so by mistake, must be made beyond a reasonable doubt." Mayo, 75 Or. 100, 144 Pae. 574, 145 Pae. 13, 146 Pac. 475; Boyertown Nat. Bank v. Hartman, 147 Pa. St. 558, 30 Am. St. Rep. 759, 23 Atl. 842; Graham v. Carnegie Steel Co., 217 Pa. St. 34, 66 Atl. 103; Waslee V. Eossman, 231 Pa. St. 219, 80 Atl. 643; Moore v. Giesecke, 76 Tex. 543, 13 S. W. 290; Fuller v. Knapp, 82 Vt. 166, 72 Atl. 688; Fairbanks v. Harvey, 83 Vt. 283, 75 Atl. 268; Fife V. Gate, 85 Vt. 418, 82 Atl. 741; Bibb V. American Coal & Iron Co., 109 Va. 261, 64 S. E. 32; Percy v. First Nat. Bank, 110 Va. 129, 65 S. E. 475; Solenberger v. Strickler's Adm'r, 110 Va. 273, 65 S. E. 566; Wilkinson v. Dorsey, 112 Va. 859, 72 S. E. 676; HefEron v. Fogel, 40 Wash. '698, 82 Pac. 1003; Norton v. Gross, 52 Wash. 341, 100 Pac. 734; Campbell v. Glazier, 61 Wash. 520, 112 Pac. 490; Jarrell v. Jarrell, 27 W. Va. 743; Isner v. Nydegger, 63 W. Va. 677, 60 S. E. 793 (rescission); Smith v. Owens, 63 W. Va. 60, 59 S. E. 762; Adolph v. Adolph, 148 Wis. 210, 134 N. W. 353. The fol- lowing recent cases state that the proof must be "beyond a reasonable doubt" or "reasonable controversy": Hand v. Cox, 164 Ala. 348, 51 South. 519; Parker v. Carter, 91 Ark. 162, 134 Am. St. Kep. 60, 120 S. W. 836; Johnson v. Steuart, 97 Ark. 635, 135 S. W. 354; Goodrum v. Merchants & Planters' Bank, 102 Ark. 326, Ann. Cas. 1914A, 511, 144 S. W. 198; Newell V. Hartman & Pehrenbaeh Brewing Co., 9 Del. Ch. 240, 80 Atl. 672; Eobinson Point Lumber Co. v. Johnson, 63 Pla. 562, 58 South. 841; Fidelity Phenix Fire Ins. Co. v. Hil- liard, 65 Fla. 443, 62 South. 585; Noble V. Trump, 174 Iowa, 320, 156 N. W. 376; Miller v. Stuart, 107 Md. 23, 68 Atl. 273; Birch v. Baker, 81 N. J. Eq. 264, 86 Atl. 932; Hope v. Bourland, 21 Okl. 864, 98 Pae. 580; Davidson v. Bailey (Okl.), 155 Pac. 511; Fairbanks v. Harvey, 83 Vt. 283, 75 Atl. 268; Fife v. Cate, 85 Vt. 418, 82 Atl. 741; Smith v. Owens, 63 W. Va. 60, 59 S. E. 762; Adolph V. Adolph, 148 Wis. 210, 134 N. W. 353 ("substantial doubt"). The "reasonable doubt" test, however, was rejected in Southard v. Curley, 134 N. Y. 148, 30 Am. St. Eep. 642, 16 L. R. A. 561, 31 N. E. 330, after a careful review of the language em- ployed by courts in many previous cases; and in Panhandle Lumber Co. V. Rancour, 24 Idaho, 603, 135 Pac. 558; Bowers v. Bennett, 30 Idaho, 188, 164 Pae. 93. See, also, Coggins & Owens V. Carey, 106 Md. 204, 124 Am. St. Eep. 468, 10 L. R. A. (N. S.) 1191, 66 Atl. 673, which seems in- consistent with later Maryland cases. 1761 MISTAKE. § 860 I table considerations that it is sometimes, though improp- erly, called discretionary; it is never granted unless it is entirely in accordance with equity and good conscienceij It is therefore a well-settled rule, that in suits for the speci- fic enforcement of agreements, even when written, the dei fendant may by means of parol evidence show that^ through the mistake of both or either of the parties, the writing does not express the real agreement, or that the agreement itself was entered into through a mistake as to I its subject-matter or as to its terms.^ In short, a court ol equity will not grant its affirmative remedy to compel the defendant to perform a contract which he did not intend to make, or which he would not have entered into had itsj true effect been understood. "What is thus true of mistake is equally true of a defense based upon fraud or surprise.^ •= Wherever the defendant's mistake was, either intentionally or not, induced, or made probable or even possible, by the acts or omissions of the plaintiff, then, on the plainest prin- ciples of justice, such error prevents a specific enforce- § 860, 1 Joynes v. Statham, 3 Atk. 388 ; Garrard v. Grinling, 2 Swanst. 244; Lord Gordon v. Marquis of Hertford, 2 Madd. 106; Clarke v. Grant, 14 Ves. 519; TVinch v. Winchester, 1 Ves. & B. 375; Manser v. Back, 6 Hare, 443; Wood v. Scarth, 2 Kay & J. 33; Alvanley v. Kinnaird, 2 Macn. & G. 1; Watson v. Marston, 4 De Gex, M. & G. 230; Falcke v. Gray, '4 Drew. 651 ; Barnard v. Cave, 26 Beav. 253 ; Webster v. Cecil, 30 Beav. 62; Bradbury v. White, 4 Greenl. 391; Quinn v. Roath, 37 Conn. 16; Best v. Stow, 2 Sand. Ch. 298; Coles v. Bowne, 10 Paige, 526; Ely V. Perrine, 2 N. J. Eq. 396; Ryno v. Darby, 20 N. J. Eq. 231; Towner v. Lucas, 13 Gratt. 705, 714; Chambers v. Livermore, 15 Mich. 381; Cath- cart V. Robinson, 5 Pet. 263. § 860, (b) The text is quoted in to the amount of land to be con- McLaughlin V. Leonhardt, 113 Md. veyed). See, also, Fort Smith v. 261, 77 Atl. 647. Brogan, 49 Ark. 306, 5 S. W. 337; §860, (c) The text is quoted in Wilken v. Voss, 120 Iowa, 500, 94 Somerville v. Coppage, 101 Md. 519, N. W. 1123; Mansfield v. Sherman, 61 Atl. 318; Gottfried v. Bray, 208 81 Me. 365, l7 Atl. 300; Hatch v. Mo. 652, 106 S. W. 639; and cited in Kizer, 140 111. 583, 33 Am. St. Rep. Beatley v. Space, 100 Neb. 486, 160 258, 30 N. E. 605. See, also, § 868. N. W. 887 (vendor misled vendee as 11—111 § 860 EQUITY JUKISPBTJDENCE. 1762 ment of the agreement.^ d guch co-operation by the plain- I tiff, however, is not at all essential. A mistake which is entirely the defendant's own, or that of his agent, and for which the plaintiff is not directly or indirectly responsible, may be proved in defense, and may defeat a specific per- formance. This is indeed the very essence of the equitable theory concerning the nature and effect of mistake.^ e A § 860, 2 Denny v. Hancock, L. K. 6 Ch. 1; Bascomb v. Beekwith, L. R. 8 Eq. 100; Swaisland v. Dearsley, 29 Beav. 430; Webster v. Cecil, 30 Beav. 62; Mason v. Armitage, 13 Ves. 25; Clowes v. Higginson, 1 Ves. & B. 524; 15 Ves. 516; Pym v. Blackburn, 3 Ves. 34; and see Doggett v. Emerson, 3 Story, 700; Rider v. Powell, 28 N. Y. 310; Matthews v. Ter- williger, 3 Barb. 50. § 860, 3 Ball v. Storie, 1 Sim. & St. 210 ; Malins v. Freeman, 2 Keen, 25; Mauser v. Back, 6 Hare, 443; Leslie v. Tompson, 9 Hare, 268; Alvan- ley V. Kinnaird, 2 Macn. & G. 1, 7; Helsham v. Langley, 1 Younge & C. 175; Neap v. Abbott, Coop. C. P. 333; Howell v. George, 1 Madd. 1; Wood V. Scarth, 2 Kay & J. 33; Baxendale v. Seale, 19 Beav. 601; Web- ster V. Cecil, 30 Beav. 62; Western R. R. Co. v. Babcock, 6 Met. 346; Park v. Johnson, 4 Allen, 259; Post v. Leet, 8 Paige, 337. See, however, Mortimer v. Pritchard, 1 Bail. Eq. 505. In applying these rules of the text, it may be laid down as a general proposition that wherever, in the description of the subject-matter or in* the terms and stipulations, a written agreement is ambiguous, so that the defendant may reasonably have been mistaken as to the subject-matter or terms, or is susceptible of different constructions, so that upon one con- struction it would have an effect which the defendant may be reasonably supposed not to have contemplated or intended, or so that the defendant may have reasonably put a different construction upon it from that which was understood by the plaintiff, in either of these cases a specific per- formance will be denied at the instance of the defendant, on the ground that it is inequitable to enforce the apparent agreement, when he has shown that there was no real meeting of minds, no common assent upon the same matters: Calverly v. Williams, 1 Ves. 210; Jenkinson v. Pepys, cited 15 Ves. 521; 1 -Ves. & B. 528; Clowes v. Higginson, 1 Ves. & B. 524; Harnett v. Yielding, 2 Schoales & L. 549; Watson v. Marston, 4 De Gex, M. & G. 230; Parker v. Taswell, 2 De Gex & J. 559; Callaghan v. Callaghan, 8 Clark & P. 374; Wycombe R'y v. Donnington Hospital, L. R. 1 Ch. 268; Neap v. Abbott, Coop. C. P. 333; Wood v. Scarth, 2 Kay & J. § 860, (d) Campbell v. Durham, 86 Md. 189, 84 Atl. 416. See, also, Ala. 299, 5 South. 507. Buckley v. Patterson, 39 Minn. 250, § 860, (e) The text is cited to this 39 N. W. 490. effect in DifEenderffer v. Knoohe, 118 1763 MISTAKE. § 860 mistake thus set up by the defendant is not merely a ground of defense, of dismissing the suit. If the plaintiff alleges a written agreement, and demands its specific performance, and the defendant sets up in his answer a verbal provision or stipulation, or variation omitted by mistake, surprise, or fraud, and submits to an enforcement of the contract as thus varied, and clearly proves by his parol evidence that the written contract modified or varied in the manner al- leged by him constitutes the original and true agrfiement made by the parties, the court may not only reject the plain- tiff's version, but may adopt that of the defendant, and may decree a specific performance of the agreement with the parol variation upon the mere allegations of his an- swer, without requiring a cross-bill.* The court will either decree a specific execution of the contract thus varied by the defendant, or else, if the plaintiff refuses to iaccept such relief, will dismiss the suit.* s Under the old chancery prac- .33; Baxendale v. Seale, 19 Beav. 601; Swaisland v. Dearsley, 29 Beav. 430; Webster v. Cecil, 30 Beav. 62; Hood v. Oglander, 34 Beav. 513; Manser v. Back, 6 Hare, 443. An attempt has been made in a few cases to limit the operation of this doctrine. Thus in Clowes v. Higginson, 1 Ves. & B. 524, Sir Thomas Pliimer was of opinion that the admission of defendant's parol evidence of mistake, surprise, or fraud should be re- stricted to matters collateral to and independent of the written contract itself. He disputed the doctrine which permits the defendant to contra- dict the terms themselves of a written contract for the purpose of defeating a specific performance, but conceded that parol evidence was admissible to show mistake, fraud, or surprise, in something collateral to the contract. See also Price v. Ley, 4 GifE. 235; 32 L. J. Ch., N. S., 530. Notwithstanding this attempt to limit the doctrine, it is very clear that parol evidence of mistake, surprise, or fraud is admissible in defense as well where it contradicts the very terms themselves of the written agreement, as where it contradicts or modifies something collateral to the contract: Ramsbottom v. Gosdon, 1 Ves. & B. 165; Winch v. Winchester, 1 Ves. & B. 375; Marquis of Townshend v. Stangroom, 6 Ves. 328; and see cases cited in former part of this note. § 860, 4 E.amsbottom v. Gosdon, 1 Ves. & B. 165 ; Winch v. Winches- ter, 1 Ves. & B. 375; Joynes v. Statham, 3 Atk. 388; Fife v. Clayton, 13 §860, (f) Quoted in Eedfield v. §860, (g) Redfield v. Gleason, 61 Gleason, 61 Vt. 220, 15 Am. St. Rep. Vt. 220, 15 Am. St. Rep. 889, 17 Atl. 889, 17 Atl. 1075. " 1075. § 860 EQUITY JURISPBXIDENOB. 1764 tice, the action of the court in such cases seemed to have been discretionary. Under the reformed procedure, which permits affirmative relief, either legal or equitable, to be obtained by defendants through a counterclaim, such a decree, under proper pleadings, is doubtless a matter of course and of right. Even where there has been no mis- take, surprise, or fraud, if in such a -suit the defendant alleges and proves an additional parol provision or stipu- lation agreed upon by the parties, the court will decree a specific performance of the written contract with this ver- bal provision incorporated into it, or else will dismiss the suit entirely. 5 It is not every mistake which will defeat \ the enforcement of an agreement. The error must be ma- \terial, and must possess' all of the elements heretofore de- scribed as requisite to the existence of the equitable juris- diction. ^ Ves. 546; Clarke v. Grant, 14 Ves. 519; Gwynn v. Lethbridge, 14 Ves. 585; Martin v. Pyeroft, 2 De Gex, M. & G. 785; London etc. E'y v. Win- ter, Craig & P. 57; Price v. Ley, 4 Giff. 235; Manser v. Back, 6 Hare, 443; Wood v. Scarth, 2 Kay & J. 33; Barnard v. Cave, 26 Beav. 253 Webster v. Cecil, 30 Beav. 62; Vouillon v. States, 2 Jur., N. S., 845 Bradford v. Union Bank, 13 How. 57; Quinn v. Roath, 37 Conn. 16 Patterson v. Bloomer, 35 Conn. 57, 95 Am. Dec. 218; Wells v. Cruger, 5 Paige, 164; Best v. Stow, 2 Sand. Ch. 298; Ferussae v. Thorn, 1 Barb, 42; Bradbury v. White, 4 Greenl. 391; Ryno v. Darby, 20 N. J. Eq. 231 McComas v. Easley, 21 Gratt. 23; Arnold v. Arnold, 2 Dev. Eq. 467 Huntington v. Rogers, 9 Ohio St. 511, 516; Chambers v. Livermore, 15 Mich. 381 ; Murphy v. Rooney, 45 Cal. 78! § 860, 5 Martin v. Pyeroft, 2 De Gex, M. & G. 785 (a very instructive case); Leslie v. Tompson, 9 Hare, 268; Barnard v. Cave, 26 Beav. 253; and see Croome v. Lediard, 2 Mylne & K. 251, in which the subject of parol variation is fully discussed. The rule of the text will not be ap- plied where the contract has been to a great extent performed, and the parties cannot be restored to their original position: VouUlon v. States, 2 Jur., N. S., 845. § 860, 6 Thus an inadvertent omission to propose an intended provision or stipulation as a part of the agreement is not: Parker v. Taswell, 2 De Gex & J. 559. But see Broughton v. Hutt, 3 De Gex & J. 501. Nor is a mistake as to the purpose for which the property referred to in the con- tract is to be used: Mildmay v. Hungerford, 2 Vern. 243. 1765 MISTAKE. § 861 § 861. Parol Evidence of Mistake on the Plaintiff's Part in Suits for a Specific Performance — English Rule. — We come, in the third place, to the question as to parol evidence of mistake on the part of the plaintiff in suits brought upon written agreements seeking to obtain their specific enforce- ment. It has been shown that parol evidence of the mis- take may be used by the plaintiff in suits brought directly upon it and seeking the remedy of a reformation or a can- cellation, in order to be relieved from its consequences; and also that in suits on a written contract the defendant may resort to parol evidence of a mistake by way of de- fense, and even that the court may decree a performance of the contract as thus varied by means of his evidence. The question now presented is, whether, in suits of the same nature for- the enforcement of a written agreement, the plaintiff, in addition to his averment of the written con- tract, may allege a mistake, surprise, or fraud, and may by means of parol evidence establish the verbal modifica- tion in the terms of the contract which would result from such error or fraud, and may obtain in the same suit a specific performance of the agreement so modified orf varied. The rule is well established in England that this ' cannot be done, unless there has been a part performance of the parol variation.^ ^ The reason originally assigned § 861, 1 The leading case is Woollam v. Heam, 7 Ves. 211 ; 2 Lead, Cas. Eq., 4th Am. ed., 920, and notes; Earl Damley v. London etc. E'y, L. E. 2 H. L. 43; Wilson v. Wilson, 5 H. L. Cas. 40, 65, per Lord St. Leonards; Rich v. Jackson, 4 Brown Ch. 514; 6 Ves. 334, note; Higgin- son V. Clowes, 15 Ves. 516, 523; Winch v. Winchester, 1 Ves. & B. 375, 378; Manser v. Back, 6 Hare, 443, 447; Squire v. Campbell, 1 Mylne & C. 459, 480; London etc. R'y v. Winter, Craig & P. 57, 61; Emmet v. Dewhurst, 3 Macn. & G. 587; Attorney-General v. Sitwell, 1 Younge & C. 559; Clinan v. Cooke, 1 Schoales & L. 22, 38, 39; Davies v. Fittou, 2 Dru. & War. 225, 233,. There are dicta suggesting a contrary view by Lord Hardwicke, in Walker v. Walker, 2 Atk. 98, 100; 6 Ves. 335, note; and in Joynes v. Statham, 3 Atk. 388; by Lord Thurlow, in Pember v. Mathers, 1 Brown Ch. 52; and by Lord Eldon, in Marquis of Townshend § 861, (a) May v. Piatt, 11900] 1 v. Guthrie, 81 N. J. Eq. 271, 87 Atl. Ch. 616. The text is cited in Wirtz 134. § 862 EQUITY JTIBISPBUDEN-CB. 1766 for this rule was, that the admission of parol evidence as the foundation for final relief in such suits would be a violation of the statute of frauds. If this reasoning has any force, it is difficult to see why it does not equally for- bid the enforcement of written contracts as modified by parol evidence at the instance of defendants, or why it does not in fact strike at the very foundation of the doctrine of reforming written agreements by. means of parol evidence., §862. Same. American Rule — Evidence Admissible. — The American courts have pursued a more simple and en- lightened course of adjudication. The doctrine is well set- tled in the United States that where the mistake or fraud in a written contract is such as admits the equitable rem- edy of reformation, parol evidence may be resorted to by the plaintiff in suits brought for a specific performance. V. Stangroom, 6 Ves. 328, 339 ; and see also Harrison v. Gardner, 2 Madd. 198; Clarke v. Grant, 14 Ves. 519, 524, per Sir William Grant; ClifEord V. Tuirell, 1 Younge & C. Ch. 138, per Knight Bruce, V. C. As to en- forcing the performance of a written contract with a parol modification at the instance of and proved by the defendant, see Martin v. Pyoroft, 2 De Gex, M. & G. 785; Robinson v. Page, 3 Russ. 114, and cases in note under the last paragraph. This English doctrine, although estab- lished by such an array of authority, is open to the following observa- .tions: 1. When the alleged mistake, and a fortiori the fraud, is com- mitted by the plaintiff himself, it would be manifestly unjust that he should be allowed to correct his own error, or obviate the effect of his own deceit, and obtain the afiSrmative remedy of a specific execution of the contract as thus amended. In its application to such a case, the doc- trine rests upon the sure foundations of equity, and prevails in the United States as well as in England. 2. But when the mistake is common, or the fraud is committed by the other party, so that the contract is one which may be reformed, there is certainly no greater injustice in permitting such correction, as a preliminary to an enforcement, to be made on the demand of the plaintiff, and as the result of parol evidence introduced by him, than in allowing it to be made on the allegations, parol proofs, and con- tention of the defendant. And when we consider that the plaintiff is able, by means of parol evidence, to obtain a reformation of the written contract, and that he can in a second suit compel the specific performance of the agreement as thus corrected, the doctrine of the text seems to rest upon no more solid foundation thain mere verbal logic. 1767 MISTAKE. § 862 The plaintiff in such a suit may allege, and by parol evi- , dence prove, the mistake or fraud, and the modification in 1 the written agreement made necessary thereby, and may j obtain a decree for the specific enforcement of the agree- ' ment thus varied and corrected.^ » As in suits for a refor- § 862, 1 The leading case is Keisselbrack v. Livingston, 4 Johns. Ch. 144, 148. Chancellor Kent placed the decision broadly and squarely upon this doctrine, and said, concerning it, as follows: "Why should not the party aggrieved by a mistake have relief as well where he is plaintiff as where he is defendant? It cannot make any difference in the reason- ableness and justice of the remedy, whether the mistake were to the prejudice of the one party or the other. If the court be a competent juris- diction to correct such mistakes, — and that is a point understood and set- tled,^the agreement, when corrected and made to speak the real sense of the parties, ought to be enforced, as well as any other agreement perfect in the first instance. It ought to have the same efficacy and be entitled to the same protection, when made accurate under a decree of the court, as when made accurate by the act of the parties." The doctrine is either directly decided or recognized by the following eases : Bellows v. Stone, 14 N. H. 175; Smith v. Greeley, 14 N. H. 378; Tilton v. Tilton, 9 N. H. 385; Craig v. Kittredge, 23 N. H. 231; Beardsley v. Knight, 10 Vt. 185,^ 33 Am. Dec. 193; Glass v. Hulbert, 102 Mass. 24, 41, 3 Am. Rep. 418; Metcalf V. Putnam, 9 Allen, 97; Quinn v. Roath, 37 Conn. 16; Wooden V. Haviland, 18 Conn. 101; Chamberlain v. Thompson, 10 Conn. 243, 26 Am. Dec. 390; Gillespie v. Moon, 2 Johns. Ch. 585, 7 Am. Dec. 559; Lyman v. Un. Ins. Co., 17 Johns. 373; Rosevelt v. Fulton, 2 Cow. 129; Coles V. Bowne, 10 Paige, 526, 535; Gouvemeur v. Titus, 1 Edw. Ch. 477; 6 Paige, 347; Hyde v. Tanner, 1 Barb. 75; Gooding v. McAlister, 9 How. Pr. 123 ; Smith v. Allen, 1 N. J. Eq. 43, 21 Am. Dec. 33 ; Hendrickson v. Ivins, 1 N. J. Eq. 562; Christ v. Diffenbach, 1 Serg. & R. 464, 7 Am. Dec. 624; Susquehanna Ins. Co. v. Perrine, 7 Watts & S. 348; Gower v. Sterner, 2 Whart. 75; Bowman v. Bittenbender, 4 Watts, 290; Clark v. Partridge, 2 Pa. St. 13; 4 Pa. St. 166; Wesley v. Thomas, 6 Har. &,J. 24; Moale v. Buchanan, 11 Gill & J. 314, 325; Coutt v. Craig, 2 Hen. & M. 618; Newsom v. Bufferlow, 1 Dev. Eq. 383; Brady v. Parker, 4 Ired. Eq. 430 ; Clopton v. Martin, 11 Ala. 187 ; Harris v. Columbiana Ins. Co., § 862, (a) The text is quoted in Auken (N. D.), 96 N. W. 301; cited, House V. McMullen, 9 Cal. App. 664, also, in ScMrmer v. Union Brew- 100 Pae. 344; Wirtz v. Guthrie, 81 ing & Malting Co., 26 Cal. App. 169, N. J. Eq. 271, 87 Atl. 134. This sec- 146 Pac. 194; Schmidt v. Johnstone, tion is cited in Davis v. Ely, 104 N. 31 N. D. 53, 158 N. W. 293. See, C. 16, 17 Am. St. Eep. 667, 5 L. B. also, Popplein^v. Foley, 61 Md. 381; A. 810, 10 S. E. 138; Forester v. Van Nutall v. Nutall (Ky.), 82 S. W. 377. § 862 EQUITY JXJBISPEUDENCB. 1768 1 mation alone, the evidence must be of the clearest and most convincing nature ; the burden of proof is on the plain- ; tiff, and he must prove his case beyond a reasonable doubt.2 1) It is not sufficient merely to prove a mistake which might be groimd for a rescission. The plaintiff must establish a mistake of such a character as entitles him to a reformation, and such circumstances as render a reforma- tion possible.^ In those states which have adopted the re- , formed procedure this doctrine is clearly established and \ its operation enlarged. In one civil action the plaintiff may not only unite and obtain both the remedy of reformation and the equitable remedy of specific performance, but also the remedy of reformation and the legal remedy of a pecuniary judgment for debt or damages for the breach of /the contract as corrected, or the legal remedy of a recovery of specific property.* "^ Also, the defendant, by means of a 18 Ohio, 116, 51 Am. Dec. 448; Webster v. Harris, 16 Ohio, 490; Worley V. Tuggle, 4 Bush, 168, 173; Shelby v. Smith, 2 A. K. Marsh. 504; BaUey V. Bailey, 8 Humph. 230; Leitensdorfer v. Delphy, 15 Mo. 160, 55 Am. Dec. 137; Murphy v. Rooney, 45 Cal. 78; Murray v. Dake, 46 Cal. 644. §862, 2Nevins v. Dunlap, 33 N. Y. 676; Lyman v. U. Ins. Co., 2 Johns. Ch. 630, 17 Johns. 373; Harris v. Reece, 5 Gilm. 212; Beard v. Linthicum, 1 Md. Ch. 345; Brady v. Parker, 4 Ired. Eq. 430; Hanison V. Howard, 1 Ired. Eq. 407; Hunter v. Bilyeu, 30 lU. 228, 246; Selby v. Geines, 12 111. 69; Bailey v. Bailey, 8 Humph. 230; and see ante, % 859, and cases in note. § 862, 3 Lyman v. U. Ins. Co., 2 Johns. Ch. 630 ; Keisselbrack v. Liv- ingston, 4 Johns. Ch. 144; Rider v. Powell, 28 N. Y. 310; Mathews v. Terwilliger, 3 Barb. 50; Hall v. Clagett, 2 Md. Ch. 151, 153; Philpott v. Elliott, 4 Md. Ch. 273; Durant v. Bacot, 15 N. J. Eq. 411; Beehe v. Young, 14 Mich. 136 ; Tesson v. Atlantic M. Ins. Co., 40 Mo. 33, 36, 93 Am. Dec. 293; Fowler v. Fowler, 4 De Gex & J. 250, 265. § 862, 4 Pomeroy on Remedies, sees. 78-85. Reforming and a pecuniary -judgment on the instrument as reformed: Bidwell v. Astor Ins. Co., 16 N. Y. 263; Cone v. Niagara Ins. Co., 60 N. Y. 619; 3 Thomp. & C. 33; N. Y. Ice Co. V. N. W. Ins. Co., 23 N. Y. 357, 359; Welles v. Yates, 44 § 862, (b) The text is cited iu French v. State Farmers' Mutual Bird V. Mayo, 75 Or. 100, 144 Pac. Hail Ins. Co., 29 N. D. 426, L. E. A. 574, 145 Pac. 13, 146 Pac. 475. 1915D, 766, 151 N. W. 7. § 882, (e) The text is quoted in 1769 MISTAKE. - §863 counterclaim, may obtain against the plaintiff the same ■union of affirmative equitable or equitable and legal reliefs.^ § 863. Evidence of a Parol Variation Which has Been Part Performed. — There is one particular case with, respect to which the English and American courts are agreed, — the part performance by the plaintiff of the parol provision which he alleges in variation of the written: agreement. It is the settled rule, both in England and in this country, that, in suits for a specific performance, the plaintiff may allege and prove a verbal addition or variation of the written contract, and that this additional verbal stipula- tion has been part performed by him, and may then ob- tain a decree for the specific enforcement of the entire agreement as thus modified. ^ There are two conditions of fact to which this rule applies: 1. The verbal modification may be contemporaneous with and a part of the original .agreement ; ^ 2. It may be a subsequent alteration of or N. Y. 525; Caswell v. West, 3 Thomp. & C. 383. Reformation and other specific relief, such as recovery of land: Lattin v. McCarty, 41 N. Y. 107; Phillips v. Gorham, 17 N. Y. 270; Laub v. BuckmiUer, 17 N. Y. 620; Henderson v. Dickey, 50 Mo. 161, 165; and see, on this sub- ject generally, Gray v. Dougherty, 25 Cal. 266; Walker v. Sedgwick, 8 Cal. 398; Guernsey v. Am. Ins. Co., 17 Minn. 104, 108; Montgomery v. "McEwen, 7 Minn. 351. § 862, 5 Pomeroy on Remedies, sees. 91-97 ; Murphy v. Rooney, 45 Cal. 78; Guedici v. Boots, 42 Cal. 452, 456; Talbert v. Singleton, 42 Cal. 390; Hoppough v. Struble, 60 N. Y. 430; Haire v. Baker, 5 N. Y. 357; Crary v. Goodman, 12 N. Y. 266, 268, 64 Am. Dec. 506 ; Bartlett v. Judd, 21 N. Y. 200, 203, 78 Am. Dec. 131; Cavalli v. Allen, 57 N. Y. 508; Petty V. Malier, 15 B. Mon. 591, 604; Ingles v. Patterson, 36 Wis. 373; Onson V. Cown, 22 Wis. 329. § 863, 1 Anonymous, 5 Vin. Abr. 522, pi. 38 ; Legal v. Miller, 2 .Ves. Sr. 299; Pitcairn v. Ogboume, 2 Ves. Sr. 375; Price v. Dyer, 17 Ves. 356; Gilroy v. Alis, 22 Iowa, 174; and cases in the two following notes. § 863, 2 As an illustration : The real agreement was for the sale of two lots; the writing only set forth a contract for the sale of one; the plain- tiff proves by parol evidence the true contract, and also a suflScient part performance with respect to the second lot ; a specific performance of the whole is granted: Moale v. Buchanan, 11 Gill & J. 314; Parkhurst v. Cortlandt, 1 Johns. Ch. 273; .14 Johns. 15; and see Tilton v. Tilton, 9 N. H. 385; Glass v. Hulbert, 102 Mass. 24, 43; 3 Am. Rep. 418. § 864 EQUITY JUEISPEtTDBlirCB. 1770 addition to the original" written agreement.^ The rule ap- plies alike to each of these two cases ; but in both the part performance must be of the verbal stipulation, and must conform to all requisites as settled with respect to the part performance of any verbal agreement.* § 864. Effect of the Statute of Frauds upon the Use of Parol Evidence.a^— I shall conclude this branch of the sub- ject with an examination, in more general terms, of the doctrine concerning the admission of parol evidence to vary the terms of written instruments which are embraced within the statute of frauds, the theory upon which the doctrine rests, the extent to which such evidence is admissible, and the limits upon the doctrine which have been asserted by some decisions. The discussion embraces both the use of parol evidence in suits brought merely for the reforma- tion of such written instruments, and also its use where the plaintiff seeks, in one suit, to correct a written instrument by means of a verbal variation, and to specifically enforce it as corrected; the same fundamental principle underlies both of these classes. A distinct conflict of opinion exists among the American decisions with respect to the extent of the general doctrine and the limitations upon its op- eration; and the question is one of so much practical im- portance that it demands a careful examination. I shall state the two opposing positions, and the grounds on which they are maintained, as clearly and accurately as may be possible, and shall endeavor to show which of the two ac- cords with principle and is sustained by authority. It is, of course, assumed that the variation in the writing, which § 863, 3 O'Connor v. Spaight, 1 Schoales & L. 305; Devling v. Little, 26 Pa. St. 502. § 863, 4 Cases in the two preceding notes ; Glass v. Hulbert, 102 Mass. 24, 28, 3 Am. Rep. 418, per Wells, J.; Allen's Estate, 1 Watts & S. 383; BrougMon v. Coffer, 18 Gratt. 184. § 864, (a) Sections 864-867 are This paragraph is cited in Atwood eited in Allen v. Kitchen, 16 Idaho, v. Mikeska, 29 Okl. 69, 115 Pae. 133, 18 Ann. Cas. 914, 100 Pao. 1052. 1011. 1771 MISTAKE. § 865 is to be establislied by parol evidence, arose from mistake, surprise, or fraud. § 865. Two Classes of Cases in Which the Use of Parol Evidence may be Affected by th€ Statute. — In contracts re- quired by the statute of frauds to be in writing, all possible- errors requiring a verbal variation, whether arising from mistake, surprise, or fraud, may be reduced to two general classes: 1. By means of the error the contract may in- clude within its terms certain subject-matters — as, for example, lands — ^which were not intended by the parties to come within its operation, in which case the parol evi- dence will show that such subject-matters should be omitted, and the relief demanded will be a correction which shall exclude them, and confine the operation of the agreement to the remaining subject-matters mentioned in it, and to which alone it was intended by the parties to apply ; 2. By means of the error the contract may omit certain subject- matters — as lands — which were intended by the parties to come within its operation; and in this case the parol evidence will show that such subject-matter should be in- cluded, and the relief demanded will be a modification of the writing, so that it shall embrace them, and shall thus extend its operation to particular subject-matters not men- tioned in it, but to which it was originally intended to ap- ply. So far as the statute of frauds can affect the parol variation of written instruments, it is obvious that these two classes describe all possible cases which can arise. Now, it has been asserted — and I merely state the position at present without inquiring into its correctness — that a reformation and enforcement based upon parol evidence in the first of these classes does not conflict with the statute of frauds, since the relief does not make a parol contract, but simply narrows a written one already made. On the other hand, as it is asserted, the same relief in the second class "does directly conflict with the statute, since it is a virtual making of a parol, contract in relation to land or other subject-matter specified in the statute. In short. § 866 EQUITY JUKISPETJDENCE. 1772 it is argued, the remedy in the latter instance is a parol extension of a written contract, so that it shall embrace a subject-matter not otherwise within its scope ; in the for- mer instance it is the withdrawal, by parol evidence, of a portion of the subject-matter from the scope of a written contrapt which is left in full force as to the remaining portion which had been embraced within it from the be- ginning; one is an affirmative process of making a con- - tract ; the other is merely a negative process of limiting a contract already made. The conflict of decision before mentioned turns upon these two classes. According to the interpretation of the general doctrine maintained by one group of decisions, the admission of parol evidence is con- fined to cases falling within the first class; according to the other view, the evidence is admissible alike in cases be- longing to both classes. § 866. General Doctrine That Parol Evidence of Mistake or of Fraud is Admissible in Both Classes of Cases.^ — The doctrine in all its breadth and force is maintained by courts and jurists of the highest ability and authority, which hold that, whether the contract is executory or executed, the plaintiff may introduce parol evidence to show mistake or fraud whereby the written contract fails to express the actual agreement, and to prove the modifications neces- sary to be made, whether such variation consists in limit- ing the scope of the contract, or in enlarging and extend- ing it so as to embrace land or other subject-matter which had been omitted through the fraud or mistake, and that he may then obtain a specific performance of the contract thus varied, and such relief may be granted although the agreement is one which by the statute of frauds is required to be in writing.^ This view, in my opinion, is not only §866, 1 Keisselbrack v. Livingston, 4 Johns. Ch. 144; Gillespie v. Moon, 2 Johns. Ch. 585, 8 Am. Dec. 559 ; Phyf e v. Wardell, 2 Edw. Ch. §866, (a) This section is cited in v. King (Tex. Civ. App.), 122 8. W. Eeynolds v. Hooker (Vt.), 56 Atl. 581. 988; also, in William Carlisle & Co. 1773 MISTAKE. § 866 supported by the overwhelming preponderance of judicial authority, but is in complete accordance with the funda^ mental principles of equity jurisprudence.^ Indeed, the other theory, as will more fully appear in the sequel, has no necessary connection with specific performance; if adopted and consistently carried out, it would necessarily restrict within narrow bounds the most salutary equitable remedy of reformation. The same broad view of the doCT trine is clearly illustrated in the treatment of executed contracts or conveyances of land. It is settled by the great preponderance of authority that a deed of land may be thus corrected by enlarging its scope, extending its operation to other subject-matter, supplying portions of land which had been omitted, making the estates conveyed more com-' prehensive, as changing a life estate into a fee, and the like, and by enforcing the instrument thus varied against the grantor.*! If the doctrine can be thus applied to deeds which have actually conveyed the title, then a fortiori may it be applied to mere executory contracts which do not disturb the legal title.^ d No such relief, however, can be 47; Coles v. Bown, 10 Paige, 526, 535; Hendrickson v. Ivins, 1 N. J. Eq. 562; Workman v. Guthrie, 29 Pa. St. 495, 72 Am. Dec. 654; Raffensberger V. Callison, 28 Pa. St. 246 ; Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181; Gower v. Sterner, 2 Whart. 75; Philpott v. Elliott. 4 Md. Ch. 273; Tilton V. Tilton, 9 N. H. 385; Murphy v. Eooney, 45 Cal. 78; Quinn v. Roath, 37 Conn. 16; Monro v. Taylor, 3 Macn. & G. 713, 718; Leuty v. Hillas, 2 De Gex & J. 110, 120; Beardsley v. Duntley, 69 N. Y. 577. § 866, 2 Monro v. Taylor, 3 Macn. & G. 718 ; Leuty v. Hillas, 2 De Gex & J. 110, 120; Craig v. Kittredge, 23 N. H. 231; Smith v. Greeley, 14 N. H. 378; Tilton v. Tilton, 9 N. H. 385; Blodgett v. Hobart, 18 Vt. 414; Chamberlain v. Thompson, 10 Conn. 243, 26 Am. Dec. 390; Gouverneur § 866, (b) The text is quoted in § 866, (c) The text is cited to this Neininger v. State, 50 Ohio St. 394, effect in McMee v. Henry, 163 Ky, 34 N. E.. 633 (reforming instrument 729, 174 S. W. 746. executed by a surety) ; and in House § 866, (d) Quoted, hut not fol- V. McMullen, 9 Cal. App. 664, 100 lowed, in Wirtz v. Guthrie, 81 N. .T. Pa*. 344; and Bronston's Adm'r v. Eq. 271, 87 Atl. 134. This para- Bronston's Heirs, 141 Ky. 639, 133 graph is cited in Atwood v. Mi- S. W.. 584; McMee V. Henry, 163 Ky. keska, 29 Okl. 69, 115 Pac. 1011; 729, 174 S. W. 746. , King v, Mayberry, 168 N. C. 563, § 867 BQUITT JURISPEUDEirCB. 1774 granted, either when the contract is executory or executed, and no parol evidence can be used to modify the terms of a written instrument, and most emphatically when that instrument is required by the statute of frauds to be in writing, except upon the occasion of mistake, surprise, or fraud ; one or the other of these incidents must be alleged and proved before a resort can be had to parol evidence in such cases. This is certainly the general rule, and the ex- ceptions to it are more apparent than real.^ « § 867. Glass v. Hulbert — Examination of Proposed Limi- tations on This General Doctrine.^ — The courts of some states have confined the operation of the general doctrine to the first of the two classes described in a preceding para- graph. They have refused to apply the doctrine of a parol variation on behalf of the plaintiff to written instruments V. Titns, 1 Bdw. Ch. 477; 6 Paige, 347; Wiswall v. Hall, 3 Paige, 313; De Peyster v. Hasbrouck, 11 N. Y. 582 ; Hendrickson v. Ivins, 1 N. J. Eq. 562; Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181; Flagler v. Pleiss, 3 Rawie, 345; Moale v. Buchanan, 11 GiU & J. 314; Worley v. Tuggle, 4 Bush, 168, 182; Provost v. Rebman, 21 Iowa, 419; Wright v. McCormick, 22 Iowa, 545; Hunter v. Bilyeu, 30 111. 228; Murray v. Dake, 46 Cal. 644. § 866, 3 Lee v. Kirby, 104 Mass. 420; Blakeslee v. Blakeslee, 22 Pa. St. 237. The rule prevailing in several states, which allows parol evidence to show that a deed absolute on its face is really a mortgage even when there was no mistake or fraud in its execution, might be regarded as an exception, but is not so treated by the courts which have adopted it; it is rested by them upon entirely different principles. 84 S. E. 846. See, also, McDonald Craig Co., 163 Ky. 750, 174 S. W. V. Yungbluth, 46 Fed. 836; Taylor 749; Mitchell v. Griffith, 87 Neb. 140,- V. Deverell, 43 Kan. 469, 23 Pac. 126 N. W. 998; Abbott v. Flijit's 628; Goodbar v. Dunn, 61 Miss. 618; Adm'r, 78 Vt. 274, 62 Atl. 721; Nor- Hitchins v. Pettingill, 58 N. H. 386; ton v. Gross, 52 Wash. 341, 100 Pac. Crescent Mining Co. v. Wasatch 734. Mining Co., 5 Utah, 624, 19 Pac. §866, (e) The text is quoted in 198; Nutall v. Nutall (Ky,.), 82 S. House v. McM-ullen, 9 Cal. App. 664, W. 377. See, also, to the same 100 Pac. 344. effect, Wykle v. Bartholomew, 258 § 867, (a) This paragraph is cited, HI. 358, 101 N. B. 597; Froyd v. generally, in MoMee v. Henry, 163 Schultz, 260 in. 268, Ann. Oas. Ky. 729, 174 S. W. 746; William Car- 1914D, 225, 103 N. E. 220; Castle- lisle & Co. v. King (Tex. Civ. App.), man-Blakemore Co. v. Pickrell & 122 S. W. 581. 1775 MISTAKE. § 867 within the statute of frauds, when the modification would enlarge the scope of the instrument so that it should include subject-matter not embraced within it as it stands, or would increase the estate, or would otherwise cause it to operate upon interests which were not originally contained within its terms.i The grounds upon which this conclusion is § 867, 1 The case in which this restrictive view is set forth in the most elaborate and distinct manner, and is maintained with the greatest dis- play of reasoning, is Glass v. Hulbert, 102 Mass. 24, 3 Am. Rep. 418. The practical importance of the question justifies a careful examination of this noted decision. One of two adjoining lots belonging to the same per- son was bought in reliance upon the vendor's false and fraudulent repre- sentations that it included a certain sixteen acres, whereas these acres formed a part of the other lot. On discovering the fraud, the purchaser brought the suit, praying that the vendor might be compelled to convey the lot really intended. This remedy the court refused, holding that the vendee must be confined to a rescission and a legal action for damages. The following extracts from the opinion, by Wells, J., will show the theory maintained by the Massachusetts court. Mr. Justice Wells, after criticising the opinion of Chancellor Kent in the leading case of Gillespie v. Moon, 2 Johns. Ch. 585, 8 Am. Dec. 559, and claiming that much of what the chancellor there said concerning the extent and operation of the general doctrine was a mere dictum, not warranted by the facts nor neces- sary to the decision, proceeds: "The principle which was maintained by Chancellor Kent in Gillespie v. Moon, 2 Johns. Ch. 585, 8 Am. Bee. 559, was, that relief in equity against- the operation of a written instrument, on the ground that by fraud or mistake it did not express the true con- tract of the parties, might be afforded to a plaintiff seeking a modification of the contract, as well as to a defendant resisting its enforcement. That proposition must be considered as fully established. It is quite another proposition to enlarge the subject-matter of the contract, or to add a new term to the writing, by parol evidence, and enforce it. No such proposi- tion was presented by the case of Gillespie v. Moon, and it does not sus- tain the right to such relief against the statute of frauds. . . . When the proposed reformation of an instrument involves the specific enforcement of an oral agreement within the statute of frauds, or when the term sought to be added would so modify the instrument as to make it operate to convey an interest or secure a right which can only be conveyed or secured through an instrument in writing, and for which no writing has ever existed, the statute of frauds is a sufficient answer to such a pro- ceeding, unless the plea of the statute can be met by some ground of estoppel to deprive the party of the right to set up that defense : Jordan V. Sawkins, 1 Ves. Jr. 402; Osbom v. Phelps, 19 Conn. 63. 48 Am. Dea § 867 EQUITY JURISPETJDBN-CE. 1776 based are briefly as follows: The statute of frauds per- emptorily requires that every contract creating or trans- ferring or otherwise dealing with an interest in land must be in writing, and that while the limitation or restriction 133; Clinan v. Cooke, 1 Schoales & L. 22. The fact that the omission or defect in the writing, by reason of which it failed to convey the land, or express the obligation which it is sought to make it convey or express, was occasioned by mistake or by deceit and fraud, will not alone constitute such an estoppel. There must concur, also, some change in the condition or position of the party seeking relief, by reason of being induced to enter upon the execution of the agreement, or to do acts upon the faith of it as if it were executed, with the knowledge and acquiescence of the other party either express or implied, for which he would be left without redress if the^ agreement were to be defeated. . . . The principle on which courts of equity rectify an instrument so as to enlarge its operation, or to convey or enforce rights not found in the writing itself, and make it eon- form to the agreement as proved by parol evidence, on the groiind of an omission by mutual mistake in the reduction of the agreement to writing, is, as, we understand it, that in equity the previous oral agreement is held to subsist as a binding contract, notwithstanding the attempt to put it in writing; and upon clear proof of its terms the court compel the in- corporation of the omitted clause, or the modification of that which is inserted, so that the whole agreement as actually intended to be made shall be truly expressed and executed: Hunt v. Rousmaniere, 1 Pet. 1; Oliver V. Mut. etc. Ins. Co., 2 Curt. 277. But when the omitted term or obliga- tion is, within the statute of frauds, there is no valid agreement which the court is authorized to enforce outside of the writing. In such case relief may be had against the enforcement of the contract as written or the assertion of rights acquired under it contrary to the terms and intent of the real agreement of the parties. Such relief may be given as well upon the suit of a plaintiff seeking to have a written contract or some of its terms set aside, annulled, or restricted, as to a defendant resisting its specific performance: Gillespie v. Moon, 2 Johns. Ch. 585, 8 Am. Dec. 559; Keisselbraek v. Livingston, 4 Johns. Ch. 148. Relief in this form, although procured by parol evidence of an agreement differing from the written contract, with proof that the difference was the result of accident or mistake, does not confiict with the provisions of the statute of frauds. That statute forbids the enforcement of certain kinds of agreement with- out writing, but it does not forbid the defeat or restriction of written contracts, nor the use of parol evidence for the purpose of establishing the equitable grounds therefor. The parol evidence is introduced, not tq establish an oral agreement independently of the writing, but to show that the written instrument contains something contrary to or in excess of the 1777 MISTAKE. § 867 of a written agreement, so that it shall not include all the subject-matter originally within its scope, does not conflict with the statute, a reformation or enforcement based upon parol evidence, by which the contract is made to operate real agreement of the parties, or does not properly express that agree- ment: Higginson v. Clowes, 15 Ves. 516; 1 Ves. & B. 524; Squier v. Campbell, 1 Mylne & C. 459, 480. But rectification by making the con- tract include obligations or subject-matter to which its written terms will not apply is a direct enforcement of the oral agreement, as much in conflict with the statute of frauds as if there were no writing at all. Such rectification, when the enlarged operation includes that which is within the statute of frauds, must be accomplished, if at all, under the other head of equity jurisdiction, namely, fraud." I remark, in this connection, that it is difficult to understand what the learned judge means by this last statement. The ground on which the plaintiff in the suit sought relief was fraud,^;-direct fraudulent misrepresentations by the defendant, and not mere mistake, — and the relief was denied because, as the court said, the granting it would violate the statute of frauds. How, then, could the relief be sought, consistently with this view, under the jurisdiction over fraud? It is possible that he refers to the remedy of rescission based upon fraud; but the use of the word "rectification" seems to be opposed to this explanation. The same view of the doctrine was maintained in Elder y. Elder, 10 Me. 80, 25 Am. Dec. 205, per Weston, J., although it does not appear that any fraud was alleged as in the Massa- chusetts case. See also, as supporting the same theory with more or less directness,'' Osbom v. Phelps, 19 Conn. 63, 48 Am. Dec. 133; Miller v. Chetwood, 2 N. J. Eq. 99; Dennis v. Dennis, 4 Rich. Eq. 307; Westbrook v. Harbeson, 2 McCord Eq. 112; Climer v. Hovey, 15 Mich. 18; Whit- teaker v. Vanschoiack, 5 Or. 113; Best v. Stow, 2 Sand. Ch. 298. The American editor of the Leading Cases in Equity seems to favor the same view in his notes to Woollam v. Heam, vol. 2, pp. 920, 944r-1040, 4th Am. ed. § 867, (b) Davis v. Ely, f04 N. G. Eep. 1092, 23 L. E. A. (N. S.) 1197, 16, 17 Am. St. Kep. 667, 5 L. E. A. 102 Pae. 753 (contract as written 810, 10 S. E. 138. See, also, Wirtz omitted words necessary to connect V. Guthrie, 81 N. J. Eq. 271, 87 Atl. parties witli it as sureties). This 134; and compare Allen v. Kitchen, theory does not prevent reformation 16 Idaho, 133, 18 Ann. Cas. 914, 100 of an instrument which was in- Pac. 1052 (cannot reform a contract tended to be an absolute convey- within the statute of frauds so as to ance, by striking out a defeasance make clear a description which is clause which was inserted by mis^ void for indefiniteness) ; Mead v. take: Kennedy v. Poole, 213 Mass, White, 53 Wash. 638, 132 Am. St. 495, 100 N. E. 635. 11-^113 § 867 EQUITY JTJBISPBUDEKCB. 1778 upon new and distinct subject-matter, estates, or interests, is a direct violation of the legislative mandate, and a gross usurpation of power by the courts, and cannot therefore be permitted. With regard to the character of these decisions as correct representations of the equitable doctrine, and to their effect as binding authority, it would perhaps be enough to say that, at the time when they were made, the courts of Massachusetts and of Maine, able and learned as they were, possessed only a very narrow and partial equitable jurisdiction, conferred entirely by statutes, and it was the very central position of their local system, re- peatedly affirmed in the most positive manner, that they would not and could not enlarge their statutory jurisdic- tion by implication. This fact has exerted a most marked influence upon these courts in their manner of dealing with general topics which were partly embraced within the terms of the local statutes.^ Passing by this fact, how- ever, the decisions themselves are, in my opinion, based upon a misconception and misinterpretation of the true province and methods of equity in dealing with manda- tory statutes of form, — such as the statute of frauds or of wills, — in cases of fraud, mistake, accident, and surprise, so as to prevent the enactments themselves from being made the instruments of injustice.3 The principles which underlie the theory advocated by the Massachusetts court, if carried out to their legitimate results, would work a virtual revolution in equity jurisprudence, would confine its most salutary remedial functions within very narrow limits, and would overturn doctrines Which have been re- garded as settled since the earliest periods of the juris- diction.4 They would greatly abridge the remedy of refor- § 867, 2 See vol. 1, §§ 311-321, 322-337. § 867, 3 See the language of Lord Westbury in McConnick v. Grogan, L. R. 4 H. L. 82, 97, quoted ante, vol. 1, § 431. § 867, 4 In the first place the authorities are overwhelmingly opposed to the fundamental positions maintained by the Massachusetts and Maine courts, and the ratio decidendi in these numerous cases is conclusive. The statement necessarily implied by Mr. Justice "WeUs, that the relief of 1779 MISTAKE. § 867 mation ; they would prevent the court from establishing and enforcing parol contracts which the defendant's actual fraud had prevented from being put into writing; and in fact, these principles cannot be reconciled with the doc- reformation is confined to agreements not within the statute of frauds, is ■without any foundation of fact. The eases are many, decided by the ablest courts, where a reformation an^ enforcement have been granted of written sigreements within the statute of frauds, the effect of which ■was to enlarge the scope of the ■writing and make it include and operate upon lands not embraced ■within its original form, — eases belonging to the second class described in a foregoing paragraph. I will refer to a few such instances by way of illustration. In Moale v. Buchanan, 11 GUI & J. 314, a vendor had agreed to sell certain lots ; he gave a deed, in pursuance of his contract, in which part of the lots were omitted by mis- take. The court granted a rectification and compelled the vendor to con- vey the other lots. In De Peyster v. Hasbrouck, 11 N. Y. 582, defend- ant gave a mortgage on a piece of land which he fraudulently induced the plaintiff to believe was a lot containing a tannery and mill, ■while in fact these structures stood on another lot. The court granted relief by ex- tending the lien of the mortgage so that it should include the land on which the buildings stood. In Wiswall v. Hall, 3 Paige, 313, a grantee intended to purchase and supposed he was obtaining certain land con- taining a wharf and other structures, and the grantor fraudulently suf- fered him to take a deed which only conveyed an adjacent and worthless lot. The court granted a reformation, and compelled the grantor to convey the true land. In Gouverneur V. Titus, 6 Paige, 347, 1 Edw. Ch. 477, a deed was corrected which by mistake conveyed an entirely different piece of land from the one intended to be purchased. In Flagler v. Pleiss, 3 Rawle, 345, a deed ■was reformed and made to convey land which had been left out by mistake. In Hendrickson v. Ivins, 1 N. J. Eq. 562, a bond was corrected and enforced against a surety, although the surety's contract was, of course, required to be in ■writing by the statute. In Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181, under the peculiar procedure then prevailing in Pennsylvania, an agreement, which was fraudulently represented as containing an entire tract of 260 acres, but which only covered a third of that amount, was virtually reformed, and the defendant compelled to convey the entire tract. The case, though in form an action of ejectment, was decided entirely upon equitable princi- ples." See also Tilton v. Tilton, 9 N. H. 385; Smith v. Greeley, 14 N. H. 378; Blodgett v. Hobart, 18 Vt. 414; Beardsley v. Duntley, 69 N. Y. 577. §867, («) In McDonald v. Yung- of Glass v. Hulbert is expressly dia- hlufh, 46 Fed. 836, and Hitchins v. approved; see, also, Noel's Ex'r v. Pettingill, 58 N. H. 386, the doctrine Gill, 84 Ky. 241, citing the text. § 867 EQUITY JUBISPKUDENCB. 1780 trines upon which the jurisdiction of equity to enforce parol contracts in cases of part performance is vested. The stat- Mr. Justice Wells would escape from the force of these and other cases of the same class, by clauning that they were decided upon the principle of equitable estoppel. He asserts that relief of the kind under con- sideration can only be given when the defendant has by his conduct estopped himself from setting up and relying upon the mandates of the statute. It is a complete answervto this ingenious position, that these cases were not in fact decided upon the ground of equitable estoppel. In ail the cases of this class, the ratio decidendi was in n/i instance an equi- table estoppel. In ascertaining what doctrines and rules have been estab- lished by adjudicated eases, we must always inquire what was the actual ground of the decision, what was the actual ratio decidendi adopted by the courts; it is useless to speculate as to other and possible grounds upon which the decisions might have been rested. But, as I shall show in the sequel, even if this class of decisions could be referred to the principle of equitable estoppel, their direct antagonism to the positions of the Massa- chusetts court would not thereby be lessened. I wiU now examine these positions' upon principle. The sole ground of opposition to the equitable jurisdiction is the statute of frauds. If there is any force in the objection, it applies as well to fraud as to mis- take. Indeed the Massachusetts decision expressly takes this view, and denies the power of granting such relief in cases of fraud as well as in those of mistake. The Maine court does not avowedly push its reasoning to this extreme. In the first place, I shall suggest some considerations negatively. A fatal objection to the whole theory is, that it proves too much; if accepted as a true principle of equity, it necessarily destroys una flatu several branches of the jurisdiction which are among its most familiar and salutai-y instances of relief. This theory is not in its essence directed against the remedy of specific performance, but against that of reformation; the act which these courts find to be so impossible is the construction of a contract by parol evidence, not the enforcement of a contract after it is constructed. The theory, therefore, militates against the remedy of reformation, as such, in all its phases, and as distinct from the subsequent remedy of enforcement. It also seems, notwithstanding the ingenious and very refined distinctions dravTn by the Massachusetts court, to militate no less against the remedy of rescission. In short, if this theory be accepted, it must nullify the well-settled doctrines which permit a plaintiff to reform a written contract which, through fraud or mistake, does not express the real intent of the parties as shown by their prior parol agreement, and which permit a defendant to vary an agree- ment and enforce it as varied. It is well settled that both of these pro- ceedings may be had; and neither the English nor the American courts have . suggested the limitation that they can only be resorted to wbere the 1781 MISTAKE, § 867 ute of frauds is no real obstacle in the way of administer- ing equitable remedies so as to promote justice and pre- written instrument includes too much and the relief consists in narrowing its operation. But each of these proceedings is in appearance a viola- tion of the statute of frauds, and is certainly prohibited by the principles of the theory which I am examining. Each of them is, in fact, the estab- lishing by parol a contract which the statute says can only be established by writing. Nor can I see any essential distinction between the remedy of reformation in these instances and that of rescission, when the party, in order to lay the foundation for the rescission, is obliged to show by parol evidence a departure. in the written instrument from the intent as verbally agreed. The party proves by parol evidence that there was a verbal contract broader than the written one, and because the written one thus varies from this agreement, it is set aside. The gist of the pro- ceeding lies, not ip the nature of the remedy, whether it be rescission or reformation, but in the establishment by means of parol evidence of a contract which embraces more than the written instrument does, and, in thus doing what it is said the statute forbids. Again, this theory is in direct conflict with the well-settled doctrine that if one of the parties to a contract which is required by the statute of frauds to be in writing, by his own fraudulent practices prevents it from being reduced to writing- in compliance with the statute, equity will interfere at the suit of the other party, and will enforce the agreement, although verbal: See Mestaer v. Gillespie, 11 Ves. 627, 628, per Lord Eldon; Montacute v. Maxwell, 1 P. Wms. 618; Haigh v. Kaye, L. K. 7 Ch. 469; Whitridge v. Parkhurst, 20 Md. 62; Jenkins v. Eldredge, 3 Story, 181; Fed. Cas. No. 7,266; Tay- lor v. Luther, 2 Sum. 228; Ted. Cas. No. 13,796; Barnard v. Flinn, 8 lud. 204. Finally, this theory, if correct, would at once overturn the whole juris- diction of establishing and enforcing a parol contract which has been partly performed. The Massachusetts court accounts for the numerous cases in which written instrum'ents within the statute of frauds have been reformed and enforced by enlarging their operation and making them in- clude new subject-matter, by referring them all to the doctrine of equi- table estoppel. This explanation, while conceding that such cases were correctly decided, is insufficient, and fails to remove the inconsistency and antagonism between those decisions and the theory maintained by the court. If the statute of frauds is so peremptory in its mandates that it forbids the proof of a contract by parol when it ought to be in writing, upon the occasion of fraud or mistake, it is equally peremptory in for- bidding such proof upon the occasion of an equitabfe estoppel. It is just as much a violation of the statute to permit a contract to be established by parol evidence on the plea of an estoppel from mere conduct, as on the plea of fraud or mistake. If the statute may be avoided on the one § 867 EQUITY JUKISPBUDENCB. 1782 vent wrong. Equity does not deny nor overrule the statute ; but it declares that fraud or mistake creates obliga- ground, it may be on the other; and it should be borne in mind that the lole foundation for the theory is the inviolability of the statute. There is nothing in an equitable estoppel which gives it any more power to dis- pense with the statute than may be given to fraud or mistake. In fact, the very foundation of the doctrine of equitable estoppel is the notion that it would be a virtual fraud upon one party if the other was not estopped; and some American courts have gone so far in this direction as to hold that actual fraud is an indispensable element' of every equitable estoppel. It thus appears that the principles involved in this theory, if adopted, would undermine aU these various instances of equitable juris- diction, an4 the objections urged by the courts in support of the theory prove too much. To the foregoing negative observations I shall now add an affirmative criticism of theory. Notwithstanding the great learning and eminent ability of the courts which have announced it, the theory involves, as it seems to me, a misconception of the fundamental principles of equity jurisprudence, — a failure to grasp those essential principles in their true nature, operation, and effects. As occasions for the exercise of equitable jurisdiction and for the granting of equitable relief, fraud and mistake stand upon exactly the same footing; their effects upon the rights of the injured party are the same; the necessity which they create for relief is the same. It is true that there is an element of moral wrong in fraud, which is not present in mistake where it at first occurs, and a judge feels inclined to punish the wrong-doer. But it is a principle which is funda- mental and should never be forgotten, that equity relieves against fraud on account of its effects upon the rights of the injured party, and not on account of the moral delinquency of the wrongdoer. Now, the effects of a pure mistake upon the rights of the suffering party are the same as injuries, and calling as loudly for relief as those of fraud. Furthermore, although in the original mistake there is no element of immorality, yet afterwards, when the mistake is discovered, and the party benefited insists upon retaining its advantages, and refuses to voluntarily correct the error, but plants himself upon the strict legal rights which the erroneous writ- ing gives him, there is but a very shadowy distinction between the im- moral character of his conduct and that of the person who intentionally, by misrepresentations and concealments, induces another to enter into an agreement.* And for this reason we find judges constantly describing the conduct of persons in such a situation, who insist upon holding the advantages accidentally obtained by mistake, as fraudulent, and the per- § 867, (d) This sentence of the note is quoted in Howard v. Tettrf- baum, 61 Or. 144, 120 Pao. 373. 1783 MISTAKE. § 867 tions, and confers remedial rights which are not within the statutory prohibition ; in respect of them, the statute is up- sons themselves as guilty, from a moral point of view, of virtual, if not actual, fraud. Whatever power, therefore, courts of equity possess to prevent and remove the consequences of fraud, they also possess in deal- ing with the effects of mistake. What, then, is the true principle upon which equity grants its reliefs on the occasion of fraud or mistake in written instruments, especially when these remedies seem to militate against the provisions of the statute of frauds? There are many settled doctrines of equity which maintain, protect, and enforce rights both of property and of remedy in seeming antagonism to the statutes of frauds, of wills, of recording, and the like. It has been shown in the first volume that in all such instances equity does not overrule the statute, nor deny nor disturb the legal title protected by the statute; it fastens a personal obligation upon the conscience of the party, and compels him to hold and use his legal title for the benefit of the other person who is recognized by the court as possessing the beneficial right : See vol. 1, § § 430, 431, and the language of Lord Westbury there quoted. The principle is unalterably fixed in the foundations of the juris- prudence that equity will not suffer a statute passed for the purpose of preventing fraud to be used as an instrument for accomplishing fraud; the statute will be uplifted, when necessary to prevent such a result. One or two examples will serve to illustrate this grand principle. In the case of enforcing a verbal contract on the ground of part performance, the relief is wholly based upon the notion that for the defendant — the vendor — to insist upon the statute and to set it up as a bar would be a fraud upon the plaintiff. Although the fraud is merely constructive, yet, be- cause the mere act of setting up the statute as a peremptory defense would be a virtual fraud, a court of equity treats the statute as uplifted; it fastens a personal obligation upon the conscience of the defendant, and compels him to hold his legal title in trust for the plaintiff, and to per- form the obligation by a conveyance. It is the same when parties have entered into a verbal agreement which the statute of frauds requires to be in writing in order to be binding, and one of them by his fraudulent conduct prevents it from being executed in a written form. Here, ac- cording to the terms of the statute, there is no contract; and, according to the theory under review, there being no contract, it should be impossi- ble for a court of equity to construct one by parol p^-oof of what the parties had agreed upon, and to enforce it when established. But a court of equity is not in the least hindered by these considerations, nor pre- vented from granting its relief. The fraud being shown and the contract proved by parol evidence, the court is not embarrassed by the statute. It fastens upon tha wrong-doer a personal obligation to do exactly what he had verbally agreed to do, and if necessary, treats him as holding the § 868 EQUITY JUKISPKUDENOE. 1784 lifted. A more detailed examination of the theory advo- cated by these decisions, which its importance seemed to require, I have placed in the foot-note. §868. IV. Instances of Equitable Jurisdiction Occa- sioned by Mistake— By Way of Defense.— I shall, in con- cluding this section, enumerate the various modes in which the equitable jurisdiction may be exercised, and the various forms of remedy which may be granted, on the occasion of legal title to the subject-matter in trust for the plaintifE, and compels him to consummate his own duty and the other's right by a conveyance, and thus the statute is uplifted. The same principle appKes to facts and cir- cumstances like those involved in the case of Glass v. Hulbert. When A and B have made a verbal agreement by which A is to convey certain lots of land, and in putting this agreement into a written form, through mis- take or the fraud of A, the writing includes only a portion of the lots, or different land from that intended by the parties, a court of equity is not any more obstructed by the statute in granting relief than in the in- stances before mentioned. The real agreement and intention being shown by parol evidence, the court fastens a personal obligation upon A; it treats him as holding the legal title of the lots really intended in trust for the vendee; and it works out and executes this trust by compelling a con- veyance. It follows from the foregoing analysis of the principle, as well as from the general current of authorities, that, in granting the equitable relief of reformation and enforcement in such cases of mistake or fraud, it makes no possible difference whether the failure of the written instru- ment to express the real agreement and intent of the parties consists in its including too much or too little; it is immaterial whether the verbal con- tract to be proved by parol is broader than the written instrument, cover- ing more or different subject-matter, or is narrower, embracing only a part of the subject-matter or terms which are found in the writing; whether the reformation shall enlarge the scope of the written contract by adding other terms or subject-matter, or shall restrict it by subtracting from its terms or subject-matter. In either of these instances the statute of frauds opposes no obstacle to relief, since in pursuance of the very principle upon which equity intervenes and gxants any relief, the statute is regarded as uplifted, so that it may not become the instrument of per- petuating the very fraud which it was designed by the legislature to prevent. ' That this principle has been established on the grounds and to the extent which I have described, no one acquainted with the course of decision in the English and American courts can deny; and in my opin- ion, notwithstanding occasional do\ibts and even protests from individual judges, they have not thereby exceeded their proper powers and functions. 1785 MISTAKE. § 868 mistake. These modes and forms will be enumerated; the full discussion of the doctrines and rules which govern the remedies themselves, and regulate the exercise of the juris- diction in awarding them, will be given in the subsequent chapters which treat of remedies. The jurisdiction may be exercised either defensively or affirmatively. In equitable suits to compel the specific performance of contracts, or to enforce the obligation arising out of contract, or to en- force an obligation arising out of any other transaction, the defense of mistake is available to defeat or modify the relief. Of course, the mistake alleged and proved by the defendant must in all respects conform to the rules heretofore stated concerning the requisites of mistake in equity ; it must be material, and must have determined the action of the party in entering into the contract or trans- action. It may be common to both parties ; it may be in- duced or procured by the conduct of the plaintiff; or it may be an error of the defendant alone, wholly due to himself. In either case it will be a defense.^ The effect of mistake as a defense in equitable actions has already been considered in the former paragraphs which treat of the admission of parol evidence, and the decisions there cited will furnish examples and illustrations.^ In states which have adopted the reformed procedure, the equitable jurisdiction may also be invoked, if necessary, by defend- § 868, 1 See ante, § 860 ; see also Allen v. Richardson, L. R. 13 Ch. Div. 524; Jones v. Clifford, L. R. 3 Ch. Div. 779; McKenzie v. Hesketh, L. R. 7 Ch. Div. 675; Dehny v. Hancock, L. R. 6 Ch. 1; Davis v. Shepherd, L. R. 1 Ch. 410 ; Wycombe R'y v. Donnington Hospital, L. R. 1 Ch. 268 ; Hooper v. Smart, L. R. 18 Eq. 683; Baskcomb v. Beckwith, L. R. 8 Eq. 100; "Whittemore v. Whittemore, L. R. 8 Eq. 603; Moxey v. Bigwood, 4 De Gex, T. & J. 351; Parker v. Taswell, 2 De Gex & J. 559; Webb v. Kirby, 7 De Gex, M.-& G. 376; Price v. Macaulay, 2 De Gex, M. & G. 339; Swaisland v. Dearsley, 29 Beav. 430; Alvanley v. Kinnaird, 2 Macn. & G. 1, 7 ; Helsham v. Langley, 1 Toimge & C. 175 ; Howell v. George, 1 Madd. 1; Mason v. Armitage, 13 Ves. 25; Doggett v. Emerson, 3 Story, 700; West. R. R. v. Babcock, 6 Met. 346; Post v. Leet, 8 Paige, 337; Mortimer v. Pritchard, 1 Bail. Eq. 505. §868, (a) Quoted in Dennis v. Northern Eac. By. Co. (Wash.), 55 Pac. 210. §§869,870 EQUITY JTJEI3PBTJDEN0E. 1786 ants in legal actions. This may be done by means of equi- table defenses whieb simply defeat the plaintiff's legal cause of action, or by means of equitable counterclaims or cross-complaints, which demand for the defendant some affirmative relief, as reformation or cancellation.^ §869. By Way of Affirmative Relief — Recovery of Money Paid by Mistake. — The jurisdiction to confer affirma- tive relief will only be exercised in cases where an adequate remedy cannot be obtained at law. Whenever money has been paid, or chattels have been delivered, through mistake, the legal remedy by action will ordinarily bje adequate and certain; in fact, the action to recover back money paid by mistake is a very familiar one at law. Whenever land has been conveyed, or contracted to be conveyed, through mis- take, the adequate remedy of the grantor or vendor would generally require the equitable relief of a cancellation. Although an action at law will ordinarily lie to recover back money paid through mistake, still, if the circumstances are special, and such that an action at law will either not lie at all, or will furnish an inadequate relief, a court of equity has undoubted jurisdiction, and will entertain a suit for the recovery of the money, if in good conscience it ought tp be repaid. 1 * § 870. Affirmative Relief — Reformation and Cancella- tion.'^ — The most important affirmative remedies conferred § 868, 2 See ante, § 862; see Arthur v. Homestead F. Ins. Co., 78 N. Y. 462; 34 Am.Eep. 550. § 869, 1 Davis v. Morier, 2 Coll. C. C. 303; Ex parte James, L. R. 9 Ch. 609; Rogers v. Ingham, L. R. 3 Ch. Div. 351, 356; Bingham v. Bing- ham, 1 Ves. Sr. 126. As to mistake in settling accounts and relief from, see Gething v. Keighley, L. R. 9 Ch. Div. 547; § 869, (a) This paragraph is cited Emerson, 160 Mass. 438, 39 Am. St. in Abbott v. Dow, 133 Wis. 533, 118 Eep. 501, 35 N. B. 1065. N. W. 960. See, also, Straus v. Nor- §870, (a) This section is cited in ris, 78 N. J. Eq. 488, 79 Atl. 611; Kinney v. Ensmenger, 87 Ala. 340, Crocker-Woolworth Nat. Bank v. 6 South. 72; Crescent Min. Co. v. Nevada Bank, 139 Cal. 564, 96 Am. Wasatch Min. Co., 5 Utah, 624, 19 St. Eep. 169, 73 Pac. 456; Gould v. Pae. 198; Page v. Higgins, 150 Mass. 1787 ^ MISTAKE. §870 by an exercise of the equitable jurisdiction on the occasion of mistake are cancellation and reformation. Cancellation is appropriate when there is an apparently valid written i agreement or transaction embodied in writing, while in fact/ by reason of a mistake of both or one of the parties, either no agreement at all has really been made, since the minds | of both parties have failed to meet upon the same matters, or else the agreement or transaction is different, with re- spect to its subject-matter or terms, from that which was j intended.^ ^ Eeformation is appropriate, when an agree- ment has been made, or a transaction has been entered into or determined upon, as intended by all the parties in- terested, but in reducing such agreement or transaction to writing, either through the mistake common to both parties, or through the mistake of the plaintiff accompanied by the fraudulent knowledge and procurement of the defendant, the written instrument fails to express the real agreement or transaction." In such a case the instrument may be cor- rected so that it shall truly represent the agreement or § 870, 1 Illustrations: Childers v. Childers, 1 De Gex & J. 482; Cooper V. Joel, 1 De Gex, F. & J. 240; Bentley v. Mackay, 4 De Gex, Y. & J. 279 ; Henkle v. Royal Ex. Ins. Co., 1 Ves. Sr. 317 ; Marquis of Townshend V. Stangroom, 6 Ves. 328; Holmes v. Clark, 10 Iowa, 423; Jackson v. Andrews, 59 N. Y. 244; Nevins v. Dunlap, 33 N. T. 676; Story v. Conger, 36 N. Y. 673; 93 Am. Dec. 546; Welles v. Yates, 44 N. Y. 525; Diman v. Providence R. R., 5 R. I. 130, 135; Sawyer v. Hovey, 3 Allen, 331, 81 Am. Dec. 659; "Woodbury etc. Bank v. Ins. Co., 31 Conn. 517; Tesson v. Atlantic Ins. Co., 40 Mo. 33, 93 Am. Dec. 293. 27, 5 L. R. A. 152, 22 N. B. 63; Ord- Fitzgerald (HI.), 68 N. E. 430; way V. (Ihace, 57 N. J. Eq. 478, 42 Farmers' Loan & Tr. Co. v. Suydam Atl. 149; Green v. Stone, 54 N. J. (Neb.), 95 N. W. 867;. Green v. Eq. 387, 55 Am. St. Kep. 577, 34 Atl. Stone, 54 N. J. Eq. 387, 55 Am. St. 1099i Bep. 577, 34 Atl. 1099; Wirsching §870, (b) The text is quoted in v. Grand Lodge (N. J. Eq.), 56 Atl. United States v. Gridley, 186 Fed. 713; De Voin v. De Vein, 76 Wis. 66, 544; eited to this effect, in Morgan 44 N. W. 839; Lord v. Horr, 30 V. Owens, 228 HI. 598, 81 N. E. 1135; Wash. 477, 71 Pae. 23. See, also, Abbott V. Ddw, 133 Wis. 533, 113 N. § 1377, and Pom. Eq. Eem. W. 960. See Page v. Higgiiis, 150 § 870, (c) Quoted in De Voin v. Mass. 27, 22 N. E. 63; Barker v. De Voin, 76 Wis. 66, 44 N. W. 839; §870 EQUITY JURISPRUDENCE. 1788 transaction actually made or determined upon according to the real purpose and intention of the parties.^ ^ The rules which govern these remedies and determine when § 870, 2 Illustrations: Baker v. Paine, 1 Ves. Sr. 456; White v. White, L. R. 15 Eq. 247; Bloomer v. Spittle, L. R. 13 Eq. 427; Mackenzie v. Coulson, L. R. 8 Eq. 368; Fowler v. Fowler, 4 De Gex & J. 250; Rider v. Powell, 28 N. Y. 310; De Peyster v. Hasbrouck, 11 N. Y. 582; Ford v. Joyce, 78 N. Y. 618; Moran v. McLarty, 75 N. Y. 25; Cone v. Niagara Ins. Co., 60 N. Y. 619 ; Comer v. Himes, 49 Ind. 482, 489 ; Heavenridge v. Mondy, 49 Ind. 434; Winnipiseogee etc. Co. v. Perley, 46 N. H. 83; Wooden v. Haviland, 18 Conn. 101; Langdon v. Keith, 9 Vt. 299; Firm- stone V. De Camp, 17 N. J. Eq. 317; Weston v. Wilson, 31 N. J. Eq. 51; Sanders v. Wagner, 32 N. J. Eq. 506; Gump's Appeal, 65 Pa. St. 476; Chew v. Gillespie, 56 Pa. St. 308; Dulany v. Rogers, 50 Md. 524; Bradford v. Union Bank, 13 How. 55, 57, 66. Sloss-Sheffield Steel & Iron Co. v. Aetna Life Ins. Co., 74 N. J. Eq. 635, 70 Atl. 380; Frost v. Eeagon, 32 Okl. 849, 124 Pac. 13; Churchill V. Capen, 84 Vt. 104, 78 Atl. 734. § 870, (d) The text is quoted in Sloss-Sheffield Steel & Iron Co. v. Aetna Life Ins. Co., 74 N. J. Eq. 635, 70 Atl. 380; in Frost v. Eeagon, 32 Okl. 849, 124 Pae. 13; and cited in Dickey v. Forrester (Tex. Civ. App.), 148 S. W. 1181 ; May v. Cearley (Tex. Civ. App.), 138 S. W. 165; American Ass'n V. Williams, 166 Fed. 17, 93 C. 0. A. 1; American Nat. Ins. Co. v. Schlosberg, 117 Ark. 655, 174 S. W. 1158; Day v. Dyer, 171 Iowa, 437, 152 N. W. 53; Castleman-Blakemore Co. V. Pickrell & Craig Co., 163 Ky. 750, 174 S. W. 749; King v. May- berry, 168 N. C. 563, 84 S. E. 846. See, also, Cowen v. Truefitt, Limited, [1898] 2 Ch. 551, [1899] 2 Ch. 309; Western Assur. Co. v. Ward, 75 Fed. 338 (C. C. A.), 41 U. S. A. 443; Jones V. McNealy (Ala.), 35 South. 1022; Kinney v. Ensmenger, 87 Ala. 340, 6 South. 72; Allis v. Hall (Conn.), 56 Atl. 637; Taylor v. Glens Falls Ins. Co. (Fla.), 32 South. 887; Christenaen v. Hollingsworth, 6 Idaho, 87, 96 Am. St. Bep. 256, 53 Pac. 211; Stanley v. Marshall, 206 111. 20, 69 N. E. 58; Webb v. Ham- mond, 31 Ind. App. 613, 68 N. E. 916; Earl v. Van Natta, 29 Ind. App. 532, 164 N. E. 901; Smelser v. Pugh (Ind.), 64 N. E. 943; Adams v. Wheeler, 122 Ind. 251, 23 N. E. 760; Palmer Steel & Iron Co. v. Heat, Light & Power Co., 160 Ind. 232, 66 N. E. 690; St. Clair v. Marquell (Ind.), 67 N. E. 693; Fritzler v. Rob- inson, 70 Iowa, 500, 31 N. W. 61; Williams v. Hamilton, 104 Iowa, 423, 65 Am. St. Rep. 475, and note, 73 N. W. 1029; Barry v. Bownd, 119 Iowa, 105, 93, N. W. 67; Story v. Gammell (Iowa), 94 N. W. 982; Western Wheeled Scraper Co. v. Stickleman (Iowa), 98 N. W. 139; Fierce v. Houghton (Iowa), 98 N. W. 306; Schaeffer v. MiUs (Kan.), 76 Pac. 436; Phoenix Ins. Co. v. Ey- land, 69 Md. 437, 1 L. E. A. 548, 16 Atl. 109; Boulden v. Wood, 96 Md. 332, 53 Atl. 911; White v. Shaffer, 97 Md. 359, 54 Atl. 974; Page v. Hig- gins, 150 Mass. 27, 5 L. E. A. 152, 22 N. E. 63; Newland v. First Bap- 1789 MISTAKE. § 871 they may be conferred, together with the various kinds and classes of instances in which they have been granted, will be found in subsequent chapters. § 871. Conditions of Fact Which are Occasions for Af- firmative Relief. a- — The conditions of fact which furnish- occasions for the exercise of the jurisdiction to grant af- firmative relief, either of reformation, of cancellation, or pf pecuniary recovery, are many and various. The following are some of the most important. The relief which equity gives in aid of a defective execution of powers may be occa- sioned by mistake as well as by accident.! Judgments at law recovered through mistake may be a ground for the in- terposition of equity in enjoining or setting aside the judg- ment, to the same extent and under the same limits as those recovered by accident.^ ^ Marriage settlements may be corrected when, through mistake, they do not represent the original agreement between the parties, either with respect to their subject-matter or their terms, and especially where § 871, 1 See ante, §§ 589, 590, 834, 835, where this particular instance of the jurisdiction is explained. § 871, 2 See ante, § 836. tist Church (Mich.), 100 N. W. 612; (Tex.), 70 S. W. 201; Kelley v. Mikiska v. Mikiska (Minn.), 95 N. Ward, 94 Tex. 289, 60 S. W. 311; W. 910; Hawkins v. Blair (Miss.), Dennis v. Northern Pac. Ey. Co., 20 36 South. 246; Moore v. Crump Wash. 320, 55 Pac. 210; Lord v. (Miss.), 37 South. 109; Wirsching v. Horr, 30 Wash. 477, 71 P.ac. 23; Nut- Grand Lodge (N. J. Eq.), 56 Atl. ter v. Brown, 51 W. Va. 598, 42 S. 713; Trusdell v. Lehman, 47 N. J. E. 661; Silbar v. Ryder, 63 Wis. 106, Eq. 218, 20 Atl. 391; Green v. Stone, 23 N. W. 106; James v. Cutler, 54 54 N. J. Eq. 387, 55 Am. St. Rep. Wis. 172, 10 N. W. 147. See, also, 577, 34 Atl. 1099; Southern F. & W. § 1376, and Pom. Eq. Rem. Co. V. Ozment, 132 N. C. 839, 44 S. § 871, (a) This section is cited in E. 681; Jones v. Warren (N. C;), Smith v. Butler, 11 Or. 46, 4 Pac. 46 S. E. 740; Forester v. Van Auken 517; Miles v. Miles (Miss.), 37 (N. D.), 96 N. W. 301; Marshall v. South. 112. Homier, 13 Okl. 264, 74 Pac. 368; § 871, (b) The text is cited in North, etc., K'y Co. v. Swank, 105 Bacon v. Bacon, 150 Cal. 477, 89 Pa. St. 555; Baab v. Houser (Pa. Pac. 317; Hilt v. Heimberger, 235 St.), 53 Atl. 344; Silliman v. Tay- 111. 235, 85 N. E. 304. See, also, lor (Tex. Civ. App.), 80 S. W. 651; §§ 1364, 1376, 1377, and Pom. Eq. San Antonio Nat. Bank v. McLane Rem. § 871 EQUITY JURISPBUDENOE. 1790 the formal instrument does not correspond with the pre- liminary writings.3 Family compromises and settlements may certainly be set aside or corrected, but the jurisdic- tion is exercised with great caution, and never unless the mistake is palpable so as to indicate a surprise, or unless there are incidents of inequitable conduct by some of the parties.* Equity has a very narrow jurisdiction to cor- rect mistakes in wills, but only when the error appears upon the face of the will itself, so that both the mistake and the correction can be ascertained and supplied by the con- text, from a plain interpretation of the terms of the instru- ment as it stands. A resort to extrinsic evidence is never permitted, either to show a mistake or to ascertain the cor- rection. Mistakes which can be thus corrected may be in the names of legatees or devisees, in the description of property, or in other terms. ^ <= The jurisdiction to grant § 871, 3 Higginson v. Kelly, 1 Ball & B. 252; Wright v. Goff, 22 Beav. 207; Breadalbane v. Chandos, 2 Mylne & C. 711; Bold v. Hutchinson, 5 De Gex, M. & G. 558, 566; Hanley v. Pearson, L. R. 13 Ch. Div. 545; In re Daniel's Settlement, L. R. 1 Ch. Div. 375; In re Bird's Trusts, L. R. 3 Ch. Div. 214; Smith v. IlifEe, L. R. 20 Eq. 666; Cogan v. Duffield, L. R. 20 Eq. 789; In re De la Touche's Settlement, L. R. 10 Eq. 599; Elwes v. Elwes, 3 De Gex, P. & J. 667. As to setting aside a marriage settlement, see Evans v. Carrington, 2 De Gex, P. & J. 481; Merryweather v. Jones, 4 GifE. 509; Hartopp v. Hartopp, 21 Beav. 259. § 871, 4 See ante, §§ 850, 855. § 871, 5 "When evidence of cireumstanees is admitted to explain an ambiguity this is not for the purpose of correcting a mistake. The fol- lowing cases illustrate the extent and limits of this jurisdiction: In re Aird's Estate, L. R. 12 Ch. Div. 291; Whitfield v. Langdale, L. R. 1 Ch. Div. 61; Barber v. Wood, L. R. 4 Ch. Div. 885; Newman v. Piercey, L. R. 4 Ch. Div. 41; Wilson v. Morley, L. R. 5 Ch. Div. 776; Travers v. Blun- ■dell, L. R. 6 Ch. Div. 436; Homer v. Homer, L. R. 8 Ch. Div. 758; Gar- land V. Beverley, L. R. 9 Ch. Div. 213; In re Nunn's Trusts, L. R. 19 Eq. 331; Farrer v. St. Catherine's College, L. R. 16 Eq. 19; Hardwick v. Hardwick, L. R. 16 Eq. 168; McKechnie v. Vaughan, L. R. 15 Eq. 289; In re Ingle's Trusts, L. R. 11 Eq. 578; Hall v.Lieteh, L. R. 9 Eq. 376; Box V. Barrett, L. R. 3 Eq. 244; Hart v. Tulk, 2 De Gex, M. & G. 300; §871, (c) The text is cited in Northen's Estate, 28 C'h. Div. 153; Lewis V. Eeed's Ex'r, 168 Ky. 559, Home- for Incurables v. Noble, 172 182 S. W. 633. See, also, In re U. S. 383, 19 Sup. Ct. 226. 1791 MISTAKE. §871 the relief of reformation may be exercised with respect to Campbell v. Bouskell, 27 Beav. 325; Taylor v. Richardson, 2 Drew. 16; Snyder v. Warbasse, 11 N. J. Bq. 463; "Wood v. White, 32 Me. 340, 52 Am. Dec. 654; Jackson v. Payne, 2 Met. (Ky.) 567; Goode v. Goode, 22 Mo. 518, 66 Am. Dec. 630; Trexler v. Miller, 6 Ired. Eq. 248; Johnson v. Hubbell, 10 N. J. Eq. 332, 66 Am. Dec. 773 ; Yates v. Cole, 1 Jones Eq. 110, 59 Am. Dec. 602; McAlister v. Butterfleld, 31 Ind. 25; Ei-win v. Hamner, 27 Ala. 296; Machem v. Maehem, 28 Ala. 374; Alter's Appeal, 67 Pa. St. 341, 5 Am. Rep. 433; Nutt v. Nutt, 1 Freem. (Miss.) 128; and see Kerr on Fraud and Mistake, 448-453. The rules upon this subject belong to the general doctrine concerning the interpretation of wills, and will be found in works which treat of wills. The subject of correcting mistakes in wills, mentioned in the text, needs a little fuller explanation. There is no jurisdiction of equity to entertain suits for the reformation of wills analogous to that for the reformation of conveyances, agreements, and the like. The power Jo correct mistakes in wills is simply a part of the more general function of construction and interpretation, and may be exercised, if at all, in administration suits, or in any other suits wherein the rights of parties under the will are adjudicated. In many of the states it would be exercised by courts having a probate jurisdiction in the proceedings for the final settlement and distribution of the estate. How- ever exercised, the power only exists within very narrow limits. The only possible modes of correcting mistakes in wills are by transposing, reject- ing, or supplying words or clauses; and the fundamental principle is set- tled, that both the error, and the correction of it, must appear with cer- tainty on the face of the will itself, and extrinsic evidence can never be resorted to for that purpose. Courts find little difficulty in transposing the order of words or dispositions so that all shall be reconciled, and an efEeet be given to each and to the whole. This is not an infrequent step in the process of interpretation. Rejecting a word or clause is also not an extreme measure where the context clearly requires it. To supply a word or clause demands a very strong and unusual case, where it must certainly appear that something has been omitted by inadvertency. Even then the alternative, that the whole disposition should be rejected as unmeaning, might be adopted. If a clause is to be rejected, the neces- sity for it must arise from the face of the will itself. If a word or clause is to be supplied, the necessity for such a supply, and also the very word or clause itself to he supplied, must appear from the face of the will. The case of Du Bois v. Ray, 35 N. Y. 162, which contains a full citation of authorities, furnishes an excellent example. Children which a named person "may leave" was read as though changed to "may have." The case of patent ambiguities, which admit extrinsic evidence in order to identify the person or thing intended, is not an exception to the foregoing conclusions, since patent ambiguities are in no true sense of the § 871 EQUITY JUKISPBUDENCE. 1792 written instniments operating inter vivos, whetlier they term mistakes. I add a few illustrations of such correction of error, taken from the decisions. Cases of Supplying Words. — Where, from the will generally, it is clear that certain words are omitted from part of it, and also what these words are, the omission may be supplied. Thus where there was a gift to A and B, and "if either died before twenty-one, and without issue," his share to go to the other, and "if both died without issue," then the prop- erty to go to a third person, C ; the words "before twenty-one" were sup- plied in the latter part, so that the clause should read, "if both died before twenty-one and without issue," then the property to go to C : Kirk- patriek v. Kirkpatrick, 13 Ves. 476; Sheppard v. Lessingham, Amb. 122; Spalding v. Spalding, Cro. Car. 185. In another case, a similar gift to A and B, and if either died "without leaving issue," then to the other, and if both should die "without issue," then the property was to go over to C; the word "leaving" was supplied in. the last clause, so that it should read "if both died without leaving issue," then over to C, since the latter form was necessary at the time to render the executory devise over valid : Radford v. Radford, 1 Keen, 486. These examples sufficiently illustrate the correction by simply supplying words. Cases of Rejecting Words. — ^Particular words, inconsistent with the clearly expressed provisions and purposes of the will, may be rejected, but only by an inspection of the will itself, without aid from extrinsic evidence. Thus where freehold lands were devised to A for ninety-nine years, with remainder, after the death of A, to his eldest son in tail, and then to his other sons successively, the words giving an absolute term of ninety-nine years to A were rejected, and he- was left to take a life estate in accordance with the other limitations: Coryton v. Helyar, 2 Cox, 340; and see Chapman v. Gilbert, 4 De Gex, M. & G. 366. In a devise to A and to his heirs for their lives^ the words "for their lives" were rejected as unmeaning and inconsistent: Doe v. Stenlake, 12 East, 515; Doe v. Thomas, 3 Ad. & E. 123; Hugo v. Williams, L. R. 14 Eq. 224. In a be- quest to "my aforesaid nephews and nieces," the word "aforesaid" was rejected, none having been before mentioned in the will: Campbell v. Bouskell, 27 Beav. 325. Transposing and Changing Words. — If the testator's language is with- out meaning as it stands, but can be made intelligible by a transposition of words, this will sometimes be done to carry out the intent clear from the will as a whole. Thus if it be quite clear from the context that in describing Whiteacre he means Blackacre, and in describing Blackacre he means Whiteacre, a transposition of the names will be allowed, so as to make the disposition correspond with the limitation : See Mosley v. Mas- sey, 8 East, 149; Doe v. Allcock, 1 Barn. & Aid. 137, per Holroyd, J. But any such correction must be made without the aid of extrinsic evi- 1793 MISTAKE. . § 871 are executed contracts, such as deeds of conveyance, mort- denee; it must clearly appear from the will what the mistake is, and must be equally clear from the will what correction is needed ; e.' g., a will contained several numbered schedules, and the testator in a certain clause referred to one number, by evident mistake, for another, and this was cor- rected : Hart v. Tulk, 2 De Gex, M. & G. 300. In Marshall v. Hopkins, 15 East, 309, there was a device of a "messuage, lands, and appurtenances in the occupation of A," and these words "in the occupation of A," were read as coming directly after the word "messuage," so that the whole should be the "messuage in the occupation of A, lands and appur- tenances," since the rest of the will showed certainly that this correction was necessary to make sense. "Or" Changed to "And." — One of the most common instances of cor- rection is the changing "or" to "and," and vice versa. This change is most often made when the intention of the will is clear to provide for a person arid his issue, but in the gift over to third persons in the event of there being no issue, the contingency is expressed in such a manner that, if read literally, it would, under the settled rules of law, wholly defeat the plain intention : e. g., a devise to A and to his heirs, and if A died under twenty-one or without issue, then the property was to go over to a third person, C; A died under twenty-one, but leaving a child; "or" was read "and," so that it was held that both events must happen, viz., A's death under twenty-one, and his death without issue, before the gift over to C could take effect: See Soulle v. Gerrard, Cro. Eliz. 525; Moore, 422; Walsh V. Peterson, 3 Atk. 193; Framlingham v. Brand, 3 Atk. 390; Greated v. Greated, 26 Beav. 621 ; Miles v. Dyer, 5 Sim. 435. Also, where there was a gift to A in either of two events, his attaining the age of twenty-five or his marrying,, and a gift of the property over to B in ease A died under twenty-five or died unmarried, the last "or" was read "and" as a matter of necessity, to make it correspond with the meaning of the gift to A: Grant v. Dyer, 2 Dow, 73. The cases are numerous in which "or" has been changed to "and," but these instances are sufficient as illustrations. "And" Changed to "Or." — In the same manner "and" is occasionally read "or," for the purpose of carrying out the testator's intention; but never without an imperative necessity for the change, apparent on the face of the will: See In re Sanders's Tnists, L. R. 1 Eq. 675; In re Kirkbride's Trusts, L. E. 2 Eq. 400; e. g., where the will gave a bequest to a class of persons at a particular time, — at the testator's death, — "and to such of them as shall then be living," the word "and" was a plain mistake for "or," and a change to "or" was necessary to carry into effect the plain intent: Hetherington v. Oakman, 2 Younge & €. Ch. 299; May- nard v. "Wright, 26 Beav. 285. These examples show that the power of 11—113 § 871 EQUITY JUKISPEUDENCB. 1794 gages, leases, or executory agreements, such as bonds, courts to correct actual mistakes in wills, as a part of their function of interpretation, by supplying, rejecting, transposing, or substituting words, is confined within very narrow and well-defined limits, and is never to be exercised except when the general purpose or scheme of the will is clear beyond a doubt, and as clearly and positively demands the correction, in order that this purpose and scheme may be carried into effect. As I have before stated, these are all the instances of true mistakes in the language of wills which furnish an occasion for the power to correct. In order to complete this general view, however, I will add a few illustra- tions of misdescriptions, either of property given or of the beneficiaries to whom it is given, which become known from the general evidence of the surrounding circumstances which is always admissible. Such mis- descriptions, being discovered by the extrinsic evidence, may be harmon- ized, explained, and made effective through the ingtrumentality of such evidence. But it should be carefully observed that this process of ad- justing the misdescriptions to the actual conditions of fact is in no proper sense a correction of mistakes. Misdescription of the Property Given. — In respect to such misdescrip- tions the maxim Falsa demonstratio non nocet, often controls and prevents a failure of the gift. Where the description consists of two parts, one of which is accurate and sufficient if it stood alone, and the second is in- complete and erroneous, this maxim generally applies, — always does so if the property answers to the accurate part of the description, and there is no other property of the testator to which such description in any of its parts can apply. Thus if the property is accurately described in other respects, an error as to the county in which it is stated to be situated is immaterial, if the testator had no other property answering to the descrip- tion: Hastead v. Searle, 1 Ld. Eajmi. 728. If the property is commonly known by some particular name, as Whiteacre, and is devised by that name, the addition of some further erroneous description, as that it is in the occupancy of A, while in fact it was in that of B, does not defeat the gift : Blague v. Gold, Cro. Car. 447 ; and see Howard v. Conway, 1 Coll. C. C. 87; Stephens v. Powys, 1 De Gex & J. 24. Lands being correctly described as at or near A, in the parish of B, the inaccurate addition of their being in the testator's occupation would not defeat the gift: White V. Birch, 36 L. J. Ch. 174; but see Doe v. Parkin, 5 Taunt. 321. Under the description, "my farm called Whiteacre, in the occupation of A," lands forming part of the farm, but not occupied by A, would be in- cluded in the devise: Goodtitle v. Southern, 1 Moore & S. 299; Down v. Down, 7 Taunt. 343; and see, in respect to such kinds of description, Slingsby v. Grainger, 7 H. L. Cas. 273, per Lord Cranworth; Press v. Parker, 2 Bing. 456; Polden v. Bastard, L. R. 1 Q. B. 156; Doe v. Mar- 1795 MISTAKE. § 871 policies of insurance, notes, bills of exchange, and the tin, 4 Bam. & Adol. 771; Bodenham v. Pritoliard, 1 Bam. & C. 350; Waite V. Morland, 12 Jur., N. S., 763. Description Consisting of Several Terms. — If the description is ambig- uous, it is a leading principle that if there are several terms of the description applied to the subject-matter of the gift, every such term may be material, and if there is property corresponding with the descrip- tion in every particular, it alone will in general pass, to the exclusion of other property which answers to the description only in part. For ex- ample, a testator having said that he owned certain lands in A subject to a mortgage, devised the said lands; this was held not to include lands of the testator in A which were not mortgaged : Pullin v. PuUin, 3 Bing. 47. A devise of lands at A, held of B, in the occupation of C, would not carry land not in C's occupation, there being other lands in his occu- pation and so answering to the description : Morrell v. Fisher, 4 Ex. 591. Where a testator devised his "messuages at, in, or near A, and purchased from B," and it appeared that he owned two houses about twenty yards from A, and four other houses about four hundred yards from A, and that all six had been purchased from B by one conveyance, it was held that the devise embraced only the two first mentioned, as being at, in, or near A: Doe v. Bower, 3 Bam. & Adol. 453. Property Answering the Description. — It is a settled general rule that where there is property answering the description, then no other will pass.* Thus if an estate is situated in two counties, towns, or places, A and B, even if there is no division line, and the whole is used and enjoyed as one property, and the testator devises only by the description, "my house, lands, farms, etc., in A," that part of the estate alone which is in A will pass by the gift : "Webber v. Stanley, 16 Com. B., N. S., 698 ; Pedley v. Dodds, L. E. 2 Eq. 819; Smith v. Ridgway, L. E. 1 Ex. 331; Lister v. Pickford, 34 Beav. 576; Doe v. Oxenden, 3 Taunt. 147; 4 Dow, 65;- but see Harman v. Grurner, 35 Beav. 478. The testator had pur- chased a house rmd some lands, situated in two towns, from A, and he devised by description all his "house, farm, and lands situate in" one of the towns, and the land situate in the other town was held not to be included in the gift: Doe v. Lyford, 4 Moore & S. 550. A testator possessed four pieces of land. A, B, C, and D, all held under one lease, and devised the A,, B, and C tracts, and the D tract was held not to pass : "West V. Lawday, 11 H. L. Cas. 375. On the other hand, a devise men- tioning four houses as given, the court held from the context that five were meant and were included in the devise : Sampson v. Sampson, L. E. 8 Eq. 479. Names of Beneficiaries. — Cases of mistakes in the names of devisees and legatees are very numerous. ' In very many instances the ambiguity § 871, (d) See, also, In re Seal, [1894] 1 Ch. 316. § 871 EQUITY JUEISPBUDENCE. 1796 like.fi « There is, of course, no power to reform wills.'^ * The relief of cancellation may be granted with respect to deeds of conveyance, mortgages, agreements concerning land, and other similar transactions, subject always to the important limitation that the party can obtain no adequate is such that extrinsic evidence is necessary to identify the person in- tended. This particular kind of error properly belongs, therefore, to the general subject of extrinsic evidence in aid of the interpretation of wUls. Where there is some error in the name, the beneficiary is sometimes con- nected with other description which will identify the individual, and obviate the error by bringing it within the maxim. Falsa demonstratio non nocet: e. g., a bequest to A B, the right name, with the erroneous addition, "legitimate son of C," has been sustained: Standen v. Standen, 2 Ves. 589; Giles v. Giles, 1 Keen, 688. Where a devise was to the second son of Edward W., of a certain place, the second son of Joseph W., of that place, was held entitled to take : Lord Camoys v. Blundell, 1 H. L. Cas. 778. Collateral descriptions of the beneficiary are often suffi- cient to identify him, and to obviate an error in his name; e. g., under a bequest to William A., eldest son of Charles A., it was held that Andrew A., who was the eldest son, was entitled: Pitcaim v. Erase, Finch, 403; and see Dowsett v. Sweet, Amb. 175; Stringer v. Gardiner, 4 De Gex & J. 468. Under a bequest to "Clare Hannah, the wife of A.," the wife of A. was held entitled, although her name was simply Hannah, and she had a daughter named Clare Hannah: Adams v. Jones, 9 Hare, 485; and see Ryall v. Hannam, 10 Beav. 536; Hodgson v. Clarke, 1 De Gex, F. & J. 394. These are a very few out of a great number of examples of errors in the names and descriptions of beneficiaries which have been corrected by the context, and in the light of the surrounding circum- stances. § 871, 6 See cases cited ante, under § 870. § 871, 7 Sherwood v. Sherwood, 45 Wis. 357, 30 Am. Eep. 757. §871, (e) The text is cited ia also, Bingel v. Volz, 142 HI. EemiD V. Landon, 43 Ind. App. 91, 214, 34 Am. St. Kep. 64, 16 L. K. A. 86 N. E. 973. 321, 31 N. E. 13; Collins v. Capps, § 871, (f ) No Reformation of 235 111. 560, 126 Am. St. Eep. 232, Wills.— The text is cited in Miller 85 N. K 934; Sturgis v. Work, 122 V. Rowan, 251 HI. 344, 96 N. E. Ind. 134, 17 Am. St. Eep. 349, 22 285, dissenting opinion; Holmes v. N. E. 996; Chambers v. Watson, 56 Campbell College, 87 Kan. 597, Iowa, 676, 10 N. W. 239; Polsey v. Ann. Cas. 1914A, 475, 41 L. E. A. Newton, 199 Mass. 450, 15 Ann. Cas. (N. S.) 1126, 125 Pac. 25; Cowie 139, and note, 85 N. E. 574; Mudd V. Strohmeyer, 150 Wis. 401, 136 v. Cunningham (Mo.), 181 S. W. N. W. 956, 137 N. W. 778. See, 386. 1797 MISTAKE. § 871 remedy at law.^ e With respect to mistakes in awards, the jurisdiction exists, but will be exercised only within very narrow limits. If a mistake appears on the face of the award itself, or in some contemporaneous writing, or is vol- untarily admitted by the arbitrator, or he states circum- stances which clearly show an error, equity may relieve by setting aside or perhaps correcting the award"; otherwise there is no ground for interf erence.^ ^ A court of equity may, perhaps, under special circumstances, exercise its jurisdiction by correcting mistakes in judgments and de- crees and other records, where the error is clerical or min- isterial, and not judicial, and there is no other means of obtaining the relief.^^^ Where an instrument has been § 871, 8 See ante, § 870. §871, SMordue v. Palmer, L. R. 6 Ch. 22; Morgan v. Mather, 2 Ves. 15 ; Knox v. Symmonds, 1 Ves. 369 ; Mills v. Bowyers' Soc, 3 Kay & J. 66; Houghton v. Bankart, 3 De Gex, F. & J. 16; Haigh v. Haigh, 3 De Gex, F. & J. 157; Goodman v. Sayers, 2 Jacobs & W. 249; Young v. Walter, 9 Ves. 364; Eoosevelt v. Thurman, 1 Johns. Ch. 220; Bouck v. Wilber, 4 Johns. Ch. 405 ; Underbill v. Van Cortland, 2 Johns. Ch. 339 ; 17 Johns. 405; Winship v. Jewett, 1 Barb. Cb. 173; Hartshorn v. Cut- trell, 2 N. J. Eq. 297; Ryan v. Blunt, 1 Dev. Eq. 386. If the award is within the submission, no mistake of the arbitrator, either of law or of fact, established by extrinsic evidence will be a ground for the interference of equity. The subject of awards and of the proceedings thereon has in many states been So regulated by statute that the jurisdiction of equity over them has become unimportant, if not obsolete. § 871, 10 Bamesly v. Powell, 1 Ves. Sr. 119, 284, 289; Colwell v. War- ner, 36 Conn. 224; Loss v. Obry, 22 N. J. Eq. 52; Wheeler v. Eart- §871, (g) See post, § 1376 and Charlottesville & A. E. Co., 110 Va. Pom. Eq. Eem. 70, 18 Ann. Cas. 1027, 65 S. E. 503; § 871, (h) Mistake In Awards. — and see Eolf e v. Patrons' Andros- Brush V. Fisher, 70 Mich. 469, 14 coggin Mut. Fire Ins. Co., 105 Me. Am. St. Eep. 510, 38 N. W. 446; 58, 72 Atl. 732; Eoberts v. Consumers In re Curtis, 64 Conn. 501, 42 Am. Can Co., 102 Md. 362, 111 Am. St. St. Eep. 200, 30 Atl. 769. In Bar- Eep. 377, 62 Atl. 585 (setting aside rows V. Sweet, 143 Mass. 316, 9 N. E. for arbitrary refusal to hear testi- 665, and Frick v. Christian Co., 1 mony) ; Donaldson v. Buhlman, 134 . Fed. 250, the mistake was admitted Wis. 117, 113 N. W. 638, 114 N. W. by the arbitrator. See, also, in 431 (award deciding question not support of text, White Star Min. Co. submitted). V. Hultberg,. 220 HI. 57?, 77 N. E. § 871, (i) Mistakes in Judgments. 327, reviewing cases; McKennie v. The text is cited in Dillard v. Jones, § 871 EQUITY JUEISPEUDENCE. 1798 surrendered or discharged, or an encumbrance or charge has been satisfied through mistake, the jurisdiction may be exercised by granting such relief as will replace the party entitled in his original position, either by setting aside the formal discharge, or by compelling a re-execution of the in- strument.ii J The jurisdiction extends to the settlement of accounts, made according to the intention of the parties, but based upon or involving a mistake. Belief will be granted as the circumstances may require, either by setting aside the settlement, or by permitting a party to surcharge or falsify.i^k Finally, the equitable jurisdiction may be land, 23 N. J. Eq. 13; Gump's Appeal, 65 Pa. St. 476; Byrne v. Edmonds, 23 Gratt. 200; Kearney v. Sacer, 37 Md. 264; Barthell v. Roderick, 34 Iowa, 517; Palmer v. Bethard, 66 lU. 529; Chapman v. Hurd, 67 El. 234; Stites V, Wiedner, 35 Ohio St. 555; Pool v. Docker, 92 HI. 501; Young v. Morgan, 9 Neb. 169; but see Wardlaw v. Wardlaw, 50 Ga. 544. § 871, 11 Swaggerty v. NeUson, 8 Baxt. 32; Lemon v. Phoenix etc. Ins. Co., 38 Conn. 294; Seholefield v. Templer, Johns. 155; East Ind. Co. v. Donald, 9 Ves. 275; Bast Ind. Co. v. Neave,^ Ves. 173. §871, 12 Gething v. Keighley, L. R. 9 Ch. Div. 547; Stuart v. Sears, 119 Mass. 143; Russell v. The Church, 65 Pa. St. 9; McCrae v. Hollis, 4 Desaus. Eq. 122; Mounin v. Beroujon, 51 Ala. 196; Bamett v. Bamett, 6 J. J. Marsh. 499; Waggoner v. Minter, 7 J. J. Marsh. 173. 229 lU. 119, 11 Ann. Cas. 82, 82 157, 26 L. E. A. (N. S.) 816, and N. E. 206; Moore v. Shook, 276 111. note, 123 N. W. 414; Troll v. Sauer- 47, 114 N. E. 592; Engler v. Knob- brun, 114 Mo. 323, 89 S. W. 364; laugh, 131 Mo. App. 481, 110 S. W. Vliet v. Cowenhoven, 83 N. J. Eq. 16; Greeley v. De Cottes, 24 Ma. 234, 90 Atl. 681; Scott v. Smith, 475, 5 South. 239; Smith v. Butler, gg Or. 591, 115 Pac. 969; Home luv. 11 Or. 46, 4 Pac. 517. See, also, Co. v. Claraon, 21 S. D. 72, 109 N. W. Pom. Eq. Bem., chapter on relief 507^ Stoeckle v. Eoseuheim (Del. against Judgments. Uh.), 87 Atl. 1006. See, further, § 871, (j) Surrender, Discharge, or Whiteley v. Delauey, [1914]. App. Satisfaction by Mistake. — This sec- Cas. (H. L.) 132, reversing [1912]. tion is cited to this effect in White 1 Ch. 735, and restoring [1911] 2 V. Stevenson (Cal), 77 Pac. 829; Ch. 448. See, also, ante, § 719, and cited, also, in Strehlow v. Eee, 36 note. As to reinstatement of mort- N. D. 59, 161 N. W. 719. See, also, gages released by mistake, see the Eiegel v. American L. Ins. Co., 140 valuable monographic note, 58 L. . Pa. St. 193, 23 Am. St. Rep. 22o,_ 11 »■ A. 788. L. R. A. 857, 21 Atl. 392; Voris v. §871, (k) Mistake in Settlement Ferrell, 57 Ind. App. 1, 103 N. E. of Accounts. — Russell v. Stevenson 122; Errett v. Wheeler, 109 Minn. (Wash.), 75 Pac. 627. See, also, 1799 ACTUAL PBATTD. exercised by the relief of a pecuniary recovery for money paid under a mistake, whenever no adequate remedy can be obtained by an action at law.^^ The affirmative reliefs of reformation and of cancellation are, however, subject to the limitation that they are never conferred against a bona j5 It is settled, therefore, that a per- § 881, 1 New Brunswick etc. R'y v. Muggeridge, 1 Drew. & S. 363, 381, per Kindersley, V. C; Cent. R'y of Venezuela v. Kiseh, L. E. 2 H. L. 99, 113, per Lord Chelmsford; Henderson v. Laeon,. L. R. 5 Eq. 249, 263, per Lord Hatherley. ' § 881, 2 Kisch V. Cent. R'y of Ven., 3 De Gex, J. & S. 122, 135, per Turner, L. J.; Denton v. Macneil, L. R. 2 Eq. 352. § 881, 3 In re Reese River Mining Co., L. R. 2 Ch. 604, 609, per Turner, L. J. § 881, (b) Pacaya. Eubber & ;tion, [1914] 1 Ch. 542 (rescission of Produce Co., Ltd., Burns' Applioa- contract granted , on ground th,at 11—115 § 881 EQUITY JURIStEUDENCE, 1826 son who has been induced by the misrepresentations of such documents to purchase shares of stock or to enter into a contract with the company for their purchase may, if he acts without delay upon learning .the truth, obtain relief against the company, either by being struck off from the list of stockholders and contributaries in the proceeding instituted for its winding up and final settlement, or by means of an equitable suit brought against the company for the purpose of rescinding his purchase of shares, and of recovering back ther money which he paid for them. He may even, in a proper case, obtain relief against the fraud- ulent directors personally by means of an equitable suit for an accounting and repayment of the money, or by means of an action at law for the recovery of damages on ac- count of the deceit.'* <^ Relief against the directors per- § 881, 4 Kisch v. Cent. R'y of Venezuela, 3 De Gex, J. & S. 122; Cen- tral R'y etc. V. Kisch, L. R. 2 H. L. 99 ; Reese River Mining Co. v. Smith, L. R. 4 H. L. 64; New Sombrero etc. Co. v. Erlanger, L. R. 5 Ch. Div. 73; In re Hereford etc. Co., L. R. 2 Ch. Div. 621; In re Coal Gas Co., L. R. 1 Ch. Div. 182; In re London etc. Bank, L. R. 7 Ch. 55; In re Estates Investment Co., L. R. 4 Ch. 497; Ross v. Estates Investment Co., L. R. 3 Ch. 682; 3 Eq. 122; In re Reese River Mining Co., L. R. 2 Ch. 604; Peek v. Gumey, L. R. 13 Eq. 79; Hill v. Lane, L. R. 11 Eq. 215; McNiell's Case, L. R. 10 Eq. 503; Kent v. Freehold etc. Co., L. R. 4 Eq. 588; Smith v. Reese River Mining Co., L. R. 2 Eq. 264; Rohrschneider v. Knickerbocker Ins. Co., 76 N. Y. 216, 32 Am. Eep. 290. In the foUow- ing cases relief was refused on the ground that the representations were "the prospectus contains various v. Green, 66 Kan. 204, 71 Pae. 236; misrepresentations and as a whole Bosley v. N". M. Co., 123 N. T. 555, was calculated to convey an untrue 25 N. E. 990; MulhoUand v. Wash- and misleading impre5sion as to the ington Match Co. (Wash.), 77 Pae. condition, value and prospects of 497; Cox v. National Coal & Oil the company's property ... a party Inv. Co., 61 W. Va. 291, 56 S. K cannot take a benefit from a con- 494 (subscriber may rescind and in tract springing out of a falsehood the same action compel the guilty which he has placed before the other directors to refund payments made party as an inducing cause"). for the stock); Luetzke V. Eoberts, § 881, (c) Smith v. Chadwick, 20 130 Wis. 97, 109 N. W. 949 (repre- Ch. Div. 27; Edgington v. Fitz- sentations that the stock was fully maurice, 29 Ch. Div. 459; Arnison subscribed). V. Smith, 41 Ch. Div. 348; Hay den 1827 ACTUAL FEATJD. § 881 sonally requires a much stronger case of fraud than relief against the company. The purchase of shares may be set aside, and the purchaser relieved from his liability as a contributory, without any knowledge of the untruth on the part of those who issued the document. .Eecovery from the directors personally requires knowledge of the untruth on their part, or else that the statement should be made un- der such circumstances that knowledge will be imputed to them.s e It is also settled that the stockholder must take the requisite proceedings to be relieved against the com- pany at once upon his discovery of the truth; any unrea- not fraudulent, since they were either mere estimates of value in a busi- ness which was well known to be very hazardous, or even ambiguous, or were simply exaggerations:* In re Mercantile Trading Co., L. R. 4 Ch. 475; Hallows v. Ternie, L. R. 3 Ch. 467, 475; 3 Eq. 520; In re Coal Co., L. R. 20 Eq. 114; Ship v. CrossMll, L. R. 10 Eq. 73, 82, 83; Heymann v. European etc. R'y, L. R. 7 Eq. 154; Denton v. Macneil, L. R. 2 Eq. 352. The misrepresentation must be the proximate cause of the purchase of the shares: Barrett's Case, 3 De Gex, J. & S. 30. § 881, 5 Hill v. Lane, L. R. 11 Eq. 215; Peek v. Gurney, L. R. 13 Eq. 79; 6 H. L. 377; Ship v. Crosskill, L. R. 10 Eq. 73, 82, 83; Henderson v, Laeon, L. R. 5 Eq. 249; Cargill v. Bower, L. R. 10 Ch. Div. 502. For examples of actions at law, see Swift v. Winterbotham, L. R. 8 Q. B. 244; Bagshaw v. Seymour, 4 Com. B., N. S., 873; Clark v. Dickson, 6 Com. B., N. S., 453. The rule is settled in England, that a director of a corporation is not liable for the fraud of co-directors or other offlcers or agents, — e. g., in false prospectuses, — unless he has either expressly authorized or tacitly permitted its commission: Cargill v. Bower, L. R. 10 Ch. Div. 502; fol- lowing Weir V. Bamett, L. R. 3 Ex. Div. 32 ; on appeal, L. R. 3 Ex Div. 238; and holding that Peek v. Gurney, L. R. 6 H. L. 377, is not opposed to this view. § 881, (d) SMck V. Citizens' Enter- Hubbard v. Weare, 79 Iowa, 678, 44 prise Co., 15 Ind. App. 329, 57 Am. N". W. 915. That knowledge of tlie St. Eep. 230, 44 K. E. 48. untruth of the representation by the § 881, (e) The text is quoted in person making it is not necessary McFarland v. Carlsbad Hot Springs for rescission of the purchase, see Sanitarium Co., 68 Or. 530, Ann. Karberg'a Case, [1892] 3 Ch. 1; Oas. 1915C, 555, 137 Pao. 209. See, Tarnsworth v. Muscatine Produce & also, Derry y. Peek, 14 App. Cas. Pure lee Co., 161 Iowa, 170, 141 (H. L.) 337, cited post, note to § 8S'4; N. W. 940. § 882 EQUITY JUBISPEUDENCE. 1828 sonable delay, and any act on his part tending to show acquiescence, will debar him of relief. ^^ § 882. III. Untruth of the Statement.— The statement of fact must be untrue, or else there is no misrepresentation. The entire doctrine of ttie law and of equity concerning that species of fraud which consists in suggestio falsi is based upon the assumption that the representation is in fact untrue, as this very name itself shows. This is the premise of fact which is assumed in ever^ case which dis- cusses the nature of fraud, and decides whether it does or does not exist in any particular instance. This requisite element needs, therefore, no examination and no citation of special authorities; it is not susceptible of any excep- tion or limitation.* § 881, 6 The decisions require promptness on his part. In one of the cases a delay of three months after learning the facts was held fatal: Sharpley v. Louth etc. R'y, L. R. 2 Ch. Div. 663; Smith's Case, L. K. 2 Ch. 604; Peek v. Gumey, L. R. 13 Eq. 79; Ashley's Case, L. R. 9 Eq. 263 ; Scholey v. Central R'y etc., L. R. 9 Eq. 266, note ; Heymann v. European etc. R'y, L. R. 7 Eq. 154; Whitehouse's Case, L. R. 3 Eq. 790; Mixer's Case, 4 De Gex & J. 575, 586. When a person has thus been induced to purchase shares, he cannot rescind his purchase and be struck ofE from the list of contributaries, nor maintain an action against the company for that purpose, nor to recover back the amount paid, after the winding up of the company, nor even after, the proceedings to wind up have been commenced, since after the establishment of these proceed- ings by an order of the court the corporation is ended as a legal being; but this restriction does not seem to apply to suits brought to enforce a liability against the fraudulent directors personally: Burgess's Case, L. R. 15 Ch. iDiv. 507; Oakes v. Turquand, L. R. 2 H. L. 325; Stone v. City & Co. Bank, L. R. 3 C. P. D. 282; Houldsworth v. City of Glasgow Bank, L. R. 5 App. C. 317, 323; Tennent v. City of Glasgow Bank, L. R. 4 App. C. 615, 621; Kent v. Freehold etc. Co., L. R. 3 Ch. 493; In re London etc. Bank, L. R. 12 Eq. 331; In re Overend etc. Co., L. R. 3 Eq. 576. §881, (f) Quoted in Hatch Y. 61 W. Va. 291, 56 S. E. 494 (delay Lucky Bill Min. Co., 25 Utah, 405, at request of officer of the company 71 Pac. 865. For a case where excused). See, also, §§ 917, 965. laches were held not to exist, see § 882, (a) This paragraph is cited Karberg's Case, [1892] 3 Ch. 1; in McDonald v. Smith, 95 Ark. 523, Cox V. National Coal & Oil Inv. Co., 130 S. W. 515. See, also, Boddie v. 1829 ACTUAL FRAUD. §§883,884 § 883. IV. The Intention, Knowledge, or Belief of the Party Making the Statement. — This element — the mental state or condition of the party making the representation — is the most important and characteristic feature of fraud, both in equity and at law. It is, moreover, that constitu- ent of fraud with respect to which there exists the principal difference or divergence between the theory which prevails in equity and that which forms a part of the law. It will aid us, therefore, in obtaining a more accurate notion of the equitable conception by comparison, to present a very brief summary of the doctrine on this subject which has been settled by courts of law. § 884. The Knowledge and Fraudulent Intention Requi- site at Law. — The court of queen's bench at one time main- tained, in a series of decisions, the following doctrines: Whenever one party to a transaction, A, made a representa- tion of fact which was in reality untrue, and the other party, B, relied upon the statement, and was induced by it to do or to omit something, and thereby suffered some damage, such representation was fraudulent, and A was liable for his actual fraud, even though he had made the statement with- out any knowledge of its untruth, — ^his liability was. inde- pendent of his knowledge or ignorance of its actual falsity. This theory admitted the possibility of fraud at law where there was no moral delinquency; it denied that moral wrong was an essential element in the legal conception of • fraud. The same view was for a time accepted and adopted by a considerable number of decisions in different Ameri- can states.! These cases have, however, been overruled, and the theory itself has been abandoned, in England, and even generally, if not universally, throughout the states of our own country.^ It is now a settled doctrine of the law § 884, 1 Fuller v. Wilson, 3 Q. B. 58; 3 Q. B. 1009; Taylor v. Asliton, 11 Mees. & W. 401; Evans v. Collins, 5 Q. B. 804. Ward, 150 Ala. 198, 44 South. 105; §884, (a) A line of cases holds Prentice v. Crane, 234 HI. 302, 84 that the ignorance of a party mak- N. E. 916. ing a positive assertion is decisive § 884 EQUITY JURISPEUDENCE. 1830 that there can be no fraud, misrepresentation, or conceal- ment without some moral delinquency; there is no actual legal fraud which is not also a moral fraud.^^ This im- moral element consists in the necessary guilty knowledge and consequent intent to deceive, — sometimes designated by the technical term, the scienter. The very essence of the legal conception is the fraudulent intention flowing from the guilty knowledge. No misrepresentation is fraudulent at law, unless it is made with actual knowledge of its falsity, or under such circumstances that the law must necessarily impute such knowledge to the party at the time when he makes it. It is well settled that fraudulent misrepresenta- tions may assume the three following forms or phases at law: 1. A party making an untrue statement has at the time an actual, positive knowledge of its falsity; he states what he absolutely knows to be untrue. This is the simplest, plainest, and most direct species of fraud. "^ 2. A party making an untrue statement does not at the time have any belief that it is true.^ The making an untrue statement, of § 884, 2 Evans v. Collins, 5 Q. B. 820, reversing 5 Q. B. 804; Barley v. Walford, 9 Q. B. 197; Moens v. Heyworth, 10 Mees. & W. 147; Ormrod v. Huth, 14 Mees. & W. 650. Untrue representations honestly made do not constitute fraud at law: Wakeman v. DaUey, 51 N. Y. 27, 10 Am. Rep. 551; Marsh v. Talker, 40 N. Y. 562, 566. of Ms fraud, -without regard to the Va. 231, 57 S. E. 811. See, also, unreasonableness of his belief in Boddy v. Henry, 113 Iowa, 462, 53 the truth of the assertion. These L. E. A. 769, 85 N. W. 771; War- cases thus adopt the equitable rule field v. Clark, 118 Iowa, 6&, 91 N. W. stated in § 887. See by way of il- 833. lustration, Cooper v. Schlesinger, 111 § 884, (c) The text is cited in U. S. 148, 4 Sup. Ct. 360; Chatham Smith v. Packard & Co'., 152 Iowa, Furnace Co. v. MofEatt, 147 Mass. 1, 130 N. W. 1076. 403, 9 Am. St. Kep. 727, 18 N. B. § 884, (d) "There can be no vari- 168, and cases cited; Bullitt v. ance in the principle upon which Farrar, 42 Minn. 8, 18 Am. St. Rep. one is held liable for damage who 485, 6 L. R. A. .149, 43 N. W. 366. asserts the existence of a fact, § 884, (b) Quoted in Cowley v. knowing that in truth it does not Smyth, 46 N. J. Law, 380, 50 Am. exist, and that upon which a like Eep. 432; and cited in Collins v. responsibility is visited upon one Chipman, 41 Tex. Civ. App. 563, 95 who, conscious that he is ignorant S. W. 666; ToUey v. Poteet, 62 W. concerning the subject-matter of 1831 ACTUAL FBAUD. § 884 the truth of which the party of course has no knowledge, and which he does not even believe to be true, is tantamount to the making of a statement which the party knows to be un- true. 3. Finally, a party making an untrue statement, hav- ing at the time no knowledge whatever on the subject, and no reasonable grounds to believe it to be true, is guilty of fraud, and his claiming that he believed it to be true cannot remove its fraudulent character. A definite statement of what the party do^s not know to be true, where he has no reasonable grounds for believing it to be true, will, if false, have the same legal effect as a statement of what the party positively knows to be untrue.^ ® In each of these three § 884, 3 Evans v. Edmonds, 13 Com. B. 777, 786, per Maule, J. Smout V. Ilbery, 10 Mees. & W. 1, 10, per Alderson, B.; Taylor v. Ash- ton; 11 Mees. & W. 401; Young v. Covell, 8 Johns. 23, 5 Am. Dec. 316 Benton v. Pratt, 2 Wend. 385, 20 Am. Dec. 623; Tyson v. Passmore, 2 Pa. St. 122, 44 Am. Dec. 181; Fisher v. Worrall, 5 Watts & S. 478, 483 Joice V. Taylor, 6 Gill & J. 54, 25 Am. Dec. 325. In Evans v. Edmonds, 13 Com. B. 777, Maule, J., said: "I conceive that if a man, having no knowledge whatever on the subject, takes upon himself to represent a certain state of facts to exist, he does so at his peril; and if it be done either with a view to secure some benefit to himself, or to deceive a third person, he is in law guilty of a fraud, for he takes upon himself to warrant his own belief of the truth of that which he so asserts.'' In Young V. Covell, 8 Johns. 23, 5 Am. Dec. 316, the court said of an action for deceit, that "it cannot be maintained without proving actual fraud in the defendant, or an intention to deceive the plaintiff by false representa- tions. The simple fact of misrepresentation, unaccompanied by fraudu- lent design, is not sufficient." See, also, Stitt v. Little, 63 N. Y. 427; Eaton, C, & B. Co. v. Avery, 83 N. Y. 31, 38 Am. Rep. 389.; Hubbell v. Meigs, 50 N. Y. 480; Hathome v. Hodges, 28 N. Y. 486; Hathaway v. Johnson, 55 N. Y. 93, 14 Am. Rep. 186; Indianapolis etc. R. R. v. Tyng, 63 N. Y. 653, J55; Butler v. CoUins, 12 Cal. 457; McBean v. Pox, 1 111. App. 177; Collins v. Evans, 5 Q. B. 820; Ormrod v. Huth, 14 Mees. & W. 650; Pasley v. Freeman, 3 Term Rep. 51; National Exch. Co. v. Drew, 2 Macq. 103. wMeli he speaks, still falsely asserts § 884, (e) The text is quoted in that, within his own personal knowl- Joplin v. Nunnelly, 67 Or. 566, 134 edge, a fact stated by him does in Pac. 1177. This third rule of the truth exist": Eiley v. Bell, 120 Iowa, text, at one time supposed to be 618, 95 N. W. 170. well established, was overturned in §884 EQUITY JURISPRUDENCE. 1832 phases there is moral wrong, and a very slight, if any, dif- ference in the degree of the culpability. In each there is actual knowledge of the untruth, or else the law conclusively imputes knowledge to the party, and treats him as though actually possessing it; the ease of Deny v. Peek, 14 App. Cas. (H. L.) 337; reversing Peek v. Dexry, 37 Ch. Eiv. 541; followed in Glasier v. Rolls, 42 Ch. Div. 436; Angus V. Clifford, [1891] 2 Ch. 449 (important for its analysis and ex- planation of Derry v. Peek by Lindley, L. J., Bowen, L. J., and Kay, L. J.); Low v. Bouverie, [1891] 3 Ch. 82 (holding that Derry V. Peek did not touch the law of es- toppel). The house of lords, in Derry v. Peek, 14 App. CTas. (H. L.) 337, unanimously held that the ab- sence of reasonable grounds for be- lief, while it may be evidence of a fraudulent intent, does not, of itself, ' constitute such fraud as will justify an action for damages either at law or in equity. Lord Bramwell re- marks (p. 351) : "To believe without reasonable grounds is not moral cul- pability, but (if there be such a thing) mental culpability." Lord Herschell, who delivered the leading opinion, sums up (p. 374) : "First, in order to sustain an action of de- ceit, there must be proof of fraud, and nothing short of it will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as dis- tinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real be- lief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth." The decision, though, of course, binding on English courts, has been most severely criticised both in England and in this coun- try: see especially an article by Sir Frederick Pollock in 5 Law Quarterly Review, 410. The disas- trous effects anticipated from the de- cision, as far as company directors and promoters issuing a prospectus are concerned, were promptly averted by the Directors' Liability Act of 1890. See, also, Nash v. Minnesota, etc., Co., 163 Mass. 574, 47 Am. St. Eep. 489, 28 L. R. A. 753, 40 N. E. 1039; Kountze v. Ken- nedy, 147 N. Y. 124, 49 Am. St. Rep. 651, 29 L. E. A. 360, 41 N. E. 414; Cahill V. Applegarth (Md.), 56 Atl. 794; Du Bois v. Nugent, 69 N. J. Eq. 145, 60 Atl. 339, citing the text; Shaekett v. Biekford, 74 N. H. 57, 124 Am. St. Rep. 933, 7 L. R. A. (N. S.) 646, 65 Atl. 252. It should be noticed in this connection that in exercising the concurrent juris- diction to award damages for fraud the English courts of equity follow the legal definition of fraud, and not the equitable. Thus in Arkwright V. Newbold, 17 Ch. Div. 320, Cotton, L. J., remarks: "An action of deceit is a common-law action, and must be decided on the same principles, whether it be brought in the chan- cery division or any of the common- 1833 ACTUAL FRAUD, §885 § 885. Knowledge or Intention Requisite in Equity. — There are undoubtedly some authorities which, taken liter- ally, would make moral wrong a necessary ingredient of fraud in equity as well as at law, since they require a guilty knowledge of the untruth as an essential element.^ This view is, however, certainly incorrect. It is fully settled by the ablest courts, English and American, that there may be actual fraud — not merely constructive fraud — in equity § 885, 1 Thus in Adams's treatise, 6th Am. ed., 176, 364, the author, after stating that there are two classes of fraud, the first by means of willful misrepresentation, and the second by procuring acts to be done by persons under duress or incapacity, adds : "In order to constitute a fraud of the first class, there must be a representation, express or implied, false within the knowledge of the party making it, reasonably relied upon by the other party," etc. law divisions." This language is adopted by Lord Blackburn in Smith V. Chadwick, 9 App. Cas. (H. L.) 193; and by Lord Hersehell in Derry v. Peek, at p. 360. These equitable actions of deceit, there- fore, furnish no authority for de- termining when the equitable remedies of rescission, cancellation, etc., are proper. It hag recently been held in Eng- land that Derry v. Peek leaves un- touched the rule of agency that a person professing to have authority as agent, who induces another to act in a matter of business on the faith of his having that authority, is liable on an implied warranty of his authority, if it turns out that his authority did not exist: Oliver v. Bank of England, [1902] 1 Ch. 610, 627. In Nocton v. Lord Ashburton, ri914] App. Cas. (H. L.) 932, it was held, also, (per Haldane, L. C.) that Derry v. Peek does not narrow the scope of the remedy in actions within the exclusive jurisdiction of a court of equity, which, though classed under the head, of fraud, do not necessarily involve the existence of a fraudulent intention; here, an action for indemnity arising from a careless misrepresentation by a solicitor to his client, on the faith of which the client released a mort- gage security to the solicitor's bene- fit. The opinion is instructive in its analysis of Derry v. Peek, and in its definition of actual and construc- tive fraud. Derry v. Peek has, of course, failed to receive univtrsal recogni- tion in this country; thus, in Gid- dings V. Baker, 80 Tex. SOS, 16 S. W. 33, it was held that a party making false representations is liable at law if, by the exercise of ordinary dili- gence he could have known that his statement was not true. See, also, Houston V. Thornton, 122 N. C. 365, 65 Am. St. Eep. 699, 29 S. E. 827 (negligence of directors in permit- ting false statement to be made makes them liable) ; Trimble v. Eeid, 19 Ky. Law Eep. 604, 41 S. W. 319. § 885 EQUITY JUBISPEUDENCB. 1834 without any feature or incident of moral culpability; that the actual fraud consisting of misrepresentation is not necessarily immoral. A person making an untrue state- ment, without knowing or believing it to be untrue, and with- out any intent to deceive, may be chargeable with actual fraud in equity.^ a Whatever would be fraudulent at law will be so in equity ; but the equitable doctrine goes farther, and includes instances of fraudulent misrepresentations which do not exist in the law. Ther§ are, however, well- established limits to this equitable conception, which should be carefully observed. Every wrongful act, even by per- sons in positions of trust and confidence, which gives occa- sion for a remedy is not fraudulent. Breaches of their duty § 885, 2 In Traill v. Baring, 4 De Gex, J. & S. 318, 328, Turner, L. J., said: "I desire, in the first place, to absolve the defendants from all imputation of any intention of actual fraud. But that by no means disposes of the case; for there are many states of circumstances in which there is technical fraud, in which transactions are fraudulent in the eyes of this court, or characterized by the designation of fraud, although there may be no moral fraud. The question really here is, whether this case does or does not fall within the range of those cases in which this court holds a transaction to be fraudulent, although it may not be morally so." In Ship V. Crosskill, L. E. 10 Eq. 73, 83, Lord Romilly said: "I fully adopt the distinction expressed by Lord Redesdale, between fraud properly so called, and what is called constructive fraud, where persons have really been guilty of no moral fraud, but by a species of construc- tion df equity they are said to be guilty of a fraud." In using the word "constructive" here, the master of rolls plainly does not refer to that main division of fraud called "constructive" in contrast with the division called "actual." He is speaking of those instances belonging to the gen- eral division "actual," in which the fraud arises from the construction of equity, in contradistinction to the fraud at law, which must always be immoral. See also Hovenden v. Lord Annesley, 2 Schoales & L. 607, 617, per Lord Redesdale; Rawlins v. "Wickham, 3 De Gex & J. 304, 316. § 885, (a) Quoted in Potter's Ap- App. 563, 95 S. W. 666. This section peal, 56 Conn. 1, 7 Am. St. Rep. 272, is cited in Coolidge v. Ehodes, 199 12 Atl. 513; in Tarault v. Seip, 158 111. 24, 64 N. E. 1074; Tolley v. K. C. 363, 74 S. E. 3; Joplin v. Nun- Potest, 62 W. Va. 231, 57 S. E. 811. nelly, 67 Or. 566, 134 Pac. 1177; See, also, Neely v. Eembert (Ark.), Collins V. Chipman, 41 Tex. Civ. 71 S. W. 259. 1835 ACTUAL FRAUD. § 886 by persons in fiduciary relations, acts of agents in excess of their authority, and the like, are not, as such, instances of actual fraud, although they may sometimes fall within the division of ' ' constructive fraud. "3 I shall, in further illus- tration of this subject, enumerate and describe the different phases and forms of fraudulent misrepresentations recog- nized by equity, some of them being identical with those found in the law. §886. Forms of Fraudulent Misrepresentations in Equity.* — 1. Where a party makes a statement which is untruCj and has at the time an actual, positive knowledge of its untruth, and the necessarily resulting intent to deceive, — the scienter at law. This is the most direct, and in some respects the highest, form of fraud.^ Wherever the facts of the statement are the acts of the very party making it, which are represented as having been done by him, if the statement is untrue, the knowledge of its untruth is neces- sarily and conclusively imputed to the party. In all cases involving such kind of misrepresentation, if knowledge of the untruth be a requisite element of the liability, such § 885, 3 Stewart v. Austin, L. R. 3 Eq. 299, 306, holding that an act in excess of authority by an agent is not equitable fraud. §886, lln Patch v. Ward, L. R. 3 Ch. 203, 207, Lord Cairns well describes this form as follows: "Actual fraud, such that there is on the part of the person chargeable with it the malus animus, the mala mens putting itself in motion and acting in order to take an undue advantage of some other person for the purpose of actually and knowingly de- frauding him": Hill v. Lane, L. R. 11 Eq. 215; Ship v. CrosskiU, L. R. 10 Eq. 73, 82, 83; Henderson v. Lacon, L. R. 5 Eq. 249, 262; Rawlins V. Wickham, 3 De Gex & J. 304, 312; Reynell v. Sprye, 1 De Gex, M. & Q. 660, 691; West v. Jones, 1 Sim., N. S., 205, 208; Chesterfield v. Janssen, 2 Ves. Sr. 124, 155; Neville v. WUkinson, 1 Brown Ch. 543, 546; Attwood v. Small, 6 Clark &r. 232; Evans v. Bicknell, 6 Ves. 173, 182; Bankhead v. AUpway, 6 Cold. 56, 75; Wampler v. Wampler, 30 Gratt. 454; Laidlaw v. Organ, 2 Wheat. 178, 195; Smith v. Richards, 13 Pet. 26, 36; Frenzel v. Miller, 37 Ind. 1, 10 Am. Dec. 62. § 886, (a) This classification is graph is cited, generally, in Miller quoted in McMullin's Adm'r v. v. Ash, 156 Cal. 544, 105 Pac. 600. Sanders, 79 Va. 356. This para. § 886 EQUITY JUKISPEUDENCB. 1836 knowledge will be conclusively presumed.^ In suits involv- ing misrepresentations of this form, if the party charged with the fraud is examined as a witness in his own behalf, the better rule is, that he cannot be asked, as a part of his examination in chief, whether or not he believed his repre- sentation to be true.3 2. If a person makes an untrue state- ment, and has at the time no knowledge of its truth, and even has no belief in'its truth, he is chargeable with fraud in equity as well as in law. Making a statement which the party does not believe to be true is only slightly removed in culpability from the making a statement which the party knows to be false.* § 886, 2 This conclusion necessarily follows from the form of the rep- resentation and the nature of man's mind and memory. In Henderson V. Laeon, L. R. 5 Eq. 249, 262, the suit was brcMght to hold directors of a company personally liable for false representations contained in a prospectus which untruly stated that they had done certain acts. Page Wood, V. C. (Lord Hatherley), after holding that in such a suit it is necessary to fix upon the directors the scienter as in an action for deceit, that they must have guilty knowledge of the untruth of their statements, adds : "In this instance it appears to me that the scienter is clearly fixed upon the directors, from the moment you find a representation concern- ing their own acts which is incorrect, and which they must be taken to have known to be incorrect, and to have knowingly stated, and thereby to have misled the party complaining of the misrepresentation." See also Ship V. Crosskill, L. R. 10 Eq. 73, 83, 84; New Brunswick etc. Co. V. Muggeridge, 1 Drew. & S. 363. § 886, 3 Hine v. Campion, L. R. 7 Ch. Div. 344. To allow the party charged under such circumstances to testify in his own behalf that he had a belief, or that he had no wrongful intent, and the like, is a viola- tion, as it seems to me, of the plainest and most fundamental principles of judicial evidence. If he asserts his belief or denies his intent, and reliance is placed in what he says, then his liability is destroyed and the controversy is ended. § 886, 4 Jennings v. Broughton, 5 De Gex, M. & G. 126, 130 ; Haight V. Hayt, 19 N. Y. 464; White v. Merritt, 7 N. Y. 352, 57 Am. Dec. 527 Doggett V. Emerson, 3 Story, 700; Hough v. Richardson, 3 Story, 659 Daniel v. Mitchell, 1 Story, 172; Warner v. Daniels, 1 Wood. & M. 90 Hammatt v. Emerson, 27 Me. 308, 46 Am. Dec. 598; Stone v. Denny, 4 Met. 151; Hazard v. Irwin, 18 Pick. 95; Twitchell v. Bridge, 42 Vt. 68; Cabot T. Christie, 42 Vt. 121, 1 Am. Rep. 313; Fisher v. Mellen,. 103 Ma?!S. 503 (asserting as fact known to the party what was only opinion). 1837 ACTUAL FRAXJD. § 887 § 887. The Same. — 3. "Where a person makes an untrue statement, and has at the time no knowledge of its truth, and there are no reasonable grounds for his believing it to be true, he is chargeable with fraud, although he had no absolute knowledge of its untruth, and may claim to have had a belief in its truth, i ^ This is the mode in which the rule is ordinarily laid down by courts of law, and sometimes by courts of equity. The equity cases have, however, settled the rule in somewhat broader terms, omitting entirely the qualification ' ' that there are no reasonable grounds for the person's believing his statement to be true." In other words, it is settled in equity by an overwhelming array of authority that where a person makes a statement of fact, which is actually untrue, and he has at the time no knowl- edge whatever of the matter, he is chargeable with fraud, and his claim to have believed in the truth of his statement cannot be regarded as at all material. The definite asser- tion of something which is untrue, concerning which the party has no knowledge at all, is tantamount in its effects to the assertion of something which the party knows to be untrue.2 ^ § 887, 1 Jennings v. BrougMon, 5 De Gex, M. & G. 126, 130. § 887, 2 It might, perhaps, be said that these two modes of stating the doctrine were virtually the same; because if the party had no knowledge § 887, (a) Quoted in Bethell t. paragraph is cited in Drake v. Fair- Bethell, 92 Ind. 318; McMullin's mont Drain Tile & Brick Co., 129 Adm'r .v. Sanders, 79 Va. 356. See, Minn. 145, 151 N. W. 914. See, also, also, Southern Development Co. v. Potter's Appeal, 56 Conn. 1, 7 Am. Silva, 125 U. S. 247, 8 Sup. Ct. 881; St. Eep. 272, 12 Atl. 513; Mohler Coolidge V. Ehodes, 199 111. 24, 64 v. Carder, 73 Iowa, 582, 35 N. W. N. E. 1074; Bethell v. Bethell, 92 647; McMullin's Adm'r v. Sanders, Xnd. .?18, 327. 79 Va. 356, and Hunt v. Davis, 98 §887, (b) Quoted in McMullin's Ark. 44, 135 S. W. 458; Morgan Adm'r v. Sanders, 79 Va. 356; County Coal Co. v. Halderman, 254 Tarault v. Seip, 158 N. C. 363, 74 Mo. 596, 163 S. W. 828; Joines v. S. E. 3; Howe v. Martin, 23 Okl. 'Combs, 38 Old. 380, 132 Pae. 1115; 561, 138 Am. St. Rep. 840, 102 Pac. Bonelli v. Burton, 61 Or. 429, 123 128; Collins v. Chipman, 41 Tex. Pae. 37; Bradley v. Tolson, 117 Va. Civ. App. 563, 95 S. W. 666. This 467, 8'5 S. B. 466. § 888 EQUITY JUEISPKUDENCB, 1838 § 888. The Same.* — 4. Where a person makes a state- ment of fact which is untrue, but at the time of making it he at all concerning the matter, he certainly would have no reasonable gTounds for believing his statement to be true. It is plain, however, that the equity courts intend their language to be broader than that of the law courts, and to include iQStances not falling within the legal formula. The qualification "there are no reasonable grounds for believing his state- ment" seems to imply circumstances which operate affirmatively to pre- vent the party from forming a belief. The language of the equity courts, in omitting this qualification, seems to be wholly negative, and to require only an absence of knowledge: Rawlins v. Wickham, 3 De Gex & J. 304, 313, 316; Traill v. Baring, 4 De Gex, J. & S. 318, 326, 328, 329; West v. Jones, 1 Sim., N. S., 205, 208; Attorney-General v. Ray, L. R. 9 Ch. 397, 405; Smith v. Reese R. M. Co., L. R. 2 Eq. 264, 269; Pulsford V. Richards, 17 Beav. 87, 94; Hart v. Swaine, L. R. 7 Ch. Div. 42, 46. In this last case the court say: "The defendant took upon him- self to assert that to be true which has turned out to be false, and he ma:de this assertion for the purpose of benefiting himself. Though he may have done this believing it to be true, the result is that he is guilty of a fraud." In Rawlins v. Wickham, 3 De Gex & J. 304, Turner, L. J., said: "If upon a treaty for purchase one of the parties to the contract makes a representation materially affectuig the subject-matter of the contract, he surely cannot be heard to say that he knew nothing of the truth or falsehood of that which he represented, and still more surely he cannot be allowed to retain any benefit which he has derived if the repre- sentation he has made turns out to be untrue. It would be most dan- gerous to allow any doubt to be cast upon this doctrine": Torrance v. Bolton, L. R. 8 Ch. 118; 14 Eq. 124; Aberaman Iron Works v. Wickens, L. R. 4 Ch. 101; 5 Eq. 485; Peek v. Gumey, L. R. 13 Eq. 79, 113; Smith V. Richards, 13 Pet. 26; Hough v. Richardson, 3 Story, 659; Smith v. Babcock, 2 Wood. & M. 246; Mason v. Crosby, 1 Wood. & M. 342; Ham- matt V. Emerson, 27 Me. 308, 326, 46 Am. Dec. 598; Harding v. Randall, 15 Me. 332; Hazard v. Irwin, 18 Pick. 95; Stone v. Denny, 4 Met. 151; Marsh v. Talker, 40 N. T. 562; Bennett v. Judson, 21 N. Y. 238; Craig V. Ward, 36 Barb. 377; Taymon v. Mitchell, 1 Md. Ch. 496; Smith v. Mitchell, 6 Ga. 458; Reese v. Wyman, 9 Ga. 430, 439; Thompson v. Lee, 31 Ala. 292; Oswald v. McGehee, 28 Miss. 340; Mitchell v. Zimmei-man, 4 Tex. 75, 51 Am. Dec. 717; York v. Gregg, 9 Tex. 85; Buford v. Cald- well, 3 Mo. 477; Glasscock v. Minpr, 11 Mo. 655; Converse v. Blumrich, 14 Mich. 109, 123, 90 Am. Dec. 230; Allen v. Hart, 72 111. 104; Wilcox § 888, (a) This section is cited in Lawrence v. Gayetty, 78 Cal. 126, 12 Am. St. Eep. 29, 20 Pac. 382. 1839 ACTUAL FRAUD. § 888 honestly believes it to be true, and this belief is based upon reasonable grounds which actually exist, the misrepresenta- tion so made is not fraudulent either in equity or at law.^ ^ This general proposition is subject, however, to the two fol- lowing important limitations: 5. Where such an untrue statement is made in the honest belief of its truth, so that it is the result of an innocent error, and the truth is after- wards discovered by the person who has innocently made the incorrect representation, if he then suffers the other party to continue in error, and to act on the belief that no mistake has been made, this, from the time of the discovery, becomes, in equity, a fraudulent representation, even though it was not so originally.^ ^ g. Finally, if a statement of V. Iowa W. Univ., 32 Iowa, 367; Hammond v. Pennoek, 61 N. Y. 145, 151, 152; Hawkins v. Palmer, 57 N. Y. 664; Sharp v. Mayor, 40 Barb. 256; Twitchell v. Bridge, 42 Vt. 68; Beebe v. Knapp, 28 Mich. 53 ; Stone V. Covell, 29 Mich. 359; Prenzel v. Miller, 37 Ind. 1, 10 Am. Eep. 62; Graves v. Lebanon Bank, 10 Bush. 23, 19 Am. Rep. 50; Bankhead v. AUoway, 6 Cold. 56; Thompson v. Lee, 31 Ala. 292; Elder v. Allison, 45 Ga. 13. § 888, 1 Cabot v. Christie, 42 Vt. 121, 126, 1 Am. Eep. 313; Fisher v. MeUen, 103 Mass. 503; Wakeman v. Dalley, 51 N. Y. 27, 10 Am. Rep. 551; Marsh v. Talker, 40 N. Y. 562, 566; Weed v. Case, 55 Barb. 534; Hartford Ins. Co. v. Matthews, 102 Mass. 221; Wheeler v. Randall, 48 111. 182. § 888, 2 Reynell v. Sprye, 1 De Gex, M. & G. 660, 709, per Lord Cran- worth; Traill v. Baring, 4 De Gex, J. & S. 318, 329, 330, per Turner, L. J.; UnderhUl v. Horwood, 10 Ves. 209, 225. § 888, (b) That the English courts duced by them to act, is tanta- will not grant rescission of an exe- mount to rescission for mutual mia- cuted contract for the sale of a chat- take, and is freely granted: see, for tel or a chose in action on the example, Weise v. Grove (Iowa), 99 ground of an innocent misrepresen- N. W. 191, and cases cited. See, also, tation, see Seddon v. North Eastern Kell v. Trenchard, 142 Fed. 16, 73 Salt Co., [1905] 1 Ch. 326, and cases C. C. A. 202; Shahan v. Brown, 167 cited. Ala. 534, 52 South. 737; Brown v. §888, (c) The text is quoted and Linn, 50 Colo. 443, 115 Pac. 906; followed in Hancock v. Home, 134 Gardner v. Mann, 36 Ind. App. 694, Tenn. 107, 183 S. W. 520. Eescis- 76 N. E. 417; Severson v. Kock, 139 sion for innocent misrepresentations, Iowa, 343, 140 N. W. 220; Pennington believed by the party who was in- v. Eoberge, 122 Minn. 295, 142 N. W. § 889 EQUITY JUBISPBUDBNCE. 1840 fact, actually untrue, is made by a person who honestly be- lieves it to be true, but under such circumstances that the duty of knowing the truth rests upon him, which, if fulfilled, would have prevented him from making the statement, such misrepresentation may be fraudulent in equity, and the per- son answerable as for fraud; forgetfulness, ignorance, mis- take, cannot avail to overcome the pre-existing duty of knowing and telling the truth.3 d § 889. Requisites of a Misrepresentation as a Defense to the Specific Enforcement of Contracts in Equity.^ — ^Having thus described the elements of a misrepresentation, with ref- erence to the knowledge or belief of the person, in order that it may constitute fraud in the contemplation of equity, and §888, 3Burrowes v. Lock, 10 Ves. 470, 475; Rawlins v. Wickham, 3 De Gex & J. 304, 313, 316; Traill v. Baring, -4 De Gex, J. & S. 318, 329, 330; Pulsford v. Richards, 17 Beav. 87, 94; Smith v. Reese River M. Co., L. R. 2 Eq. 264, 269; Slim v. Croueher, 1 De Gex, F. & J. 518, 523, 524; 2 Gil?. 37; Price v. Macaulay, 2 De Gex, M. & G. 339, 345; Hutton V. Rossiter, 7 De Gex, M. & G. 9; Ayre's Case, 25 Beav. 513, 710; Drake v. rairmont Drain Tile S. E. 811. See, also, Prewitt v. & Briek Co., 129 Minn. 14.5, 151 Trimble, 92 Ky. 176, 36 Am. St. Eep. N. W. 914; Jacobson v. Chicago, 586, 17 S. W. 356; Westerman v. M. & St. P. Ey. Co., 132 Minn. 181, Corder, S6 Kan. 239, Ann. Cas. Ann. Cas. 1918A, 355, L. R. A. 1916D, 1913C, 60, 39 L. E. A. (N. S.) 500, 144 156 N. W. 251; Wilson v. Rob- 119 Pac. 868 (statements by vendor inson, 21 N. M. 422, 155 Pac. 732; as to title); Tucker v. Osbourn, 101 Du Bois V. Nugent, 69 N. J. Eq. 145, Md. 613, 61 Atl. 321 (officers of cor- 60 Atl. 339; Stevenson v. Gauble, poration); Post v. Liberty, 45 Mont. 55 Tex. Civ. App. 75, 118 S. W. 811; 1, 121 Pac. 475 (vendor pointing out Buchanan v. Burnett, 102 Tex. 492, boundaries of land); Shaw v. 132 Am. St. Eep. 900, 119 S. W. 1141; O'Neill, 45 Wash. 98, 88 Pac. Ill Bruner v. Miller, 59 W. Va. 36, 52 (representations by vendor as to S. E. 995; Kathan v. Comstock, 140 ownership and boundaries). Wis. 427, 28 L. E. A. (N. S.) 201, § 889, (a) This section is cited in 122 N. W. 1044. McMullin's Adm'r v. Sanders, 79 Va. §888, (d) The text is quoted in 356; Duy v. Higdon, 162 Ala. 528, Grant v. Ledwidge, 109 Ark. 297, 160 50 South. 378; Adams v. GiUig, 199 S. W. 200; Tarault v. Seip, 158 N. C. N. T. 314, 20 Ann. Cas. 910, 32 363, 74 S. E. 3; Collins v. Chipman, L. E. A. (N. S.) 127, 92 N. E. 670; 41 Tex. Civ. App. 563, 95 S. W. 666; Stevenson v. Cauble, 55 Tex. Civ. Tolley V. Poteet, 62 W. Va. 231, 57 App. 75, 118 S. W. 811. 1841 ACTUAL FEAtTD. § 889 having explained the various forms or phases which such a misrepresentation may assume, it will be proper to present in this connection those special features and qualities of a misrepresentation which apply to the particular case of a defense to suits for the enforcement of contracts ; the entire view of this subject will thus be completed. In setting up a material misrepresentation to defeat the specific per- formance of a contract, the element of a scienter, of knowl- edge, of belief with or without reasonable grounds, or of in- tent, is wholly unnecessary and immaterial. So far as this most essential element of a fraudulent misrepresentation is concerned, it is sufficient to defeat a specific performance that the statement is actually untrue so as to mislead the party to whom it is addressed; the party making it need not know of its falsity, nor have any intent to deceive ; nor does his belief in its truth make any difference. With respect to its effect upon the ' specific performance of a contract, a party making a statement as true, however honestly, for the purpose of influencing the conduct of the other party, is bound to know that it is true, and must stand or fall by his representation.! The point upon which the defense turns is the fact of the other party having been misled by a repre- sentation calculated to mislead him, and not the existence of a design to thus mislead.'^ It follows as a plain conse- 522; Ainslie v. Medlycott, 9 Ves. 12, 21; Henderson v. Lacon, L. R. 5 Eq. 249, 262; Swan v. North Br. etc. Co., 2 Hurl. & C. 175, 183; Bab- coek V. Case, 61 Pa. St. 427, 430, 100 Am. Dec. 654. § 889, 1 In re Banister, L. R. 12 Ch. Div. 131, 142; Ainslie v. Medly- cott, 9 Ves. 13, 21; Dyer v. Hargrave, 10 Ves. 506; "Wall v. Stubbs, 1 Madd. 80. The following are recent cases which furnish examples of misrepresentations which have been set up to defeat a specific perform- ance:'' Powell V. Elliot, L. R. 10 Ch. 424; Harnett v. Baker, L. R. 20 Eq. 50; Upperton v. Nickolson, 6 Ch. 436; 10 Eq. 228; Whittemore v. Whittemore, L. R. 8 Eq. 603; Denny v. Hancock, L. R. 6 Ch. 1; Ley- § 889, (i>) Jacob v. Eevell, [1900] age Co. v. Wharton, 143 Iowa, 61, 2 Ch. 858; Kelly v. C. P. B. E. Co., 119 N. W. 969. 74 Cal. 557, 5 Am. St. Bep. 470, 16 § 889, (c) Quoted in Taliaferro v. Pac. 386; Isaacs v. Skrainka, 95 Mo. Boyd, 115 Ark. 297, 171 S. W. 105. ■ &17, 8 S. W. 427; New York Broker- H— 116 § 889 EQUITY JUKISPKUDENCB. 1842 quence of this general doctrine that if a party makes a mis- representation, whereby another is induced to enter into an agreement, he cannot escape from its effects by alleging his forgetfulness at the time of the actual facts.^ "Where the misrepresentation does not extend to the entire scope of the agreement, or even to any of its most important parts, but relates merely to some incidental, subordinate, or collat- eral feature of it, the court, instead of denying all relief to the plaintiff, may direct a specific performance, with an abatement of the price, or other form of compensation, to the defendant.^ ^ Of course, when the representation is so coupled with knowledge, or want of belief, or intent, as to constitute actual fraud tu any of its phases, it will a fortiori defeat the remedy of specific performance. land V. Illingworth, 2 De Gex, P. & J. 248, 252, 254; Price v. Macaulay, 2 De Gex, M. & G. 339; Swimm v. Bush, 23 Mich. 99; Hohnes's Appeal, 77 Pa. St. 50. In none of these eases, with one or two exceptions, was there the slightest suggestion of any intent to deceive on the part of the vendor; nor even an allegation that he knew of the wrong statement. The question of his knowledge, belief, or intent was wholly immaterial, because the decision need not turn upon it. It is the fact of the other party's being misled, and not the design to mislead him, which consti- tutes the defense in this class of cases.* It is apparent, therefore, that the language which judges have used concerning misrepresentations in such cases should not 'be confounded with the terms which are employed in describing the elements of a misrepresentation in order that it may be fraudulent. §889, 2Burrowes v. Lock, 10 Ves. 470, 476; Price v. Macaulay, 2 De Gex, M. & G. 339; Bacon v. Bronson, 7 Johns. Ch. 194, 11 Am. Dec. 449. The same is true in suits for rescission and other relief based upon actual fraud. § 889, 3 See several of the cases in the last note but one. § 889, (d) This passage is quoted foreclose a purchase-money mort- in Pennybacker v. Laidley, 33 W. gage, where the vendor has made Va. 624, 11 S. E. 39. false representations as to the quan- §889, (e) Quoted in McMullin's tity of land conveyed: McMichael Adm'r v. Sanders, 79 Va. 356. The v. Webster, 57 N. J. Eq. 295, 73. same principle has been applied in Am. St. Eep. 630, 41 Atl. 714. favor of a defendant in a suit to 1843 ACTUAL FRAUD. § 890 § 890, V. Effect of the Representation on the Party to Whom It is Made — His Reliance upon It.* — ^Another element of a fraudulent misrepresentation, without which there can be no remedy, legal or equitable, is, that it must be relied upon by the party to whom it is made, and must be an im- mediate cause of his conduct which alters his legal relations. Unless an untrue statement is believed and acted upon, it can occasion no legal injury. It is essential, therefore, that the party addressed should trust the representation, and be so thoroughly induced, by it that, judging from the ordi- nary experience of mankind, in the absence of it he would not, in all reasonable probability, have entered into the contract or other transaction.^ ^ It is not necessary that § 890, 1 It is certainly incorrect to lay down this rule as it is often found both in judicial opinions and text-books, namely : "The inducement must be so strong that without it the party would not have entered into the contract." It is clearly impossible, from the nature of the case, to state such a future and contingent matter with absolute certainty; the mode in which the rule is formulated in the text is the only one con- sistent with the truth, and is all that the law really means or can demand. In the great case of Attwood v. Small, 6 Clark & F. 232, 447, in which the whole doctrine of fraud was fully explained. Lord Brougham thus states this rule: "Now, my lords, what inference do I draw from these cases? It is this, that general fraudulent conduct signifies nothing; that general dishonesty of purpose signifies nothing; that attempts to over- reach go for nothing, unless all this dishonesty of purpose, "aU this fraud, all this intention and design, can be connected with the particular trans- action, and not only connected with the particular transaction, but must be made to be the very ground upon which this transaction took place, and must have given rise to this contract." The rule was also well ex- pressed in Pulsford v. Richards, 17 Beav. 87, 96: "To use the expression of the Roman law, it must be a representation dans locum contractui, — ■ that is, a representation giving occasion to the contract, — ^the proper inter- pretation of which appears to me to be the assertion of a fact on which the person entering into the contract relied, and in the absence of which §890, (a) This section is cited in await v. Eogers, 151 Cal. 630, 91 Hicks V. Stevens, 121 111. 186, 11 Pac. 526. See, also, Farrar v. N. E. 241. Churchill, 135 U. S. 609, 10 Sup. §890, (b) The text is quoted in Ct. 771; Kincaid v. Price, 82 Ark. Pennybacker v. Laidley, 33 W. Va. 20, 100 S. W. 76; Arkadelphia Lum- 624, 11 S. E. 39; and cited in Green- ber Co. v. Thornton, 83 Ark. 403, § 890 EQUITY JUBISPRTJDENCE. 1844 the false representation should be the sole inducement; others may concur with it in influencing the party. Where several representations have been made, and one of them is false, the court has no means of determining, as was well it is reasonable to infer that he would not have entered into it; or the sup- pression of a fact the knowledge of which it is reasonable to infer would have made him abstain from the contract altogether" : Re5meII v. Sprye, 1 De Gex, M. & G. 660, 691, 708, 709; Jenniugs v. Broughton, 5 De Gex, M. & G. 126; Rawlins v. Wickham, 3 De Gex & J. 304; Nelson v. Stocker, 4 De Gex & J. 458; Lord Brooke v. Rounthwaite, 5 Hare, 298, 306; Vigors V. Pike, 8 Clark & P. 562, 650; Conybeare v. New Brunswick etc. Co., 1 De'Gex, F. & J. 578; Smith v. Reese River M. Co., L. R. 2 Ch. 604, 613; 2 Eq. 264; Evans v. Bicknell, 6 Ves. 174, 182-192; Nicol's Case, 3 De Gex & J. 387; Hough v. Richardson, 3 Story, 659; Daniel v. Mitchell, 1 Story, 172; Mason v. Crosby, 1 Wood. & M. 342; Tuthill v. Babeock, 2 Wood. & M. 298; Ferson v. Sanger, 1 Wood. & M. 138; Prescott v. Wnght, 4 Gray, 461; Taylor v. Fleet, 1 Barb. 471, 475; Morris Canal Co. v. Emmett, 9 Paige, 168, 37 Am. Dec. 388; Masterton v. Beers, 1 Sweeny, 406; 6 Rob. (N. Y.) 368; Levick v. Brotherline, 74 Pa. St. 149, 157; Percival v. Harger, 40 Iowa, 286; Bryan v. Hitchcock, 43 Mo. 527; Klopenstein v. Mulcahy, 4 Nev. 296; Slaughter's Adm'r v. Gerson, 13 WaU. 379; Wampler v. Wampler, 30 Gratt. 454; McShane v. Hazlehurst, 50 Md. 107; McBean v. Fox, 1 HI. App. 177; Roseman v. Canovan, 43 Cal. 110; Long v. Warren, 68 N. Y. 426; Chester v. Com- stock, 40 N. Y. 575, note; Taylor v. Guest, 58 N. Y. 262; Laidlaw v. Organ, 2 Wheat. 178, 195. 104 S. W. 169; Estep v. Armstrong, 598, 12 S. W. 295; Wann v. Scullin. 69 Cal. 536, 11 Pac. 132; Kheingans 210 Mo. 429, 109 S. W. 688; Parker V. Smith, 161 Cal. 362, Ann. Gas. v. Hayes, 39 N. J. Eq. 469; BaUey 1913B, 1140, 119 Pae. 494; Sears v. v. Frazier, 62 Or. 142, 124 Pac. 643; Hieklin, 13 Colo. 143, 21 Pae. 3022; Corbett v. McGregor, 62 Tex. Civ. Hicks v. Stevens, 121 111. 186, 11 App. 354, 131 S. W. 422; Houghtoa N. E. 241; Hooker v. Midland Steel v. Graybill, 82 Ya. .573; Conta v. Co., 215 HI. 444, 106 Am. St. Rep. Corgiat, 74 Wash. 28, 132 Pac. 746; 170, 74 N. B. 445; Gillespie v. Tul- Clough v. Cook (Del.), 87 Atl. 1017. ton Oil & Gas Co., 236 111. 188, 86 If the words used were capable of N. E. 219; Provident Loan Trust Co. two meanings, one true and the V. Mcintosh (Kan.), 75 Pac. 498; other false, the plaintiff in an ae- Euffner v. Riley, 81 Ky. 165; Sever- tion of deceit must show that ho ance v. Ash, 81 Me. 278', 17 Atl. 69; took them in the false sense: Smith Cochrane v. Pascault, 54 Md. 1; v. Chadwiek, 9 App. Cas. (H. L.) Diamond v. Shriver, 114 Md. 643, 80 187, affirming 20 Ch. Div. 27. Atl. 217; Powell v. Adams, 98 Mo. 1845 ACTUAL FBATJD. § 891 said by Lord Cranwortli, that this very one did not turn the scale.2 The misrepresentations must, however, be con- cerning something really material. Statements, although false, respecting matters utterly trifling, which cannot affect the value or character of the subject-matter, so that if the truth had been known the party would not probably have altered his conduct, are not an occasion for the interposi- tion of equity. 3 d § 891. The Party must be Justified in Relying on the Rep- resentation.^ — The foregoing requisite, that the representa- tion must be relied upon, plainly includes the supposition that the party is justified, under all the circumstances, in thus relying upon it. This branch of the rule presents by far the greatest practical difficulties in the decision of cases, because, although the rule is well settled, and is most clearly just, its application must depend upon the facts of each § 890, 2 ReyneU v. Sprye, 1 De Gex, M. & G. 660, 708, 709; Addington V. Allen, 11 Wend. 374 (an action for deceit, in which the court said: "Although other inducements besides the representations may have operated in the giving credit, it is enough if the vendor is moved by such representations, so that without them the goods would not have been parted with"). § 890, 3 Percival v. Harger, 40 Iowa, 286; Winston v. Gwathmey, 8 B. Men. 19; Geddes v. Pennington, 5 Dow, 159. §890, (c) False Eepresentation Iowa, 567, 121 N". W. 529; Texas & Need not be Sole Inducement. — See P. Ey. Co. v. Jowers (Tex. Civ. ante, § 880, note, for the opinion in App.), 110 S. W. 946; Buchanan v. Eeynell v. Sprye. In support oi' the Burnett, 102 Tex. 492, 132 Am. St. text, see, also, Oliver v. Bank -of Eep. 900, 119 S. W. 1141, affirming England, [1902] 1 Ch. 610; Linhart S. C. 152 Tex. Civ. App. 68, 114 V. Foreman's Adm'r, 77 Va. 540; S. W. 406. The text is quoted in English V. North, 112 Ark. 489, 166 • Taliaferro v. Boyd, 115 Ark. 297, S. W. 577; Koebel v. Doyle, 256 111. 171 S. W. 105, 610, 100 N. E. 154 (person making §390, (d) See, also, §§ 879, 898. misrepresentation got another to § 891, (a) This section is cited in eorrohorate his story; "fact that Coolidge v. Ehodes, 199 111. 24 64 there is more than one telling the N. E. 1074; Miller v. Ash, 156 Cal. same falsehood does not show that 544^ 105 Pac. 600; Ehrmann v. Stit- reliance is placed on the second one zel, 121 Ky. 751, 123 Am. St. Eep. alone"); Kelty v. McPeake, 143 224. 90 S. W. 275. § 891 EQUITY JTJEISPRXJDBNCB. 1846 particular case, and upon evidence which is often obscure and conflicting. In determining the effect of a reliance upon representations, it is most important to ascertain, in the first place, whether the statement was such that the party was justified in relying upon it, or was such, on the other hand, that he was hownd to inquire and examine into its correctness himself. In respect to this alternative, there is a broad distinction between statements of fact which really form a part of, or are essentially connected with, the sub- stance of the transaction, and representations which are mere expressions of opinion, hope, or expectation, or are mere general commendations. It may be laid down as a general proposition that where the statements are of the first kind, and especially where they are concerning mat- ters which, from their nature or situation, may be assumed to be within the knowledge or under the power of the party making the representation, the party to whom it is made has a right to rely on them, he is justified in relying on them, and in the absence of any knowledge of his own, or of any facts which should arouse suspicion and cast doubt upon the truth of the statements, he is not bound to make inquiries and examination for himself. It does not, under such circumstances, lie in the mouth of the person asserting the fact to object or complain because the other took him at his word ; if he claims that the other patrty was not misled, he is bound to show clearly that such party did know the real facts ; the burden is on him of removing the presump- tion that such party relied and acted upon his statements.^ ^ § 891, 1 Eeynell v. Sprye, 1 De Gex, M. & G. 660, 691, 708; Rawlins v. Wickham, 3 De Gex & J, 304; Conybeare v. New Brunswick etc. Co., 1 De Gex, F. & J. 578. In Leyland v. lUingworth, 2 De Gex, F. & J. 248, 253, 254, in wMch it was held that the purchaser had a right to rely on § 891, (b) May Rely on State- of party making representations) ; ments of Fact. — The text is quoted Westermau v. ,Corder, 86 Kan. 239, in Hicks v. Stevens, 121 HI. 186, 11 Ann Cas. 1913C, 60, 39 L. R. A. N. E. 241. The text is cited in Ly- (N. S.) 500, 119 Pae. 868 (same) ; man v. Lyman, 90 Conn. 399, Caplen v. Cox, 42 Tex. Civ. App. 297, Jj. R. A. 1916E, 643, 97 Atl. 312 92 S. W. 1048'. See, also, the lead- (facts peculiarly within knowledge ing case of Redgrave v. Hurd, 1847 ACTUAL FEATJD. § 891 The rule is equally well settled with respect to the second alternative. Where the representation consists of general commendations, or mere expressions of opinion, hope, ex- pectation, and the like, and where it relates to matters a certain statement made by the vendor, and was not bound to inquire for himself, Turner, L. J., said: "If the question had been, whether the supply of water was adequate or iaadequate, the case would probably have fallen within the authorities referred to, in opposition to the pur- chaser's claim. It would have ieen a question of opinion, not of fact, and the purchaser would Have been put upon inquiry. But there is no such question in this case. The description is a representation of a fact," etc. See also Dyer v. Hargrave, 10 Ves. 505; Fenton v. Browne, 14 Ves. 144; Wall v. Stubbs, 1 Madd. 80; Stewart v. Alliston, 1 Mer. 26; Trower V. Neweome, 3 Mer. 704; Lowndes v. Lane, 2 Cox, 363; Scott v. Hanson, 1 Sim. 13; Harris v. Kemble, 1 Sim. Ill; 5 Bligh, N. S., 730; Price v. Macaulay, 2 De Gex, M. & Gr. 339; Aberaman Iron Works v. Wickens, L. R. 4 Ch. 101; 5 Eq. 485; Martin v. Cotter, 3 Jones & L. 496, 507; Brealey v. Collins, Younge, 317; Lord Brooke v. Rounthwaite, 5 Hare, 298; Cox v. Middleton, 2 Drew. 209; Farebrother v. Gibson, 1 De Gex & J. 602; Cook* v. Waugh, 2 GifiE. 201; Johnson v. Smart, 2 Giff. 151; Boynton v. Hazelboom, 14 Allen, 107, 92 Am. Dec. 738; Best v. Stow, 2 Sand. Ch. 298; Holmes's Appeal, 77 Pa. St. 50; Swimm v. Bush, 23 Mich. 99; Beafdsley v. Duntley, 69 N. Y. 577; Wilkin v. Barnard, 61 N. Y. 628; McShane v. Hazlehurst, 50 Md. 107; Slaughter's Adm'r v. Gerson, 13 Wall. 379; Drake v. Latham, 50 lU. 270; Fish v. Cleland, 33 111. 238; Banta v. Palmer, 47 111. 99; David v. Park, 103 Mass. 501; Brad- bury V. Bardin, 35 Conn. 577; Batdorf v. Albert, 59 Pa. St. 59; Watts V. Cummins, 59 Pa. St. 84; 'Brandon v. Forest Co., 59 Pa. St. 187; Spal- ding V. Hedges, 2 Pa. St. 240; Morehead v. Fades, 3 Bush, 121 (a very instructive case). L. E. 20 Ch. Div. 1, 13, 14, et seq.; S. W. 1023; Hunt v. Davis, 98 Ark. Odbert v. Marquet, 163 Fed. &92, 44, 135 S. W. 458; Grant v. Led- affirmed, 175 Fed. U, 99 C. C. A. widge, 109 Ark. 297, 160 S. W. 200; 60; Shahan v. Brown, 167 Ala. 534, Bank of Woodland v. Hiatt, 58 Cal. 52 South. 737; Wilks v. Wilks, 176 234; Wenzel v. Shulz, 78 Cal. 221, Ala. 151, 57 South. 776 (paraphraa- 20 Pae. 404; Davis v. Butler, 154 ing text); King v. Livingston Mfg. Cal. 623, 98 Pae. 1047; Brandt v. Co., 180 Ala. 118, 60 South. 143 Krogh, 14 Cal. App. 39, 111 Pae. (that statements were incredible 275; Tracy v. Smith, 175 Cal. 161, merely goes to the probability of 165 Pae. 535; Taber v. Piedmont their being relied upon); Gammill v. Heights Bldg. Co., 25 Cal. App. 222, Johnson, 47 Ark. 335, 1 S. W. 610; 143 Pae. 319; Dillman v. Nadle- Evatt V. Hudson, 97 Ark. 265, 133 hoffer, 119 HI. 567, 7 N". E. 88; Maine 891 EQUITY JUKISPEUDENCE. 1848 which, from their nature, situation, or time, cannot be sup- posed to be within the knowledge or under the power of the party making the statement, the party to whom it is made is not justified in relying upon it and assuming it to be true ; he is bound to make inquiry and examination for himself so as to ascertain the truth ; and in the absence of evidence, it will be presumed that he has done so, and acted upon the result of his own inquiry and examination.^ « Any repre- § 891, 2 Dyer v. Hargrave, 10 Ves. 505 ; Penton v. Browne, 14 Ves. 144; Brealey v. Collins, Younge, 317; Lord Brooke v. Rounthwaite, 5 Hare, 298; Abbott v. Sworder, 4 De Gex & S. 448; Colby v. Gadsden, 34 Beav. 416; Attwood v. Small, 6 Clark & F. 232; Hough v. Richard- son, 3 Story, 659; Pratt v. Philbrook, 33 Me. 17; Brown v. Leach, 107 Mass. 364; Veasey v. Doton, 3 Allen, 380; Clark v. Everhart, 63 Pa. St. 347; Winters's Appeal, 61 Pa. St. 307; Tindall v. Harkinson, 19 Ga. 448; Glasscock v. Minor, 11 Mo. 655; Wright v. Gully, 28 Ind. 475. As illustrations, in the often-quoted case of Jennings v. Broughton, 5 De Gex, M. & G. 126, 17 Beav. 234, it was held that in a contract for the sale of V. Midland Investment Co., 132 Iowa, 272, 109 N. W. 801; Chase v. Wolgamot, 137 Iowa, 128, 114 N. W. 614; Severson v. Kock, 159 Iowa, 343, 140 N. W. 220; Speed v. HoUingsworth, 54 Kan. 436, 38 Pae. 496; Circle v. Potter, 83 Kan. 363, 111 Pae. 479; Cottrill v. Krum, 100 Mo. 397, 18 Am. St. Eep. 549, 13 S. W. 753; MeGhee v. Bell, 170 Mo. 121, 59 L. R. A. 761, 70 S. W. 493; Brolaski v. Carr, 127 Mo. App. 279, 105 S. W. 284; Davis v. Forman, 229 Mo. 27, 129 S. W. 213; Post v. Liberty, 43 Mont. 1, 121 Pae. 475; McMiehael v. Webster, 57 N. J. Eq.' 295, 73 Am. St, Eep. 630, 41 Atl. 714; Turner v. Kuehnle, 70 N. J. Eq. 61, 62 Atl. 337; Leland v. Tweto, 19 N. D. 551, 125 N. W. 1032 (state- ments as to value); Hood v. Wood (Old.), 161 Pae. 211 (same); Steen V. Weisten, 51 Or. 473, 94 Pae. 834 (vendor's statement as to quality of timber on land sold); Bonelli v. Burton, 61 Or. 429, 123 Pae. 37; Crompton v. Beedle, 83 Vt. 287, Ann. Cas. 1912A, 399, 30 L. E. A. (N. S.) 748, 75 Atl. 331; Hull v. Fields, 76 Va. 594; Linhart v. Foreman's Adm'r, 77 Va. 540; Eorer Iron Co. V. Trout, 83 Va. 397, 5 Am. St. Eep. 285, 2 S. E. 713; Fitzgerald v. Frankel, 109 Va. 603, 64 S. E. 941; MulhoUand v. Washing- ton Match Co. (Wash.), 77 Pae. 497; MeMullen v. Bousseau, 40 Wash. 497, 82 Pae. 883; Fischer v. Hillman, 68 Wash. 222, 39 L. E. A. (N. S.) 1140, 122 Pae. 1016 (vendor's, asser- tion as to his title); Baker v. Becker, 153 Wis. 369, 141 N. W. 304. § 891, (c) The text is cited in Kin- caid V. Price, 82 Ark. 20, 100 S. W. 76 (statement as to market value of hay); Smith v. Ehode Island Co. (E. I.), 98 Atl. 1; McDonald v. Smith, 95 Ark. 523, 130 S. W. 515. See, also, ante, § 878. 1849 ACTUAL FRAUD. § 892 sentation, in order that one may be justified in relying upon. it, must be, in some degree at least, reasonable ; at all events, it must not be so self -contradictory or absurd that no rea- sonable man could believe it. It must not, also, be so vague and general in its terms that it conveys no certain meaning.^ § 892. When He is or is not Justified in Relying. — ^As a generalization from the authorities, the various conditions of fact and circumstance with respect to the question how a mine, there was an essential difference between a representation of what was actually to be seen or had been seen at the works, — the veins of ore, the amount of ore actually mined, and the like, — and a general statement of the expectations, prospects, and capacities of the mine, — the latter being in their very nature contingent and speculative, and re- specting which the buyer was as able to judge as the seller.* In Trower V. Newcome, 3 Mer. 704, an advowson had been sold at auction, the writ- ten description stating that ''a voidance of the preferment was likely soon to occur," but not speaking at all of the then present incumbent. At the sale, the auctioneer verbally announced that "the living would be void on the death of a person aged eighty-two.'' This statement was, of course, made without authority, and so did not bind the vendor; for otherwise it seems to be a representation in the clearest possible manner of a most material fact. In truth, the then incumbent was only thirty- two years old. Sir William Grant held that the representation in the written description was so vague and general, and so entirely a matter of speculation or opinion, that the purchaser was only put on inquiry by it, and could not claim to have been misled. In Scott v. Hanson, 1 Sim. 13, 1 Euss. & M. 128, a statement that the land sold "was uncom- monly rich water-meadow," was only a general commendation. In Hume V. Pocock, L. R. 1 Ch. 379, 1 Eq. 423, it was held that the mere assertion by a vendor that he has a good title, on which the vendee relies without any investigation, is not necessarily such a misrepresentation as will de- feat an enforcement of the contract. In JefEerys v. Fairs, L. R. 4 Ch. Div. 448, a representation made without knowledge or any possible intent to mislead was held no ground for interference, because it was of such a nature that the purchaser took his chance. § 891, 3 Trower v. Newcome, 3 Mer. 704, per Sir William Grant ; Irv- ing V. Thomas, 18 Me. 418, 424, per Shipley, J.; Savage v. Jackson, 19 Ga. 305; Halls v. Thompson, 1 Smedes & M. 443. §891, (d) See, also, Southern De- Slavens, 129 Iowa, 107, 105 N. W. velopinent Co. v. Silva, 125 TJ. S. 369. 217, 8 Sup. Ct. 881; Garrett v. § 892 EQUITY JITRISPinjDENCB. 1850 . far a party is justified in relying upon the representation made to him may be reduced to the four following cases, in the first three of which the party is not, while in the fourth he is, justified in relying upon the statements which are offered as inducements for him to enter upon certain con- duct : 1 1. When, before entering into the contract or other transaction, he actually resorts to the proper means of as- § 892, 1 The doctrine is so admirably smmned up by Lord Langdale, M. R., in Clapham v. ShUlito, 7 Beav. 146, 149, 150, that I shall extract a passage from his opinion. "Cases have frequently occurred in which, npon entering into contracts, misrepresentations made by one party have not been, in any degTce, relied on by the other party. If the party to whom the representations were made himself resorted to the proper means of verification, before he entered into the contract, it may appear that he relied upon the result of his own investigation and inquiry, and not upon the representations made to him by the other party. Or if the means of investigation and verification be at hand, and the attention of the party receiving the representations be drawn to them, the circumstances of the case may be such as to make it incumbent on a court of justice to impute to him a knowledge of the result, which upon due inquiry he ought to have obtained, and thus the notion of a reliance on the representations made to him may be excluded. Again, when we are endeavoring to as- certain what reliance was placed on representations, we must consider them with reference to the subject-matter and the relative knowledge of the parties. If the subject is capable of being accurately known, and one party is, or is supposed to be, possessed of accurate knowledge, and the other is entirely ignorant, and a contract is entered into after repre- sentations made by the party who knows, or is supposed to know, with- out any means of verification being resorted to by the other, it may well enough be presumed that the ignorant man relied on the statements made to him by him who was supposed to be better informed; but if the sub- ject is in its nature uncertain, if all that is known about it is matter of inference from something else, and if the parties making and receiving representations on the subject have equal knowledge and means of acquir- ing knowledge, and equal skill, it is not easy to presume that representa- tions made by one would have much, or any, influence upon the other." The third and fourth cases in the text above are discussed in the preced- ing paragraph (§891). The first and second are in reality only one; they involve the same principle, and the only difference between them is in the mode of proof, — a fact being directly proved by direct evidence in the first, which is irresistibly inferred by a legal presumption in the second. 1851 ACTUAL FBAUD. § 893 certaining the truth and verifying the statement; 2. When, having the opportunity of making such examination, he is charged with the knowledge which he necessarily would have obtained if he had prosecuted it with diligence ; 3. When the representation is concerning generalities equally within the knowledge or the means of acquiring knowledge possessed by both parties ; * 4. But when the representation is concern^ ing facts of which the party making it has, or is supposed to have, knowledge, and the other party has no such advan- tage, and the circumstances are not those described in the first or the second case, then it will be presumed that he relied on the statement; he is justified in doing so.^ § 893. Information or Means of Obtaining Information Possessed by the Party Receiving the Representation. — I purpose to examine under this head the first two cases men- tioned in the foregoing summary ; they are the ones which present by far the greatest practical difficulties in the admin- istration of justice. If, after a representation of fact, how- ever positive, the party to whom it was made institutes an inquiry for himself, has recourse to the proper means of ob- taining information, and actually learns the real facts, he cannot claim to have relied upon the misrepresentation and to have been misled by it. Such claim would simply be un- true.^ The same result must plainly follow when, after the representation, the party receiving it has given to him a § 892, (a) The author's classifica- third class) ; Marmeni v. Bellarts, tion is quoted in Farnsworth v. 84 Or. 610, 164 Pae. 955; Eeimers Duffner, 142 V. S. 43, 12 Sup. Ct. v. Brennan, 84 Or. 53, 164 Pae. 552. 164, by Mr. Justice Brewer; in Mc- §892, (b) The text is quoted in Clure V. Glady Fork Lumber Co., Shores v. Hutchinson, 69 Wash. 329, 18a Fed. 76, 105 C. C. A. 368; in 125 Pae. 142; and cited in Steven- Vanderbilt v. Bishop, 188 Fed. 971; son v. Cauble, 55 Tex. Civ. App. in Mitchell Mining Co. v. Ham- 75, 118 S. W. 811. monds, 12 Ariz. 300, 100 Pae. 795 §893, (a) The text is quoted in (an insta,nee of the first class) ; Tillis v. Smith Sons Lumber Co., Shores v. Hutchinson, 69 Wash. 329, 188 Ala. 122, 65 South. 1015; Shores 125 Pae. 142 (first class); and cited v. Hutchinson, 69 Wash. 329, 125 in Burk v. Johnson, 146 Fed. 209, Pae. 142; Wilson v. Mills, 91 Wash. 76 C. C. A. 567 (an instance of the 71, 157 Pae. 467. §893 EQUITY JTTEISPBTJDENCE, 1852 sufficient opportunity of examining into the real facts, when his attention is directed to the sources of information, and he commences, or purports or professes to commence, an investigation. The plainest motives of expediency and of justice require that he should be charged with all the knowl- edge which he might have obtained had he pursued the in- quiry to the end with diligence and completeness. He can- not claim that he did not learn the truth, and that he was misled. 1 ^ § 893, 1 One ground of this latter branch of the rule is the practical impossibility in any judicial proceeding of ascertaining exactly how much knowledge the party obtained by his inquiry; and the opportunity which a contrary rule would give to a party of repudiating an agreement or other transaction fairly entered into, with which he had become dissatis- §893, (b) Quoted in Neely v. Eembert (Ark.), 71 S. W. 259; Op"- penlieimer v. Clunie, 142 Cal. 313, 75 Pae. 889; Hirsekman v. Hodges, O'Hara & Russell Co., 59 Fla. 517, 51 South. 550; Moore v. Beakley (Tex. Civ. App.), 183 S. W. 380; Skores v. Hutckinson, 69 Wask. 329, 125 Pac. 142; Wilson v. Mills, 91 Wask. 71, 157 Pac. 467; and cited in Steven- son V. Cauble, 55 Tex. Civ. App. 75, 118 S. W. 811; Westerman v. Corder, 86 Kan. 239, Ann. Cas. 1913G, 60, 39 L. K. A. (N. S.) 500, 119 Pac. 868; Meyer v. Maxey, 92 Wash. 73, 158 Pac. 995; Peterson v. Jakn Con- tracting Co., 96 Wask. 210, 164 Pae. 937. See tke important ease of Col- ton V. Stanford, 82 Cal. 356, 16 Am. St. Kep. 137, 23 Pae. 16; also, Soutkern Development Co. v. Silva, 125 U. S. 247, 8 Sup. Ct. 881; Parrar V. Ckurckill, 135 XJ. S. 609, 10 Sup. Ct. 771; Farnswortk v. Duffner, 142 TJ. S. 43, 12 Sup. Ct. 164; Skappirio V. Goldberg, 192 XJ. S. 232, 24 Sup. Ct. 259; Magee v. Verity, 97 Mo. App. 486, 71 S. W. 472; Herron v. Herron, 71 Iowa, 428, 32 N. W. 407; but see Ligkt v. Jacobs, 183 Mass. 206, 66 N. E. 799. See, furtker, in support of tke text, Odbert v. Mar- quet, 163 Fed. 892, affirmed, 175 Fed. 44, 99 C. C. A. 60 (sale of min- eral lands); Mitekell Min. Co. v. Hammonds, 12 Ariz. 300, 100 Pac. 795; Wrigkt v. Boltz, 87 Ark. 567, 113 S. W. 201; Brooks v. Culver, 168 Mick. 436, 134 N. W. 470; Morgan County Coal Co. v. Halderman, 254 Mo. 596, 163 S. W. 828 (sale of mines); Corbett v. McGregor, 62 Tex. Civ. App. 354, 131 S. W. 422; Luckenback v. Tkomas (Tex. Civ. App.), 166 S. W. 99; Stewart v. Larkin, 74 Wask. 681, L. E. A. 1916B, 1069, 134 Pae. 186; Jarvis v. Ireland, 89 Wask. 286, 154 Pac. 455; Cazier v. Hart, 158 Wis. 362, 148 N. W. 860. Tke rule of tke text is obviously inapplicable wkere tke in- vestigation is kampered by tke de- ceit or misdirections of the otker party or kis agents; Matker v. Barnes, Keigkley & Greer, 146 Fed. 1000. 1853 ACTUAL FKAUD. § 894 § 894. Knowledge Possessed by the Same Party— Patent Defects. — The same principle is applied under a somewhat different condition of circumstances. If the party receiving a misrepresentation is, at the time when it is made, either fled:" Nelson v. Stocker, 4 De Gex & J. 458; Conybeare v. New Bruns- wick etc. Co., 1 De Gex, F. & J. 578; Nicol's Case, 3 De Gex & J. 387; Cargill V. Bower, L. E. 10 Ch. Div. 502; Pratt v. Philbrook, 33 Me. 17; Brown v. Leach, 107 Mass. 364; Clark v. Everhart, 63 Pa. St. 347; Wright V. Gully, 28 Ind. 475; Glasscock v. Minor, 11 Mo. 655; Tindall v. Harkin- son, 19 Ga. 448; Wilkin v. Barnard, 61 N. Y. 628; Morehead v. Eades, 3 Bush, 121 (a very instructive case, in which this aspect of the doctrine is discussed by Robertson, J.); David v. Park, 103 Mass. 501; Spalding V. Hedges, 2 Pa. St. 240; Batdorf v. Albert, 59 Pa. St. 59; Watts v. Cummins, 59 Pa. St. 84; Brandon v. Forest Co., 59 Pa. St. 187; Fish v. Cleland, 33 111. 238; Banta v. Palmer, 47 111. 99; Brown v. Leach, 107 Mass. 364; Rockaf allow v. Baker, 41 Pa. St. 319, 80 Am. Dec. 624. In illustration of the first branch of the rule given in the text. Lord Holt said, 'in deciding an action at law for deceit (the principle -being the same in law and in equity), as follows: Lysney v. Selby, 2 Ld. Eaym. 1118, 1120 : "If the vendor gives in his particular of the rents, and the vendee says he wUl trust him and inquire no further, but rely on his par- ticular, then, if the particular be false, an action will lie; but if the vendee will go and inquire further what the rents are, then it seems unreasonable he should have any action, though the particular be false, because he did not rely on the particular." The great case of Attwood v. Small, 6 Clark & F. 232, is an admirable illustration of the second branch of the rule, and was finally decided in the house of lords by an application of its doctrine. Attwood had bargained to sell his works, and had made representations in regard to them, and these statements were claimed to be false. But during the negotiations the vendee had sent a committee to the works for the express purpose of examining into the truth of the statements. As a matter of fact, they made a very super- ficial and incomplete examination, and did not discover all the truth; but they had the opportunity to make a thorough investigation; they were engaged in the same business, and were therefore experts; they were satisfied with what they saw, and reported favorably, and the contract was concluded. On a suit for rescission of the agreement, the house of lords held that the vendees, by their own acts, had cut off any claim to *eing misled, and must be charged with the full knowledge which they might h.ive obtained.. If a party chooses to judge for himself., and then § 893, (c) Quoted in Neely v. Eembert (Ark.), 71 S. "W. 259. § 894 EQTniY JUBISPKTTDENCB. 1854 from knowledge acquired previously or obtained at that very moment, fully aware of the truth, acquainted with the facts as they really are, he cannot claim to be misled, and cannot defeat or disaffirm or rescind the transaction on the ground that it was entered into through false representa- tions. The case of patent defects is merely an application of this equitable doctrine. If, in a contract of sale or of leasing, representations are made by the vendor concerning some incidents, qualities, or attributes of the subject-matter which are open and visible, so that the falsity of the state- ment is patent to any ordinary observer, and it is made to appear that the purchaser, at or shortly before the conclud- ing the contract, had seen the thing itself which constitutes the subject-matter, then a knowledge of the facts is charge- able upon such party ; he is assumed to have made the agree- ment knowingly, and cannot allege that he was misled by does not thoroughly use all the opportunities and sources of information offered or open to him, he cannot be permitted to set up his own care- lessness or imprudence, and claim to have been misled. Jennings v. Broughton, 5 De Gex, M. & G. 126, 17 Beav. 234, illustrates the same rule in a striking manner. Plaintiff had bought an interest in a mine, statements concerning it having been made by the vendors. The suit was brought to rescind the sale, on the ground that these statements were grossly fraudulent. The vendee had visited the mine, before concluding the bargain, to Isok for himself. The statements were concerning matters which he might have found out during his investigation, and it was held by the master of roUs and by the court of appeal that he must be taken to have ascertained the truth, and could not claim to have been misled by the misrepresentations. Lowndes v. Lane, 2 Cox, 363, is another illus- trative case. A purchaser had bought property consisting partly of woods, on the representation that these woods had yielded, from timber cut and sold, £250 a year, on the average, for fifteen years. This state- ment was practically false, and was very misleading. But before con- eluding the contract a writing was delivered to him and kept in his pos- session, which, if examined by him, would have disclosed all the real facts and shown the untruth of the previous statements. He was held chargeable with the knowledge which he might and ought thus to have obtained. 1855 ACTUAL PEATJD. . § 895 the false representations. i ^ This special rule concerning patent defects requires that the thing concerning which the statements are made should be seen or otherwise personally known by the purchaser, and that the defects should be plainly open and patent to any ordinary observer, and espe- cially that no means should be used to conceal them, or to divert the buyer's attention from them, or in any way to prevent a fair inquiry. 2 b §895. When the Knowledge or Information must be Proved, and not Presumed. — The principle discussed in the two preceding paragraphs ^ is subject, however, to the fol- lowing most important qualification, which is based upon the proposition heretofore stated, that whenever a positive rep- § 894, 1- Nelson v. Stocker, 4 De Gex & J. "458; Dyer v. Hargrave, 10 Ves.,505; Bowles v. Round, 5 Ves. 508; Pope v. Garland, 4 Younge & C. 394; Shackleton v; Sutcliffe, 1 De Gex & S. 609; Grant v. Munt, Coop. 173; Hough V. Richardson, 3 Story, 659, Fed. Gas. No. 6,722; Veasey v. Doton, 3 Allen, 380; Winter's Appeal, 61 Pa. St. 307; Slaughter's Adm'r V. Gerson, 13 Wall. 379. § 894, 2 If the parties do not stand upon an equality, and one, having better means of knowledge than the other, uses any means to conceal the true facts, or to divert the inquiry from them, the transaction thus pro- cured would be fraudulent: Mead v. Bunn, 32 N. Y. 275. § 895, 1 That is, the principle underlying the first and second cases mentioned ante, in § 892. § 894, (a) Quoted in OppenKeimer Christensen v. Koeh, 85 Wash. 472, V. Clunie, 142 Cal. 313, 75 Pac. 899. 148 Pae. 585 (even though vendor See, in general, Hoist v. Stewart, ofifered to pay railroad fare of pur- 161 Mass. 516, 42 Am. St. Rep. 442, chaser to inspect); Van Horn v. 37 N. B. 755; Brady v. Finn, 162 Chambers, 89 Wash. 553, 154 Pac. Mass. 260, 38 N. E. 506; Baeon v. 1084. See, also, Knapp v. Schemmel Leslie, 50 Kan. 494, 34 Am. St. Kep. & Armstrong (Iowa), 124 N. W. 134, 31 Pae. 1066 (purchaser had re- 309 (vendee visited the land, but as sided near the property for twenty it was covered with snow, could not years); Gonta v. Corgiat, 74 Wash. ascertain its character and quality); 28, 132 Pae. 746 (dimensions of lot). and Groves v. Chase, 60 Colo. 155, § 894, (b) The rule, therefore, does 151 Pac. 913 (here also purchaser of not apply where the land is in a land prevented from making exam- distant state: Brown v. Linn, 50 ination by snow); Wilson v. Hen- Colo. 443, 115 Pac. 906; Haack v. derson (Mo.), 191 S. W. 72; Jeffreys Scott (Iowa), 124 N. W. 1068; v. Weekly, 81 Or. 140, 158 Pac. 522. § 895 EQUITY JUBISPRUDEN-CB. 1856 resentation of fact is made, the party receiving it is, in gen- eral, entitled to rely and act upon it, and is not bound to verify it by an independent investigation. Where a repre- sentation is made of facts which are or may be assumed to be within the knowledge of the party making it, the knowl- edge of the receiving party concerning the real facts, which shall prevent his relying on and being misled by it, must be clearly and conclusively established by the evidence.* The mere existence of opportunities for examination, or of sources of information, is not sufficient, even though by means of these opportunities and sources, in the absence of any representation at all, a constructive notice to the party would be inferred ; the doctrine of constructive notice does not apply where there has been such a representation of fact.2 b If one party^-a vendor, for example — claims that the invalidating effects of his misrepresentations are. ob- viated, and that the purchaser was not misled by them, § 895, 2 Drysdale v. Mace, 2 Smale & G. 225, 230. § 895, (a) Quoted in Hicks v. consulted the records: Olson T. Stevens, 121 HI. 186, 11 N. E. 241, Orton, 28 Minn. 36, 8 N. W. 878; and in Werline v. Aldred (Okl.), 157 Backer v. Pyne, 130 Ind. 288, 30 Pac. 305. This section is cited in Am. St. Eep. 231, 30 N. E. 21; Wenzel v. Shulz, 78 Cal. 221, 20 Pac. Baker v. Maxwell, 99 Ala. 558, 14 404; in Miller v. Ash, 156 Cal. 544, South. 468; Hooek v. Bowman, 42 105 Pac. 600; in Bogers v. Portland Neb. 80, 47 Am. St. Kep. 691, 60 & B. St. Ky., 100 Me. 86, 70 L. K. A. N. W. 387 (reviewing many cases). 574, 60 Atl. 713; in Smith v. Ehode See, also, Maine v. Midland Invest- Island Co. (E. I.), 98 Atl. 1; in ment Co., 132 Iowa, 272, 109 N. W. Stevenson v. Cauble, 55 Tex. Civ. 801; Kelty v. McPeake, 143 Iowa, App. 75, 118 S. W. 811 (misrepre- 567, 121 N. W. 529; Severson v. sentation as to location of land). Kock, 159 Iowa, 343, 140 N. W. 220; § 895, (b) The text is quoted in Hall v. Bank of Baldwin, 143 Wis. Eichelberger v. Mills Land & Water 303, 127 N. W. 969; but see Ander- Co., 9 Cal. App. 628, 100 Pac. 117; son v. Eainey, 100 N. C. 321, 5 S. E. Werline v. Aldred (Okl.), 157 Pac. 182. In Hoist v. Stewart, 161 Mass. 305; Western Mfg. Co. v. Cotton, 126 516, 42 Am. St. Eep. 442, 37 N. E. ky. 749, 12 L. E. A. (N. S.) 427, 755, it was held that a purchaser of 104 S. W. 758. It is held that false land may rely upon representations statements by vendor of lands as to as to the time of the passing of boundaries, title, etc., may be relied trains, although the means of knowl- on, though the vendee might have edge are equally open to both par- 1857 ACTUAL FEAXTD. § 895 either because they were concerning patent defects in the subject-matter, or because he was from the outset ac- quainted with the real facts, or because he had made in- quiry, and had thereby ascertained the truth, the foregoing qualification plainly applies ; it is pla,inly incumbent on the vendor to prove the alleged knowledge of the purchaser by ' clear and positive evidence, and not to leave it a matter of mere inference or implication ; an opportunity or means of obtaining the knowledge is not enough.^ o The qualification § 895, 3 Price v. Macaulay, 2 De Gex, M. & G. 339, 346, per Knight Bruce, L. J. : "Supposing, however, that the defendant [a purchaser] had actually known at the time of the purchase what were the real state and condition of the subject-matter of the contract, it may be that he would not be entitled to complain. But in order to enable a vendor to avail himself of that defense in such a case, he must show very clearly that the purchaser knew that to be untrue which was represented to him as true; for no man can be heard to say that he is to be assumed not to have spoken the truth. ... It is said that subsequently he had such notice as might have led him to ascertain how the facts stood. That, however, is not sufficient in a case of misrepresentation; he must be shoion clearly to have had information of the real state of the facts conmaunicated to his mind." See also Wilson v. Short, 6 Hare, 366, 378; Dyer v. Har- grave, 10 Ves. 505 ; Higgins v. Samels, 2 Johns. & 'H. 460 ; Harnett v. Baker, L. R. 20 Eq. 50; Rawlins v. "Wickham, 3 De Gex & J. 304, 314, 318-320; Attwood v. Small, 6 Clark & F. 232; Smith v. Reese River Co., L. R. 2 Eq. 264 ; Conybeare v. New Brunswick etc. Co., 1 De Gex, P. & J. 578; 9 H. L. Cas. 711; Kisch v. Cent. R'y of Venezuela, 3 De Gex, J. & S. 122; L. R. 2 H. L. 99, 125. ties. It is said, on the other hand, dimensions, though he was shown the that the grantor cannot claim to land and had opportunity to meas- have been misled by similar false ure it) ; Western Mfg. Co. v. Cotton, statements on the part of the 126 Ky. 749, 12 L. R. A. (N. S.) grantee, being conclusively pre- 427, 104 S. W. 758. See, also, Eed- Bumed to know the state of his own grave v. Hurd, 20 Ch. Div. 1, and title: Eol)bin3 v. Hope, 57 Cal. 493. especially the remarks of Jessel, See, also, § 810. M. E., at p. 21; Shahan v. Brown, § 895, (c) The text is quoted in 167 Ala. 534, 52 South. 737; King Eiehelberger v. Mills Land & Water v. Livingston Mfg. Co., 180 Ala. 118, Co., 9 Cal. App. 628, 100 Pae. 117 60 South. 143; Evatt y. Hudson, 97 (purchaser may rely on vendor's A;rk. 265, 133 S] W. 1023; Bank of representations, as to acreage or Woodland v. ' Hiatt, '58 Cal. 234; 11—117 I 895 EQUITY JUEISPRUDBNCB. 1858 applies no less plainly to the ease where the party receiving a representation has given to him an opportunity of examin- ing into the real facts, or where his attention is directed to the sources of information. The mere opportimity or the means of investigation are not sufficient. Undoubtedly, if there had been no representation, they might or would have put the party upon an inquiry, and would, therefore, amount in law to a constructive notice of the facts which might have been learned by such inquiry; but the positive representa- tion of a fact cannot be counteracted by such implication. It must be shown that the party proceeded, in some meas- ure, to avail himself of the opportunity, — ^that he took some steps in making an independent investigation, — so that, although his examination might not have been complete and successful, yet he must be charged with the knowledge he would have acquired by means of a thorough investigation. In other words, it must appear that, through the oppor- tunity and means of inquiry, he received some information concerning the actual facts, so that, from considerations of Wenzel v. Shulz, 78 Oal. 221, 20 Pac. etrument without reading it in re- 404; Brandt v. Krogh, 14 Cal. App. lianee upon the other party's fraudu- 39, 111 Pac. 275; Vance v. Supreme lent representations as to its con- Lodge of Fraternal Brotherhood, 15 tents: St. Louis, I. M. & S. Ey. Co. Cal. App. 178, 114 Pae. 83; Hicks V. v. McConneU, 110 Ark. 306, 161 Stevens, 121 ni. 186, UN. E. 241; S. W. 496; Togni v. Taminelli, 11 Chase v. Wolgamot, 137 Iowa, 128, Cal. App. 7, 103 Pac. 899; Colorado 114 N. W. 614; Speed v. HoUings- luv. Loan Co. v. Bouehat, 48 Colo, worth, 54 Kan. 436, 38 Pac. 496; 494, 111 Pac. 61; Bay v. Baker, 165 Circle v. Potter, 83 Kan. 363, 111 Ind. 74, 74 N. E. 619; Kemery v. Pae. 479; Davis v. Mitchell, 72 Or. Zeigler, 176 Ind. 660, 96 N. E. 950; 165, 142 Pac. 788; Mutual Life Ins. Western Mfg. Co. v. Cotton, 126 Co. V. Hargus (Tex. Civ. App.), 99 Ky. 749, 12 L. E. A. (N. S.) 427, S. W. 580. A relationship of trust 104 S. W. 758; Mutual Life Ins. Co. and confidence between the parties v. Hargus (Tex. Civ. App.), 99 S. W. may obviate a duty of inquiry which 580. Compare Smith v. Humphreys, otherwise would exist: Gray v. 104 Md. 285, 65 Atl. p7. See, also, Reeves, 69 Wash. 374, 125 Pac. 162 ante, § 877, notes 2, (e) ; § 856, note (parties dealt as friends). (e). Cases where a party signed an in- 1859 ACTUAL FRAUD. § 895 expediency, lie should not be allowed to allege his failure to obtain all the knowledge which he might have acquired.* §895, 4 Price v. Macaulay, 2 De Gex, M. & G. 339, 346; Gibson v. D'E'ste, 2 Younge & C. Ch. 542, 572; the great case of Attwood v. Small, 6 Clark & F. 232, well illustrates this position. The vendors of the ■works made certain positive representations concerning the property. The mere fact that the vendees could have visited the works, and by a personal examination have ascertained all the facts for themselves, would not lessen the effect of this representation. Even had the vendors in- vited the purchasers to come, given them an express opportunity to in- vestigate, directed their attention to this means of verification, etc., this would not have altered the result. The vendees would have had a right to say: "No, you have made a statement concerning an existing condition of fact which is all within your own knowledge; true, we can come and verify this statement for ourselves, but we are willing to rely on your representation and complete the purchase.'' Had they done so, they would have been justified in doing it, and could have rescinded the contract. But they did not do so. They acted on the opportunity; they availed themselves - of the means; they took some steps in making an investiga- tion, and thus some information as to the true condition of affairs was communicated to their minds. That the investigation was not thorough, and the knowledge obtained perfect, was their own- fault; whatever it was, they relied on it, and not on the representation of the vendors. Cos V. Middleton, 2 Drew. 209, is also illustrative. A vendor, in negotiating the sale of a house, stated that it was "substantially and well built," which was false. Although the vendee could very easily have inspected the house, and examined for himself how it was bmlt, he was not obliged to do so, and did not, and it was held that this opportunity which he had did not impair the effect of the misrepresentation.* It is also decided in several cases, -that where a vendor makes untrue statements respecting a lease, — respecting its covenants and provisions, — § 895, (d) Effect of a Partial or enabled the defendant to ascertain Cursory Examination. — The impor- the truth or falsity of the repre- tant case of Eedgrave v. Hurd, L. E. sentation that had been made." 20 Ch. Div. 1, furnishes a fresh point Attwood v. Small, supra, 6 Clark & of departure for the more recent F, 232, which was relied upon by the English eases. The decision of Pry, court below, was considered and ex- J., in that case was reversed by the plained by Jessel, M. B., who con- Court of Appeal on a review of the eludes (p. 17) : "In no way, as it evidence, Baggallay, L. J., remark- appears to me, does the decision, or ing (p. 23) that the vendee's inves- any of the grounds of decision, in tigation "was of a most cursory Attwood v. Small, support the propo- character^ which could not have sition that it is a good defense to an 896 EQUITY JUEISPKTJDENCB, 1860 § 896. Words of General Caution. — The rule that some independent knowledge of the true facts must be brought home to the party receiving such a representation, in order to counteract its effects in misleading him, and to prevent although the law would charge the vendee with constructive notice of what these covenants, etc., are, yet such notice does not obviate the effects of the false statements} the representation overrides what would otherwise be taken at law as a knowledge on the part of the purchaser, and he can take advantage of it as against the vendor: Van v. Corpe, 3 Mylne & K. 269; Flight v. Barton, 3 Mylne & K. 282; Pope v. Garland, 4 Younge & C. 394, 401. There is no contradiction between these conclusions and the rules stated in the two preceding paragraphs (§§893, 894). The question is. Did the party rely on the representation, or on his own knowledge? To obvi- ate the effect of the representation, it must be clearly and conclusively shown that he relied on his own knowledge. This the general doctrine and the qualification both demand.* But neither of them requires that action for rescission of a contract on the ground of fraud that the man who comes to set aside the contract inquired to a certain extent, but did it carelessly and inefaciently, and would, if he had used reason- able diligence, have discovered the fraud." The following language of Jessel, M. K., has frequently been quoted as expressing the result of "Bedgrave v. Hurd (pp. 13, 14): "Nothing can be plainer, I take it, on the authorities in equity than that the effect of false representa- tion is not got rid of on the ground that the person to whom it was made has been guilty, of negligence." Quoted in Togni v. Taminelli, 11 Cal. App. 7, 103 Pac. 899 (signing unread instrument under fraudulent representations as to its contents). See, also. King v. Livingston Mfg. Co., 180 Ala. 118, 60 South. 143 ("the law protects the simple as well as the wise"). Further instances of a partial or cursory investigation, as in Redgrave v. Hurd, insufficient to do away with the effects of the misrepresentation, are found in Ean- caid V. Price, 82 Ark. 20, 100 S. W. 76; Buchanan v. Burnett, 102 Tex. 492, 132 Am. St. Eep. 900, 119 S. W. 1141, affirming S. C, 52 Tex. Civ. App. 68, 114 S. W. 406; Jones v. Hawk, 64 Wash. 171, 116 Pac. 642 (representations as to character and value of land, to verify which would entail a detailed analysis or a min- ute examination; effect of represen- tation not obviated by purchaser's general survey of or visit to the property); Best v. Offield, 59 Wash. 466, 30 L. E. A. (N. S.) 55, 110 Pac. 17 (misrepresentation by vendor of area of land which was very ir- regular in shape; rescission, though vendee went over the land). §895, (e) Quoted in Turner v. Houpt, 53 N". J. Eq. (8 Dick.) 526, 33 Atl. 28. 1861 ACTUAL FEATJD. § 896 his reliance upon it, is of wide application. Nothing done by the party naaking the statement, and no extrinsic circum- stances, will avail, unless they clearly lead to the conclusion that the transaction was concluded upon the strength of in- formation, or substantial grounds for forming a judgment, other than the representation itself. A positive representa- tion of fact cannot be obviated by any general statement of the party making it, or by any extrinsic circumstances which merely admit of or warrant an inference contrary to the representation, even though of themselves such state- ments or such circumstances might be sufficient to put the other party upon the inquiry. This is simply another ap- plica,tion of the principle that the right of a party receiving a representation to rely upon it cannot be taken away or interfered with by inference or implication.^ If, therefore, the party accompanies or follows his misrepresentation by words of general caution, or by advice to the other that he consult his friends or professional advisers before conclud- ing the agreement, he does not thereby counteract any effect upon the transaction which his untrue statement would this knowledge be perfect, complete, accurate. Where there is an oppor- tunity or means of examination, 'the party may decline to use it, for he has a right to rely on the representation of fact, and to remain person- ally in ignorance. If, however, he takes steps in an investigation, and thus obtains some independent knowledge, and afterwards concludes the agreement, he must be assumed to have concluded it upon the strength of that acquired knowledge, however partial and deceptive, and not upon the representation. Where, however, there is no investigation made after the representation, in order to test it, but the vendor claims that his state- ments have not misled, because the defects were patent, or because the buyer was, from the outset, acquainted with all the facts, there it is the completeness and accuracy of the purchaser's knowledge alone- which counteracts the effects of the representation and shows that it was not ' relied upon and did not mislead; in such case, therefore, it must be shown that the purchaser's knowledge of all the material facts covered by the misrepresentation was full, accurate, and perfect. The vital question in each case, however, is, Did the party receiving the representation rely upon it in concluding the agreement or other transaction? or did he rely upon his own knowledge? § 896, 1 Wilson v. Short, 6 Hare, 366, 377, § 896 EQUITY JURISPRUDENCE. 1862 otherwise produce.^ a Nor does even the sale of a thing "with all its faults" render a contract valid which might otherwise be impeached or defeated by means of the ven- dor's representations.^ § 896, 2 ReyneU v. Sprye, 1 De Gex, M. & G. 660, 709, 710, per Lord Cranworth; Dobell v. Stevens, 3 Barn. & C. 623, 625; Preseott v. Wright, 4 Gray, 461; Russell v. Branham, 8 Blackf. 277. In the often-quoted case of ReyneU v. Sprye, 1 De Gex, M. & G. 660, Lord Cranworth, in answer to the objection that Reynell was cautioned by Sprye, and was negligent in not consulting his advisers, said : "No such question can arise in a case like the present, where one contracting party has intentionally misled the other, by describing his rights as being different from what he knew them really to be. In such a case it is no answer to the charge of imputed fraud to say that the party alleged to be guilty of it recom- mended the other to take advice, or even put into his hands the means of discovering the truth. However negligent the party may have been to whom the incorrect statement has been made, yet that is a matter afford- ing no ground of defense to the other. No man can complain that another has too implicitly relied on the truth of what he has himself stated.'"* § 896, 3 Wbere this condition is a part of the agreement, the purchaser must take the subject-matter with all its defects, patent or latent; but the vendor is not protected against his false representations: Schneider v. Heath, 3 Camp. 506;. Early v. Garrett, 9 Barn. & C. 928; Springwell v. Allen, 2 East, 446, note. The case of Harris v. Kemble, 1 Sim. Ill, 120, 5 Bligh, N. S., 730, which came before. Sir John Leach, M. R., Lord Chancellor Lyndhurst, and the house of lords, is a very instructive dis- cussion of the doctrine conceisiing misrepresentations in most of its phases. A contract relating to a theater was made between the joint owners of it, for a sale of the share of one to the other. It was claimed that misrepresentations had been made as to the profits. These repre- sentations were based upon the books of accounts, which were open to both parties, and were justified by the accounts as they appeared on the books. Sir John Leach, for these reasons, held against the claim, and decided that the representations did not avoid the contract. This de- cision was beyond all doubt right, if the premises of fact were correct. Lord Lyndhurst and the house of lords, considering that the agreement was unquestionably procured by the representations, and that they were §896, (a) Quoted in Hieks v. §896, (b) This note is cited in Stevens, 121 111. 186, 11 N. E. 241. Mather v. Barnes, KeigMey & Greer, This paragraph is cited, generally, 146 Fed. lOOO. in Miller v. Ash, 156 Cal. 544, 105 Pae. 600. 1863 ACTUAL PBAtTD. § 897 § 897. Prompt Disaffirmance Necessary. » — ^AU these con- siderations as to the nature of misrepresentations require great punctuality and promptness of action by the deceived party upon his discovery of the fraud. The person who has been misled is required, as soon as he learns the truth, with all reasonable diligence to disaffirm the contract, or abandon the transaction, and give the other party an op- portunity of rescinding it, and of restoring both of them to their original position. He is not allowed to go on and derive all possible benefits from the transaction, and then claim to be relieved from his own obligations by a rescission or a refusal to perform on his own part. If after discover- ing the untruth of the representations, he conducts himself with reference to the transaction as though it were still sub- sisting and binding, he thereby waives all benefit of and relief from the misrepresentations.^ ^ made for the purpose of obtaining it, found as a fact that the accounts were not equally plain, to both parties; on the contrary, they were pur- posely kept in such a manner that the party not familiar with them could not get at their real condition and ascertain the true state of the business without the aid of an expert accountant. They therefore held that the party had been misled, and the contract was rescinded. § 897, 1 See cases ante, under § § 817-820, as to effects of acquiescence and delay. Vigers v. Pike, 8 Clark & F. 562, 630, per Lord Cottenhan; Whitney v. Allaire, 4 Denio, 554 (when a party, after the making a con- tract, but before its performance, discovers the fraud of the other, and § 897, (a) This section is cited in 43 Mont. 82, 115 Pac. 37 (remaining JMierrill v. Wilson, 66 Mich. 232, 33 in possession, and payment of in- N. W. 716; Oppenheimer v. Clunie, stallment after discovery of fraud); 142 Cal. 313, 75 Pae. 899; National Davis v. Porman, 229 Mo. 27, 129 Mut. B. & L. Ass'n v. Blair, 98 Va. S. W. 213 (no waiver); Bradley v. 490, 36 S. E. 513; Eeetor, etc., of Tolson, 117 Va. 467, 85 S. E. 466 Univ. of Virginia v. Snyder, 100 (writing letter recognizing existence Va. 567, 42 S. E. 337; Burk v. John- of contract, after knowledge of son, 146 Ped. 209, 76 C. C. A. 567 fraud). (delay for a year after discovery of § 897, (h) Quoted in Eomanoff the fraud) ; Duy v. Higdon, 162 Ala. Land & Min. Co. v. Cameron, 137 528, 50 South. 378; In re Warner's Ala. 214, 33 South. 864; Evans v. Estate, 168 Cal. 771, 145 Pae. 504; Duke, 140 Cal. 22, 73 Pac. 732; Miller v. Browning, 28 Ky. Law Greenwood v. Penn, 136 111. 146, 26 Eep. 175, 8'9 S. W. 3; Ott v. Pace, N. E. 487; Citizens' St. B. Co. t. § 898 EQmTY JUEISPBtJDENCE. 1864 § 898. VI. Materiality of the Misrepresentation. — The last element of a misrepresentatioiij in order that it may be the ground for any relief, affirmative or defensive, in equity or at law, is its materiality. The statement of facts of which it consists must not only be relied upon as an induce- ment to some action, but it must also be so material to the interests of the party thus relying and acting upon it, that he is pecuniarily prejudiced by its falsity, is placed in a worse position than he otherwise would have been. The party must suffer some pecuniary loss or injury as the natural consequence of the conduct induced by the misrepre- sentation. In short, the representation must be so mate- rial that its falsity renders it unconscientious in the person making it to enforce the agreement or other transaction which it has caused. Fraud without resulting pecuniary still goes on and performs his part, he is thereby precluded from the equitable remedy of cancellation, and also from the remedy of recover- ing back the consideration, but not from the legal remedy of damages for deceit) ;« Woodcock v. Bennet, 1 Cow. 711, 13 Am. Dec. 568;'Voor- hees V. De Meyer, 2 Barb. 37; Masson's Appeal, 70 Pa. St. 26, 29; An- thony V. Leftwich, 3 Rand. 258; McCorkle v. Brown, 9 Smedes & M. 167; Gibbs v. Champion, 3 Ohio, 335; Pratt v. Carroll, 8 Craneh, 471; McMichael v. Kihner, 76 N. Y. 36, 46; Schiffer v. Dietz, 83 N. T. 300; Vemol V. Vernol, 63 N. Y. 45; Van Liew v. Johnson, 4 Hun, 415; Par- sons V. Hughes, 9 Paige, 591; Bassett v. Brown, 105 Mass. 551; North- rop V. Bushnell, 38 Conn. 498; Bobb v. Woodward, 50 Mo. 95. Horton, 18 Ind. App. 335, 48 N. E. Ch. 140; Latrobe v. Dietrich, 114 22, 45 Cent. Law J. 485; Southern Md. 8, 78 Atl. 983; Culver v. Avery, States Fire & Casualty Ins. Co. v. 161 Mich. 322, 126 N. W. 439; Kaup De Long, 178 Ala. 110, 59 South. v. Sehinstock, 88 Neb. 95, 129 N. W. 61; Cross v. Mayo, 167 Cal. 594, 140 184; Faulkner v. Wassmer, 77 N. J. Pac. 283 (possession and user for six Eq. 537, 30 L. E. A. (N. S.) 872, and months after full knowledge). See note, 77 Atl. 341; Winters v. post, § 917. See, also, Shappirio v. Coward (Tex. Civ. App.), 174 S. W. Goldberg, 192 XJ. S. 232, 24 Sup. Ct. 940; Le Vine v. Whitehouse, 37 259; Oppenheimer v. Clunie, 142 Cal. Utah, 260, Ann. Cas. 1912C, 407, 109 313, 75 Pac. 899; Merrill v. Wilson, Pac, 2. 66 Mich. 232, 33 N. W. 716; Acer v. §897, (c) To the same effect, see Hotehkiss, 97 N. T. 395. See, Odbert v. Marquet, 163 Fed. 892, further, Pom. Eq. Eem. "Laches," affirmed, 195 Fed. 44, 99 C. C. A. 60. and § 687; Law v. Law, [1905] 1 1865 ACTUAL FBAUD. § 898 damage is not a ground for the exercise of remedial juris- diction, equitable or legal; courts of justice do not act as mere tribunals of conscience to enforce duties wbich are purely moral.^* If any pecuniary loss is shown to have § 898, 1 Fellowes v. Lord Gwydyr, 1 Sim. 63; 1 Russ. & M. 83; Slim V. Crouelier, 1 De Gex, F. & J. 518; Flint v. Woodin, 9 Hare, 618; Pol- hill V. Walter, 3 Bam. & Adol. 114; Clarke v. White, 12 Pet. 178; Wells V. Waterhouse, 22 Me. 131; Taylor v. Guest, 58 N. Y. 262; Wuesthoff v. Seymour, 22 N. J. Eq. 66; Marr's Appeal, 78 Pa. St. 66; Abbey v. Dewey, 25 Pa. St. 413; Lindsey v. Lindsey, 34 Miss. 432; Branbam v. Record, 42 Ind. 181; Rogers v. Higgins, 57 111. 244; Wells v. Millet, 23 Wis. 64; Morrison v. Lods, 39 Cal. 381; Bartlett v. Blaine, 83 111. 25, 25 Am. Rep. 346; McShane v. Hazlehurst, 50 Md. 107; Bennett v. Judson, 21 N. Y. 238. Fellowes v. Lord Gwydyr, 1 Sim. 63, 1 Russ. & M. 83, is a very instructive case. The defendant, as vendee, entered into a contract of purchase, as he supposed, with one B, through the active instrumentality of A, who falsely represented himself as an agent for B. It turned out that A was the real party in interest, and he sought to enforce the con- tract. The misrepresentation was set up as a defense. There was noth- ing proved from which it could be inferred that the defendant would not have made the same contract, on the same terms, with A himself; nor was it shown that he had sustained any loss, damage, or inconvenience from the false statements. The court therefore held the misrepresenta- §898, (a) The text is quoted in 162 Ala. 476, 50 South. 227; Davis In re Miley, 187 Fed. 177; Jakway v. Butler, 154 Cal. 623, 98 Pae. 1047 V. Proudfit, 76 Neb. 62, 14 Ann. Gas. (not necessary for purchaser to show 258, 106 N. W. 1039; Hoeldtke v. that property was worth less than Horstman, 61 Tex. Civ. App. 148, he paid; sufficient that, if represen- 128 S. W. 642. See §§ 879, 890; tations were true, property would Seeley v. Eeed, 25 Fed. 361; Eoay have been worth more than it is V. Butler, 69 Cal. 580, 11 Pac. 463; actually worth); Eiehelberger v. Marriner v. Dennison, 78 Cal. 202, Mills Land & Water Co., 9 Cal. App. 20 Pac. 386; Marsh v. Cook, 32 N. J. 628, 100 Pae. 117; Woodson v. Win- Eq. 262. See, also, Eichardson v. Chester, 16 Cal. App. 472, 117 Pac. Lowe, 149 Fed. 625, 79 C. C. A. 317 565; Miranovitz v. Gee, 163 Wis. 246, (vendee asserting fraud must prove 157 N. W. 790 (where vendor's mis- that property is less valuable than representations are material, vendee the price paid; compare King v. Lam- has right to rescind though the land horn, 186 Fed. 21, 108 C. C. A. 123); was worth the price paid; he is en- National Leather Co. v. Roberts, titled to the bargain he expected). ,221 Fed. 922, 137 C. C. A. 492; This familiar principle of the text Whitcomb v. Shultz, 223 Fed. 268, appears to be flatly contradicted in 138 C; C. A. 510; Crooker v. White, the remarkable case of Brett v. § 898 EQUITY JITBISPEXJDENCB. 1866 resulted, the court will not inquire into the extent of the tions to be immaterial, and to be no defense.'' In Wuesthoff v. Seymour, 22 N. J. Eq. 66, the vendor, in the negotiation which led to a contract for the sale of land, falsely represented to the vendee that a certain alley on the premises was only a private right of way belonging to a few per- sons only; in fact, it was a public aUey, a public highway. This false representation being set up as a defense in a suit for a specific perform- ance, the court held that it was immaterial; that it worked no material injury to the defendant, since his rights of property were substantially the same in either case. With great deference to the judgment of so able a court, this decision cannot, in my opinion, be supported on prin- ciple. The public easement was certainly a far greater encumbrance, and more detrimental to the pecuniary value of the premises, than a private easement in favor of a few specified persons would have been. One fact is a test of the difference. The purchaser might be able, by negotiation with the few persons entitled, to extinguish their easement, but he could not, by any private proceeding or negotiation, extinguish the public ease- ment of the highway. Again, the private easement would be lost by non- user for a specified period; if the public easement could be destroyed at all in this manner, it would require a much longer time. It should be remembered that if any pecuniary loss results from the misrepresenta- tion, the quantum of it is immaterial. Cooney, 75 Conn. 338, 53 Atl. 729. honor and good faith require a man Plaintiff and others had an oral un- to ask of a court of equity for the derstanding not to sell their resi- profit of others will not be refused dence property in a certain locality without strong cause." While one- for an objectionable purpose, to wit, cannot fail to admire the fine moral- f or boarding-house use. Defendants ity of this judgment, it is regret- obtained a conveyance from plaintiff table that the very eminent judge by false representation as to the who pronounced it did not see fit to purpose for which it was to be used. fortify statements, so unexpected Plaintiff retained no property in the and important, with some discussion vicinity and received full value. It of the principle involved in the light was held, however, that the convey- of the authorities, ance should be set aside, the court § 898, (l») Compare New York saying, per Baldwin, J.: "In meaa- Brokerage Co. v. Wharton, 143 Iowa, uring injury equity does not eon- 61, 119 N. W. 969, as to mistake cern itself merely with money in identity of vendee as a defense losses. . . . The oral understanding to specific performance; see, also, . put them under an honorary note to Cole v. Hunter Tract Im- obligation, which may be properly provement Co., 61 Wash. 365, Ann. taken into account in determining Cas. 1912C, 749, 32 L. R. A. (N. S.) whether a case has been made out 125, 112 Pae. 368. for equitable relief. . . . What 1867 ACTUAL FRAUD. § 899 injury; it is sufficient if the party misled has been very slightly prejudiced, if the amount is at all appreciable,^ <> § 899, Effects of a Misrepresentation. ^ — Having thus de- scribed the elements of a fraudulent misrepresentation in equity, I will add, in order to complete the account, a brief statement of its effects upon the rights of the defrauded, and the duties of the defrauding party. Wherever an agree- ment or other like transaction has been procured by means of a material fraudulent misrepresentation by one of the parties, the other has an election of equitable remedies. The injured party may, at his option, compel the fraudulent party to make good his representation — that is, to carry it into operation in the nature of a specific performance — ■ when it is of such a nature that it can be thus performed; or he may rescind the agreement, and procure the transac- tion to be completely canceled and set aside. ^^ Such a §898, 2 Cadman v. Homer, 18 Ves. 10; Smith, v. Kay, 7 H. L. Cas. 750, 775. § 899, .1 Eawlins v. Wickham, 3 De Gex & J. 304, 321, 322; Clermont V. Tasburgh, 1 Jacob & W. 112; Edwards v. McLeay, 2 Swanst. 287; Coop. t. Eld. 308; Pulsford v. Eichards, 17 Beav. 87, 95; Att'y-Gen. v. Ray, L. E. 9 Ch. J97; Pearson v. Morgan, 2 Brown Ch. 388; Evans v, Bicknell, 6 Ves. 174; Savery v. King, 5 H. L. Cas. 627; Western Bank V. Addie, L. E. 1 H. L. S. 145, 162; McFerran v. Taylor, 3 Cranch, 269; Neblett v. Macfarland, 92 U. S. 101; Grymes v. Sanders, 93 U. S. 55, 62; Bacon v. Bronson, 7 Johns. Ch. 194, 11 Am. Dec. 449 ; Neilson v. McDon- ald, 6 Johns. Ch. 201; McCall v. Davis, 56 Pa. St. 431; Gatling v. NeweU, 9.1nd. 572; Johnson v. Jones, 13 Smedes & M. 580. Courts of equity in §898, (e) The text is quoted in 458, 79 Atl. 608 (vendee's misrepre- Wainscott v. Occidental, etc., Ass'n, sentation that land would be used 98 Cal. 253, 33 P.ac. 88; in Spreckels for a house, whereas he used it for v. Gorrill, 152 Cal. 383, 92 Pac. 1011; a store, material), in Jakway v. Proudfit, 76 Neb. 62, 14 § 899, (a) This section is cited in Ann. Cas. 258, 106 N. W. 1039, 109 McMulliu v. Sanders, 79 Va. 356. N. W. 388; in Pouse v. Shelly, 64 § 899, (b) See, as illustration of W. Va. 425, 63 S. E. 208. See, also, compelling the fraudulent party- to Pennington v. Eoberge, 122 Minn. make good his representations, Piper 295, 142 N. W. 710; Steen v. v. Hoard, 107 N. T. 73, 1 Am. St. Weisten, 51 Or. 473, 94 Pae. 834; Kep. 785, 13 N. E. 626. Bowker v. Cunningham, 78 N. J. Eq. § 899 EQUITY JtrEISPEUDENCE. 1868 fraudulent misrepresentation, even though it relates only to a portion of a contract, furnishes a complete defense to an enforcement of the whole agreement. The fraudulent party will not be permitted, against the objection of the other, to waive that particular portion with which the false statement is concerned, and to obtain a specific performance of the remainder.2 A material misstatement of fact, made innocently, and therefore not fraudulent, if it relates to the substantial terms of the agreement, to its very essence, will also constitute a complete defense to the specific execution of the contract, although it may not be a sufficient* ground for any affirmative relief.^ On the other hand, where the misrepresentation, though material and untrue, is innocent, made in a bona fide belief of its truth, and therefore not fraudulent, and it relates to or concerns some portion only administering these two principal remedies, viz., either cancellation or com- pelling a party to make good his representation by a specific performance, will also grant whatever additional and auxiliary relief may be necessary to render these remedies completely effective. Thus when a person has through fraud obtained the legal title to land or other property, equity constantly treats him as a trustee for the one equitably entitled, and hence has sprung the doctrine of constructive trusts. The court will also grant an injunction to restrain the fraudulent party from disposing of the prop- erty, or from enforcing an executory contract or even a judgment obtained by fraud, and the like." § 899, 2 Viscount Clermont v. Tasburgh, 1 Jacob & W. 112, 119, per Sir Thomas Plumer. The. language of the judge in this case plainly describes a fraudulent misrepresentation ; all his expressions are utterly inconsistent with an innocent though untrue misdescription or other misstatement. See, also, Cadman v. Homer, 18 Ves. 10 ; Boynton v. Hazelboom, 14 Allen, 107, 92 Am. Dec. 738; Thompson v. Tod, 1 Pet. C. C. 380. § 899, 3 See ante, § 889, and cases cited. For examples, where the ven- dor's untrue statement was as to his title to the whole property contracted to be sold ; or where it concerned the nature of the entire estate, as repre- senting it to be in fee when it was leasehold or for life ; or where it related to some minor feature, but that feature affected the whole subject-matter alike. In such cases a partial enforcement with compensation would plainly be impossible.* § 899, (c) See §§ 221, 914, note, § 899, (a) See Jacobs v. Eevell, 1340, 1363. [1900] 2 Ch. 858. 1869 ACTUAL FEAXJD. § 899 of the contract, it is not necessarily nor generally a com- plete defense to the enforcement of the contract. Under such circmnstances, there is no rule of equity which pre- vents a partial enforcement of a contract which is divisible, or the specific execution of it with compensation in respect of its portions, incidents, or features which do not corre- spond with the description.* e The destructive effect of fraud upon any contract, conveyance, or other transaction is so essential and far-reaching that no person, however free from any participation in the fraud, can avail himself of what has been obtained by the fraud of another, unless he is not only innocent, but has given some valuable consid- eration.s * Although the burden of the fraud thus passes by § 899, 4 All the numerous instances of a specific performance with com- pensation or abatement from the price on account of some partial failure of the subject-matter to agree with the description are illustrations and proofs of the statement in the text. In Powell v. Elliott, L. R. 10 Ch. 424, the vendors of a large coal mine made misrepresentations as to the net income, and a specific execution with a deduction from the agreed price was decreed. In Whittemore v. Whittemore, L. R. 8 Eq. 603, there was a serious, but not intentional, nlisrepresentation as to the amount of land, and the agreement was enforced against the vendee with a corresponding abatement. In Leyland v. Illingworth, 2 De Gex, F. & J. 248, there was a misrepresentation by the vendors as to a water supply, and the vendee was given the option of either being discharged entirely from the contract or of completing it with compensation. Even where the misrepresentation is intentional, and the remedy of rescission would be granted, still the con- tract is voidable, and not void, and in accordance with the rule stated in the former part of the above paragraph, the injured party may waive his right to a complete defeat, and may insist on a partial specific perform- ance with compensation for the defect, unless the case is such as furnishes no foundation for estimating the amount of the compensation. See, also, Pratt V. Carroll, 8 Cranch, 471; Voorhees v. De Meyer, 2 Barb. 37; Wood- cock V. Bennet, 1 Cow. 711, 13 Am. Dec. 568; Masson's Appeal, 70 Pa. St. 26, 29; Anthony v. Leftwich, 3 Rand. 238, 258; McCorkle v. Brown, 9 Smedes & M. 167; Gibbs v. Champion, 3 Ohio, 335. § 899, 5 Scholefield v. Templer, 4 De Gex & J. 429, 433, per Campbell, L. C; Topham v. Duke of Portland, 1 De Gex, J. & S. 517, 569, per § 899, (e) McMuUin's Adm'r v. Scoggin v. Mason, 46 Tex. Civ. App. Sanders, 79 Va. 356,, 365. 480, 103 S. W.,831. See, also, § 918. . §899, (f) The text is quoted in § 900 EQUITY JUBISPKUDENCE. 1870 transfer even to an innocent person,. the right to relief, it seems, does not necessarily pass in the same manner. The general rule. that a misrepresentation must be relied upon by the party receiving it, in order that it may be a sufficient ground for impeaching or defeating a contract, extends to the assignment of an agreement which, as between the original parties, is affected by a misrepresentation. If a contract between A and B, voidable at the instance of B on account of A's misrepresentation made to him in procuring it, is assigned by B to a third person, C, who is in no such relations with the original parties that he is affected by the fraud, and to whom no false statements are made in obtain- ing the transfer, the agreement thus assigned, if otherwise binding upon him, would be valid against C ; at least its en- forcement against him would not be hindered by A's origi- nal misrepresentations, since he had not acted upon their faith and credit. ^ s § 900. Second. Fraudulent Concealments. — ^A failure to disclose some material fact affecting the subject-matter, however unintentional and blameless, may be and often is a Turner, L. J. : "I take it to be clear that no person, however innocent he may himself be, can, where there is no valuable consideration, derive a title under the fraud of another" : Huguenin v. Baseley, 14 Ves. 273 ; Rus- sell v. Jackson, 10 Hare, 204, 212; Bowen v. Evans, 2 H. L. Cas. 259; Goddard v. Carlisle, 9 Price, 169; Vaiie v. Vane, L. R. 8 Ch. 383. This is the converse of the rule that a bona fide purchaser for a valuable con- sideration may acquire a title free from an equity arising out of a prior fraud. § 899, 6 Smith v. Clarke, 12 Ves. 477, 484. Fraud only renders con- tracts voidable, and can be taken advantage of only by the person de- frauded, his representatives and privies ; the right to a remedy is personal : Harris v. Kemble, 5 Bligh, N. S., 730, 751. The proposition of the text assumes that the contract alone is assigned. If a cause of action on accotmt of the fraud has accrued in B's favor, and that is expressly as- signed to C vsdth the contract, — which is permissible under modem legis- lation in many of the states, — the result would be different. § 899, (g) The text is quoted in testator for fraud, see Bethany Hoa- Clough v. Cook (Del.), 87 Atl. 1017. pital Co. v. Philippi, 82 Kan. 64, 30 As to the right of a devisee or lega- L. K. A. (N. S.) 194 and note, 107 tee to attack a conveyance by Pac. 530. 1871 ACTUAL FRAUD. § 901 suflficient ground to defeat the specific performance of a con- tract, since that particular relief is only granted when it is just and equitable to both parties. Such a failure to dis- close would nbt be fraudulent; the term "concealment" does not strictly apply to it ; and it is only of fraudulent con- cealments we are now to speak, as one of the two main divi- sions of actual fraud. Fraudulent concealment implies knowledge and intention. Although there are some species of fraudulent misrepresentations, as has been shown, with- out these qualities, it is hardly possible to conceive of a fraudulent concealment without a knowledge of the fact suppressed possessed by the party, and an intention not to disclose such fact.* § 901. General Doctrine — Duty to Disclose. — The general doctrine with respect to concealment as a form of actual fraud, and as distinguished from those analogous violations of fiduciary duty which do not constitute actual fraud, but may be included within the term "constructive fraud," may be stated as follows : If either party to a transaction con- ceals some fact which is material, which is within his own knowledge, and which it is his duty to disclose, he is guilty of actual fraud. 1 * It is very difficult to lay down any gen- §901, 1 Gibson v. D'Este, 2 Younge & C. Ch. 542; Wilde v. Gibson, 1 H. L. Gas. 605; Edwards v. MeLeay, 2 Swanst. 287; Coop. 308; Fox v. Mackreth, 2 Brown Ch. 400, 420 ;- Phillips v. Homfray, L: R. 6 Ch. 770; Baskcomb v. Beckwith, L. R. 8 Eq. 100; Denny v. Hancock, L. R. 6 Ch. 1; Haywood v. Cope, 25 Beav. 140; Lucas v. James, 7 Hare, 410; Drysdale §900, (a) Quoted in Griel v. Lo- N. W. 860; Myler v. Fidelity Mut. max, 89 Ala. 420, 6 South. Til. Life Ins. Co. (Okl.), 167 Pac. 601. §901, (a) Quoted in Keen v. gee, also, Stewart v. Wyoming C. B. James, 39 N. J. Eq. 257, 51 Am. Kep. Co., 128 U. S. 383, 9 Sup. Ct. 101; 29; Moore v. Sawyer, 167 Fed. 826; Griel v. Lomax, 89 Ala. 420, 6 South. Eiehards v. Henry, 18 Ariz. 186, 157 741; Oliver v. Oliver (Ga.), 45 S. E. Pac. 980. This section is cited in 232; People's Bank v. Bogart, 81 Horton v. Handvil, 41 N. J. Eq. 57, N. T. 108, 37 Am. Rep. 481; Wood 3 Atl. 72; Whitman V. Bowden, 27 v. Amory, 105 N. T. 281, 11 N. E. S. C. 53, 2 S. E. 630; Noyes v. Lan- 636; Bennett v. McMillin, 179 Pa. don, 59 Vt. 569, 10 Atl. 342; also, St. 146, 57 Am. St. Eep. 591, 36 Atl. in Cazier v. Hart, 158 Wis. 362, 14S 188. § 901 EQUITY JUKISPBUDBNCB. 1872 eral formula which shall be more definite than this, arid at the same time accurate. The difficulty consists in stating a general rule, in harmony with decisions of authority, as to the duty of either party to disclose facts which arq within his knowledge. It is certain that every concealment or failure to disclose material facts known to one party is not fraud in equity or at law, whatever quality it may have be- fore the tribunal of the individual conscience. It has never been contended, in our system of jurisprudence, that a vendor in a contract of sale is bound to disclose all facts which, if known by the buyer, would prevent or tend to prevent him from making the purchase. Much less has it ever been maintained that the buyer is bound to discover all facts known to himself which would enhance the value of the article sold or affect the conduct of the vendor. Even where the buyer purchases on credit, his mere failure to V. Mace, 5 De Gex, M. & G. 103; 2 Smale & G. 225; Dolman v. Nokes, 22 Beav. 402; Bowles v. Stewart, 1 Schoales & L. 209, 224; Roddy v. Williams, 3 Jones & L. 1; Gordon v. Gordon, 3 Swanst. 400; Leonard v. Leonard, 2 Ball & B. 171; Broderiok v. Broderick, 1 P. Wms. 240; Roll v. White, 3 De Gex, J. & S. 360; Mackay v. Douglas, L. R. 14 Eq. 106; Diceonson v. Talbot, L. R. 6 Ch. 32; Vane v. Vane, L. R. 8 Ch. 383; Stan- ley V. Stanley, L. R. 7 Ch. Div. 589; People's Bank t. Bogart, 81 N. Y. 101; 37 Am. Rep. 481; Brown v. Montgomery, 20 N. T. 287, 75 Am. Dec. 404; Livingston v. Peru Iron Co., 2 Paige, 390; Bench v. Sheldon, 14 Barb. 66; Nichols v. Pinner, 18 N. Y..2954 23 N. Y. 264; Hennequin v. Naylor, 24 N. Y. 139; Hall v. Naylor, 18 N. Y. 588, 75 Am. Dec. 269; Allen V. Addington, 7 Wend. 9, 20; Bank of' Republic v. Baxter, 31 Vt. 101; Paddock v. Strobridge, 29 Vt. 470; Roseman v. Canovan, 43 Cal. 110, 117; Drake v. Collins, 5 How. (Miss.) 253; Bowman v. Bates, 2 Bibb, 47, 4 Am. Dec. 677; Rawdon v. Blatchford, 1 Sand. 344; Holmes's Appeal, 77 Pa. St. 50 ; Swimm v. Bush, 23 Mich- 99 ; Snelson v. Franklin, 6 Munf . 210; McNiel v. Baird, 6 Munf. 316; Emmons v. Moore, 85 111. 304; Dameron v. Jamison, 4 Mo. App. 299; Connelly v. Fisher, 3 Tenn. Ch. 382; Young v. Hughes, 32 N. J. Eq. 372; Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728 ; Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46 ; Hanson V. Edgerly, 29 N. H. 343; SehifEer v. Dietz, 83 N. Y. 300; McMichael v. Kilmer, 76 N. Y. 36, 44; Dambmann v. Schulting, 75 N. Y. 55, 61; Hadley V. Clinton etc. Co., 13 Ohio St. 502, 82 Am. Dec. 454; Goninan v. Stephen- son, 24 Wis. -75; Hastings v. O'Donnell, 40 Cal. 148. The general doc- trine was very clearly stated by Earl, J., in Dambmann v. Schulting, 75 1873 ACTUAL FEAUD. § 901 disclose his indebtedness, or his embarrassed financial con- dition, is not necessarily a fraudulent concealment. The same is generally true of all other species of contracts and transactions, except of those species of agreements or en- gagements which are in their very essential nature in- trinsically fiduciary, involving a condition of absolute good faith. While the decisions admit these propositions, they are agreed, on the other hand, that it is only silence which is permitted. If in addition to the party's silence there is any statement, even any word or act on his own part, which tends affirmatively to a suppression of the truth, to a cover- ing up or disguising the truth, or to a withdrawal or dis- traction of the other party's attention or observation from the real facts, then the line is overstepped, and the conceal- ment becomes fraudulent. The maxim is, AUud est celare, aliud tacere? ^ N. Y. 55, 61 : "The general rule is, that a party engaged in a business transaction with another can commit a legal fraud only by fraudulent mis- representations of facts, or by such conduct or such artifice for a fraudu- lent purpose as will mislead the other party or .throw him off from his guard, and thus cause him to omit inquiry or examination which he would otherwise make. A party buying or selling property, or executing instru- ments, must, by inquiry or examination, gain all the knowledge he desires. He cannot proceed blindly, omitting all inquiry and examination, and then' complain that the other party did not volunteer all the information he had. Such is the general rule. But there are exceptions to this rule. Where there is such a relation of trust and confidence between the parties that the one is under some legal or equitable obligation to give full informa- tion to the other party, — information which the other party has a right, not merely in foro conscientiae, but juris et de jure, to have, — then the withholding such information purposely may be a fraud." All of the foregoing cases show implicitly, and many of them hold expressly, the converse of the rule given in the text, namely, that in all transactions, where there is no legal or equitable duty to make a disclosure, the failure to disclose material facts known to one party alone is not a fraudulent concealment by him. § 901, 2 In Turner v. Harvey, Jacob, 169, 178, Lord Eldon, after stating the purchaser's right in general to keep silence, added: "A very little is sufficient to affect the application of that principle. If a word— a single § 901, (b) The text is quoted in C C. A. 491; Moore v. Sawyer, 167 Files v. Rankin, 153 Fed. .537, 82 Fed. 826. TI— 118 § 902 EQUITY JUKISPBUDBNCB. 1874 § 902. When Duty to Disclose Exists.^-^-Concealment be- comes fraudulent only when it is the duty of the party hav- word — be dropped which tends to mislead the vendor, that principle will not be allowed to operate." See, also, Davies v. Cooper, 5 Mylne & C. 270; Nickley v. Thomas, 22 Barb. 652; Bench v. Sheldon, 14 Barb. 66; Roseman v. Canovan, 43 Cal. 110; Dambmann v. Schulting, 75 N. Y. 55, 61. Although a party may keep absolute silence and violate no rule of law or equity, yet if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to discover the whole truth. A partial statement then becomes a fraudulent concealment, and even amounts to a false and fraudulent misrepresentation. As illus- trations: In Nickley v. Thomas, 22 Barb. 652, defendant sold a horse to the plaintiff, knowing that it was balky by habit and had repeatedly balked. He told the plaintiff that the horse "hoiked once, and was whipped up and went." This was held to be a fraudulent concealment. In Bench v. Shel- don, 14 Barb. 66, plaintiff had lost a flock of sheep, and had searched for them several days without success. Defendant discovered where the sheep were; went to the plaintiff, and without disclosing the, fact of his dis- covery or intimating it in any way, asked the plaintiff if he had found the flock; plaintiff answered that he had not; defendant then remarked that he "supposed plaintiff never would find them," and therefore offered to give plaintiff ten dollars for them; plaintiff assented, and gave the defendant a bill of sale. On discovering these facts, plaintiff brought the suit to recover back the sheep and rescind the sale, and the suit was sus- tained. The court said that the defendant might have kept silence, but the remark which he volunteered was plainly designed to mislead the plain- tiff and was a f rauduleht concealment and misrepresentation. These cases were actions at law, but they illustrate the doctrine in equity as well as at law." § 901 («) Partial Statement corporation was free from debt, the Amounting to Fraudulent Conceal- fact being that the ostensible prop- ment. — See, also, Newell v. Eandall, erty of the corporation was subject 32 Minn. 171, 50 Am. Eep. 562, 19 to a mortgage on which the corpora- N. W. 972. See, further. Files v. tion was not personally liable); Eankin, 153 Fed. 537, 82 C. C. A. Hays v. Meyers, 139 Ky. 440, 139 491; Putney v. Schmidt, 16 N. M. 400 120 Pac. 720; Rieketts v. Temp- §902, (a) This section is cited in kins, 73 N. J. Eq. 552, 6S Atl. 1075; Potter's Appeal, 56 Conn. 1, 7 Am. Gidney v. Chappell, 26 Old. 737, 110 St. Eep. 272, 12 Atl. 513; Griel v. Pac. 1099; Crompton v. Beedle, 83 Lomax, 89 Ala. 420, 6 South. 741; Vt. 287, Ann. Cas. 1912A, 399, 30 Noyes v. Landon, 59 Vt. 569, 10 Atl. L. R. A. (N. S.) 748, 75 Atl. 331; 342; Oliver v. Oliver (Ga.), 45 S. E. Tinker v. Kier, 195 Mo. 183, 94 282; Conway Nat. Bank v. Pease, S. W. 501 (representation that a 76 N. H. 319, 82 Atl. 1068. 1875 ACTUAL FRAUD. § 902 ing knowledge of the facts to discover tliem to the other; and this brings back the question, When does such duty rest upon either party to any transaction? All the instances in which the duty exists, and in which a concealment is there- fore fraudulent, may be reduced to three distinct classes. These three classes are, in general, clearly distinct and separate, although their boundaries may sometimes overlap, or a case may fall within two of them : 1. The first class in- cludes all those instances in which, wholly independent of the form, nature, or object of the contract or other transaction, there is a previous, existing, definite fiduciary relation between the parties, so that the obligation of per- fect good faith and of complete disclosure always arises from the existing relations of trust and confidence, and is necessarily impressed upon any transaction which takes place between such persons. Familiar examples are con- tracts and other transactions between a principal and agent, a client and attorney, a beneficiary and trustee, a ward and guardian, and the like. 2. The second class em- braces those instances in which there is no existing special fiduciary relation between the parties, and the transaction i*s not in its essential nature fiduciary, but it appears that either one or each of the parties, in entering into the con- tract or other transaction, expressly reposes a trust and confidence in the other; or else from the circumstances of the case, the nature of their dealings, or their position towards each other, such a trust and confidence in the par- Am. St, Eep. 493, 17 L. E. A. (N. S.) terial points is offered, or ia given 284 107 S. W. 287 (an instructive on request, by a purchaser from a ease- vendee of a' remainder, know- court of chancery, "that it must ing that the life tenant, C, was at therefore be given on all others as the point of death, being asked, to which it is neither ofEered or re- "How are Mr. and Mrs. C. getting quested, and concerning which there along?" replied, "He thought they is no implied representation in what were getting along a little smoother is actually stated: Coaks v. Boswell, than they had been"); Noble v. 11 App. Cas. (H. L,) 232, reversing Eenner, 177 Iowa, 509, 159 N. W. 27 Ch. IHv. 424, and restoring 23 214. But it does not follow that Ch. Div. 302. -■ because information on some ma- § 902 EQUITY JUEISPEXTDENCE. 1876 ticular case is necessarily implied. The nature of the trans- action is not the test in this class. Each case must depend upon its own circumstances. The trust and confidence, and the consequent duty to disclose, may expressly ap- pear by the very language of the parties, or they may be necessarily implied from their acts and other circum- stances.i ^ 3. The third class includes those instances where § 902, 1 Cases illustrating fiduciary relation and duty to disclose from the particular circumstances of the transaction:" Bowles v. Stewart, 1 Schoales & L. 209, 224; Eoddy v. "Williams, 3 Jones. & L. 1; Gordon v. Gordon, 3 Swanst. 400; Leonard v. Leonard, 2 Ball & B. 171; Broderick V. Broderick, 1 P. Wms. 239; Rolt v. White, 3 De Gex, J. & S. 360, 365, per Lord Westbury; Mangles v. Dison, 1 Macn. & G. 437; 3 H. L. Gas. 702; Mackay v. Douglas, L. R. 14 Eq. 106; Dicconson v. Talbot, L. R. 6 Ch. 32; Vane v. Vane, L. R. 8 Ch. 383; Stanley v. Stanley, L. R. 7 Ch. Div. 589; Hanson v. Edgerly, 29 N. H. 343; Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46; Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728; Paddock v. Strobridge, 29 Vt. 470; Bank of Republic v. Baxter, 31 Vt. 101; Brown v. Montgomery, 20 N. Y. 287, 75 Am. Dec. 404; SchiEEer v. Dietz, 83 N. Y. 300; Hadley v. Clinton etc. Co., 13 Ohio St. 502, 82 Am. Dec. 454. Cases illustrating duty to disclose on account of pre-existing fiduciary relations:* McLure v. Ripley, 2 Macn. & G. 274; Loader v. Clarke, 2 § 902, (b) Quoted in Keen v. and sister) ; Eddy v. Eddy, 168 Fed. James, 39 N. J. Eq. 257, 51 Am. 590, 93 C. C. A. 586 (fraudulent Rep. 29. concealment by executor whereby § 902, (c) The text is cited in widow is kept in ignorance of her Clark V. O'Toole, 20 Okl. 319, 94 right to elect against the will) ; Pac. 547" Sidney v. Chappell, 26 Potter's Appeal, 56 Conn. 1, 7 Am. Okl. 737, 110 Pac. 1099. See, also, St. Rep. 272, 12 Atl. 513; Morgan v. St. Louis & S. F. K'y Co. v. John- Owens, 228 HI. 598, 81 N. E. 1135 ston, 133 XJ. S. 566, 10 Sup. Ct. 390; (conveyance by father to son, latter Keith V. Kellam, 35 Fed. 243; Keen must inake full di'sclosure) ; Hegen- V. James, 39 N. J. E'q. 257, 51 Am. myer v. Marks, 37 Minn. 6, 5 Am. ^gp 29. St. Rep. 808, 32 N. W. 785; Bicketts §902, (d) The text is cited in v. Tompkins, 73 N. J. Eq. 552, 68 Ehrmann v. Stitzel, 121 Ky. 751, Atl. 1075 (cousins); Whitman v. 123 Am. St. Rep. 224, 90 S. W. 275. Bowden, 27 S. C. 53, 2 S. E. 630; See, also, Law v. Law, [1905] 1 Noyes v. Landon, 59 Vt. 569, 10 Ch. 140 (partners); Goldsmith v. Atl. 342. Koopman, 152 Fed. 173, 81 C. C. A. Concealment by Promoters of Cor- 465 (partners) ; Bowen v. Kutzner, porations, and their duty to the cor-. 167 Fed. 281, 93 C. C. A. 33 (brother poration when acting in relation to 1877 . ACTUAL FRAUD. § 903 there is no existing fiduciary relation between the parties, and no special confidence reposed is expressed by their words or implied from their acts, but the very contract or other transaction itself, in its essential nature, is intrin- sically fiduciary, and necessarily calls for perfect good faith and full disclosure, without regard to any particular in- tention of the parties. The contract of insurance is a familiar example.® It will be found, I think, that all cases of fraudulent concealment may be referred to one or the other of these classes. § 903. Concealments by a Vendee.^— As instances of con- cealment are most frequent in contracts of sale, it will be proper to apply the foregoing general doctrine to the ven- dee and the vendor. The decisions recognize a marked difference between the two, with reference to their duty to disclose. The contract of sale is not intrinsically fidu- ciary, and does not fall within the third of the foregoing classes. The conclusion is clearly established, that under Macn. & G. 382; A-tterbury v. Wallis, 8 De Gex, M. & G. 454; Evans v. Carrington, 2 De Gex, F. & J. 481; Tate v. Williamson, L. E. 1 Eq. 528; 2 Ch. 55; Gen. Exch. Bank v. Horner, L. R. 9 Eq. 480; Peek v. Gumey, L. E. 13 Eq. 79; In re Madrid Bank, L. E. 2 Eq. 216; In re Overend etc. Co., L. E. 3 Eq. 576; Heymann v. European etc. Co., L. E. 7 Eq. 154; In re Coal etc. Co., L. E. 20 Eq. 114; Overend etc. Co. v. Gurney, L. E. 4 Ch. 701; In re Lushes Trusts, L. E. 4 Ch. 591; Sharpe v. Foye, L. E. 4 Ch. 35; In re Coal etc. Co., L. E. 1 Ch. Div. 182; In re Hereford etc. Co., L. E. 2 Ch. Div. 621; Craig v. Phillips, L. E. 3 Ch. Div. 722; Morgan V. Elford, L. E. 4 Ch. 352; New Sombrero etc. Co. v. Erlanger, L. E. 5 Ch. Div. 73; Bagnall v. Carlton, L. E. 6 Ch. Div. 371; Davies v. London etc. Co., L. E. 8 Ch. Div. 469; Lovesy v. Smith, L. E. 15 Ch. Div. 655; Young V. Hughes, 32 N. J. Eq. 372. it %s vendors. See the very impor- § 902, (e) The text is cited to this tant recent English eases, Lagunas effect in Myler v. Fidelity Mut. Nitrate Co. v. Lagunas Syndicate, Life Ins. Co. (Old.), 167 Pae. 601. [1899] 2 Ch. 392; In re Leeds and §903, (a) This section is cited in Hanley Theaters of Varieties, Lim., Oliver v. Oliver (Ga.), 45 S. E. 232; [1902] 2 Ch. 809; also, Erlanger v. and in Cazier v. Hart, 158 Wis. 362, New Sombrero Phosphate Co., L. E. 148 N. W. 860. 3 App. Cas. 1218. § 903 EQUITY JUEISPRUDENCB. 1878 ordinary circumstances, there being no previously exist- ing fiduciary relation between the parties, and no con- fidence being expressly reposed by the vendor in the very contract, no duty rests upon the vendee to disclose facts which he may happen to know advantageous to the vendor, — facts concerning the thing to be sold which would en- hance its value,- or tend to cause the vendor to demand a higher price, and the like; so that a failure to disclose will not be a fraudulent concealment.^ ^ The reason is evident. § 903, 1 In the leading ease of Fox v. Mackreth, 2 Cox, 320, 2 Brown Ch. 400, 420, Lord Thurlow thus stated this doctrine : "Suppose A, know- ing of a mine on the estate of B, and knowing at the same time that B was ignorant of it, should treat and contract with B for the purchase of that estate at only half its real Value, by reason of not disclosing to B the fact of the existence of the mine; can a court of equity set aside this bargain ? No. But why is it impossible ? Not because the one party is not aware of the unreasonable advantage taken by the other of this knowl- edge; but because there is no contract existing between them by which one party is bound to disclose to the other the circumstances which have come within his knowledge; for if it were otherwise, such a principle must ex- tend to every ease in which the buyer of an estate happened to have a clearer discernment of its real value than the seller. It is therefore not only necessary that great advantage should be taken in such a contract, and that such an advantage should arise from superiority of skill or in- formation, but it is also necessary to show some obligation binding the party to make such a disclosure." To the same general efEect, see Dolman V. Nokes, 22 Beav. 402; Dicconson v. Talbot, L. K. 6 Ch. 32. Livingston v. Peru Iron Co., 2 Paige, 390; Harris v. Tyson, 24 Pa. St. 347, 64 Am. Dec. 661; Drake v. Collins, 5 How. (Miss.) 253; Williams V. Spurr, 24 Mich. 335; Law v. Grant, 37 Wis. 548; see, however, per contra, Bowman v. Bates, 2 Bibb, 47, 4 Am. Dec. 677; Williams v. Beaz- ley, 3 J. J. Marsh. 578. In Bowman v. Bates, 2 Bibb, 47, 4 Am. Dec. 677, a person discovered a valuable salt spring on another's land, and bought the tract from him at an ordinary price, without disclosing his dis- covery. The sale was, for that reason, set aside. One cannot help admir- ing the stern morality of this decision, even if it be not sustained by the current of authority. See, also, as illustrating the general rule, Laidlaw V. Organ, 2 Wheat. 178, 195 ; Goninan v. Stephenson, 24 Wis. 75 ; Cleland v. Fish, 43 111. 282; Wright v. Brown, 67 N. Y. 1; Anonymous, 67 N. Y. 598. § 903, (b) Pratt Land & Imp. Co. Rep. 35, 33 South. 185; Culton v. V. McClain, 135 Ala. 452, 93 Am. St. Asher, 149 Ky. 659, 149 S. W. 946; 1879 AOTTJAL FEAXTD. § 903 The law assumes that the owner has better opportunities than any one else to know all the material facts concern- ing his own property, and is thus able under all ordinary circumstances to protect his own interests. The duty to disclose can rest upon the vendee only when the case be- longs either to the first or the second of the above-men- tioned classes. If, therefore, there is a confidence reposed by the vendor in the vendee, by reason of some prior exist- ing fiduciary relation between them, the vendee's failure to disclose a material fact would undoubtedly be a fraudu- lent concealment. Also, if, during the negotiation and con- clusion of the sale, confidence is expressly reposed in the vendee, or if from the circumstances of the contract and the acts of the "parties such confidence is necessarily im- plied, the vendee's silence might be a fraudulent conceal- ment. In instances of the latter kind, a much stronger and clearer case of confidence and consequent duty to dis- close is necessary against the vendee than would be re- quired under analogous isircumstances against the vendor.^ c § 903, 2 Tate v. Williamson, L. K. 2 Ch. 55, 1 Eq. 528, is a very in- struetive case of fraudulent concealment by a vendee by reason of an existing fiduciary relation. Wbile a vendee's silence, in the absence of any existing fiduciary relations, -wiU. not ordinarily be a fraudulent concealment unless tbe "fact of confidence reposed by the vendor is clearly made out, yet such confidence may be more easily inferred, and the duty to disclose may more readily arise, when the material facts concealed are wrongful acts with respect to the subject-matter, knowingly done by the vendee him- self. Phillips V. Homfray, L. E. 6 Ch. 770, is an illustration. The owner of a colliery contracted to purchase an adjoining mine from the proprietor thereof. The vendee concealed the fact that he had already got out a considerable quantity of coal from the vendor's mine without the latter's knowledge. This concealment was held to be fraudulent and to defeat the contract, although it did not appear there had been any under-valuation of the mine on account of the coal taken. See, also, Emmons v. Moore, American Car & Foundry Co. v. 1912A, 399, 30 L. K. A. (N. S.) 748, Merehants' Despatch Transp. Co., , 75 Atl. 331. 216 Fed. 904 (vendee does not dis- §903, (c) Law v. Law, [1905] 1 close to ignorant vendor true value Ch. 140 (partners) ; Goldsmith v. of patents) . See notes to Crompton Koopman, 152 Fed. 173, 81 0. C. A. V. Beedle, 83 Vt. 287, Ann. Cas. 465 (partners). § 904 EQUITY JUEISPETJCENCE. 1880 § 904. Concealments by a Vendor. — ^A broader duty cer- tainly rests upon the vendor ; a duty rests on him to dis- close material facts under far more circumstances than is true of the purchaser. This duty, however, is not uni- versal. In ordinary contracts of sale, where no previous fiduciary relation exists, and where no confidence, expressed or implied, growing out of or connected with the very trans- action itself, is reposed on the vendor, and the parties are dealing with each other at arm's-length, and the purchaser is presumed to have as many reasonable opportunities for ascertaining all the facts as any other person in his place would have had, then the general doctrine already stated applies: no duty to disclose material facts known to him- self rests upon the vendor; his failure to disclose is not a fraudulent concealment.^ ^ Of course, any affirmative act 85 111. 304; Cleland v. Fish, 43 111. 282; Young v. Hughes, 32 N. J. Eq. 372; Connelly v. Fisher, 3 Tenn. Ch. 382; Dameron v. Jamison, 4 Mo. App. 299. § 904, 1 Haywood v. Cope, 25 Beav. 140; Wilde v. Gibson, 1 H. L. Cas. 605; Gibson v. D'Este, 2 Younge & C. Ch. 542; People's Bank v. Bogart, 81 N. Y. 101, 37 Am. Dec. 481; Smith v. Countryman, 30 N. Y. 655; Han- son V. Edgerly, 29 N. H. 343; Fisher v. Budlong, 10 R. I. 525; Kintzing V. McElrath, 5 Pa. St. 467; Hadley v. Clinton etc. Co., 13 Ohio St. 502; Frenzel v. Miller, 37 Ind. 1; Williams v. Spurr, 24 Mich. 335; Mitchell v. MeDougall, 62 111. 498; Law v. Grant, 37 Wis. 548; Laidlaw v. Organ, 2 Wheat. 178; Hastings v. O'Donnell, 40 Cal. 148. In Haywood v. Cope, 25 Beav. 140, it was held that the vendor's mere failure to disclose acts as having been done by himself, when the buyer must necessarily have known that they were done by somebody, is not only not a fraudulent concealment, but is even not a sufficient ground for de- feating a suit for a specific performance brought by the vendor. Plaintiff had worked coal under his land, and had abandoned it as unprofitable. Twenty years after, defendant cleaned out the pit, examined the coal in the shaft with other persons, and then entered into a contract for a lease. The mine turned out to be worthless. Sir John Romilly, M. R., held that §904, (a) Marriner v. Dennison, Am. St. Eep. 170, 74 N. E. 445 (di- 78 Cal. 202, 20 Pac. 386; People's- reetor of corporation not trustee for Bank's Appeal, 93 Pa. St. 107, 39 individual stockholder with respect Am. Eep. 728. See, also, Hooker v. to his stock). Midland Steel Co., 215 111. 444, 106 ■ 1881 ACTUAL FRAUD. § 904 or language tending to conceal or withdra-w the buyer's attention from the real facts will turn the scale and render the vendor's conduct fraudulent, as has already been shown. If, on the other hand, the case belongs to the first class mentioned in a former paragraph, the duty of disclosure becomes manifest and stringent. Whenever the vendor oc- cupies an established fiduciary relation towards the buyer, independent of the dontract, a full disclosure is demanded; any suppression or silence as to material facts, which would in any degree tend to prevent the sale, is clearly a fraudu- lent concealment ; the utmost good faith and openness is required of vendors occupying such relations. ^ , Equity and the law go farther than this. Not only where the vendor thus occupies a fiduciary position towards the pur- chaser, independently of the sale, but also when, in the very contract of sale itself, or in the negotiations prelimi- nary to it, the purchaser expressly reposes a trust and con- fidence in the vendor, and when, from circumstances of that very transaction, or from the acts or relations of the par- ties in connection with it, such a trust and confidence re- posed by the purchaser is necessarily implied in the con- tract of sale, it is the duty of the vendor to make a like disclosure, and his failure to do so is a fraudulent con- cealment.3 ^ defendant had no ground of defense because plaintiff did not communi- cate the fact that he had worked and abandoned the mine, since the defend- ant, from his own personal examination, must have known that it had been worked and abandoned by someone. § 904, 2 These cases of dealings between agent and principal, attorney and client, trustee and beneficiary, and the like, are discussed in subse- quent sections; cases illustrating the rule alluded to in the text will be found in that connection. See, also, cases cited ante, under § 902, on fidu- ciary relations. § 904, 3 It is impossible to formulate a rule applicable to the situation intended to be described more definite than this. When it appears that §904, (b) The text is quoted in Avery, 161 Mich. 322, 126 N. W. Grant v. Ledwidge, 109 Ark. 297, 439; Liland v. Tweto, 19 N. D. 551, 160 S. W. 200. See, also. Culver v. 125 N. W. 1032 (failure of vendor § 905 EQUITY JURISPRUDENCE. 1882 § 905. Non-disclosure of Facts a Defense to the Specific Enforcement of Contracts in Equity. — ^Although the discus- sion relates to fraudulent concealments, such as necessarily imply knowledge and an intent not to communicate the fact, it is proper to notice one other rule affecting the relations between the vendor and purchaser in equity. A fraudu- the purchaser has in express terms reposed a jEonfidence in the vendor, there can be no doubt or difficulty. The difficulty arises where such con- fidence must be implied or inferred. With respect to this situation of the parties, the decisions, it must be confessed, are not harmonious; many of them seem to be separated by a very shadowy line. The truth probably is, that the apparent conflict among the decisions is due more to a differ- ence in the effect of evidence, and in the conclusions of fact, than to any difference in the rules of law recognized and acted upon by the courts. Where the confidence reposed must be implied or inferred from the cir- cumstances of the transaction, each case must turn upon its own particular facts: Gibson v. D'Este, 2 Younge & C. Ch. 542; Wilde v. Gibson, 1 H. L. Cas. 605; Edwards v. McLeay, 2 Swanst. 287; Coop. 308; Dolman v. Nokes, 22 Beav. 402; Haywood v. Cope, 25 Beav. 140; Brown v. Mont- gomery, 20 N. Y. 287; People's Bank v. Bogart, 81 N. Y. 101, 37 Am. Rep. 481; Rawdon v. Blatchford, 1 Sand. Ch. 344; Paddock v. Strobridge, 29 Vt. 470, 477; Holmes's Appeal, 77 Pa. St. 50; Snelson v. Franklin, 6 Munf. 210; McNeil v. Baird, 6 Munf. 316; Halls v. Thompson, 1 Smedes & M. 443; Roseman v. Canovan, 43 Cal. 110; Schiffer v. Dietz, 83 N. Y. 300; Howell v. Biddleeom, 62 Barb. 131; Clark v. Bamer, 2 Lans. 67; Bank of Republic v. Baxter, 31 Vt. 101; Howard v. Gould, 28 Vt. 523, 67 Am. Dec. 728; Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46; Han- son V. Edgerly, 29 N. H. 343. Brown v. Montgomery, 20 N. Y. 287,, is a very illustrative case of con- fidence implied from the circumstances of the particular sale. It doubt- less stands on the border-line, but has not been overruled, nor even ques- tioned so as to shake its authority. The vendor sold a check of a third party. At the time of the sale he knew that other checks of the same maker had been dishonored on that very day and the day before, but did not communicate this fact to the buyer. The check turned out worthless, as the maker had become insolvent. Held to be fraudulent concealment. The able opinion of Denio, J., holds that, under the circumstances, from the nature of the transfer and of the cheek itself, a confidence reposed of stock, the value of whieh eould tiou was insolvent): Thomas v. not be ascertained by vendee, to Murphy, 87 Minn. 358, 91 N. W. disclose the fact that the corpora- 1097. 1883 ACTTTAL FEAUD. § 905 lent eonc'ealment, defeating a contract of sale at law, and furnishing ground for its cancellation in equity, is, of course, a complete defense to its specific performance. Iri addition to these concealments properly so called, the sup- pression of a material fact, or the failure to communicate a material fact by the vendor, without any purpose of de- ceiving or misleading the other party, and even without having himself any knowledge of the fact, while not affect- ing the validity of the agreement at law, and not being sufficient ground for its cancellation in equity, because not fraudulent, may still render the agreement so unfair, un- equal, or hard, that a court of equity, in accordance with its settled principles in administering the remedy of speci- fic performance, will refuse to enforce the contract against the party who was misled.^ The two contracting parties do not stand upon an equality ; either one had a knowledge of important facts of which the other was ignorant, or else there was a mistake by one or perhaps by both. Such mis- description, consisting of omitting material particulars, however free of wrongful intent they may be, have often been held a sufficient defense to suits for specific enforce- ment. ^^ by the buyer in the vendor was implied; the character of a check as a mercantile instrument, representing, as it does, that so much money then lies on deposit awaiting presentation, created a fiduciary duty on the ven- dor's part; the vendor was therefore bound to disclose. § 905, 1 Shirley v. Stratton, 1 Brown Ch. 440 ; Deane v. Kastron, 1 Anstr. 64; EUard v. Lord Llandaff, 1 Ball & B. 241; Hesse v. Briant, 6 De Gex, M. & G. 623; Maddeford v. Austwick, 1 Sim. 89; Bonuett v. Sadler, 14 Ves. 526; Drysdale v. Mace, 5 De Gex, M. & G. 103; Baskcomb V. Beckwith, L. R. 8 Eq. 100; Lucas v. James, 7 Hare, 410; Denny v. Han- cock, L. R. 6 Ch. 1. 1 905, (a) Quoted in Byars v. generally, in Gidney v. Chappell, Stubbs, 85 Ala. 256, 4 South. 755. 26' Old. 737, 110 Pac. 1099. See, §905, (b) Byars v. Stubbs, 85 further, Pom. Eq. Eem. Compare Ala. 256, 4 South. 755 (concealment Lucas v. -Long, 125 Md. 420, 94 by vendee). This paragraph is cited, Atl. 12. § 906 EQUITY JURISPRUDENCE. 1884 § 906, Concealments by Buyers on Credit.^ — The partic- ular case of the buyer on credit who conceals his bad finan- cial condition requires a brief additional mention, because it is the most common species of fraud, and because it in- volves one or two special rules. As to what constitutes a false representation by such a buyer, nothing need be added, except that, in this instance especially, the state- ment of the buyer must be something more than the mere expression of an opinion as to his pecuniary ability. As to what constitutes a fraudulent concealment under these circumstances, there has been some uncertainty and even conflict of decision in determining what matters such buyer is bound to disclose, so that his failure to do so would be a fraud. The following rules may be regarded as settled by the decided weight of authority ; they are certainly sus- tained by courts of the greatest ability and influence: 1. The purchaser when buying on credit is not bound to disclose the facts of his financial condition. If he makes no actual misrepresentation, if he is not asked any ques- tions, and does not give thereto any untrue, evasive, or partial answers, his mere silence as to his general bad pecuniary condition, his indebtedness, or even his insol- vency, will not constitute a fraudulent concealment, 2. If, however, the former good financial condition of the buyer has been known to the vendor through prior dealings or otherwise, and any sudden or complete change has hap- pened to the buyer, such as his sudden loss of property by fire or other accident, or his sudden insolvency or em- barrassment by the failure of others, or a general assign- ment which he has made of all his property, and the like, he is bound to disclose such facts to the vendor previously to the completion of the sale ; his mere silence with respect to such changes in his condition, even when no questions are asked of him, is a fraudulent concealment. 3. Finally, if at the time he purchases the goods on credit, and fails §906, (a) This section is cited In Newell v. Randall, 32 Minn. 171, 50 Am. Eep. 562, 19 N. W. 972, 1885 ACTUAL FRAUD. § 907 to disclose Ms general insolvency, embarrassed condition, or indebtedness, the buyer forms or has in his mind the intention or design of not paying for them, this is a fraud on his part. In other words, a purchase on credit with a preconceived design on the buyer's part, formed at or be- fore the purchase, not to pay for the thing bought consti- tutes a species of fraudulent concealment.^ ^ § 907. Contracts and Transactions Essentially Fiduciary. Wherever a contract is in its essential nature intrinsically fiduciary, the utmost good faith and the fullest disclosure of material facts are required from the parties, without any reference to their prior or collateral relations, or to the circumstances surrounding the particular transaction. Any concealment of a material fact known to a party would necessarily be fraudulent. The most familiar, and illus- trative example of such contracts is that of insurance. ^ ^ §906, 1 Gary v. Hotailing, 1 Hill, 311, 37 Am. Dec. 323; Bigelow v. Heaton, 6 Hill, 43; Mitchell v. Worden, 20 Barb. 253; Nichols v. Pinner, 18 N. Y. 295; 23 N. Y. 264 (in this case the subject was fully examined, and the three rules given in the text were laid down) ; Hennequin v. Nay- lor, 24 N. Y. 139; King v. Phillips, 8 Bosw. 603; Bell v. Ellis, 33 Cal. 620, 626, expressly overruling and repudiating the contrary view maintained in Seligman v. Kalkman, 8 Cal. 207. Hathome v. Hodges, 28 N. Y. 486, illustrates the kind of indirect evidence admissible to show the Buyer's fraudulent design. § 907, 1 The subject of insurance is so broad, the questions arising under the general duty of the assured to make disclosure are so numerous, that I can only refer to the treatises upon the law of insurance in which they are discussed. See, also, 1 Smith Lead. Cas. 843, notes to Carter v. Boehm; and 2 Am. Lead. Cas. 926, notes to Locke v. Am. Ins. Co. §906, (b) Quoted in Brewer 'v. N. W. 900 (intention not to pay); Goodyer, 88 Ind. 5Y2. This para- Houghtaling v. Hills, 59 Iowa, 289, graph is quoted in full in Slayden- 13 N. W. 305; Hotchkin v. Third Kirksey Woolen Mills v. Weber, 46 Nat. Bank, 127 N. Y. 329, 27 N. E. Tex. Civ. App. 433, 102 S. W. 471. 1050. See, also, Jaffrey v. Brown, 29 Fed. - § 907, (a) See, also, Myler v. ,Fi- 476; Taylor V. Mississippi Mills, 47 delity Mut. Life Ins. Co. (Okl.), Ark. 247, 1 S. W. 283; Kitson v. 167 Pac. 601 (full disclosure re- Farwell, 132 111. 327, 23 N. E. 1024; quired of insurer on surrender of Oswego Starch Factory v. Lendrum, policy). 57 Iowa, 573, 42 Am. Bep. 53, 10 § 908 EQUITY JTJEISPETJDENCB. 1886 The contract of suretyship, in the relations between the surety and the other parties, and especially the creditor, is also fiduciary, although not in the same degree as that of insurance. It demands good faith towards the surety, and while the creditor is not absolutely bound voljintarily to disclose every fact which might affect the contract, very slight incidents and collateral circumstances will render his concealment of material facts fraudulent.^ b § 908. Liability of Principals for the Frauds of Their Agents.* — The general question as to the authority, express or implied," of agents to bind their principals, and to render those principals liable for any kind of remedy, legal or equitable, by means of fraudulent representations or con- cealments, and the more special questions as to the im- plied authority held by directors, trustees, managers, of- ficers, employees, and the like, inherent in their official or representative position, to bind their corporations, stockholders, beneficiaries, co-directors, associates, or em- ployers by their fraudulent representations or conceal- § 907, 2 There are some dicta and even decisions that the contract of suretyship is in all respects identical with that of insurance in relation - to the obligation of 'full disclosure. These dicta and decisions have been overrtiled, and the doctrine as now settled in England and the United States regards the contract of suretyship as partially fiduciary. The whole subject is fuUy examined in the following cases: Wythes v. Labouchere, 3 De Gex & J. 593; Owen v. Homan, 4 H. L. Cas. 997; 3 Maen. & G. 378; Hamilton v. Watson, 12 Clark & F. 109; Pidcock v. Bishop, 3 Bam. & C. 605; North Br. Ins. Co. v. Lloyd, 10 Ex. 523; Stone v. Compton, 5 Bing. N. C. 142; 6 Scott, 846; Maitland v. Irving, 15 Sim. 437; Squire v. Whit- ton, 1 H. L. Cas. 333; Railton v. Math.ews, 10 Clark & F. 934; Carew's Case, 7 De Gex, M. & G. 43; Etting v. Bank of U. S., 11 Wheat. 59; Howe Machine Co. v. Farringfon, 82 N. T. 121; Sooy v. State, 39 N. J. L. 135; Atlas Bank v. Brownell, 9 R. I. 168, 11 Am. Rep. 231; Franklin Bank v. Cooper, 36 Me. 179, 195 ; Evans v. Keeland, 9 Ala. 42. § 907, (b) This paragraph is- Bections are cited in Keen v. James, quoted in full in Fidelity & Deposit 39 N. J. Eq. 257, 51 Am. Rep. 29. Co. V. MosMer, 151 Fed. 806. As to This section is cited in Gottschalk suretyship, see Whitcomb V. Shultz, v. Kircher, 109 Mo, 170, 17 S. W. 223 Fed. 268, 138 C. C. A. 510. 905. §908, (a) This and the following 1887 ACrtJAL FEAUD. § 909 ments, and to render the latter classes of persons liable, on account of the fraud, for any species of remedy, equi- table or legal, do not come within the scope of this book; they belong to the law of agency., I shall attempt no dis- cussion of them, and for their treatment the reader is re- ferred to works professedly on the law of agency. It is proper to say, however, that there seems to be a marked dif- ference between the conclusions upon these latter ques- tions reached by the more recent English decisions and those maintained by the American cases. The tendency of the English courts has been very strong to take a very strict and narrow view of the powers and liabilities of directors, officers, trustees, and the corporations, stock- holders, co-directors, and other beneficiaries whom they represent. On the other hand, the general tendency of the American decisions is to enlarge the implied author- ity of such officials, and to extend the liability created by their frauds and resting upon corporations, stockholders, and co-directors. The question as to the extent of liability incurred by corporations, stockholders, co-directors, co- trustees, and the like, for the frauds and breaches of duty of officers, directors, and trustees, will be treated of in a subsequent section which deals with the particular sub- ject of fiduciary relations. At present I shall simply state the general rules which define the liability of principals for the fraudulent representations and concealments of their agents, when such fraudulent acts are within the scope of the authority, express or implied, possessed by the agent, without any attempt to discuss the nature, extent, and limits of the authority itself. § 909. The Same.^ — ^In the first place, it is very clear that when an agent, in doing the business of his principal, and acting within the scope of the authority conferred upon him, makes fraudulent representations or concealments §909, (a) This section is cited in Fed. 105, 44 C. C. A. 371; Tuttle v. Gottsehalk v. Kircher, 109 Mo. 170, Harris, 83 N. J. Eq. 666, 92 AtL 17 S. W. 905; Alger v. Keith, 105 596. § 909 EQUITY JUKISPEUDENCE. 1888 with the knowledge or consent of his principal, expressed or implied, so that the act of the agent is virtually that of his principal, then the principal is liable in the same man- ner, to the same extent, and for the same remedies as though the fraud were committed by himself personally; he may even be liable in an action at law for deceit. The doctrine is carried much farther. When the agent acts beyond and even in direct opposition to his express author- ity, but within the scope of his implied authority, — that is, within the apparent authority contained in and conferred by the terms of his commission, or the nature of his ofi&cial functions or of his employment, or appearing from a prior course of dealing with or on behalf of his principal, or from any other mode of his being held out to the world as appearing to possess the authority, and the principal is personally innocent of any fraud, — the principal cannot acquire and retain any benefit obtained under such circum- stances from the fraud, representations, or concealments. If the principal, upon learning of his agent's fraud, should expressly ratify and adopt the transaction, he would make the fraud his own. An express ratification, however, is not necessary. If the principal receives and retains the proceeds of the agent's fraud, — the property, money, and the like obtained through an executed transaction, — or claims the benefit of or attempts to enforce an executory obligation thus procured, he renders himself liable for the fraudulent acts of his agent.^ The defrauded party is en- titled to such remedies, legal or equitable, as are appro- priate to the nature of the transaction. The only mode in which the principal, under these circumstances, can escape liability, is by repudiating the acts of his agent, and re- fusing to accept or retain any benefit of the transaction, immediately upon his discovery of the fraud. Many Ameri- can decisions go much farther than this. They hold that §909, (b) Quoted in Trumbull v. N. J. Eq. 466, 64 Atl. 478 (Pitney, Hewitt, 65 Conn. 60, 31 Atl. 492, V. C). and- cited in Turner v. Kuehnle, 71 1889 ACTUAL FBAXJD. § 909 where an agent has thus committed a fraud within the scope of his apparent authority, though in direct opposi- tion to his express instructions, the principal is bound by the act, even though he is personally innocent, and has de- rived no benefit whatever from the fraudulent transaction of his agent.i o § 909, 1 The following cases furnish illustrations of the conclusions stated in the text, and also of the differences between the tendencies of English and American decisions: Gibson v. D'Este, 2 Younge & C. 542; 1 H. L. Cas. 605 ; Conybeare v. New Brunswick etc. Co., 1 De Gex, F. & J. 578; 9 H. L. Cas. 711, 726, per Lord Westbury; 730, per Lord Cranworth; Bristow V. Whitmore, 9 H. L. Cas. 418; Gibson's Case, 2 De Gex & J. 275; Nieol's Case, 3 De Gex & J. 387, 437; Udell v. Atherton, 7 Hurl. & N. 172; Fuller v. Wilson, 3 Q. B. 58; Cornfoot v. Fowke, 6 Mees. & W. 358; Moens v. Heyworth, 10 Mees. & W. 147; Bondfoot v. Monteflore, L. R. 2 Q. B. 511; Mackay v. Commercial Bank, L. R. 5 P. C. 394; Bumes V. Pennell, 2 H. L. Cas. 497; Ranger v. Great Western R'y, 5 H. L. Cas. 72; National Exeh. Co. v. Drew, 2 Macq. 103, 125; Meux's Ex'rs' Case, 2 De Gex, M. & G. 522; Oakes v. Turquand, L. R. 2 H. L. 325; Sutton V. Wilders, L. R. 12 Eq. 373; Earl of Dundonald v. Masterman, L. R. 7 Eq. 504; Scholefield v. Templar, Johns. 155; Hartopp v. Hartopp, 21 Beav. 259; Western Bank v. Addie, L. R. 1 H. L. S. 145; Veazie v. Will- iams, 8 How. 134; Mason v. Crosby, 1 Wood. & M. 342; Fitzsimmons v. Joslin, 21 Vt. 129, 52 Am. Dec. 46; Concord Bank v. Gregg, 14 N. H. 331; Coddington v. Goddard, 16 Gray, 436; Litchfield Bank v. Peck, 29 Conn. 384; "Van Wyck v. Watters, 81 N. Y. 352;- Fishkill Savings Inst. v. National Bank of Fishkill, 80 N. Y. 162, 36 Am. Rep. 595; Bennett v. Judson, 21 N. Y. 238; Elwell v. Chamberlain, 31 N. Y. 611*; Condit v. Baldwin, 21 N. Y. 219, 78 Am. Dec. 137; Bell v. Day, 32 N. Y. 165; Smith V. Tracy, 36 N. Y. 79 ; Estevez v. Purdy, 66 N. Y. 446 ; Durst v. Burton, 47 N. Y. 167, 7 Am. Rep. 428; Allerton v. AUerton, 50 N. Y. 670; Titus V. Great West T. Co., 61 N. Y. 237; Davis v. Bemis, 40 N. Y. 453, note; Indianapolis etc. R. R. v. Tyng, 63 N. Y. 653; Hathaway v. Johnson, 55 N. Y. 93, 14 Am. Rep. 186 ; Durst v. Burton, 2 Lans. 137 ; Graves v. Spier, 58 Barb. 349 ; Young v. Hughes, 32 N. J. Eq. 372 ; MundorfE v. Wicker- sham, 63 Pa. St. 87, 3 Am. Rep. 531; Gustar v. Titusville etc. Co., 63 Pa. St. 381; Grossman v. Penrose Bdg. Co., 26 Pa. St. 69; Crump v. United §909, (e) Mullens v. Miller, 22 Fairchild v. MeMalion, 139 N. Y. Ch. Div. 194; Clark v. Eeeder, 40 290, 36 Am. St. Rep. 701, 34 N. E. Fed. 513; Eiser y. Walton, 78 Cal. 779, affirming 65 Hun, 621, 20 N. Y. 490, 21 Pac. 362; Lindmeier v. Mona- Supp. 31. han, >64 Iowa, 24, 19 N. W. 839; 11—119 § 910 EQUITY JURISPRUDENCE. 1890 § 910. Jurisdiction of Equity in Cases of Fraud.^— It is impossible, especially in the United States, to formulate any universal rules concerning the extent or the exercise of the equitable "jurisdiction in matters of fraud, since the decisions of different courts and in different states are directly at- variance with respect to its existence and ex- tent, and since its exercise must depend, to a great extent, upon the circumstances of particular cases, and even upon the temperaments and opinions of individual judges.'^ The jurisdiction, when it exists, may be exercised by granting reliefs which are peculiarly equitable, or reliefs which are States Mining Co., 7 Gratt. 352, 56 Am. Dec. 116; River v. Plankroad Co., 30 Ala. 92; Bowers v. Johnson, 10 Smedes & M. 169; Lawrence v. Hand, 23 Miss. 103; Hester v. Memphis etc. R. R., 32 Miss. 378; Mitchell V. Mims, 8 Tex. 6; Henderson v. Railroad Co., 17 Tex. 560; Morton v. Scull,. 23 Ark. 289; East Tenn. R. R. v. Gammon, 5 Sneed, 567; Negley V. Lindsay, 67 Pa. St. 217, 5 Am. Rep. 427; Mendenhall v. Treadway, 44 Ind. 131; Boland v. Whitman, 33 Ind. 64; Shawmut etc. Co. v. Stevens, 9 Allen, 332; Fogg v. Griffin, 2 Allen, 1. For instances in which the fraud of persons not in a relation of agency is not ground for relief, see Root V. Bancroft, 8 Gray, 619; Lepper v. Nuttman, 35 Ind. 384; Wright V. Flinn, 33 Iowa, 159; Cummings v. Thompson, 18 Minn. -246; Fisher v. Boody, 1 Curt. 206. In the following series of remarkable cases, princi- pals were held liable for fraud of their agents, done simply within the apparent scope of their authority, although the principal had received no benefit whatever from the transaction, and in many of the cases the principal was a corporation, and its agent an officer thereof: North River Bank v. Aymar, 3 HiU, 262; Farmers and Mechanics' Bank v. Butchers' etc. Bank, 16 N. Y. 125, 69 Am. Dec. 678; 14 N. Y. 623; Griswold v. Haven, 25 N. Y. 595, 82 Am. Dec. 380; Exchange Bank v. Monteath, 26 N. Y. 505; N. Y. & N. H. R. R. v. Schuyler, 34 N. Y. 30; Cutting v. Marlor, 78 N. Y. 454; Armour v. Michigan Central R. R., 65 N. Y. Ill, 121-124, 22 Am. Rep. 603; but see, per contra, Mechanics' Bank v. N. Y. & N. H. R. R., 13 N. Y. 599, which must be regarded as entirely overruled by the subsequent cases. § 910, (a) This section is cited in § 910, (b) Quoted in County of Seeley v. Eeed, 25 Fed. 361; Smith Ada v. Bullen Bridge Co., 5 Idaho, V. Brittenham, 109 Dl. 540; Trenton 188, 95 Am. St. Eep. 180, 36 L. R, A Pass. Ey. Co. v. Wilson (N. J. Eq.), 367, 47 Pac. 818. 40 Atl. 597, reversing 55 N. J. Eq. 273, 37 Atl. 476. - 1891 AOTTJAL FRAUD. § 910 wholly pecuniary, and therefore legal. In conferring these reliefs which are purely equitable, and therefore exclusive, the power of equity knows no limit. The court can always shape its remedy so as to meet the demands of justice in every case, however peculiar.^ The most important of these equitable final reliefs, to one or the other of which all special instances and forms may be reduced, are these: Eescission ^ or cancellation, as applied to contracts, convey- ances, judgments, and all fraudulent transactions, with one marked exception; reformation of written instruments im- properly drawn through fraud; and specific enforcement by which the fraudulent party is compelled to perform the very specific obligation which rests upon him, and the de- frauded party obtains the enjoyment of the very right of which he was deprived through the fraud. This latter class of remedies • may assume an unlimited variety of forms, as the circumstances may require. It includes, among others, the compelling the fraudulent party to make good his. representations ; the treating him as a trustee with re- spect to the property which he has acquired by his fraud ; the enforcing the performance of their specific duties by trustees, directors, and officers of corporations, and all others who stand in a position of trust; the compelling a written security to stand good for what is actually due upon it, and the like. These final remedies may be ac- companied and aided by auxiliary reliefs, such as injunc- tion or a receiver. The purely pecuniary relief which courts of equity may administer, as well as courts of law, in matters of fraud, are an accounting in all its various forms and conditions, and simple recoveTies, without an accounting, of specific amounts of money which have been fraudulently obtained, or which are equitably and perhaps legally due on account of fraud. In administering all these remedies, pecuniary as well as equitable, the fundamental § 910, (c) Quoted in Vaught v. rescission, this paragraph is citod in Meador, 99 Va. 569, 86 Am. St. Rep. Matteson v. Wagoner, 147 Cal. 739, 908, 39 S. E. 225. 82 Pao. 436. §910, (d) As to the remedy of § 911 EQUITY JtrBISPBTJDBNOB, 1892 theory upon which equity acts is that of restoration,^of restoring the defrauded party primarily, and the fraudu- lent party as a necessary incident, to the positions which they occupied before the fraud was committed. Assuming that the transaction ought not to have taken place, the court proceeds as though it had not taken place, and returns the parties to that situation. Even in such cases, the court applies the maxim. He who seeks equity must do equity, and will thus secure to the wrong-doer, in awarding its relief, whatever is justly and equitably his due.i » All these forms of exclusively equitable relief, and the remedy of accounting, will be examined in subsequent chapters. At present I purpose to state, as far as is possible, the gen- eral rules concerning the existence, extent, and exercise of the jurisdiction, and to add some examples illustrating the instances in which the jurisdiction is and is not exer- cised. § 911. Fundamental Principles of the Jurisdiction.^ — ^It may be an aid in the present inquiry to recall the three § 910, 1 The remedies of cancellation, reformation, and enforcing fidu- ciary duties are so familiar that they require no citation of examples. For examples of compelling the fraudulent party to make good his repre- sentations, see cases cited ante, under § 899. Examples of treating a fraudulent party as a trustee: Gresley v. Mousley, 4 De Gex & J. 78; Stump V. Gaby, 2 De Gex, M. & G. 623 ; and see post, section on construc- tive trusts. Example of ordering a security to stand for what was really due on it: Neilson v. McDonald, 6 Johns. Ch. 201. The equitable theory of restoring the parties to their original position:* Savery v. King, 5 H. L. Gas. 627; Bellamy v. Sabine, 2 Phill. Ch. 425; Neblett v. Macfar- land, 92 U. S. 101; Grymes v. Sanders, 93 U. S. 55; Johnson v. Jones, 13 Smedes & M. 580; Gatling v. Newell, 9 Ind. 572. §910, (e) Quoted in Brown v. Co., 126 N. T. 579, 27 N. E. 1018; Norman, 65 Miss. 369, 7 Am. St. Potter v. Taggart, 59 Wis. 1, 16 Rep 663, 4 South. 293 (a most in- N. W. 563, 632; and Pom. Eq. Eem., structive case); and cited in Eobert Chapter on Cancellation. V. Finberg, 85 Conn. 557, 84 Atl. §911, (a) This section is cited in 366; Swalnson v. Brawner (Tex. Civ. Louisville, N. A. & C. E. Co. v. Ohio App.), 155 S. W. 1191. Val. I. & C. Co., 57 Fed. 42; Benson § 910, (*) See, also, Smith v. Brit- v. Keller, 37 Or. 120, 60 Pac. 918. tenham, 109 HI. 540; Lee v. V. O. 1893 ACTUAL PEATTD. § 912 fundamental principles concerning the equitable jurisdictioji which were laid down and explained in the former volume: 1. Where the primary right or interest of the plaintiff is equitable only, the jurisdiction is necessarily exclusive, and will always be exercised without regard to the nature of the relief; otherwise the party would be without remedy, since courts of law could not take cognizance of the case. 2. Where the primary right is legal, and the remedy sought is purely equitable, the jurisdiction's also exclusive, and always exists, but will not generally be exercised if the legal remedy which the party might obtain is adequate, complete, and certain.^ 3. Where the primary right is legal, and the remedy is also legal, a recovery of mOney simply, or of the possession of chattels, the jurisdiction is concur- rent, and only exists when the remedy which the party might obtain at law is not adequate.'' The great majority of cases arising from fraud undoubtedly fall under the second or third of these principles. It should be observed that in the original condition of the jurisdiction, and in those courts of this country which preserve the original methods of equity, the jurisdiction might be extended over many instances otherwise belonging to tlie third class, by reason of the auxiliary relief of a discovery.^ § 912. The English Doctrine.— The doctrine is fully set- tled by an unbroken line of decisions extending to the present day, that, with one remarkable exception, the juris- diction of equity exists in and may be extended over every case of fraud,^ whether the primary rights of the parties are legal or equitable, and whether the remedies sought are equitable or simple pecuniary recoveries, and even though courts of law have a concurrent jurisdiction of the case and can administer the same kind of relief. The Eng- §911, (b) The text is cited in §911, (d) See ante, §§224-226, Hosier v. Walter, 17 Okl. 305, 87 234. Pac. 877; Big HufE Coal Co. v. §912, (a) The text is quoted ii Thomas, 76 W. Va. 161, 85 S. fe. In re Hoscheid's Estate, 78 Wash 171. 309, 139 Pac. 61. § 911, (c) See ante, § 178. . § 912 EQUITY JUBISPKXJDENCB. 1894 li-sh judges liave virtually said that iu every case of fraud the remedy at law, either from the nature of the legal re- lief itself or from the methods of legal procedure, is inade- quate. The only question, therefore, presented to an Eng- lish court is, not whether the equitable jurisdiction exists, but whether it should be exercised.i ^ As the ablest judges § 912, 1 It -will be proper to present the views of the English courts on this question, for the long line of chancellors and other equity judges may be supposed to know, at least, the jurisdiction of their own tribunal. I select recent eases, and those in which the recovery was pecuniary, and in which there was confessedly a concurrent jurisdiction at law. Hill v. Lane, L. R. 11 Eq. 215, was a suit brought simply to recover back the money which plaintiff had paid for certain shares of stock purchased from defendants in reliance upon their false and fraudulent representations. The bill was demurred to. Vice-Chancellor Stuart said (p. 220) : "In support of the demurrer it was argued that the proper remedy for the plaintiff, if he had any, was to proceed by action at law. It has often been decided that this court wUl grant relief in such cases. ... It is so well settled that this court will entertain jurisdiction in such cases, that it would be a misfortune, indeed, to the public if there were any sufficient ground for considering that the jurisdiction is doubtful." He cites the opinions of Lord Eldon, Sir William Grant, Sir John Leach, and other eminent judges, and adds : "So long ago as the ease of Colt v. Woollaston, § 912, (b) This portion of the text at law has not been much invoked, is quoted in Anderson v. Eggers but that may be accounted for in (N. J. Eq.), 49 Atl. 578', reversing large degree by the less expensive, 61 N. J. Eq. 85, 47 Atl. 727. After equally efficient, an^ in former stating that the American courts times more speedy, rfemedy secured have not generally upheld so broad in the courts of law. When re- a jurisdiction, Dixon, J., says: "But sorted to, however, the jurisdiction New Jersey is distinguished from of equity has not been doubted." her sister states by her adherence This passage of the text is also to the standards of the mother quoted in Sumner v. Staton, 151 country respecting both rights and N. C. 198, 18 Ann. Cas. 802, 65 S. E. remedies in equity, and I know of 902, concurring opinion; and in no constitutional or statutory pro- Kuntz v. Tonuele, 80 N. J. Eq. 373, vision or judicial decision in this 84 Atl. 624 (suit by purchaser for state which can be regarded as specific performance with abatement withholding or withdrawing from from purchase money, on ground our court of chancery any jurisdie- that price was fraudulently in- ti()n possessed by its English proto- creased by agreement between ven- types. True, the jurisdiction of dor and plaintiff's broker). This equity in eases of fraud remediable section is cited in Mack v. Village 1895 . ACTUAL FRAUD. ^ 912 have often said, one of the occasions for the existence of a separate court of chancery was its power to deal with all 2 P. Wms. 154, 156, the master of rolls said: 'It is no objection that the parties have their remedy at law, and may bring an action for moneys had and received for the plaintiff's own use, for in cases of fraud the court of equity has concurrent jurisdiction with the common law,- matter of fraud being the great subject of relief here.' " The vice-chancellor also held that the decision ia Ogilvie v. Cnrrie, 37 L. J. Ch. 541, per Lord Cairns, was not in opposition to his own conclusion, and if a dictum. in that case appeared to be opposed, it was in direct conflict with an un- broken current of authority. In Ramshire v. Bolton, L. R. 8 Eq.' 294, the bill alleged that at the defendant's request he advanced to a third person, who was the drawer, one half of the amount of a bill of exchange drawn for five hundred pounds; that the advance was made upon defendant's promise to advance the other half, and his representations that the drawer and acceptor were both men of large property; that defendant's repre- sentations were intentionally false and fraudulent; that he knew the par- ties to the bUl were utterly insolvent, and that it was worthless; that he made no advance himself; but the whole was a scheme to obtain money for himself. The relief demanded was repayment of the money from the defendant personally. The biU was demurred to on the ground that the remedy was wholly at law. Vice-Chancellor Malins said (p. 299) : "No one can say that the bill does not allege a case entitling the plaintiff to recover the money at law; but the question is, whether the remedy is not in this court as well as at law." The vice-chancellor, having said that the facts brought the case within the principle of Pasley v. Freeman, 3 Term Rep. 51, and having cited instances in which equity had taken juris- diction of similar cases, he proceeded : "Lord Eldon, in Evans v. Bicknell, 6 Ves. 174, 182, declared that the case of Pasley v. Freeman, 3 Term Rep. 51, and all others .of that class, were more fit for a court of equity than a court of law, and was clearly of opinion that at least there is concur- of Frankfort, 123 Mich. 421, 82 511, 74 Atl. 975 (bill to rescind a N. W. 209; in Boonville Nat. Bank contract relating to sale of personal V. Blakey, 166 Ind. 427, 76 N. E. property maintained); Mazzola v. 529; in Foote v. Getting, 195 Mass. Wilkie, 72 N. J. Eq. 722, 66 Atl. 55, 15 L. R. A. (N. S.) 693, 80 N. E. 584; L. Martin Co. v. L. Martin & 600. As to the jurisdiction in New Wilekes Co., 75 N. J. Eq. 39, 71 Atl. Jersey, though the remedy at law. is 409; Straus v. Norris," 77 N. J. Eq. adequate, see, also, Knikel v. Spitz, 38, 75 Atl. 980. In Pennsylvania: 74 N. J. Eq. 581, 70 AtL 992 (Ste- Wagner v. Fehr, 211 Pa. St. 435, 3 venson, V. C.) ; Smith v. Krueger, Ann. Cas. 608, and note, 60 Atl. 71 N. J. Eq. 531, 63 Atl. 850; 1043. Schoenfeld v. Winter, 76 N. ,1. Eq. § 912 EQUITY JXTEISPRUDElfCB. 1896 cases of fraud; its original grant of jurisdiction covered fraud in all its forms and phases. The law courts, on the rent jurisdiction, and he says : 'It has occurred to me that that case, upon the principles of many decisions of this court, might have been main- tained here; for it is a very old head of equity that if a representation is , made to another person going to deal in a matter of interest upon the faith of that representation, the former shall make that representation good if he knows it to be false.' Can anything be more conclusive?" In St. Aubyn v. Smart, L. R. 5 Eq. 183, the defendant and one Buller had been partners as attorneys at law. Plaintiff employed the firm to obtain a sum of money due to him, being part of a fund in charge of a court. Buller attended to the business, obtained the money in his own name, and absconded with it. The suit is brought to make the defendant liable for this fraud of his copartner. The bUl did not pray for an accounting, but simply to recover the sum of money. Demurrer on ground of want of jurisdiction. The vice-chancellor said (p. 188) : "Upon a careful con- sideration of the authorities, I am perfectly satisfied that even if there be a remedy at law, there is also one in equity. The jurisdiction was clearly stated by Sir James Wigram in Blair v. Bromley, 5 Hare, 556, 2 PhiU. Ch. 361, confirmed by Lord Lyndhurst on appe&l, who, in the course of his judgment, said that in all the cases to which he had referred the effect of a misrepresentation raised an equity to restore the parties as nearly as possible to the same situation in which they would have stood but for the misrepresentation, and for which damages in an action at law might be a very inadequate remedy; and that the fact that an action at law would lie was no objection to such equity." This decision was affirmed by the court of appeal, consisting of Page Wood (Lord Hatherley) and Sel- wyn, LL. JJ., on the ground of the general jurisdiction of equity in mat- ters of fraud : St. Aubyn v. Smart, L. R. 3 Ch. 646, 650. The celebrated case of Slim v. Croueher, 1 De Gex, F. & J. 518, is a most instructive and convincing authority. Plaintiff was applied to for a loan upon the security of a lease, and was told by the borrower that he was entitled to a renewal of the lease for ninety-eight years. from his lessor. Plaintiff required a written statement from the lessor of that fact. The lessor fur- nished such a statement, and on the faith of it plaintiff made the loan. It turned out that the lessor had already executed the renewal lease to the borrower, who had assigned it to a third person for value ; at the time he made his statement the lessor had forgotten the fact. Plaintiff sues the lessor to recover the sum advanced, with interest. The court of appeal (Lord Chancellor Campbell and Lords Justices Turner and Knight Bruce) held that the defendant's misrepresentation was fraud in equity, though not an intentional moral wrong, that he was liable; and that equity had jurisdiction. Lord Campbell said (p. 523) : "The defense set up in the 1897 ACTUAL FRAUD. § 912 other haad, originally had very little, if any, jurisdiction in such matters. In the 6arly forms of action to enforce suit is, that there was a remedy at law, and that that is the only remedy competent to the plaintiff. Now, that there was a remedy at law I think is quite clear; there is no doubt in my mind that an action would lie, and that it would be for a jury to assess the damages. I am of opinion, how- ever, that this belongs to a class of eases over which courts of law and courts of equity have a common^ jurisdiction, and in which the procedure of both jurisdictions is adapted for doing justice. I do not regret that there is such a class of cases, nor should I be sorry to see it extended. But being of opinion that this is a case in which a court of equity has jurisdiction as well as a court of law, I think that it is a much better case for a court of equity than for a court of law, because a court of law could only have left it to a jury to assess the damages; whereas here, by the superior powers of the court of equity, justice can be done between the parties in the most minute detail." Knight Bruce, L. J., said (p. 527) : "On the merits of this case there can be no possibility of question." The only point reasonably arguable was, in which of the courts redress should be sought, and it has been said that redress should be sought in a court of law. It is true that according to modern practice a court of law would afford redress in the case by means of an action, with the assistance of a jury; but the courts of law in this country exercise jurisdiction in these cases by means of a gradual extension of their powers, and we know that that does not deprive the courts of equity of their ancient and undoubted jurisdiction which they exercised before courts of law enlarged their limits. The observation is familiar — and some of us have heard it used by Lord Eldon — that the jurisdiction not only belongs to this court, but belonged to it originally. ... I do not mean to say that in all cases the court will exercise the jurisdiction. It is in the power of the court to say that it will not do so in particular cases, but I am perfectly satisfied that this is a cale in which the jurisdiction ought to be exercised." These observa- tions are very weighty, and correctly state the relative position of the two jurisdictions in ^equity and at law over matters of fraud. Some of the American decisions seem to speak as though the jurisdiction at law in cases of fraud had existed from the beginning, full and complete; while that in equity was a subsequent creation, including only those matters which, it was found, could not be easily determined at law. » Turner, L. J., said (p. 528) : "If we were to grant any relief upon this appeal, we should be very much narrowing an old jurisdiction of this court, by confining it to §912, («=) Slim V. Croucher has tion of jurisdiction is left un- been overruled on the merits by touched: Low v. Bouverie, [1891] Derry v. Peek, 14 App. Gas. (H. L.) 3 Oh. 82. 337. but its authority on the ques- § 912 EQUITY JURISPBtTDENCE. 1898 covenants, debts, and other obligations ex contractu, fraud was not admitted as a defense, 'and there was no form of action appropriate for the recovery of damages on account of fraud. The jurisdiction of the law courts in such cases was of later origin, and was of gradual growth. It was not until the invention of the actions of assumpsit, case, and trover, in which equitable principles could be largely admitted, that the jurisdiction at law in matters of fraud became fully developed. The full jurisdiction of equity having -thus been established from the earliest time, it should not, in accordance with familiar principles, be at all affected by a subsequent growth of a similar common-law jurisdiction. To say that the full jurisdiction of equity has been any way abridged, impaired, or altered, because the law courts have gradually assumed and finally acquired a like jurisdiction, even though competent in many oases to administer adequate relief,' is to violate one of the most fundamental principles regulating the general equitable jurisdiction. The sum of the English doctrine, tht;refore, is, that, although the jurisdiction always exists, whether it will be exercised depends upon the circumstances of indi- vidual cases.^d cases ill -whicli the jurisdiction has been exercised. We should, I think, be taking the cases as the measure of the jurisdiction, instead of as the examples of that jurisdiction." These words contain the very essence of the true theory eoncerning the function of decided cases to operate as examples of all legal principles and doctrines, rather than as being their sources or fountains. They deserve to be emblazoned on the walls of every court-room in the country, so that they might be under the constant observation of all judges whp are applying precedents in the work of constructing and developing the law. See, also, Colt v. Woollaston, 2 P. Wnis. 154; Evans v. BickneU, 6 Ves. 174; Burrowes v. Lock, 10 Ves. 470; Green v. Barrett, l^im 45; Blair v. Bromley, 5 Hare, 542, 556; 2 Phill. Ch. 354, 361 ; Ingram v. Thorp, 7 Hare, 67 ; Cridland v. Lord De Mauley, 1 De Gex & S. 459 ; Atkinson v. Maekreth, L. R. 2 Eq. 570. § 912, 2 I add several eases, most of them recQpt, merely as examples of the exercise of tlie jurisdiction when some remedy might also have § 912, (d) This passage of the text is quoted in. Kuntz v. Tonnele, 80 N. J. Eq. 373,, 84 Atl. 624. 1899 ACTUAL FRAUD. § 913 § 913. Exception— Fraudulent Wills.— The marked ex- ception to the jurisdiction referred to in the foregoing para- graph is that of canceling wills obtained by means of fraud. In a few very early decisions, the court of chancery seems to have asserted such a jurisdiction. For more than a century, however, and through a long series of cases, the judges have either refused to exercise the jurisdiction, or been obtained at law. The discussion of the peculiarly equitable reme- dies, such as cancellation, specific enforcement, reformation, injunction, etc., is postponed. Pecuniary recoveries; jurisdiction not exercised: New- ham V. May, 13 Price, 749, 751 (suit on a fraudulent warranty) ; Leather V. Simpson, L. R. 11 Eq. 398 (to recover back money paid for a forged bill) ; Ship v. Crossldll, L. R. 10 Eq. 73 (to recover back money paid for shares) ; Ochsenbein v: Papelier, L. R. 8 Ch. 695 (court refused to enjoin an action at law on an insurance policy on the ground that the question of fraud involved could be better tried at law). Pecuniary recoveries; jurisdiction exercised: See cases in the last note, and also Wilson v. Short, 6 Hare, 366 (suit by a principal against his agent) ; Barker v. Birch, 1 De Gex & S. 376; Coomer v. Bromley, 5 De Gex & S. 532; Mcintosh v. Great West. R'y, 2 Macn. & G. 74 (discovery and relief on a contract, although there was a remedy at law). Cancellation or rescission of con- tracts, sales, etc.: Jennings v. Broughton, 5 De Gex, M. & G. 126 (can- cellation of a contract of purchase) ; Reynell v. Sprye, 1 De Gex, M. & G. 660 (setting aside an agreement) ; Rawlins v. Wickham, 3 De Gex & J. 304 (setting aside a contract of partnership and indemnifying plaintiff against the debts of the firm) ; Bartlett v. Salmon, 6 De Gex, M. & G. 33 (setting aside a contract) ; Walsham v. Stainton,' 1 De Gex, J. & S. 678 (setting aside a sale and recovering the value) ; Traill v. Baring, 4 De Gex, J. & S. 318 (canceling a policy of insurance, notwithstanding, the remedy at law) ; Skilbeck v. Hilton, L. R. 2 Eq. 587 (setting aside a release); Hoare v. Bremridge, L. R. 14 Eq. 522; 8 Ch. 22 (cancellation of an insurance policy; the jurisdiction certain, although the remedy at law might be better) ; London etc. Co. v. Seymour, E. R. 17 Eq. 85 (ditto) ; Flower V. Lloyd, L. R. 10 Ch. Div. 327 (setting aside a judgment) ; Lem- priere v. Lange, L. R. 12 Ch. Div. 675 (setting aside a fraudulent lease against an infant lessee guilty of the fraud). Recovering real estate to which the plaintiff was entitled, and which he had been prevented hy fraud from possessing and enjoying: Vane v. Vane, L. R. 8 Ch. 383 (lapse of time no bar where fraud was concealed from the plaintiff, — a remarkable case) ; Chetham v. Hoare, L. R. 9 Eq. 571 (lapse of time no bar where the. fraud has been concealed); Howard v. Earl of Shrewsbury, L. R. 2 Ch. 760. Specific enforcement of false representations; compelling the § 913 EQUITY JUKISPBTJDENCE. 1900 denied its existence; and it has finally been settled by the tribunal of last resort, that, under their general jurisdic- tion, courts of equity have no power to entertain suits for the purpose of setting aside or canceling a will on the grpund that it was procured by fraud. The same rule has been generally adopted in the United States. Under the common system, the validity of wills of real estate could only be tested in an action at law ; that of wills of personal estate was established by the decree of the ecclesiastical court in the proceedings for probate. Under the statutory system generally prevailing in this country, both wills of real estate and wills of personal estate are admitted to probate; in some of the states the decree of the probate court is conclusive with respect to both kinds; in other states it is conclusive only with respect to those of personal property.! ^ defendant to make them good: Hutton v. Rossiter, 7 De Gex, M. & G. 9, 18, 19 (against an executor who had represented that the assets of the estate were sufficient, and that a certain claim would be paid). Enfor- cing a constructive trust against a party who has fraudulently obtained the title to land: Rolfe v. Gregory, 4 De Gex, J. & S. 576 (delay excused by concealed fraud). See, also, on the subject of jurisdiction in general, Garth v. Cotton, 3 Atk. 751; Man v. Ward, 2 Atk. 228; Trenchard v. "Wanley, 2 P. Wms. 167, Huguenin v. Baseley, 14 Ves. 273; Browne v. Savage, 4 Drew. 635; Stent v. Bailis, 2 P. Wms. 220; Chesterfield v. Janssen, 2 Ves. Sr. 125; Barker v. Ray, 2 Russ. 63; Taff Vale etc. R'y V. Nixon, 1 H. L. Cas. 109, 221. § 913, 1 The early cases which admit the jurisdiction are : Herbert v. Lowns, 1 Ch. Rep. 12; Maundy v. Maundy, 1 Ch. Rep. 66; Welby v. Thomagh, Prec. Ch. 123; Goss v. Tracey, 1 P. Wms. 287; Lucas v. Bur- gess, Reg. Lib. 1573, A, fol. 7, Corp'n of Feversham v. Parr, Reg. Lib. §913, (a) This section is quoted Winter, 247 111. 243, 93 N. E. 145; in Sumner v. Staton, 151 N. C. 198, Crawfordsville Trust Co. v. Eamsey, 18 Ann. Cas. 802, 65 S. K 902, con- 178 Ind. 258, 98 N. B. 177; Knikel curring opinion; In re Hoscheid's v. Spitz, 74 N. J. Eq. 581, 70 Atl. Estate, 78 Wash. 309, 139 Pao. 61; 992. See, also, Gray v. Parks, 94 and cited in Domestic & F. Mis- Ark. 39, 125 S. W. 1023; Selden v. sionary Soc. of the P. E. Church v. Illinois Trust & Sav. Bank, 239 111. Eells, 68 Vt. 497, 54 Am. St. Eep. 67, 130 Am. St. Rep. 180, 87 N. E. 888, 35 Atl. 463; Calkins v. Calkins, 860. 229 111. 68, 82 N. E. 242; Dibble v. 1901 ACTUAL FRAUD. § 914 " § 914. The American Doctrine.^ — In a few of the earlier 1573, A, fol. 208; and see Monro's Acta CancellariEe, .698. The follow- ing eases directly or impliedly deny the jurisdiction : Allen v. McPherson, 1 H. L. Gas.. 191; 1 Phill. Ch. 133; 5 Beav. 469; Jones v. Gregory, 2 De Gex, J & S. 83; Wright v. Wilkin, 4 De Gex & J. 141; Andrews >. Powys, 2 Brown Pari. C. 504; Kerriek v. Bransby, 7 Brown Pari. C. 437; Bennet v. Vade, 2 Atk. 324; Webb v. Claverden, 2 Atk. 424; Jones v. Jones, 3 Mer. 161; Armitage v. Wadsworth, 1 Madd. 189; Roberts v. Wynn, 1 Ch. Rep. 125; Archer v. Mosse, 2 Vem. 8; Thynn v. Thynn, 1 Vern. 286; Nelson v. Oldfield, 2 Vern. 76; Plume v. Beale, 1 P. Wjns. 388; Bamesly v. Powel, 1 Ves. Sr. 284, 287; Sheffield v. Duchess of Buck- ingham, 1 Atk. 628; Ex parte Fearon, 5 Ves. 633, 647; Price v. Dew- hurst, 4 Mylne & C. 76, 80; Gingell v. Home, 9 Sim. 539, 548; In re Broderick's Will, 21 Wall. 503; Jones v. Bolles, 9 Wall. 364; Gaines v. Chew, 2 How. 619, 645; Tarver v. Tarver, 9 Pet. 174; Gould v. Gould, 3 Story, 516, 537; Adams v. Adams, 22 Vt. 50; Waters v. Stickney, 12 Allen, 1, 90 Am. Dec. 122; Colton v. Ross, 2 Paige, 396, 22 Am. Dec. 648; Trexler v. Miller, 6 Ired. Eq. 248; Blue v. Patterson, 1 Dev. & B. Eq. 457; McDowall v. Peyton, 2 Desaus. Eq. 313; Watson v. Bothwell, 11 Ala. 650; Hamberlin v. Terry, 7 How. (Miss.) 143; Cowden v. Cowden, 2 How. (Miss.) 806; Ewell v. Tidwell, 20 Ark. 136; Archer v. Meadows, 33 Wis. 166; California v. McGlynn, 20 Cal. 233, 266; Booth v. Kitchen, 7 Hun, 255; "Van Alst v. Hunter, 5 Johns. Ch. 148; Muir v. Trustees, 3 Barb. Ch. 477; Hunter's Will, 6 Ohio, 499; Hunt v. HamUton, 9 Dana, 90; Burrow v. Ragland, 6 Humph. 481. While it plainly appears from these cases that there is no jurisdiction to set aside a probate on the ground of fraud in obtaining the will, there would not seem to be any such objec- tion, on principle, to the granting of appropriate relief against the pro- bate itself on account of fraud in the proceedings independently of the will. Such relief would seem to be exactly analogous to that granted against any fraudulent decree or judgment.** • With respect to jurisdic- § 913, (*>) This note is referred to aside on ground that the will is a in Sumner V. Staton, 151 N. C. 198, 18 forgery). Ann. Oas. 802, 65 S. K 902. See, also, Stead V. Curtis, 191 Fed. 529, 112 § 914, (a) This section is cited in C. C. A. 463 (fraud must be ex- Fitzmaurice v. Hosier, 116 Ind. 365, trinsic; judgment granted on a 9 Am. St. Eep. 854, 16 N. E. 175; fraudulent instrument or perjured Thackrah v. Haas, 119 XT. S. 501, 7 testimony should not be set aside); Sup. Ct. 311; Krueger v. Armitage, Gray v. Parks, 94 Ark. 39, 125 S. W. 58 N. J. Eq. 357, 44 Atl. 167; Eogers 1023; Tracy v. Muir, 151 Cal. 363, v. Eogers, 17 E. I. 623, 24 Atl. 46; 121 Am. St. Rep. 117, 90 Pae. 832 Domestic & F. Missionary Soc. of (probate of will not generally set the P. E. Ch. v. Eells, 68 "Vt. 497, § 914 EQUITY JUBISPETJDENCB. 1902 decisions the Bnglisli rule was adopted to its full extent.^ This cannot, however, be regarded as the present Ameri- can doctriiie. As was shown in the former volume, in several of the states only a partial and very narrow equi- table jurisdiction was for a long time conferred, and this was strictly limited by the courts to the very matters speci- fied by the statutes. In other states, the equitable juris- diction was defined by statute as embracing only those cases for which there was no adequate remedy at law. Influenced partly by the tendency of this legislation, and partly by the supposed constitutional guaranties of the jury trial, which were construed to forbid the interposition of equity in controversies which could be determined 1by law, the equity courts of the United States and of the several states have practically abandoned a large part of the jurisdic- tion in matters of fraud which is confessedly held by the English court of chancery. The doctrine is settled that the exclusive jurisdiction to grant purely equitable reme- dies, such as cancellation, will not be exercised, and the concurrent jurisdiction to grant pecuniary recoveries does tion of a court of probate, see the two following remarkable cases: Rod- erigas v. East Riv. Sav. Inst., 63 N. Y. 460, 20 Am. Rep. 555; Roderigas v. East Riv. Sav. Inst., 76 N. Y. 316, 32 Am. St. Rep. 309. As to jurisdic- tion in case of a lost or destroyed will," see Gaines v. Chew, 2 How. 619, 645; Bailey v. Stiles, 2 N. J. Eq. 220; Allison v. Allison, 7 Dana, 90; Buchanan v. Matloek,. 8 Humph. 390, 47 Am. Dec. 622; Momingstar v. Selby, 15 Ohio, 345, 45 Am. Dec. 579; Slade v. Street, 27 Ga. 17. § 914, 1 For example, by Chancellor Kent in Bacon v. Bronson, 7 Johns. Ch. 201, 11 Am. Dec. 449." 54 Am. St. Rep. 888, 35 Atl. 463; §913, (c) Lost or Destroyed WiUs. Druon v. Sullivan, 66 Vt. 609, 30 Dower v. Seeds, 28 W. Va. 113, 57 Atl. 98; Farmington Corp. v. Bank, Am- Kep. 646 (the jurisdietion as- 85 Me. 46, 26 Atl. 965. Cited, also, ^^'^^^- ^^^^"^ '''' extended review of in Big Huff Coal Co. v. Thomas, 76 the cases) ; Jones v. Casler, 139 Ind. 382, 47 Am. St. Eep. 274, 38 N. E. W. Va. 161, 85 S. E. 171. Sections „,„' ^^ ^, ^,. , „' ^„ '' ' 812; Mather v. Minard, 260 111. 175, 914 et seq. are cited in Lightfoot v. ^gg j^ j, jggg (^^ ^^^^ jurisdiction Davis, 198 N. Y. 261, 139 Am. St. jn nunois). See post, note to § 1154, Rep. 817, 19 Ann. Cas. 747, 29 §914, (b) See, also, ante, §912, L. R. A. (N. S.) 119, 91 N. E. 582. (a). 1903 ACTUAL FEAUD. § 914 not exist, in any case where the legal remedy, either af- firmative or defensive, which the defrauded party might ob- tain, would be adequate, certain, and complete.^ ^ The § 914, 2 I have already discussed this general doctrine in the former volume. See, with respect to the jurisdiction of the United States courts, ante, § § 295, 296, 297, and cases cited ; with respect to the jurisdiction in New Hampshire, § 303; in Massachusetts, §§ 313, 318; in Maine, §§ 323, 327. See, also. Earl of Oxford's Case, 2 Lead. Cas. Eq. 1550-1553, note by American editor. The following are a few of the vast number of cases in which the jurisdiction in matter of fraud is discussed, and its limitations and exceptions are stated:* Grand Chute v. Winegar, 15 Wall. 373; Insurance Co. v. Bailey, 13 Wall. 616; Jones v. BoUes, 9 Wall. 364; Bank of Bellows Falls v. Rutland etc. R. R., 28 Vt. 470; Crane v. Bun- nell, 10 Paige, 333; Russell v. Clark's Ex'rs, 7 Cranch, 69, 89; Hardwick v. Forbes's Adm'r, 1 Bibb, 212; Waters v. Mattingly, 1 Bibb, 244, 4 Am. Dec. 631 ; Blackwell v. Oldham, 4 Dana, 195 ; Warner v. Daniels, 1 Wood. & M. 90, 112; Ferson v. Sanger, Daveis, 252, 259; Bassett v. Brown, 100 Mass. 355; Suter v. Matthews, 115 Mass. 253; Hubbell v. Currier, 10 Allen, 333; Miller v. Scammon, 52 N. H. 609; Woodman v. Freeman, 25 Me. 531; Piseataqua Ins. Co. v. Hill, 60 Me. 178, 183; Clark v. Robinson, 58 Me. 133, 137; Williams v. MitcheU, 30 Ala. 299; Learned v. Holmes, 49 Miss. 290; Boardman v. Jackson, 119 Mass. 161. In the two follow- ing recent eases the doctrine was clearly stated in both of its aspects: Girard Ins. Co. v. Guerard, 3 Woods, 427. Held, that a suit in equity to recover on a bond which had been delivered up and canceled through the fraud of a person not a party to the suit, but which was still in force, will not be sustained, where no discovery is sought, and where a substan- tial copy is furnished. Woods, J., said (P- 431) : "It is not mere fraud which confers jurisdiction on a court of equity. A party may be guilty of a fraud in the warranty of personal property sold, but nevertheless §914, (c) Quoted in County of 365, 9 Am. St. Rep! 854, and note, Ada V. Bullen, 5 Idaho, 188, 95 16 N. E. 175, 19 N. E'. 180; Dickin- Am. St. Eep. 180, 36 L. R. A. 367, son v. Stevenson, 142 Iowa, 567, 120 47 Pac. 818; in Willoughby v. Ball, N. W. 324; Taylor v. Taylor, 74 Me. 18 Okl. 535, 90 Pac. 1017; Johnson 582; Merrill v. McLaughlin, 75 Me. V. Swanke, 128 Wis. 68, 8 Ann. Cas. 64; Farmington Corp. v. Bank, 85 544, 5 L. R. A. (N. S.) 1048, 107 Me. 46, 26 Atl. 965; Krueger v. N.,W. 481. Armitage, 58 N". J. Eq. 357, 44 Atl. §914, (d) Buzard v. Houston, 119 167; Eogers v. Eogers, 17 E. I. 623, U. S. 347, 7 Sup. Ct. 249; Paton v. 24 Atl. 246; Green v. Spaulding, 76 Majors, 46 Fed. 210; Tillison v. Va. 411. See, also, Hogg v. Max- Ewiug, 87 Ala. 350, 6 South. 276; well, 218 Fed. 356,, 134 C. C. A. ],64. Pitzmaurice v. Mozicr, 116 Ind. § 914 EQUITY JUBISPEUDENCB. 1904 language on this subject often used bY judges represents nearly the entire jurisdiction of equity in matters of fraud, whatever be the remedies granted, as concurrent with that at the law, and as not existing where adequate legal re- lief can be given. The inaccuracy of this mode of expres- the remedy is at law on the warranty. So if the maker of a bond, by fraudulent artifice, or even theft, gets possession of the bond from the obligee, still if the obligee has a duplicate of the bond, he cannot pro- ceed in equity to recover upon the bond. A court of equity has juris- diction to relieve from the consequences of fraud, as where a bond or note is procured, or deed of conveyance obtained, on false and fraudulent pretenses. So where a bond or deed is delivered up on fraudulent repre- sentations and is canceled or destroyed." I would remark that if this reasoning is correct, it seems to strike at the root of the jurisdiction to entertain suits on lost instruments of indebtedness. Wampler v. Wam- pler, 30 Gratt. 454: Held, that a deed of conveyance obtained by fraud may be set aside. Christian, J., said (p. 459) : "Courts of equity have an original, independent, and inherent jurisdiction to relieve against every species of fraud. Every transfer or conveyance of property, by what means soever it may be done, is in equity vitiated by fraud. Deeds, obli- gations, contracts, awards, judgments, or decrees may be tKe instruments to which parties resort to cover fraud, and through which they may obtain the most unrighteous advantages, but none of such devices or instruments will be permitted by a court of equity to obstruct the requirements of justice. If a case of fraud be established, a court of equity will set aside all transactions founded upon it, by whatever machinery they may have been effected, and notwithstanding any contrivance by which it may have been attempted to protect them. These principles have now become axioms of equity jurisprudence." I am convinced that the practical sur- render by the equity courts of this country of so large a portion of their original and most certain jurisdiction was both unfortunate and unneces- sary. There are multitudes of cases, even for the recovery of money alone, in which justice could be administered and the rights of both liti- gants protected far better by a trained judge than by leaving everything to the rough-and-ready justice of an ordinary jury. The English courts have perceived and admitted this truth.- Doubtless the influence of able courts, like those of Massachusetts, Maine and Pennsylvania, has been very powerful in shaping the decisions of other state tribimals, the narrow and purely statutory jurisdiction of the former states not, perhaps, hav- ing been sufficiently observed.* §914, (e) This note is discussed 8 Ann. Cas. 544, 5 L. E. A. (N. S.) in Johnson v. Swanks, 128 Wis. 68, 1048, 107 N. W. 481. 1905 ACTUAL FRAUD. § 914 sion has been shown in the former volume.^ The true doc- trine is, that where the estate or interest is equitable, the jurisdiction exists and will always be exercised; where the estate, interest, or right is legal, and the remedies are equi- table, the jurisdiction always exists, but will not always be exercised ;, where the right is legal, and the remedy is pecuniary and legal, the jurisdiction is concurrent and only exists where the remedy at law is inadequate.s I have placed in the foot-note a number of recent decisions, ar- ranged in groups according to the nature of their reliefs, merely as examples and illustrations of the doctrine adopted by the American courts.^ The question whether § 914, 3 Cancellation of conveyances, contracts, and other private in- struments. The jurisdiction exercised:^ Derrick v. Lamar Ins. Co., 74 111. 404 (an assignment of a policy fraudulently procured from tlie as- sured by an officer of the insurance company set aside) ; Remington etc. Co. V. O'Dougherty, 81 N. Y. 474 (a forged deed) ; Hammond v. Pen- noek, 61 N. Y. 145; Fisher v. Hersey, 78 N. Y. 387 (a sale of land in pursuance of a decree, but fraudulently made; sale set aside, and a resale ordered) ; Hackley v. Draper, 60 N. Y. 88 (sale of a debt in pursuance of an order of court obtained by fraud) ; Bruce v. Kelly, 5 Hun, 229, 232 (conveyance); Vandercook v. Cohoes Sav. Inst., 5 Hun, 641 -(fraudulent sale under a decree of foreclosure) ; Smith v. Griswold, 6 Or. 440 (a court of equity will cancel a bill of sale of personal property executed §914, (f) See §§138, 140, note, taining an instrument under seal 175, note 188. * are a subject for relief in equity § 914, (g) Quoted in Buck v. only) ; Southern States Fire & Ward, 97 Ya. 209, 33 S. E. 513. Casualty Ins. Co. v. Whatley, 173 See § 178. The text is cited in Ala. 101, 55 South. 620; Culmon v, Hosier v. Walter, 17 Okl. 305, 87 Sarraille, 142 Cal. 638, 76 Pac. 486; Pae. 877. . Harris v. Dumont, 207 111. 583, 69 §914, (i) Thackrah v. Haas, 119 N. E. 811; Stebbins v. Petty (111.), U. S. 501, 7 Sup. Ct. 3U; U. S. Life 70 N. E. 673; Clay v. Hammond, 199 Ins. Co. V. Cable, 98 Fed. 761, 39 111. 370, 93 Am. St. Bep. 146, 65 C. C. A. 756; Mutual Life Ins. Co. N. E. 352; Felt v. Bell (111.), 68 V. Pearson, 114 Fed. 395; ITnion N. E. 794; Fitzmaurice v. Mozier, Life Ins. Co. v. Eiggs, 123 Fed. 312; 116 Ind. 365, 9 Am. St. Eep. 854, Farwell v. Colonial Trust Co., 147 16 N. E. 175, 19 N. E. 180, and note Fed. 480, 78 C. C. A. 22; Hogg v. (promissory note); Matlack v. SEaf- Maxwell, 218 Fed. 356, 134 C. C. A. fer, 51 Kan. 208, 37 Am. St. Eep. 356 (in the federal courts, collateral 270, 32 Pac. 890; West lake v. Dunn fraudulent representations in ob- (Mass.), 68 N. E. 212; Fred Macey 11—120 § 914 EQUITY JUKISPKUDENCE. 1906 equity has jurisdiction of suits merely for the recovery of money, or whether the action should be at law, has, how- ever, ceased to be of any practical importance in those states which have adopted the reformed procedure. The through fraud) ; Globe Life Ins. Co. v. Reals, 50 How. Pr. 237 (a life policy) ; Glastenbury v. McDonald, 44 Vt. 450 (a contract) ; Willemin v. Dunn, 93 111. 511 (voluntary conveyance on account of mental weakness and undue influence) ; Puller v. Percival, 126 Mass. 381 (cancellation of a firm note fraudulently given by a partner of the plaintiff to a holder with notice of the fraud) ; Emigrant Co. v. County of Wright, 97 U. S. 339 (contract for conveyance of land procured in fraud of public rights and for grossly inadequate consideration) ; Wampler v. Wampler, 30 Gratt. 454 (conveyance of land) ; Hosleton v. Dickinson, 51 Iowa, 244 (equitable defense; in an action on a promissory note given for the price of land, defendant may have the note canceled to the extent of the dam- age sustained by him from false representations in the sale) ; Field v. Herrick, 5 HI. App. 54- (a lease obtained by fraud upon the lessee); Tracy v. Colby, 55 Cal. 67 (sale of land made in pursuance of a judicial order) ; Moore v. Moore, 56 Cal. 89 (conveyance procured by undue influ- ence) ; United States Ins. Co. v. Central Nat. Bank, 7 111. App. 426 (biU supplementary to execution setting aside conveyance fraudulent against a creditor) ; Noble v. Hines, 72 Ind. 12 ; Bruker v. Kelsey, 72 Ind. 51 ; Pfeifer v. Snyder, 72 Ind. 78 (to set aside a conveyance of land fraudu- lent against the plaintiff as a judgment creditor, the complaint must aver that there is not other sufficient property subject to execution to satisfy the demand) ; Thompson v. Heywood, 129 Mass. 401 (where land was fraudiilently sold and conveyed to the owner of the equity of redemption under a power of sale contained in a prior mortgage, a subsequent mort- gagee is entitled to have such sale and conveyance canceled) ; and see Co. V. Macey, 143 Mieh. 138, 5 (N. Y.), 71 N. E. 97; Myler v. L. R. A. (N. S.) 1036, 106 N. W, 722; Culver v. Avery, 161 Mieh, 322, 126 N. W. 439; Jones v. Som- erville, 78 Miss. 269, 84 Am. St, Rep. 627, 28 South. 940; Dashner v, Buffington, 170 Mo. 260, 70 S. W. 699; MeGhee v. Bell, 170 Mo. 121, 59 L. R. A. 761, 70 S. W. 493; Mc Cue V. Stumpf (Mo.), 79 S. W. 661 Mardon v. Dorthy, 160 N. Y. 39 46 L. R. A. 694, 54 N. E. 726 (can cellation of mortgage for fraud in 609, 30 Atl. 98. procuring signature) ; Mack v. Latta Fidelity Mut. Ins. Co. (Okl.), 167 Pac. 601; Hearu v. Hearn, 24 E. I. 32S, 53 Atl. 95; Byrd v. Byrd, 95 Tenn. 364, 49 Am. St. Rep. 932, 32 S. W. 198; Cooper v. Maggard (Tex. Civ. App.), 79 S. W. 607; Hollis v. Finks (Tex. Civ. App.), 78 S. W. 555; American Cotton Co. v. Collier, 30 Tex. Civ. App! 105, 69 S. W. 1021; Morrison v. Snow, 26 Utah, 247, 72 Pac. 924; Druon v. Sullivan, 66 Vt. 1907 ACTUAL FEATJD. § 914 codes provide that all actions, simply for the recovery of money, without making any exceptions, must be tried by a Huxley v. King, 40 Mich. 73 (setting aside title fraudulently acquired under a foreclosure and redemption) ; Somerville v. Donaldson, 26 Minn. 75 (conveyance tif land) ; Poston v. Balch, 69 Mo. 115 (a sale of personal property set aside at suit of the defrauded vendor, and real estate into which the property had been converted by the fraudulent vendee subjected to a lien for its value) ; Free v. Buckingham, 57 N. H. 95 (fraudulent conveyance oiE land) ; Ladd v. Eice, 57 N. H. 374 (fraudulent convey- ance set aside and reconveyance ordered) ; Willis v. Sweet, 49 Wis. 505, 5 N. W. 895 (a deed of land delivered as an escrow, and fraudulently recorded, set aside). The same. Jurisdiction, when not exercised:^ The rule is generally adopted that a suit will not be sustained to cancel an executory, non- negotiable, personal contract, — e. g., a policy of insurance, — when the fraud might be set up as a defense to an action on the contract, and there are no special circumstances which would prevent the defense from being available, adequate, and complete: Globe etc. Ins. Co. v. Reals, 79 N. Y. 202 (where the jurisdiction of equity will not be exercised to cancel a policy of insurance or other written executory contract; it is not sufficient that a defense exists and the evidence might be lost; there must be cir- cumstances showing injury which a court of equity alone can prevent) ; Huff V. Ripley, 58 Ga. 11 (will not set aside fraudulent sale of personal property when remedy at law is adequate) ; Ins. Co. v. Bailey, 13 Wall. 616, 621, 623 (policy of insurance will not be canceled when the facts constitute a complete defense at law) ; Eawson v. Harger, 48 Iowa, 269 (contract for sale of an invention, if neither party knew of its want of novelty, and both had the same means of information and acted in good faith, the contract will not be canceled) ; Moore v. Holt, 3 Tenn. Ch. 248 §914, (1) Buzard v. Houston, 119 heiser, 152 Mich. 177, 125 Am. St. U. S. 347, 7 Sup. Ct. 249; Cable v. Eep. 406, 15 L. H. A. (N. S.) ]092, United States Life Ins. Co., 191 115 N. W. 964; Schank v. Sehueh- U. S. 288, 24 Sup. Ct. 74; Such v. man, 212 N. Y. 352, 106 N. E. 127 Bank of State of New York, 127 (contract for purchase of chattels); Fed. 450; Eiggs v. Union Life Ins. Big Huflf Coal Co. v. Thomas, 76 Co. (C. C. A.), 129 Fed. 207; Dot- W. Va. 161, 85 S. E. 171 (non- son v. Kirk, 180 Fed. -14, 103 C. C. A. negotiable instrument); Johnson v. 368; Vannatta v. Lindley, 198 111. Swanke, 128 Wis. 68, 8 Ann. Cas. 40, 92 Am. St. Eep. 270, 64 N. E. 544, 5 L. R. A. (N. S.) 1048, 107 735; Des Moines Life Ins. Co. v. N. W. 481, citing the ?ii)ove note; Self art (111.), 71 N. E. 349; Beaton Hall v. Bell, 143 Wis. 296; 127 N. w. V. Inland Township, 149 Mich. 558, 967. 113 N. 'W. 361; Smith v. Werk- i 914 EQUITY JUKISPKUDENCB. 1908 jiury, ana me same general rules of pleading are prescribed for all kinds of suits. It follows, therefore, that there (a contract for the purchase of real property will not be canceled at the suit of one contractor on account of the fraud of his co-contractor, when the other parties were innocent of the wrong) ; Tuttle vT Tuttle, 41 Mich. 211, 2 N. W. 21 (a mortgage on land, conveyed on consideration of sup- porting the grantor, will not be canceled as fraudulent against such gran- tor, when he again becomes owner of the land) ; Johnson v. Murphy, 60 Ala. 288 (the breach of an agreement to make future advances if a mort- gage is executed for past advances is not sufficient to have the mortgage canceled on the ground of fraud; the remedy is at law) ; Noel v. Horton, 50 Iowa, 687 (deed of land will not be -canceled on the ground of false representations concerning mere collateral matters not affecting the sub- stance of the contract) ; Dunaway v. Robertson, 95 111. 419 (a person who executes deeds with intent to defraud creditors and puts them on record, but does not deliver them, can have no relief against them in equity) ; Compton v. Bunker Hill Bank, 96 111. 301, 36 Am. Rep. 147 (a deed will not be canceled when made through the fraud of a third person not author- ized to act for the grantee, the fraud being unknown to the latter when the deed was received) ; Briggs v. Johnson, 71 Me. 235 (a deed invalid oh its face will not be canceled as a cloud on title) ; Lavassar v. Wash- bume, 50 Wis. 200, 6 N. W. 516 (a deed of land will not be canceled unless the proof of fraud is clear and convincing). Cancellation of judgments and other judicial proceedings, and suits to restrain actions and judgments at law. The jurisdiction exercised :i Dederer v. Voorhies, 81 N. Y. 153 (to set aside fraudulent proceedings of commissioners in making an assessment for a road) ; Hunt v. Himt, 72 N. Y. 217; 28 Am. Rep. 129 (what necessary in order to set aside a judgment for fraud) ; Jotdan v. Volkenning, 72 N. Y. 300 (ditto) ; Ross V. Wood,- 70 N. Y. 8 (ditto) ; Harbaugh v. Hohn, 52 Ind. 243 (judgment fraudulently taken for a larger sum than was due) ; Harris v. Cornell, 80 111. 54 (a fraudulent decree for the sale of land) ; Doughty v. Doughty, 27 N. J. Eq. 315 (a judgment recovered in anqther state) ; Craft v. Thompson, 51 N. H. 536 (an award obtained by fraud) ; Holland v. Trot- ter, 22 Gratt. 136 (where party was prevented by fraud from setting up a good defense in the action at law) ; Babcock v. McCamant, 53^111. 214 §914, (J) Eobb V. Vos, 155 TJ. S. obtained by fraud). See, also, 13, 15 Sup. Ct. 4 (judgment ob- Baart v. Martin, %^ Minn. 197, 116 tained by fraudulent appearance of Am. St. Eep. 394, 108 N. W. 945 attorney) ; Bosher v. Eichmond, etc., (decree registering title under Tor- Land Co., S9 Va. 455, 37 Am. St. rens system set aside although stat- Eep. 879, 16 S. E. 360 (injunction ute makes no exception for case of against action on stock subscription fraud). 1909 ACTUAL FRAUD. § 914 would be no real distinction in the form, pleadings, pro- cedure, . mode of trial, judgment, and execution, in those states, whether the action is regarded as equitable or legal. (collection of a fraudulent judgment restrained; equity jurisdiction in fraud not lost because a statute has given a similar jurisdiction at law) ; Graham v. Roberts, 1 Head, 56, 59 (a judgment by default fraudulently obtained without service of process) ; Sayles v. Mann, 4 111. App. 516 (a judgment fraudulently obtained against a married woman) ; District etc. of Algona v. District etc. of Lott's Creek, 54 Iowa, 286 (a fraudulent award) ; Huxley v. King, 40 Mich. 73 (a fraudulent foreclosure and redemption thereunder) . The same. Jurisdiction, when not exercised: United States v. Throck- morton, 98 U. S. 61 (a judgment or decree — e. g., confirming a claim under a Mexican grant — will not be set aside by an equity suit brought for that purpose, on the ground that it was obtained by fraudulent 'fend forged documents' and fraudulent and perjured testimony, when the self- same questions and the issues thereon were presented, considered, and determined by the court in the judgment itself which is assailed) ; Kelly V. Christal, 81 N. Y. 619 (equity will not set aside, or restrain, or relieve against a judgment at law on the ground of fraud, when all the facts could have been set up and would have been a complete defense to the action at law. The following cases also are to the same effect : Cairo etc. R. R. V. Titus, 27 N. J. Eq. 102; Barker v. Rukeyser, 39 Wis. 590; Thoma- son V. Fannin, 54 Ga. 361; Grubb v. Kolb, 55 Ga. 630; Cairo etc. E. R. V. Holbrook, 92 111. 297; Stilwell v. Carpenter, 2 Abb. N. C. 238) ; Shepard V. Akers, 3 Tenn. Ch. 215 (equity will not relieve against a judgment at law on the ground merely of irregularities at the trial, laches of the party himself, or negligence, or even fraud of the party's own counsel) ; Robin- son V. Wheeler, 51 N. H. 384 (equity will not relieve against a judgment at law merely on the ground of a defense insufficient at law, where no discovery is sought). Pecuniary recoveries. Concurrent jurisdiction, when exercised:^ Getty V. Devlin, 70 N. Y. 504 (against fraudulent promoters of a fraudulent §914, (yi Tyler v. Savage, 143 Land Co., 89 Va. 455, 37 Am. St. U. S. 79, 12 Sup. Ct. 340 (president Rep. 879, 16 S. E. 360 (recovery of of insolvent corporation represented money paid on stock subscription) ; tkat it was flourishing, and thus in- Wilson v. Carpenter, 91 Va. 183, duced plaintife to buy stock. Held, 50 Am. St. Eep. 824, 21 S. E'. 243. that plaintiff had a right to the See, also, King v. Livingston Mfg. appointment of a receiver and to Co., 192 Ala. 269, 68 South. 897 have the assets applied to the (concurrent jurisdiction to enable a debts); Bosher v. Eichmond, etc., purchaser of stock to recover back § 915 EQUITY JUEISPBUDENCB. 1910 § 915. Incidents of the Jurisdiction and Relief.* — There are certain incidents which are requisite to the exercise of corporation; accounting and. recovery of money invested in the stock of the company) ; Erie R. K. v. Vanderbilt, 5 Hun, 123 (suit by corporation against trustees for a fraudulent disposition of corporate property) ; Mar- low V. Mario w, 77 111. 633 (payment decreed of promissory notes fraudu- lently obtained by the maker from the holder) ; Scott v. Scott, 33 Ga. 102, 104; Harper v. Whitehead, 33 Ga. 138 (general rule, inadequate remedy at law is a sufittcient ground for a suit in equity) ; EUis v. KeUy, 8 Bush, 621, 631 (money compelled to be paid by a fraudulent judgment recovered back after a discovery of the fraud). The same. Concurrent jurisdiction for recovery of money, when not exercised:^ Stephens v. Board of Education, 79 N. T. 183, 35 Am. Rep. 511 (where trust moneys have been fraudulently disposed of, but have bee« paid to a bona fide holder) ; Bay City Bridge Co. v. Van Etten, 36 Mich. 210 (against ofilcers of a corporation, who have ceased to be such, for money fraudulently appropriated to their own use, when no dis- covery is sought) ; Youngblood v. Youngblood, 54 Ala. 486 (money over- paid through fraudulent representations) ; Huff v. Ripley, 58 Ga. 11 (fraudulent sale of personal property where the remedy at law is com- plete) ; True v. Loring, 120 Mass. 507 (money overpaid by fraud, or fraudulent conversion of chattels) ; Person v. Sanger, Daveis, 252, 259, 261 (to recover damages arising from fraud) ; Woodman v. Saltonstall, 7 Cush. 181 (where there is an adequate remedy at law in insolvency proceedings, equity wiU not interfere, in Massachusetts, even though a discovery is sought) ; Bassett v. Brown, 100 Mass. 355 (no equity juris- diction in Massachusetts of a suit for repayment of money or recon- veyance of land on the ground of fraud; the remedy is at law) ; Suter v. money paid) ; Heckendorn v. Eo- tablish a, trust, the proper remedy madka, 138 Wis. 416, 120 N. W. 257 is an action at law) ; Paton v. (same); Straus v. Norris, 77 N. J. Majors, 46 Fed. 210; Eels v. Apple- Eq. 33, 75 Atl. 980 (suit by vendee banm, 182 Mich. 582, 148 N. W. 696; to recover back proportionate part Heffernan v. Burns, 175 Mich. 457, of purchase price for misrepresen- 141 N. W. 529 (fraud as to personal tation of acreage). property, money judgment sought); §914, (1) Buzard v. Houston, 119 Taylor v. Brown, 92 Ohio 287, 110 TT. S. 347, 7 Sup. Ct. 249; Curriden N. E. 739 (pecuniary recovery V. Middleton, 232 XJ. S. 633, 58 L. against fiduciary, no accounting be- Ed. 765, 34 Sup. Ct. 458 (where ing necessary). suit is really for damages on ae- ! count of a purchase of stock in- § 915, (a) This section is cited in duced by fraudulent representatfons. Keen v. James, 39 N. J. Eq. 257, 51 and there is no attempt to rescind. Am. Rep. 29, and in Nichols v. to follow a specific fund- or to es- MeholSj 79 Conn. 644, 66 Atl. 161. 1911 ACTUAL FRAUD. § 915 the jurisdiction, and to the granting of any relief, and which result partly from the equitable conception of fraud it- Matthews, 115 Mass. 253 (fraud not sufficient to give equity jurisdiction in Massachusetts when the law provides an adequate. remedy) ; Girard Ins. Co. V. Guerard, 3 Woods, 427 (suit on a bond which has been delivered up and canceled through fraud of a third person) ; Jewett v. Bowman, 29 N. J. Eq. 174 (a bill alleging fraud cannot be turned into an action for an accounting, on failure to prove the fraud). Jurisdiction in matters relating to or connected with administrations:"^ Fulton V. Whitney, 5 Hun, 16 (the final accounting by executors or trus- tees before a surrogate is no bar to a suit in equity to enforce a trust) ; Richardson v. Brooks, 52 Miss. 118 (there is no jurisdiction in equity to correct probate proceedings; but the jurisdiction of equity over the acts of trustees will not be affected by the proceedings in a court of probate) ; Freeman v. Reagan, 26 Ark. 373, 378 (equity has jurisdiction over an -administration when there has been fraud or waste) ; Kellogg v. Aldrich, 39 Mich. 576 (no jurisdiction in equity of a suit for the distribution of an intestate's personal Estate on the ground of fraud; proceedings must be in a probate court) ; Cota v. Jones, 8 Pac. L. J. 1044, Sup. Ct. Cal. (A and B were two of the heirs and next of kin of a deceased intestate, whose estate was in the course of administration, and each was entitled to an undivided share of such estate. By false and fraudulent repre- • sentations that the estate was virtually insolvent, and that A's share was valueless, the defendant, B, procured the plaintiff, A, to give the defend- ant an absolute conveyance and assignment of all A's share in the estate for a nominal consideration. When the estate was subsequently settled and distributed, B, as the assignee of A, received A's share by the decree of distribution, which share consisted of lands and personal property, and was from eight thousand to ten thousand dollars in value. A did not discover the fraud until several years after, and upon such discovery im- mediately brought this suit. Held, that the court had jurisdiction in equity to give A complete -relief by declaring B to be a trustee of the property thus fraudulently acquired, and by compelling a conveyance to A ; that the decree of distribution did not affect A's rights or prevent the relief; and that the fraud, not having been discovered, the action was not barred by the statute" of limitations or by the lapse of time). Jurisdiction exercised by impressing a trust on property acquired by fraud : Cota v. Jones, 8 Pac. L. J. 1044, Sup. Ct. Cal. ; Bennett v. Austin, 81 N. Y. 308 (fiduciary person buying in property and held to be a true- § 914, (m) See, also, § 1154. This aside fraudulent sale by executor to paragraph of the text and this note himself, brought after Me final ac- are cited in French t. Woodruff, 25 counting and discharge). Colo. 339,'54 Pac. 1015 (suit to set § 915 EQUITY JUEISPBXIDBNCB. 1912 self in its effect uppn the rights and liabilities of the two parties, and partly from the theory concerning remedies and their administration. These incidental requisites are referable, therefore, to the two following general prin- ciples : 1. Fraud does not render contracts and other trans- actions absolutely void, but merely voidable, so that they may be either confirmed or repudiated by the party who tee) ; Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511 (trust moneys fraudulently transferred cannot be reached in the hands of a bona fide holder) ; People v. Houghtaling, 7 Cal. 348, 351 (a fraudulent grantee held to be a trustee) ; Watson v. Erb, 33 Ohio St. 35 (the breach of a verbal agreement to buy land and convey it to the^plaintiff is not a fraud which authorizes a court of equity to declare a. trust and compel a conveyance) ; McVey v. McQuality, 97 111. 93 (a fraudulent grantee treated as a trustee for the equitable owner) . Miscellaneous eases of fraud :'^ Durant v. Davis, 10 Heisk. 522 (bor- rowing money to pay for land purchased with the promise to give the lender a mortgage on the land, which promise is violated, is not a fraud giving rise to a trust, nor does the lender become subrogated to the ven- dor's lien on the land) ; Struve v. Childs, 63 Ala. 473 (an injunction ■ granted to restrain the sale of land under a power in a mortgage, when the mortgagee colludes with third persons to obtain a wrongful lien on the land under the sale) ; Leupold v. Krause, 95 111. 440 (homestead ;, neither fraud nor even the commission of a crime will work a forfeiture of homestead rights) ; Dickenson v". Seaver, 44 Mich. 624 (a right "to com- plain of fraud and to sue for relief is not assignable) ; Grubb's Appeal, 90 Pa. St. 228 (the proper construction of a deed is not a ground for equity jurisdiction-;, that is, a suit for the construction of a deed cannot be maintained; a deed wiU not be reformed when there is no allegation of fraud, mistake, or accident) ; WUliamson v. Carskadden, 36 Ohio St. 664 (in an action on a mortgage regular in form, "it may be shown in defense that the delivery, ^ to several of the persons who signed it, was un- authorized and fraudulent). The foregoing examples which are pur- posely selected from the most recent decisions wiU be suflBeient, it is hoped, to put the reader on the track of the authorities which deal with the sub- ject of equitable jurisdiction over matters of fraud. §914, (d) See, also, the interest- reet birth certificate, in which ing case, Vanderbilt v. Mitchell, 72 plaintiff was named as father; ju- N. J. Eq. 910, 14 L. E. A. (N. S.) risdictiou rested partly on ground 304, 67 Atl. 97, reversing 71 N. J. of fraud). Eq. 632, 63 Atl. 1107 (bill to cor- 1913 ACTUAL FRAUD. § 916 had suffered the wrong.i ^ 2. If he elects to repudiate, and to seek for a remedy, then equity proceeds upon the theory that the fraudulent transaction is a nullity; and it ad- ministers relief by putting the parties back into their origi- nal position, as though the transaction had not taken place, and by doing equity to the defendant as well as to the plain- tiff. The consequences of these two principles, which have been alluded to, and which remain to be considered, are as follows : — § 916. The Same. Plaintiff Particeps Doll— Ratification.^ If the plaintiff is himself a party to the fraud, particeps §915, 1 Oakes v. Turquand, L. R. 2 H. L. 325, 346; Lindsley v. Fer- guson, 49 N. Y. 623, 625; Negley v. Lindsay, 67 Pa. St. 217, 228, 5 Am. Rep. 427; PearsoU v. Chapin, 44 Pa. St. 9; Wood v. Goff, 7 Bush, 59, 63. Some of these cases draw an important distinction between fraudulent instruments which a party intends to execute in the form and character which they purport to have, — that is, he intends to execute a deed as a deed, an assignment as an assignment, — but this his intention is procured by fraud, and those instruments which he does not intend to execute in the form and character which they purport to have, but he executes them under the fraudulent representation, and conviction produced thereby, that their character is different from what it really is; for example, a person executes a deed under the fraudulent representation and conviction that he is executing a receipt; he intends to execute a receipt, ^ut really exe- cutes a deed. In the latter class of cases, the instrument is so far void, it is said, that even a hona fide purchaser can acquire no rights under it; and the remedial rights of the defrauded party are not prejudiced by this delay in enforcing them: " Tayler v. Great Indian etc. R'y, 4 De Gex & J. 559, 573, 574; Donaldson v. Gillot, L. R. 3 Eq. 274; Ogilvie v.. Jeaffireson, 2 Giff. 353; Livingston v. Hubbs, 2 Johns. Ch. 512; County of Schuylkill v. Copley, 67 Pa. St. 386, 5 Am. Rep. 441; McHugh v. County of Schuyl- kill, 67 Pa. St. 391, 396, 5 Am. Rep. 445. See, also, a series of eases on fraudulent promissory notes involving this distinction. §915, (b) Howard v. Turner, 135 Am. St. Rep. 196, 45 N. E. 577; Pa. St. 349, 35 Am. St. Bep. 883, Rauh v. Waterman, 29 Ind. App. 26 Atl. 723. 344,' 61 N. E. 743, '63 N. B. 42 (dis- §91p, (c) See § 918. sauting opinion). This section is §916, (a) This classification is cited in Snipes v. Kelleher, 31 quoted in Earnsworth v. Duffner, Wash. 286, 61 L. R. A. 506, 72 Pac. 142 U. S. 43, 12 Sup Ct. 164; 67. Crocker v. Manley, 164 111. 282, 56 § 916 EQUITY JUEISPBUDENCE. 191 i doli, to sucli an extent that he is in pari delicto with the defendant, he can obtain no relief ; equity does not, in gen- eral, relieve a person from the consequences of his own actual fraud.i^ The mere fact, however, that the plain- tiff was a party to the wrong in any degree, and is not there- fore completely innocent, will not necessarily deprive him of relief, defensive or even affirmative. If he is not in pari delicto, and is comparatively the more innocent of the two, he may obtain relief by doing full equity to those parties, if any, who have sustained injury by his partial wrong.^ While the party entitled to relief may either avoid the transaction or confirm it, he cannot do both; if he adopts a part, he adopts all ; he must reject it entirely if he desires to obtain relief .^ •= Any material act done by him, with knowledge of the facts constituting the fraud, or under such circumstances that knowledge must be imputed, which as- sumes that the transaction is valid, wUl be a ratification.* ^ § 916, 1 See ante, vol. 1, § 401, and cases cited; Dunaway v. Robertson, 95 111. 419; Roman v. MaU, 42 Md. 513. §916, 2 See ante, vol. 1, § 403, and cases cited; Solinger v. Earle, 82 N. Y, 393; Erie R. R. v. Vanderbilt, 5 Hun^ 123; Poston v. Balch, 69 Mo. 115. A person who comes within this rule must restore those who have sustained injury by him, as a condition to his obtaining any relief: See Kasterboek's Appeal, 51 Pa. St. 483 ; and see Briggs v. Rice, 130 Mass. 50. §916, 3 Great 'Luxembourg R'y v. Magnay, 25 Beav. 586, 594; Potter V. Titcomb, 22 Me. 300 ; Farmers' Bank v. Groves, 12 How. 51. To entitle a party to rescind an agreement for the exchange of land for goods, he must be able to put the other party in as good a condition as before the exchange: Smith v. Brittenham, 98 111. 188. § 916, 4 See ante, § 897. In the same suit a party cannot claim tinder and against the fraudulent transaction. If his suit is brought to enforce §916, (b) Central Life Assur. V. S. 232, 24 Sup. Ct. 259. The Society of U. S. v. Mulford, 45 text is quoted in Meteher v. Wire- Colo. 240, 100 Pae. 423. man, 152 Ky. 565, 153 S. W. 982; § 916, (c) Dennis v. Jones, 44 and cited in Cornett v. Kentucky N. J. Eq. 513, 6 Am. St. Rep. 899, River Coal Co., 175 Ky. 718, 195 14 Atl. 913. The text is quoted in S. W. 149. See, also. Halm v. Fletcher v. Wireman, 152 Ky. 565, Wright (Colo.), 168 Pae. 36 (mak- 153 S. W. 982. ing payments with Icnowledge of § 916, (d) Batification. — See post, fraud) ; Barnes v. Century Savings § 964. Shappirio v. Goldberg, 192 Bank, 165 Iowa, 141, 144 N. W. 1915 ■ ACTUAL rRAXTD. §917 §917. Promptness — Delay Through Ignorance of the Fraud. — The most important practical consequence of the two principles above mentioned is the requisite of prompt- ness. The injured "party must assert his remedial rights with diligence and without delay, upon becoming aware of the fraud. After he has obtained knowledge of the fraud, or has been informed- of facts and circumstances from which such knowledge would be imputed to him, a delay in insti- tuting judicial proceedings for relief, although for a less period than that prescribed by the statute of limitations, may be, and generally will be, regarded as an acquiescence, and this may be, and generally will be, a bar to any equi- table remedy. 1 ^ To this rule there is one limitation : it ap- rights arising from the transaction as standing, he cannot ask to have it rescinded, and the like:* See Coleman v. Cokimbia Oil Co., 51 Pa. St. 74, 77. If, however, the injured party has obtained the relief in an equity suit that a fraudulent conveyance be canceled, and the property recon- veyed, this is not, it seems, any bar to an action at law for damages : Bruce v. Kelly, 5 Hun, 229, 232. § 917, 1 See ante, §§ 817, 819, 820; Briggs v. Rice, 130 Mass. 30; Hath- away V. Noble, 55 N. H. 508; Lyme v. Allen, 51 N. H. 242; Willoughby V. Moulton, 47 N. H. 205, 208; Weeks v. Robie, 42 N. H. 316; Badger v. Badger, 2 Wall. 87, 94; AUore v. Jewell, 94 U. S. 506, 512; Sullivan v. 367; Draft v. Hesselsweet (Mich.), Howard (Tex. Civ. App.), 93 S. W. 161 N. W. 864 (making, payments 690; Fitzgerald v. Frankel, 109 Va. and remaining in possession); 603, 64 S. E. 941; Stelter v. Fowler, Gallagher v. O'Neill, 78 Neb. 671, 62 Wash. 345, J13 Pac. 1096, 114 111 N. W. 5S2; Luckenbaeh v. Pac. 879. See, further, on this sub- Thomas (Tex.. Civ. App.), 166-8. W. ject. Pom. Eq. Remedies, §687. 99; Finch v, Garrett, 109 Va. 114, §916, (e) Merrill v. Wilson, 66 63 S. E. 417; PfeifCer v. Marshall, Mich. 232, 33 N. W. 716; Acer v. 136 Wis. 51, 116 N. W. 871. For Hotchkiss, 97 N. Y. 395; Halm v. acts not amounting to a. ratification, Wright (Colo.), 168 Pac. 36. see Graybill v. Drennen, 150 Ala. §917, (a) The text is quoted in 227, 43 South. 568; Maine v. Mid- Fletcher v. Wireman, 152 Ky. 565, land Investment Co., 132 Iowa, 272, 153 S. W. 982; Wagg v. Herbert, 19 109 N. W. 801; Ginn v. Almy, 212 Old. 525, 92 Pac. 250. This section Mass. 486, 99 N. Bi.276; Davis v. is cited in Hanner v. Moulton, 138 Forman, 229 Mo. 27, 129 S. W. 213; TJ. S. 486, 11 Sup. Ct. 408; National Liland v. Tweto, 19 N. D. 551, 125 Mut. B. & L. Ass'n v. Blair, 98 Va. N. W. 1032; Jeffreys v. Weekly, 81 490, 36 S. E. 513; EomanofE Land Or. 140, 158 Pac. 522; Eomine v. & Min. Co. v. Cameron, 137 Ala. §917 EQUITY JUEISPRUDENCB. 1916 plies only when the fraud is known or ought to have been known. No lapse of time, no delay in bringing a suit, how- ever long, will defeat the remedy, provided the injured party was, during all this interval, ignorant of the fraud. The duty to commence proceedings can arise only upon his Portland R. R., 94 U. S. 806, 8U; Maxwell v. Kennedy, 8 How. 210; Campau v. Van Dyke, 15 Mich. 371; Wilbur v. Flood, 16 Mich. 40; Weaver v. Carpenter, 42 Iowa, 343; Akerly v. VUas, 21 Wis. 88; Jones V. Smith, 33 Miss. 215; Shaver v. Radley, 4 Johns. Ch. 310; Philips v. Belden, 2 Edw. Ch. 1; Ward v. Van Bokkelen, 1 Paige, 100; Bank of U. S. V. Biddle, 2 Pars. Cas. 31; McDowell v. Goldsmith, 2 Md. Ch. 370; Anderson v. Burwell, 6 Gratt. 405; Field v. Wilson, 6 B. Mon. 479. Courts of equity have also been in the habit of applying the statute of limitations as a bar, by analogy, in all ordinary cases, even though equi- table suits were not expressly included within the statutory provisions: See Kane v. Bloodgood, 7 Jgims. Ch. 90, 11 Am. Dec. 417; Lansing v. Starr, 2 Johns. Ch. 150. 214, 33 South. 864; Frost v. Walls, 93 Me. 405, 45 Atl. 2S7; Melms v. Pabst Brewing Co., 93 Wis. 153, 57 Am. St. Ilep. 899, 66 N. W. 518; In re Warner's Estate, 168 Cal. 771, 145 Pae. 504; Holmes v. Jewett, 55 Colo. 187, 134 Pac; 665; Clampitt v. Doyle, 73 N. J. Eq. 678, 70 Atl. 129; Minter v. Haw*kins, 54 Tex. Civ. App. 228, 117 S. W. 172; Heckseher v. Blanton (Va.), 66 S. E. 859. See, also, Coddington v.» E. E. Co., 103 U. S. 409; Norris v. Haggin, 136 V. S. 386, 10 Sup. Ct. 942; Cummins V. Lods, 2 Fed. 661; Terbell v. Lee, 40 Fed. 40'; Brewer v. Keeler, 42 Ark. 289; Kichardson v. Lowe, 149 Fed. 625, 79 C. C. A. 317; Burkle V. Levy, 70 Cal. 250, 11 Pac. 643; Bailey v. Fox, 78 Cal. 389, 20 Pae. 868 (four months); Central Life Assur. Society of TJ. S. v. Mulford, ' 45 Colo. 240, 100 Pac. 423; Fulton V. Fisher, 151 Iowa, 429, 131 N. W. 662 (six months not laches); State Bank of Iowa Falls v. Brown, 142 Iowa, 190, 134 Am. St. Eep. 412, 119 N. W. 81; Culton v. Asher, 149 Ky. 659, 149 S. W. 946; Allen v. Allen, 47 Mich. 74, 10 N. W. 113; Haldane V. Sweet, 55 Mich. 196, 20 N. W. 902; Burdett v. May, 100 Mo. 18, 12 S. W. 1056; Morgan County Coal Co. V. Halderman, 254 Mo. 598, 163 S; W. 828; Dierks v. Martin, 16 ISTeb. 120, 19 N. W..598; Faulkner V. Wassmer, 77 N. J. Eq. 537, 30 L. E. A. (N. S.) 872, and note, 77 Atl. 3'4f; Strong y.- Strong, 102 N. T. 73, 5 N. E. 799; Calhoun v. Millard, 121 N. T. 77, 8 L. E. A.' 248, 24 N. E. 27; Waymire v. Ship- ley, 52 Or. 464, 97 Pac. 807; Texas & P. Ey. Co. V. Jowers (Tex. Civ. App.), 110 S. W. 946; Eomaine v. Excelsior Carbide & Gas Mach. Co., 54 Wash. 41, 103 Pac. 32; smA S 897, ante. See, further, Pom. Eq. Eem., "Laches." 1917 ACTUAL FEAUD. § 917 discovery of the fraud ; and the possible effect of his laches will begia to operate only from that time.^ ^ § 917, 2 Modem statutes of limitation usually provide that the statu- tory period shall begin to run only from the discovery of the fraud by the injured party ; but even in the absence of such an express provision the courts have put this construction upon the statute: Vane v. Vane, L. R. 8 Ch. 383, 398; Eolfe v. Gregory, 4 De Gex, J. & S. 576, 579; Chetham v. Hoare, L. R. 9 Eq. 571; AUfrey v. AUfrey, 1 Macn. & G. 87, 99; Charter v. Trevelyan, 11 Clark & F. 714; Blair v. Bromley, 5 Hare, 542, 559; Sherwood v. Sutton, 5 Mason, 143; Fed. Cas. No. 12,872; Dog- gett V. Emerson, 3 Stoiy, 700; Ted. Cas. No. 3,960; Michoud v. Girod, 4 How. 503, 561; Cota v. Jones, 8 Pa«. L. J. 1044; Dodge v. Essex Ins. Co., 12 Gray, 65; Phalen v. Clark, 19 Conn. 421, 50 Am. Dec. 253; Stocks V. Van Leonard, 8 Ga. 511; Martin v. Martin, 35 Ala. 560; Smith v. Fly, 24. Tex. 345, 76 Am. Dec. 109; Gibson v. Fifer, 21 Tex. 260; Relf v. Eberly, 23 Iowa, 467; Cock v. Van Etten, 12 Minn. 522. It has some- times been said that actual concealment is necessary, and that the mere fact of non-discovery is not enough. This cannot mean that the defrauded party must necessarily have used some afiBrmative means to discover the fraud, for he might not have the slightest suspicion of its existence; nor that the fraudulent party must necessarily have used some affirmative means to cover up his acts; nor that any special duty, such as a trust or fiduciary relation, must rest upon the fraudulent party, different from that which rests upon all such wrong-doers to speak the truth. It can only mean that the defrauded party's ignorance must not be negligent; that he remains ignorant without any fault of his own; that he has not dis- covered the fraud, and could not by reasonable diligence discover it. If the statement means anything more than this, it is in direct conflict with the ablest authorities, and with the very principle upon which the rule § 917, (b) Ignorance of Fraud Ex- Commissioners v. Tensas Delta Land cuses Delay.— The text is quoted in Co., 204 Fed. 736, 123 C. C. A. 40; Mullen V. Walton, 142 Ala. 166, 39 Head v. Oglesby, 175 Ky. 613, 194 South. 97; rietcher v. Wireman, 152 S. W. 793. See, also, Kirby v. L. S. Ky. 565, 153 S. W. 982; Tooker v. etc. E. K. Co., 120 U. S. 137, 7 Sup. National Sugar Refining Co., 80 N.J. Ct. 430; Kilbourn v. Sunderland, 130 Eq. 305, 84 Atl. 10; Wagg v. Her- tJ. S. 519, & Sup. Ot. 594; Jones v. bert, 19 OM. 525, 92 Pac. 250; cited to '^'an Doren, 130 U. S. 684, 9 Sup. Ct. this effect in Melms v. Pabst Brew- 685; Brown v. Norman, 65 Miss. 369, 7 ing Co., 93 Wis. 153, 57 Am. St. Eep. Am. St. Eep. 663, 4 South. 293; Brown 899, 66 N.W. 518; Crawford's Adm'r "'■ Brown, 61 Tex. 45; also §§965, V. Smith's Ex'r, 93 Va. 623, 23 S. E. 881, 897, 418, 419; and Pom. Equi- 235 (same rule applies in case of ^^^1^ Remedies, "Laches," and § 687. blameless mistake) ; Board of Levee § 918 EQUITY JUEISPBXTDENCE. 1918 § 918. Persons Against Whom Relief is Granted.^— The remedy which equity gives to the defrauded person is most extensive. It reaches all those who were actually con- cerned in the fraud, all who directly and knowingly partici- pated in its fruits,. and all those who derive title from them voluntarily or with notice. "A court of equity will wrest property fraudulently acquired, not only from the per- petrator of the fraud, but, to use Lord Cottenham's lan- guage, from his children and his children's children, or, as elsewhere said, from any persons amongst whom he may have parceled out the fruits of his fraud. " ^ ^ There is one limitation: if the property which was acquired by the fraud has come by transfer into the hands of a bona fide purchaser for a valuable consideration and without notice, even though his immediate grantor or assignor was the fraudulent party himself, the hands of the court are stayed, and the remedy of the defrauded party, with respect to the property itself, is gone ; his only relief must be per- itself is based. In Rolfe v. Gregory, 4 De Gex, J. & S. 576^ Lord West- bury said : "As the remedy is given on tbe ground of fraud, it is governed by this important principle, that the right of the party defrauded is not affected by the lapse of time, or, generally speaking, by anything done or omitted to be done, so long as he remains, without any fault of his own, in ignorance of the fraud that has been committed." In Vane v. Vane, L. R. 8 Ch. 383, James, L. J., said that the statute will not begin to run "until the fraud is first discovered, or might with reasonable diligence have been discovered."" See, also, Meader v. Norton, 11 Wall. 442 ; Town- ship of Boomer v. French, 40 Iowa, 601 ; Humphreys v. Mattoon, 43 Iowa, 556; Reed v. Minell, 30 Ala. 61; Wilson v. Ivy, 32 Miss. 233; Buckner v. Calcote, 28 Miss. 432; Hudson v. Wheeler, 34 Tex. 356; Munson v. Hallo- well, 26 Tex. 475, 84 Am. Dec. 582; Peck v. Bullard, 2 Humph. 41. § 918, 1 Vane v. Vane, L. R. 8 Ch. 383, 397, per James, L. J.; Huguenin V. Baseley, 14 Ves. 273; Bridgeman v. Green, Wilm. 58. §917, (c) The author's note is Webber, 36 Nev. 623, 50 L. R. A. quoted in Peacock v. Barnes, 142 (N. S.) 1046, 134 Pac. 461, 135 Pac. N. C. 215, 55 S. E. 99. 139, 141 Pac. 458. § 918, (a) This section is cited in § 918, (b) See ante, § 899. The Sutherland v. Eeeve, 151 Bl. 384, 38 text is quoted in Moore v. Sawyer, N. E. 130; Sanguinetti v. Eossen, 12 167 Fed. 826; in Wagg v. Herbert, Cal. App. 623, 107 Pac. 560; Lind v. 19 Okl. 525, &2 Pac. 250. 1919 ACTUAL FRAUD. § 918 sonal against those who committed the fraud.^ o To this limitation there is, however, an exception, where the gen- eral rule giving relief applies even as against a bona fide purchaser. Where an owner has been apparently deprived of his title by a fraudulent conveyance or assignment which is void, as where he was procured to execute it by the fraud- ulent representation and under the conviction that it was ,an entirely different instrument, or where it was fraudu- lently executed in his name without any authority express or implied, or where, after being executed by him for one purpose, it was fraudulently altered without his knowl- edge or authority, so as to include the property, or where it was a forgery, and. he has done no collateral act with reference to it which might amount to an equitable estoppel by conduct, and the property, by means of such transfer, comes into the hands of a purchaser for value and with- out notice, the original defrauded owner is not barred of his remedy.^ * Equity will relieve by canceling the f raudu- § 918, 2 See ante, § 777; Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511 (trust money fraudulently obtained, and then paid to a ioiia fide holder, cannot be reached by the equitable owner. A distinction exists between money and other property. The money was here paid to the holder in satisfaction of an antecedent debt. If other kinds of prop- erty had thus been transferred, the transferee would not liave been a pur- chaser for a valuable consideration, according to the rule as settled in New York) ; Dunklin v. Wilson, 64 Ala. 162 (land sold under a fraudulent decree). § 918, 3 Tayler v. Great Indian etc. R'y, 4 De Gex & J. 559, 574; Don- aldson V. Gillot, L. E. 3 Eq. 274; Bank, of Ireland v. Evans's Charities, 5 H. L. Cas. 389; Vorley v. Cooke, 1 Giff. 230; Ogilvie v. Jeaffreson, 2 Giff. 353; Swan v. North British etc. Co., 7 Hurl. & N. 603. See, also, §918, (c) Quoted in Martin v. different instrument); and cited in Eoblnson, 67 Tex. 368, 3 S. W. 550; State v. Warner Valley Stock Co., in Moore v. Sawyer, 167 Fed. 826; 56 Or. 283, 106 Pac. 780, 108 Pao. cited in Hoeldtke v. Horstman, 61 861; Moore v. Eiddle, 82 N. J. Eq. Tex. Civ. App. 148, 128 S. W. 642. 197, 87 Atl. 227 (on the evidence, §918, (d) Bona Fide Purchase not rule held not applicable). See, also. Defense, Where Conveyance Wholly in support of the text, Cobban y. Void. — The text is quoted in Moore Conklin, 208 Fed. 231, 125 C. C. A.- V. Sawyer, 167 Fed. 826 (grantor 431 (unauthorized delivery of deed thinks the conveyance is an entirely by depositary) ; Gross v. Watts, 206 § 919 EQUITY JTJKISPBUDENCB. 1920 lent apparent transfer, and by compelling a reconveyance or reassignment, even as against the holder who is inno- cent of wrong; the doctrines of equitable estoppel and of bona fide purchase do not apply under these circumstances. Such is the doctrine announced by decisions of the highest authority. § 919. Particular Instances of Jurisdiction. — I shall con- clude this discussion of actual fraud by enumerating some well-settled instances of the jurisdiction which deserve a for limitations, Case v. James, 3 De Gex, F. & J. 256, 264; Hunter v. Walters, L. R. 11 Eq. 292; In re Barned's Banking Co., L. R. 3 Ch. 105; Hawkins v. Maltby, L. R. 3 Ch. 188; 4 Eq. 572; Cottam v. Eastern Cos. R'y, 1 Johns. & H. 243; Spaight v. Cowne, 1 Hem. & M. 359; Dowle v. Saunders, 2 Hem. & M. 242, 250; Livingston v. Hubbs, 2 Johns. Ch. 512; County of Schuylkill v. Copley, 67 Pa. St. 386, 5 Ap. Rep. 441; McHugh V. County of Schuylkill, 67 Pa, St. 391, 396, 5 Am. Rep. 445. The doc- trine of the text, and the cases which support it, are undoubtedly in con- flict with some of the American decisions concerning transfers of stock and other things in action cited in the previous section on priorities; but they accord completely with the author's views as expressed in that sec- tion and in the one on bona fide purchase. The conclusions in the text above are intentionally stated with caution and careful limitations, and they cannot be extended beyond the limits thus laid down. If the person who fraudulently executes the transfer has any implied authority, even though he acts in direct opposition to his private instructions, or if the original and defrauded owner has done any acts which will operate as an equitable estoppel, then the conclusions of the text cannot apply; the equity of the purchaser in good faith will be superior. Some of the cases cited above hold that when the owner has executed and 3elivered an assign- ment in blank, and the person to whom it is delivered fraudulently fills up the blanks, and thus conveys the property to a bona fide purchaser, such person acts with implied authority, and the owner's rights as against the purchaser are Cut off. But when the facts detailed in the text exist, when there is no authority express or implied, and no conduct working an estoppel, there is no ground of principle for preferring the equity of a subsequent claimant, however innocent, over that of the original owner, who is equally innocent, and whose title is prior in time. Mo. 373, 121 Am. St. Rep. 662, 104 ecuted differs only in details from S. W. 30 (forgery); but see Conklin that intended). See, also, ante, V. Benson, 159 Cal. 785, 36 L. R. A. § 767, (a). (N. S.) 537, 116 Pac. 34 (deed ex- 1921 ACTUAL FRAUD. § 919 special mention. In several of them the fraud affects third persons rather than the immediate party to the transac- tion; but in all a fraudulent intention, or what equity re- gards as tantamount to such an intention, is a necessary element, and they may all, therefore, be properly grouped under the head of actual fraud.^ Judgments: When a judgment or decree of any court, whether inferior or su- perior, has been obtained by fraud, the fraud is regarded as perpetrated upon the court as well as upon the injured party. The judgment is a mere nullity, and it may be at- tacked and defeated on account of the fraud, in any col- lateral proceeding brought upon it or to enforce it, at least in the same court in which it was rendered.^*" When a judgment fraudulently recovered in one court is sued upon in another court, whether the fraud can there be set up to defeat its enforcement has been questioned.? There can be no doubt, however, that under these circumstances, wherever the reformed procedure prevails, the fraud may be set up by way of equitable defense, especially if the af- firmative relief of cancellation is sought.^ Although the § 919, 1 Kerr on Fraud, Am. ed., 293 ; Duchess of Kingston's Case, 2 Smith's Lead. Cas., 7th Am. ed., 609; Lord Bandon v. Beeher, 3 Clark & r. 479, 510; Shedden v. Patrick, 1 Macq. 535; The Queen v. Saddlers' Co., 10 H. L. Cas. 431; Brownsword v. Edwards, 2 Ves. Sr. 243, 246; Harrison v. Mayor etc., 4 De Gex, M. & G. 137; Perry v. Meadoweroft, 10 Beav. 122; Webster v. Reid, 11 How. 437; Clark v. Douglass, 62 Pa. St. 408; Campbell v. Sloan, 62 Pa. St. 481; Wilson v. Watts, 9 Md. 356; Hall V. Hall, 1 Gill, 383, 391; Carpentier v. Hart, 5 Cal. 406. § 919, 2 Kerr on Fraud, 284. § 919, 3 Dobson v. Pearce, 12 N. T. 156, 166, 168 ; and see post, section on equitable defenses. §919, (a) This section is cited in ment obtained by false return of Hogg V. Link, 90 Ind. 346; Anthony service of process). The text is V. Masters, 28 Ind. App. 239, 62 cited in Elting v. First Nat. Bank, N. E. 505 J Georgia Pac. By. Co. v. 373 111. 368, 50 N. E. 1095; also in Brooke, 66 Miss. 583, 6 South. 467. State v. De Mattos, 88 Wash. 35, For further instances, see post, 152 Pac. 721. See, further, as to re- { 1377. lief against judgments obtained by § 919, (b) Anthony v. Masters, 28 fraud, etc., Pom. Equitable Remedies. Ind. App. 239, 62 N. E. 505 (judg- n— 121 § 919 EQUITY JUBISPEUDENCE. 1922 fraud may thus be set up by way of defense, the equitable jurisdiction to cancel and set aside or to restrain judgments and decrees of any court which have been obtained by a fraud practiced upon the court and the losing party, is well settled and familiar. ■* " Awards: The jurisdiction to set aside and cancel awards was settled at a very early day, and it still exists, except so far as it has been regu- lated or taken away by statute.^e Fraudulent bequests: § 919, 4 A. judgment -will not, however, be set aside on the ground of fraud, when the very same fraud alleged, and the same questions con- cerning it, were presented by the issues, litigated, and decided by the courts in the judgment which is attacked:* .United States v. Throckmorton, 98 U. S. 61. On the general subject, see Dederer.v. Voorhies, 81 N. Y. 153; Hunt V. Hunt, 72 N. Y. 217, 28 Am. Rep. 129; Jordan v. Volkenning, 72 NT. Y. 300; Ross v. Wood, 70 N. Y. 8; Harbaugh v. Hohn, 52 Ind. 243; Harris v. Cornell, 80 111. 54; Doughty v. Doughty, 27 N. J. Eq. 315; Hol- land V. Trotter, 22 Gratt. 136; Babcock v. MeCamant, 53 111. 214; Graham V. Roberts, 1 Head, 56, 59; Sayles v. Mann, 4 111. App. 516; Huxley v. Rice, 40 Mich. 73; Griffin v. Sketoe, 30 Ga. 300; Byers v. Surget, 19 How. 303. Conversely, equity has jurisdiction to aid, by whatever relief may be appropriate, in the enforcement of a valid judgment of another court, when its enforcement is hindered or prevented by fraud; as, for example, where the judgment debtor, pending the suit, transfers or withdraws his property with the intent of rendering the expected judgment nugatory: Blenkinsopp v. Blenkinsopp, 1 De Gex, M. & G. 495, 500; 12 Beav. 568, 586. § 919, 5 Kerr on Fraud, 288 ; Brown v. Bt-own, 1 Vern. 156 ; Earl v. Stocker, 2 Vern. 251; Burton v. Knight, 2 Vern. 514; Smith v. Whit- more, 2 De Gex, J. & S. 297; Haigh v. Haigh, 3 De Gex, E. & J. 157; Craft V. Thompson, 51 N. H. 536; District of Algona v. District etc., 54 Iowa, 286, 6 N. W. 295; Emerson v. Udall, 13 Vt. 477, 37 Am. Dec. 604. As to what acts or omissions will constitute fraud in an award : * Lord §919, (c) A decree registering _ §919, (e) This section is cited to title under the Torrens system may this effect in Hartford Fire Ins.. Co. be set aside for fraud, although the v. Bonner Mercantile Co., 44 Fed. statute makes no exception in such 151, 11 L. R. A. 623. It is compe- a ease; equity will read the excep- tent for the parties to agree that tion into the statute: Baart v. Mar- fraud on the part of the arbitrator tin, 99 Minn. 197, 11-6 Am. St. Eep. shall not vitiate the award: Tullis 394, 108 N. W. 945. " v. Jacson, [1892] 3 Ch. 441. §919, («) Hogg V. Link, 90 Ind. §919, (f) Brush v. Fisher, 70 346. See, also, §'§ 914, note, 1364, Mich. 469, 14 Am. St. Eep. 510, 88 221. N. W. 446; Pt. Huron, etc., By. v. 1923 ACTUAL FRAUD. ' § 919 Although an entire will cannot be set aside on account of f raud,g yet a particular devise or bequest may be impressed with a trust in favor of a third person for whom the testa- tor's beneficial intentions have been fraudulently inter- cepted and prevented by the actual devisee or legatee; and in the same manner the land descending to the heir may be impressed with a trust, where he has prevented the testator from making an intended devise by fraudulently representing to the testator that his intention will be car- ried into effect towards the beneficiary as fully as though the device were made.^h "Where 9, probate is obtained by Lonsdale v. Littledale, 2 Ves. 451, 453; Calcraft v. Roebuck, 1 Ves. 221, 226; Lingood v. Croucher, 2 Atk. 395; Ives v. Metcalfe, 1 Atk. 63, 64; Burton v. Knight, 2 Vern. 514; Haigh v. Haigh, 3 De Gex, F. & J. 157; Blennerhasset v. Day, 2 Ball & B. 104, 116; Gartside v. Gartside, 3 Anstr. 735; Spettigue v. Carpenter, 3 P. Wms. 361; Harding v. Wickham, 2 Johns. & H. 676; Harvey v, Shelton, 7 Beav. 455; Kemp v. Rose, 1 Giff. 258; Van Cortlandt v. Underhill, 2 Johns. Ch. 339; 17 Johns. 405; Knowl- ton V. Mickles, 29 Barb. 465; Rand v. Redington, 13 N. H. 72; Lee v. Patillo, 4 Leigh, 436; Emery v. Owings, 7 Gill, 488, 48 Am. Dec. 580; Jordan v. Hyatt, 3 Barb. 275; Peters v. Newkirk, 6 Cow. 103; Lutz v. Linthicum, 8 Pet. 165, 178. The whole subject of arbitration and awards, and of the procedure thereon, is very generally a matter of statutory regu- lation in this country. § 919, 6 MeCormick v. Grogan, L. R. 4 H. L. 82, 91, 97, per Lord West- bury; Dutton V. Pool, 1 Vent. 318; Thynn v. Thynn, 1 Vern. 296; Oldham V. Litchfield, 2 Vern. 506; Freem. Ch. 284; Devenish v. Baines, Prec. Ch. 3; Chamberlaine v. Chamberlaine, Freem. Ch. 34; Reech v. Kennigate, Amb. 67; Barrow v. Greenough, 3 Ves. 152; Mestaer v. Gillespie, 11 Ves. 621, 638; Chamberlain v. Agar; 2 Ves. & B. 259, 262; Chester v. Urwick, 23 Beav. 407; Dimes v. Steinberg, 2 Smale & G. 75; Morgan v. Annis, 3 De Gex & S. 461; Hindson v. Wetherill, 1 Smale & G. 604; 5 De Gex, M. & G. 301; Podmore v. Gunning, 7 Sim. 644, 660; Russell v. Jackson, Callanan, 61 Mich. 22, 34 N. W. 678; St. Rep. 1012, 12 L. R. A. (N. S.) Georgia Pae. Ey. Co. v. Brooke, 66 1087, 112 N. W. 1091; in Sumner v. Miss. 583, 6 South. 467; Hartupee v. Staton, 151 N. C. 198. 18 Ann. Cas. Pittsburgh, 131 Pa. St. 535, 19 Atl. 802, 65 S. B. 902, concurring opinion, 507. and cited in People v. Schaeffer, 266 § 919, (g) See § 913. III. 334, 107 N. B. 617. See further, § 919, (hj The text is quoted in § 1054, and note. Tyler v. Stitt, 132 Wis. 656, 122 Am. § 919 EQUITY JTJEISPETJDENOE. 1924 fraud, equity may declare the executor or the other per- son deriving title under it a trustee for the party de- frauded.'^ i Preventing acts for the benefit of another: The jurisdiction in the case of intended' testamentary gifts fraudulently prevented extends to other analogous cases. Where one person has been prevented by fraud from doing an intended act for the benefit of another, equity may re- lieve the disappointed party by establishing his rights as though the act had been done, and by confirming the title which he would thereby have acquired. * J Suppresssing in- struments: Conversely, yrhen instruments have been fraud- 10 Hare, 204, 213; Hoge v. Hoge, 1 Watts, 163, 213; Jones v. McKe^ 3 Pa. St. 496; 6 Pa. St. 425, 428; Irwin v. Irwin, 34 Pa. St. 525; Church V. Ruland, 64 Pa. St. 432, 442; Gaither v. Gaither, 3 Md. Ch. 158; Howell V. Baker, 4 Johns. Ch. 118; Jenkins v. Eldridge, 3 Story, 181. If a tes- tator devises an estate to a son, who promises his father, in consideration of such devise, to pay a certain sum to another son, equity wiU enforce the promise : Strickland v. Aldridge, 9 Ves. 516, 519 ; and such an engage- ment may be made by a silent assent to a proposal by the testator: Bym V. Godfrey, 4 Ves. 6, 10; Paine v. Hall, 18 Ves. 475. § 919, 7 Bamesly v. Powel, 1 Ves. Sr. 284, 287; McCormick v. Grogan, L. R. 4 H. L. 82; Allen v. Macpherson, 1 PhiU. Ch. 133, 145; 1 H. L. Cas. 191, 213, 214; Kennell v. Abbott, 4 Ves. 802; Charlton v. Coombes, 4 GifE. 382, 385; WUkinson v. Joughin, L. B. 2 Eq. 319; Podmore v. Gun- ning, 7 Sim. 644, 660. § 919, 8 Kerr on Fraud, 273 ; Middleton v. Middleton, 1 Jacob & W. 94, 96 (execution of an instrument prevented by duress afld undue influ- ence) ; Luttrell v. Obnius, cited 11 Ves. 638; 14 Ves. 290; 1 Jacob & "W. 96 (an intended recovery prevented, and the estate held as though the recovery had been suffered) ; as to preventing the execution of deeds, see § 919, (i) The text is quoted and a decree of distribution may be re- followed in Patterson v. Dickinson, viewed in equity for fraud or mis- 193 Fed. 328, 113 C. C. A. 252; take in Bacon v. Bacon, 150 Cal. 477, quoted in Sumner v. Staton, 151 89 Pac. 317. N. C. 198, 18 Ann. Cas. 802, 65 S. E. § 919, (j) The text is cited to this 902, concurring opinion; discussed effect in Tyler v. Stitt, 132 Wis. 656, and limited in Tracy v. Muir, 151 122 Am. St. Eep. 1012, 12 L. E. A. Cal. 363, 121 Am. St. Eep. 117, 90 (N. S.) 1087, 112 N. W. 1091, and Pac. 832 (probate of will seldom quoted in Sumner v. Staton, 151 set aside in equity on the ground N. C. 198, 18 Ann. Cas. 802, 65 S. E. that the will is a forgery). This 902, concurring opinion, paragraph is cited to the point that 1925 ACTUAL FEAUD. § 920 ulently suppressed or destroyed for the purpose of hinder- ing or defeating the rights of others, equity has jurisdiction to give appropriate relief by establishing the estate or rights of the defrauded party. ^ ^ § 920. The Sajne. Appointments Under Powers. — The jurisdiction of equity in this class of cases is based upon the principle that, in making an appointment under a power, the intention of the donor should be carried out as far as it has been expressed, — -at least, that his intention should not be directly violated. All mere powers, from their very nature, give more or less discretion to the donee. When he refuses to exercise that discretion by failing to make any appointment at all, equity does not^ as has been shown, interfere to supply the omission. When the donee is clothed with an absolute discretion with respect to the per- Buckell V. Blenkhom, 5 Hare, 131; Vane v. Fletcher, 1 P. Wms. 352; Nanney v. Williams, 22 Beav. 452; Bulkley v. Wilford, 2 Clark & F. 102; West V. Ray, Kay, 385. § 919, 9 Kerr on Fraud, 275. For exanlple, if an heir should suppress a deed or will, equity would confirm the title of the grantee or devisee. Of course the proof must he perfectly clear and convincing : Hunt v. Mat- thews, 1 Vern. 408 ; Wardour V. Berisf ord, 1 Vem. 452 ; cited 2 P. Wms. 748, 749; Finch v. Newhham, 2 Vem. 216; Dalston v. Coatsworth, 1 P. Wms. 731; Cowper v. Cowper, 2 P. Wms. 720; Tucker v. Phipps, 3 Atk. 359; Saltern v. Melhuish, Amb. 247; Hornby v. Matcham, 16 Sim. 325. When an instrument has been intentionally destroyed or suppressed, every- thing will be presumed against the party by whom the destruction or sup- pression has been done: Bowles v. Stewart, 1 Schoales & L. 209, 222; Eyton v. Eyton, 4 Brown Pari. C. 149, 153; Hampden v. Hampden, 3 Brown Pari. C. 550. If a person obtains a conveyance or other instrvunent for one particular avowed purpose, and then retains it and uses it for an entirely different purpose, equity, regarding the conduct as fraud, may give such relief as is appropriate:* Young v. Peachy, 2 Atk. 254, 256; Wilkinson v. Bray- field, 2 Vem. 307; Goodrick v. Brown, Freem. Ch. 180; Evans v. Bicknell, 6 Ves. 174, 191; Pickett v. Loggon, 14 Ves. 215, 234. §919, (k) The text is quoted in §919, (*) See numerous cases eit- Sumner v. Staton, 151 N. C. 198, 18 ed under § 1055. Ann. Cas. 802, 65 S. K. 902, concur- ring opinion. • § 920 EQUITY JURISPRUDENCE. 1926 sons wliom he may or may not make beneficiaries by ap- pointment to or among them, with respect to the shares, the manner, and the like, equity will rarely, if ever, inter- fere with any appointment which is actually made, since the court cannot say that it violates the donor's intention. "Wlien, as is generally the case, the donee, although clothed with a discretion as to whether he will appoint at all, is restricted by the terms of the instrument with respect to the persons to or among whom he may make an appoint- ment, or in respect to other material matters, an appoint- ment made with the intention of violating, and so made that it does violate, this restriction, is regarded by equity as a fraud upon the donor, and upon the persons who would be entitled to the property in default of any appointment, and will be set aside as nugatory. There are two important modes in which an appointment may be thus fraudulent: 1. Where the donee is restricted to a certain class of ben- eficiaries, not including himself, and he intentionally makes an appointment for the purpose of his own benefit, and in such a manner as directly or indirectly to secure his own benefit.* An appointment to a person of the prescribed class, with an agreement on his part that, in consideration of the appointment being made to him, he will give or se- cure to the donee some part of the property or some benefit arising from it, would be an illustration; but the forms of such fraudulent appointment are various. In this species the donee is clearly guilty of actual fraud, — a moral wrong. 2. Where the donee is restricted to a certain class of in- dividuals, and he intentionally makes an appointment for the purpose of benefiting, and in such a manner as directly or indirectly to secure the benefit of a third person not be- longing to the class specified by the donor. An appoint- ment to one of the prescribed class, with an accompanying agreement on his part to share the property with such a third person, would be an illustration. Such a violation of the donor's intention is treated by equity as a fraud § 920, (a) The text ia cited in Vogelstein v. Athletic Mining Co. (Mo. App.), 192 S. W. 760. 1927 ACTUAL FRAUD. § 920 upon the power, although it may not involve any moral wrong in the donee. It is held that, in determining whether any particular appointment is a fraud upon the power, the motive with which the power was exercised and the appoint- ment made cannot be regarded, but the purpose may; in fact, the purpose is the important element. Where the donee holds a mere power and makes a fraudulent appoint- ment, the persons who would be entitled to the property upon default of any appointment at all are the parties to whom equity gives relief, since the appointment is regarded as a nullity and is set aside. Where the power is in trust, the beneficiaries under it, who are entitled to have it exe- cuted in their favor, are plainly the parties to whom equity gives relief in case of a complete failure to appoint, or of an imperfect or fraudulent appointment.^ ^ Marital rights: § 920, 1 Kerr on Fraud, 267; Aleyn v. Belchier, 1 Eden, 132; 1 Lead. Cas. Eq. 573, 578, 598, and notes. Although this subject is one of great importance in England, it has little more than a theoretical existence in the law of most, of our states. It does not seem necessary, therefore, to enter upon any discussion of the special rules which have been settled, or of the cases which have arisen. The following are some of the recent decisions, and for further exposition the reader is referred to treatises upon powers: Topham v. Duke of Portland, 1 De Gex, J. & S. 517; 11 H. L. Cas. 32; Pryor v. Pryor, 2 De Gex, J. & S. 205; Cooper v. Cooper, L. R. 8 Eq. 312; 5 Ch. 203; In re Huish's Charity, L. R. 10 Eq. 5; Arnold V. Woodhams, L. R. 16 Eq. 29; Topham v. Duke of Portland, L. R. 5 Ch. 40; Roach v. Trood, L. R. 3 Ch. Div. 429; Palmer v. Locke, L. R. 15 Ch. Div. 294; Lane v. Page, Amb. 233; Lord Hinchinbroke v. Sejnnour, 1 Brown Ch. 395 ; Jackson v.- Jackson, 7 Clark & F. 977 ; Palmer v. Wheeler, 2 Ball & B. 18, 31; Farmer v. Martin, 2 Sim. 502, 511; Arnold v. Hard- wick, 7 Sim. 343; Reid v. Reid, 25 Beav. 469, 478; Wellesley v. Morning- ton, 2 Kay & J. 143 ; In re Marsden's Trust, 4 Drew. 594, 601 ; Routledge V. Dorril, 2 Ves. 357 ; Birley v. Birley, 25 Beav. 299. The American cases are comparatively very few. The following recognize the general doc- trine that equity will not control the exercise of a real discretion given § 920, (b) See, also, In re Perkins, cable to the fraudulent exercise of [1893] 1 Ch. 283; Alexander v. a power of appointment do not apply Alexander, 2 Ves. Sr. 640; Sadler v. to the release of a power not coupled Pratt, 5 Sim. 632; Watt v. Creyke, with a duty): Wainwright v. Miller, 3 Sm. & Giff. 362; In re Somes, [1897] 2 Ch. 255. [1896] 1 Ch. 250 (doctrines appli- § 920 EQUITY JUEISPETJDENCB. 1928 The rule was well settled in England that if a negotiation for a marriage had begun, the woman should, while it was pending, without the knowledge of or notice to the intended husband, make a voluntary conveyance or settlement of her own property, and the marriage should be completed by him in ignorance of the transfer, such conveyance or settle- ment would be a fraud upon the husband's marital rights of property, and would be set aside by a court of equity. The same general doctrine has also been adopted by sev- eral early decisions in this country.2 e This doctrine must necessarily be abrogated by the modem legislation in most of the states, which destroys all right and interest of the husband in the property of his wife. Trusts: One of the most important effects of fraud, and most striking illus- trations of the equity jurisdiction, is found in the theory of trusts arising by operation of law. When property sub- ject to a trust is fraudulently transferred, or when one person, in fraudulent violation of his fiduciary duty, ac- quires property which equitably belongs to another, or when one person by his actual fraud obtains the title to property in which another is beneficially interested, equity may work out and protect the rights of the beneficial owner by regarding the property as though it were actually im- pressed with a trust in the hands of the one who holds the legal title, by treating such person as though he were an actual trustee, and by enforcing such trust by means of a conveyance, accounting, payment, injunction, and other appropriate remedies. There is no other effect of fraud more remarkable, and none which exhibits more clearly the to the donee, but will set aside a fraudulent appointment made under color of sueh discretion: Lippincott v. Ridgway, 10 N. J. Eq. 164; Budington V. Munson, 33 Conn. 481; Williams's Appeal, 73 Pa. St. 249; Graefl v. De Turk, 44 Pa. St. 527; Cloud v. Martin, 2 Dev. & B. 274; Haynesworth V. Cox, Harp. Eq. 117, 119; Fronty v. Fronty, 1 Bail. Eq. 517, 529; Melvin V. Mefvin, 6 Md. 541; Jackson v. Veeder, 11 Johns. 169, 171. § 920, 2 Countess of Strathmore v. Bowes, 1 Ves. 22; 1 Lead. Cas. Eq. 405, 611, 618, and cases in notes by the English and American editors. §920, (o) See further, § 1113. 1929 ACTUAL FEATJD. § 921 power of courts of equity to deal with the substantial reali- ties under the appearance of external forms.^ § 921, The Statute of Frauds not an Instrument of Fraud. It is a most important principle, thoroughly established in equity, and applying in every transaction where the stat- ute is invoked, that the statute of frauds, having been enacted for the purpose of preventing fraud, shall not be made the instrument of shielding, protecting, or aiding the party who relies upon it in the perpetration of a fraud, or in the consummation of a fraudulent scheme.^ ^ This most righteous principle lies at the basis of many forms of equi- table relief, among which are the specific enforcement of verbal agreements for the sale of land which have been partly performed, the reformation and enforcement of agreements and conveyances imperfect through fraud or mistake, the cancellation of fraudulent agreements and con- veyances, and the like. One particular instance of relief will be mentioned as an illustration. Where an agreement has been verbally made which the statute requires to be in writing, and through the actual fraud of one party the execution of the written instrument is prevented, and the other party is induced to accept and rely upon the verbal agreement as valid and binding, a court of equity will not permit the fraudulent party to set up the statute of frauds as a defense, but will enforce the agreement against him, § 920, 3 See post, the sections on constructive trusts. §921, IMestaer v. Gillespie, 11 Ves. 621, 627, 628, per Lord Eldon; Haigh V. Kaye, L. R. 7 Ch. 469; Jervis v. Berridge, L. R. 8 Ch. 351; Lin- coln V. Wright, 4 De Gex & J. 16; Wood v. Midgley, 5 De Gex, M. & G. 41; Willink v. Vanderveer, 1 Barb. 599; Miller v. Gotten, 5 Ga. 341, 346; Shields v. Trammell, 19 Ark. 51; Trapnall v. Brown, 19 Ark. 39. §921, (a) The text is quoted in (N. S.) 112, 141 N. W. 944. This Deming v. Lee, 174 Ala. 410, 56 section is cited in Woodbury v. Gard- South. 921; Diamond v. Jacquith, 14 ner, 77 Me. 68; Holliday v. Perry, Ariz. 119, 125 Pao. 712; Seymour v. 38 Ind. App. 588, 78 N. E. 877; Oelrichs, 156 Cal. 782, 134 Am. St. Stracheu v. Drake, 61 Colo. 444, 158 Eep. 154, 106 Pac. 88; Halligan v. Pac. 310. See, also, Wood v. Babe, Trey, 161 Iowa, 185, 49 L. E. A. 96 N. T. 414, 48 Am. Rep. 640. § 921 EQUITY JURISPKXTDENCE. 1930 although it is merely verbal. Of course, there must be actual fraud as the distinguishing feature of the transac- tion, — something more than the mere omission to put the contract into writing. The plaintiff must be induced through the deceit, false statements, or concealments of the other party to waive a written instrument, and to rely upon the parol undertaking. The same relief, it seems, will be given when the execution of a written contract, otherwise fully agreed upon, is prevented by an inevitable accident, as by the death of a party.^ ^ §921, 2 Mestaer v. GiUespie, 11 Ves. 621, 627, 628; Montacute v. Max- well, 1 P. Wms. 618; 1 Strange, 236; 1 Eq. Cas. Abr. 19; Attorney- General V. Sitwell, 1 Younge & C. 557, 583; Walker v. Walker, 2 Atk. 98; Joynes v. Statham, 3 Atk. 388; Whitchurch v. Bevis, 2 Brown Ch. 559, 565; Lincoln v. Wright, 4 De Gex & J. 16, 22; Wood v. Midgley, 5 De Gex, M. & G. 41; Cookes v. Mascall, 2 Vem. 200; Taylor v. Luther, 2 Sum. 228; Jenkins v. Eldridge, 3 Story, 181, 290-293; Phyfe v. Waj> dell, 2 Edw. Ch. 47; Whitridge v. Parkhurst, 20 Md. 62; Wesley v. Thomas, 6 Har. & J. 24; Walkins v. Stockett, 6 Har. & J. 435; Schmidt V. Gatewood, 2 Rich. Eq. 162 ; Kinard v. Hiers, 3 Rich. Eq. 423, 55 Am. Dec. 643; Chetwood v. Brittan, 2 N. J. Eq. 438; Kennedy v. Kennedy, 2 Ala. 571; Collins v. Tillou, 26 Conn. 368, 68 Am. Dec. 398; Brown v. Lynch, 1 Paige, 147 ; Sweet v. Jacocks, 6 Paige, 355, 31 Am. Dec. 252 ; Wolford V. Harrington, 74 Pa. St. 311, 15 Am. Rep. 548; Murphy v. Hubert, 16 Pa. St. 50; 7 Pa. St. 420; Bernard v. Flinn, 8 Ind. 204; Finu- cane v. Kearney, 1 Freem. (Miss.) 65, 69; Trapnall v. Brown, 19 Ark. 39, 49; Shields v. Trammell, 19 Ark. 51; Childers v. Childers, 1 De Gex & J. 482; Davies v. Otty, 35 Beav. 208; Colyer v. Clay, 7 Beav. 188; Symes V. Hughes, L. R. 9 Eq. 475; Clarke v. Grant, 14 Ves. 519, 525; compare Blodgett V. Hildreth, 103 Mass. 484; Glass v. Hulbert, 102 Mass. 24, 3 Am. Rep. 418 ; Walker v. Locke, 5 Cush. 90. In Taylor v. Luther, 2 Sum. 228; Fed. Cas. No. 13,796, Judge Story lays down the doctrine very broadly, more so perhaps than is warranted by the principle or sustained by the authorities. The doctrine of the text and the foregoing cases should be considered in connection with the discussion concerning parol evidence in cases of fraud and mistake, near the end of the section on mistake. They lie at the foundation of the conclusions there reached, and fully support them. §921, (b) The text is cited in v. Patterson, 252 111. 335, 96 N. B. Sanguinetti v. Eossen, 12 Cal. App. 852 (to warrant relief, must be 623, 107 Pac. 560. See, also, Uden something more than mere refusal 1931 CONSTRUCTIVE FRAUD. SECTION IV. CONSTRUCTIVE FRAUD. ANALYSIS. § 922. Definition : essential elements. § 923. Three principal classes. §§ 924-942. First. Constructive fraud apparent from the intrinsic nature and subject of the transaction jtself. § 925. I. Inadequacy of consideration. § 926. Inadequacy pure and simple. § 927. Gross inadequacy amounting to fraud. § 928. Inadequacy coupled with other inequitable incidents. §§ 929^936. II. Illegal contracts and transactions. §930. 1. Contracts illegal because contrary to statute: usury, gaming, smuggling. §§ 931-935. 2. Transactions illegal because opposed to public policy. 1^ § 931. A. Contracts interfering with the freedom of marriage; marriage brokerage; in restraint of marriage; rewards for marriage; secret contracts in fraud of marriage; secret contracts to marry; rewards for procuring wills. § 932. Agreements for a separation. § 933. B. Conditions and limitations in restraint of- marriage. § 934. C. Contracts directly belonging to and affecting business rela- tions; restraint of trade; interfering with bidding at auctions and governmental lettings; puffers; fraudulent trade-marks; violating policy of statutes prescribing business methods; trading with alien enemies. § 935. D. Contracts affecting public relations; interfering with the election or appointment of officers; interfering with legislative proceedings; ditto, executive proceedings; ditto, judicial pro- ceedings. §936. 3. Contracts illegal because opposed- to good morals; for illicit intercourse; champerty and maintenance; compounding with a felony or preventing a prosecution. §§ 937-942. III. Equitable jurisdiction in case of illegal contracts. § 937. In usurious contracts; usurious mortgages. § 938. In gaming contracts. to be bound by oral agreement); and the very instructive case of Seymour v. Oelrichs, 156 Cal. 782, 134 Am. St. Kep. 154, 106 Pac. 88 (representations on account of which plaintiff, as was intended by the party making the representation, ir- revocably changed his position in reliance on the oral promise to re- duce the contract to writing, amount to an estoppel). §922 EQUITY JTT3ISPRXJDENCB. 1932 § 939. In other illegal contracts; explanation of maxim, In pari, etc. § 940. In pari delicto, general rules. § 941. In pari delicto, limitations on general rules. § 942. Not in pari delicto. |§ 943-965. Second. Constructive fraud inferred from the condition and rela- tions of the immediate parties to the transaction. § 943. General description and divisions. ■^ §§ 944-954. I. Transactions void or voidable with persons wholly or partially incapacitated. § 945. Coverture; infancy, i 946. Insanity. v^ § 947. Mental weakness. § 948. Persons in vinculis; ditto, illiterate or ignorant. § 949. Intoxication. U § 950. Duress. [^ § 951. Undue influence. § 962. Sailors. \y% 953. Expectants, heirs, reversioners. § 954. Post oiit contracts. S§ 955-965. n. Transactions presumptively invalid between persons in fidu- ciary relations. 5 955. Circumstances to which the principle applies. I 956. The general principle. § 957. Two classes of cases in which it operates. § 958. Trustee and beneficiary. § 959. Principal and agent. § 960. Attorney and client. § 961. Guardian and ward. § 962. Parent and child. V§963. Other relations: executors and administrators; physician and patient; spiritual advisers; husband and wife; partners, etc. § 964. Confirmation or ratification. § 965. Acquiescence and lapse of time. §§ 966-974. Third. Frauds against third persons who are not parties to the transaction. § 967. Secret bargains accompanying compositions with creditors. 1^ § 968. Conveyances in fraud of creditors. § 969. The consideration. § 970. The fraudulent intent. § 971. Modes of ascertaining the intent, § 972. Existing creditors. \ § 973. Subsequent creditors. '^ § 974. Conveyances in fraud of subsequent purchasers. § 922. Definition — Essential Elements. — The term "con- structive fraud" is not a very appropriate one, but has been used so long that any attempt to substitute another 1933 CONSTRUCTIVE FBAUD. § 922 in its place would be useless. It is important, however, to form an accurate notion of the meaning given to it in equity, and of the peculiar element or criterion which dis- tinguishes the various classes of cases belonging to it. The distinguishing element of actual fraud, as has been shown, is always untruth between the two parties to the transac- tion, so that actual fraud may be reduced to misrepresenta- tions and concealments. This untruth at law must be virtually intentional, — a falsehood; in equity the inten- tion is not so essential. Untruth is not the distinguishing element of constructive fraud; it is never essential that there should be untruth between the immediate parties to a transaction, in order that it may come within the de- nomination of constructive fraud; in a great many in- stances it would be impossible to predicate untruth of the wrong-doer's conduct.! ^ Constructive fraud is simply a term applied to a great variety of transactions, having little resemblance either in form or in nature, which equitj regards as wrongful, to which it attributes the same or similar effects as those which follow from actual fraud, and for which it gives the same or similar relief as that granted in cases of real fraud. It covers different grades of wrong. It embraces contracts illegal, and therefore void at law as well as in equity ; transactions voidable in equity because contrary to public policy; and transactions which- § 922, 1 It should be carefully observed, however, that in certain in- stances of constructive fraud, although there is no element of untruth whatever between the two immediate parties to the transaction, — the gran- tor and grantee, donor and donee, promisor and promisee, — there is such an element, and even perhaps an intention to deceive, towards a third person, not a party to the transaction, who is the one defrauded, and who obtains relief ; e. g., a conveyance' by A to B with intent to defraud A's creditors. This particular species has, therefore, a strong analogy to actual fraud, and the cases belonging to it are governed, to a great extent, by the rules of actual fraud. § 922, (a) The opinion of Haldane, tive on the distinction hetween ac- L. C, in Nocton v. Lord Ashburton, tual and constructive fraud. [1914] A. C. (H. L.) 932, is instruo- § 923 EQUITY JUKISPRUDENCE. 1934 merely raise a presumption of wrong, and throw upon the party benefited the burden of proving his innocence and the absence of fault.2 ^ §923. Three Principal Classes. — In the great case of Chesterfield v. Janssen, quoted in the preceding section,* Lord Hardwicke, after mentioning actual fraud, added the three other following classes : 1. That apparent' from the intrinsic nature and subject of the bargain itself; 2. That presumed from the circumstances and condition of the im- mediate parties to the transaction;'' 3. That which is an imposition on third persons not parties to the transaction. As these three groups constitute the constructive fraud of equity, the classification of the great chancellor will be adopted in the discussions of the present section.^ § 922, 2 The tenn "presumptive fraud" is sometimes used as a substi- tute for "constructive fraud," but improperly. In a great number of in- stances there is no presumption of fraud, in the true sense of that wordj aTid no such presumption could possibly arise. § 923, 1 Before entering upon the subject, two explanatory statements should be made: 1. Although the divisions are in the main sharply distin- guished, yet there are a few particular instances which cannot with cer- tainty be allotted to their single appropriate place, since they possess feat- ures which are common to two, or even to all, of the classes. Without attempting to be strictly logical, I have pursued an arrangement which is natural and practical. In this matter of order there is great difference among text-writers. 2. A large number of instances belonging to con- structive fraud are simply cases of illegal contracts and of personal in- capacity, — insanity, infancy, etc., — the rules concerning which are the same at law and in equity, and are found in every treatise upon contracts. Since the main object of the present work is to ascertain when these matters, give occasion for the equitable jurisdiction, and to determine the extent of its exercise, it does not seem necessary to enter upon any examination § 922, (b) The text is cited in which the law declares to be f raudu- Tribou v. Tribou, 96 Me. 305, 52 Atl. lent without inquiring into its nature.'' 795; Balthrop v. Todd, 145 N. C. §923, (a) §874, and note. 112, 58 S. E. 996. Sections 922- §923, (b) This paragraph is cited 929 are cited in Hodges v. Wilson, in Balthrop v. Todd, 145 N. C. 112, 165 N. C. 323, 81 S. E. 340. See, 58 S. K 996 (second class); Pruden-- also, Frost v. Latham & Co., 181 tial Life Ins. Co. v. La Chance, 113 Fed. 866, 868, definition: "An act Me. 550, 95 Atl. 223. 1935 OONSTKUCTIVE -FBAXJD. §§924,926 § 924. First. Constructive Fraud Apparent from the Intrinsic Nature and Subject of the Transaction Itself. — This class inchides three principal subjects : 1. Inadequacy of consideration; 2. Contracts illegal because opposed to statute, or to public policy, or to good morals; and 3. Cer- tain transactions which, in analogy with contracts, equity regards as contrary to public policy, and therefore illegal. I shall specify these various instances with as much ex- planation as may be needfid to exhibit the doctrines peculiar to equity, and shall then describe the equitable jurisdiction which they occasion, and the reliefs, defensive or affirma- tive, which may be Obtained by its means. § 925. I. Inadequacy of Consideration, — Inadequacy of consideration must ordinarily occur either in conveyances, executed or executory contracts of sale, or in agreements analogous to sale where there is a subject-matter trans- ferred or dealt with, and a price paid or to be paid. It may exist in the price or in the subject-matter, the latter case being the same as exorbitancy of price. It necessarily implies that the price is either too small or too great. The former is the condition ordinarily meant by inadequacy, and is plainly more susceptible of judicial investigation than the other. In both these forms inadequacy of con- sideration will be considered: 1. By itself free from any- other fact; 2. As connected with other inequitable facts and circumstances.* § 926. Inadequacy Pure and Simple.* — The rule is well settled that where the parties, were both in a situation to form an independent judgment concerning the transaction, and acted knowingly and intentionally, mere inadequacy iu of subjects which properly belong to the general law of contracts. A mere enumeration of those cases of illegality and incapacity which come within the cognizance of equity is all that is needed. § 9^5, (a) This section is cited in § 926, (a) Sections 926-928 are Phillips V. Pullen, 45 N. J. Eq. 5, 16 cited in Stephenson v. Atlas Coal Atl. 9. Co., 147 Ala. 432, 41 South. 301. § 926 EQUITY JTJEISPKUDENCE. 1936 the price or in the subject-matter, unaccompanied by other inequitable incidents, is never of itself a sufficient ground for canceling an executed or executory contract. If the parties, being in the situation and having the ability to do so, have exercised their own independent judgment as to the value of the subject-matter, courts of equity should not and will not interfere with such valuation.^ ^ In some of § 926, 1 Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Curson v. Belworthy, 3 H. L. Cas. 742; Merediths v. Saunders, 2 Dow, 514; Gartside v. Isherwood, 1 Brown Ch. 559; Griffith v. Spratley, 1 Cox, 383, 388; Colfler v. Brown, 1 Cox, 428; Fox v. Mackreth, 2 Cox, 322; 2 Dick. 689; Copis-v. Middleton, 2 Madd..409; Wood v. Abrey, 3 Madd. 417; Murray v. Palmer, 2 Schoales & L. 474, 488; Erwin v. Parham, 12 How. 197; Eyre v. Potter, 15 How. 42; Barribeau v. Brant, 17 How. 43; Slater v. Maxwell, 6 Wall. 268, 273; Warner v. Daniels, 1 Wood. & M. 90, 110; Howard v. EdgeU, 17 Vt. 9; Kidder v. Chamberlin, 41 Vt. 62; Bedel v. Loomis, 11 N. H. 74; Lee v. Kirby, 104 Mass. 420, 428; Park v. Johnson, 4 Allen, 259 ; Osgood v. Tranklin, 2 Johns. Ch. 1, 23, 7 Am. Dec. 513 ; Seymour v. Delancey, 3 Cow. 445, 15 Am. Dec. 270 ; Worth v. Case, 42 N.Y. 362; Shaddle v. Disborough, 3» N. J. Eq. 370; Ready v. Noakes, 29 N. J. Eq. 497; Wintermute v. Snyder, 3 N. J. Eq. 489; Weber v. Weit- ling, 18 N. J. Eq. 441; Harris v. Tyson, 24 Pa. St. 347, 360, 64 Am. Dec. 661; Davidson v. Little, 22 Pa. St. 245, 247, 60 Am. Dec. 81; Cummings's Appeal, 67 Pa. St. 404; Shepherd v. Bevin, 9 Gill, 32; Mayo v. Carring- ton, 19 Gratt. 74; Cribbins v. Markwood, 13 Gratt. 495, 67 Am. Dec. 775; Butler V. Haskell, 4 Desaus. Eq. 651; Juzan v. Toulmin, 9 Ala. 662, 44 •Am. Dec. 448; Delafleld v. Anderson, 7 Smedes & M. 630; Steele v. Worthington, 2 Ohio, 182; Weld v. Rees, 48 HI. 428; Scovill v. Barney, 4 Or. 288. § 926, (b) This portion of the text N. E. 956. See, also, Hamblin v. is quoted in Clark's Appeal, 57 Conn. Bishop, 41 Fed. 74; Provident Life 565 19 Atl. 332; Hemenway v. Ab- & Trust Co. v. Fletcher, 237 Fed. bott 8 Cal. App. 450, 97 Pae. 190; 104; McLeod v. McLeod, 145 Ala. Cum'mings v. Koeth, 10 Cal. App. 269, 117 Am. St. Rep. 41, 40 South. 144 101 Pac. 434; and cited in 414; Stephenson v. Atlas Coal Co., Beebe Stave Co. v. Austin, 92 Ark. 147 Ala. 432, 41 South 301; Kline v. 248, 135 Am. St. Eep. 172, 122 S. W. Kline, 14 Ariz. 369, 128 Pae. 805; 482; Bruner v. Cobb, 37 Okl. 228, English v. North, 112 Ark. 489, 166 131 Pac. 165; Gill v. South. Pac. do., S. W. 577; Lathrop v. Tracy, 24 174 Cal. 84, 161 Pac. 1153; Dickson Colo. 382, 65 Am. St. Eep. 229, 51 v. Kempinsky, 96 Mo. 252, 9 S. W. Pac. 486; Palmour v. Boper (Ga.), 618; Crum v. Sawyer, 132 Dl. 443, 34 45 S. E. 790; Shakel v. Cycle Trade 1937 GONSTEUCTIVB FEAUD. § 926 the earlier decisions, mere inadequacy, either in the price or in the value of the subject-matter, was held to he a suffi- cient hardship which might defeat the specific performance of an executory contract when set up as a defense.^ The doctrine, however, is now settled, that mere inadequacy — that is, inequality in value between the subject-matter and the price — is not a ground for refusing the remedy of specific performance; in order to be a defense, the inade- quacy must either be accompanied by other inequitable in- cidents, or must be so gross as to show fraud. In short, inadequacy as a negative defense, and as an affirmative ground for a cancellation, is governed by one and the same § 926, 2 Tilly v. Peers, cited 10 Ves. 301, per Eyre, C. B.; Day v. New- mr.n, 2 Cox, 77, and cited 10 Ves. 300, per Lord Alvanley ; Savile v. Savile, 1 P. Wms. 745; 5 Vin. Abr. 516, pi. 25. In the celebrated case of Sey- mour V. Delancey, 6 Johns. Ch. 222, 224, 225, Chancellor Kent reached this conclusion after a most able and exhaustive review of all the then ^existing authorities. His decree was reversed by a bare majority of the court of errors, although all the supreme court judges sustained Chan- cellor Kent's views : Seymour v. Delancey, 3 Cow. 445, 15 Am. Dec. 270. See, also, Clitherall v. Ogilvie, 1 Desaus. Eq. 257; Gasque v. Small, 2 Strob. Eq. 72; Clement v. Reid, 9 Smedes & M. 535. Pub. Co., 237 m. 482, 86 N. E. 1058 250, 97 Am. St. Rep. 592, 75 S. W. ($132 for $20,000); Jonas v. Weires, 439; Mueller v. Reuk'es (Mont.), 77 134 Iowa, 47, 111 N. W. 453 (un- Pao. 512; Phillips v. PuUen, 45 N. J. divided one quarter .interest in Eq. 5, 16 Atl. 9; affirmed in 45 $2,000 property sold for $22); Nixon N. J. Eq. 830, 18 Atl. 849; Diffen- V. Klise, 160 Iowa, 238, 141 N. W. darfer v. Dieks, 105 N. Y. 445, 11 322 (consideration was the support N. E. 825; Tillery v. Wren, 86 N. C. for life of grantor, who was eighty 217; Berry v. Hall, 105 N. C. 154,. years old and lived only two months 10 S. E'. 903; Hodges v. Wilson, 165 after making the deed); Herron v. N. C. 323, 81 S. E. 340; Chandler v. Herron, 71 Iowa, 428, 32 N. W. 407; Koe, 46 Okl. 349, 148 Pae. 1026; Brockway v. Harrington, 82 Iowa, Miller v. Folsom, 49 Okl. 74, 149 Pac. 23,' 47 N. W. 1013; Griffith v. Mil- 1185; Babcoek v. Wells (R. I.), 54 waukee Harvester Co., J2 Iowa, 6i54, Atl. 599; Mathews v. Crockett's 54 Am. St. Hep. 573, 61 N. W. 243; Adm'r, 82 Va. 39.4; Black v. Post, Sohan v. Gibson (Ky.), 80 S. W. 67 W. Va. 253, 67 S. E. 1072 ; Billups 1173; Keagle v. Pessell, 91 Mich. v. Montenegro-Eeihms Music Co., 69 618, 52 N. W. 58; McDonnell v. De W. Va. 15, 70 S. E. 779. Soto Sav. & Bldg. Ass'n, 175 Mo. n— 122 § 926 EQUITY JUEISPBITDENCE. 1938 rule.3 c "When a sale is made at puWic auction, conducted in a fair and open manner, with opportunity for real com- petition, the rule is eveii stronger, for fraud cannot then be inferred from any inadequacy in the price, without other circumstances showing bad faith.* ^ The particular case § 926, 3 This doctrine was first introduced by Lord Eldoa and Sir William Grant, and has since prevailed unchallenged in England, and has generally been adopted in the United States, although not without strong dissent and protest from individual judges ; Coles v. Trecothick, 9 Ves. 246 ; White V. Damon, 7 Ves. 30; Underbill v. Horwoodj 10 Ves. 209; and Stil- well V. Wilkins, Jacob, 280, 282, per Lord Eldon; Burrowes v. Lock, 10 Ves. 470, per Sir William Grant; Lowther v. Lowther, 13 Ves. 95, 103, per Lord Erskine; Collier v. Brown, 1 Cox, 428; Griffith v. Spratley, 1 Cox, 383; cited 2 Brown Ch. 179; Bower v. Cooper, 2 Hare, 408; Borell V. Dann, 2 Hare, 440; Stephens v. Hotham, 1 Kay & J. 571; Callaghan V. C^lagban, 8 Clark & F. 374, 401; Abbott v. Bworder, 4 De Gex & S. 448; Seymour v. Delaucey, 3 Cow. 445, 15 Am. Dec. 270; Hale v. Wilkin- son, 21 Gratt. 75; Booten v. Scheffer, 21 Gratt. 474; Shaddle v. Dis- borough, 30 N. J. Eq. 370; Ready v. Noakes, 29 N. J. Eq. 497; Rodman v. Zilley, 1 N. J. Eq. 320; Lee v. Kirby, 104 Mass. 420; Western R. R.- V. Babcock, 6 Met. 346; Westervelt y. Matheson, 1 Hoff. Ch. 37; Viele v. Troy & B. R. R., 21 Barb. 381; Black v. Cord, 2 Har. & G. 100; White v. Thompson, 1 Dev. & B. Eq. 493; Curlin v. Hendricks, 35 Tex. 225; Har- rison V. Town, 17 Mo. 237 ; Cathcart v. Robiason, 5 Pet. 263 ; ScoviU v. Barney, 4 Or. 288. §926, 4 White v. Damon, 7 Ves. 30, per .Lord Eldon; Borell v. Dann, 2 Hare, 440, 450, per Wigram, V. C; Ayers v. Baumgarten, 15 HI. 444; Erwin v. Parham, 12 How. 197 (a debt of two kimdred and sixty thou- §926, (e) This portion of the text performance); Boyce v. HoUoway, is quoted in Mayor etc. of Jersey 45 Ind. App. 535, 91 N. E. 34 (not City V. Kynn 74 N. J. Eq, 104, 70 a defense to specific performance); Atl. 497; O'Hara V. Wattson (Lynch), Worth v. Watts, 74 N. J. Eq. 609, 172 Cal. 525, 157 Pae. 608; Erwin v. 70 Atl. 357; Garten v. Layton, Hedrick, 52 W. Va. 537, 44 S. E. 165; 76 W. Va. 63, 84 S. E. 1058; Cona- Pennybaeker v. Laidley, 33 W. Va. way v. Sweeney, 24 W. Va. 643 (not 624, 11 S. E. 39. The text is cited a defense to action for specific per- in Dore v. Southern Pacific Co., 163 formance). Cal. 182, 124 Pa.o. 817. See, also, § 926, (d) The text is cited to this Bradley t. Heyward,' 164 Fed. 107 ; effect in Mangold v. Bacon, 237 Mo. Zempel v. Hughes, 235 111. 424, 85 496, 141 S. W. 650 (dissenting opin- N. E. 641; Bear v. Fletcher, 252 HI. io")- See Warner v. Jacob, 20 Ch. 206. 96 N. E. 997; Hamilton v. Hamil- Wv. 220; Schloss & Kahn v. Bright- ton (Ind.), 70 N. E. 535 (specific man, 195 Ala. 540, 70 South. 670; 1939 CONSTBUCTrVE FRAUD. § 927 of selling an expectancy or reversion for an inadequate price, which is in some respects an exception to the fore- going general rule, is considered in the subsequent section. §927. Gross Inadequacy Amounting to Fraud. — Al- though the actual cases in which a contract or conveyance has^ been canceled on account of gross inadequacy merely, without other inequitable incidents, are very few, yet the doctrine is settled, by a consensus of decisions and dicta, that even in the absence of all other circumstances, when the inadequacy of price is so gross that it shocks the con- science, and furnishes satisfactory and decisive evidence of fraud, it will be a sufficient ground for canceling a con- veyance or contract, whether executed or executory. Even then fraud, and not inadequacy of price, is the true and only cause for the interposition of equity and the granting of relief. 1 » sand dollars sofd at sheriff's sale for six hundred dollars). An auction sale will be set aside, and a fortiori a specific performance will be refused, when there was actual fraud in conducting it, or the buyer controlled it: Byers v. Surget, 19 How. 303, 309. § 927, 1 Gwynne v. Heaton, 1 Brown Ch. 1, 9, per Lord Thurlow : "An inequality so strong, gross, and manifest that it must be impossible to state it to a man of common sense without producing an exclamation at the inequality of it" : Gartside v. Isherwood, 1 Brown Ch. 558, 560 ; Heath- Carden v. Lane, 48 Aik. 219, 3 Am. 66 Wash. 113, 119 Pac. 22; Lallance St. Eep. 228, 2 S. W. 709; Cleaver v. Fisher, 29 W. Va. 512, 2 S. E. 775. V. Green, 107 HI. 67; Griffith v. Mil- § 927, (a) This section is quoted waukee Harvester Co., 92 Iowa, 634, in Phillips v. Pullen, 45 N. J. Eq. 5, 54 Am. St. Rep. 573, 61 N. W. 243; 16 Atl. 9; Cleere v. Cleere, 82 Ala. Learned v. Geer, 139 Mass. 31, 29 581, 60 Am. Rep. 75i), 3 South. N. E. 215; Allen v. Martin, 61 Miss. 107; Stephens v. Ozbourne, 107 78; Las Vegas Ey. & Power Co. v. Tenn. 572, 89 Am. St. Eep. 957, 64 Trust Co. of St. Louis County, 15 S. W. 902; Smith v. Collins, 148 Ala. N. M. 634, 110 Pac. 856; Stroup v. 672, 41 South. 825; Chance v. Chap- Eaymond, 183 Pa. St. 279, 63 Am. man, 195 Ala. 513, 70 South. 676; St. Rep. 758, 38 Atl. 626; Kobinson McDonald v. Smith, 95 Ark. 523, 130 V. Amateur Ass'n, 14 S. C. 148; S. W. 515; Alfrey v. Colbert, 7 Ind. Smith V. Perkins, 81 Tex. 152, 26 Ter. 338, 104 S. W. 638; Prudential Am. St. Rep. 794, 16 S. W. 805 (ex- Life Ins. Co. v. La Chance, 113 Me. eeution sale); Johnson v. Johnson, 550, 95 Atl. 223 (sale of insurance § 928 EQUITY JUBISPBUDENCB. 1940 §928. Inadequacy Coupled With Other Inequitable In- cidents. — ^If there is nothing but mere inadequacy of price, cote V. Paignon, 2 Brown Ch. 167, 173; Griffith v. Spratley, 1 Cox,' 383, 388, 389; Fox v. Mackreth, 2 Diek. 689; Evans v. Llewellin, 1 Cox, 333; Stilwell V. Wilkins, Jacob, 280; Gibson v. Jeyes, 6 Ves. 266, 273; Uniaer- hiU V. Horwood, 10 Ves. 209, 219; Coles v. Trecothiek, 9 Ves. 234, 246; Morse v. Royal, 12 Ves. 355, 373; Peacock v. Evans, 16 Ves. 512; Wood V. Abrey, 3 Madd. 417; Borell v. Dann, 2 Hare, 440, 450; Eice v. Gordon, 11 Beav. 265; Cockell V. Taylor, 15 Beav. 103, 115; Summers v. Griffiths, 35 Beav. 27; Falcke v. Gray, 4 Drew. 651; James v. Morgan, 1 Lev. Ill (exorbitancy of price; the well-known horseshoe case, in which a party stipulated to pay a sum resulting from doubling the amount for every nail in the horse's shoes) ; Howard"v. EdgeU, 17 Vt. 9; Kidder v. Cham- berlin,'41 Vt. 62; Osgood v. Franklin, 2 Johns. Ch. 1, 23, 7 Am. Dec. 513; 14 Johns. 527; Dunn v. Chambers, 4 Barb. 376; Worth v. Case, 42 N. T. 362; Hodgson v. Farrell, 15 N. J. Eq. 88; GifEord v. Thorn, 9 N. J. Eq. 702; Davidson v. Little, 22 Pa. St. 245, 60 Am. Dec. 81; Hamet v. Dun- dass, 4 Pa. St. 178; Sime v. Norris, 8 PhUa. 84; Green v. Thompson, 2 Ired. Eq. 365; Bamett v. Spratt, 4 Ired. Eq. 171; Butler v. Haskell, 4 Desaus. Eq. 651; Juzan v. Toulmin, 9 Ala. 662, 44 Am. Dec. 448;. Judge V. WUkins, 19 Ala. 765; Morriso v. Philliber, 30 Mo. 145; MitcheU v. Jones, 50 Mo. 438; Kelly v. McGuixe, 15 Ark. 555; Deaderiek v. Watkins, 8 Humph. 520; Coffee v. RufBn, 4 Cold. 487; Tally v. Smith, 1 Cold. 290; policy by insured, on his deathbed, (sale of land worth $1,200 for $12.50 for half its value); and cited in to cover taxes); Davis v. Chicago Moore v. Sawyer, 167 Fed. 826 (C. Dock Co., 129 HI. 180, 21 N. E. 830; C. Okl.); Stemfed v. Nilsen (Ariz.), Lnndy v. Seymour, 55 N. J. Eq. 1, 139 Pac. 879; Beebe Stave Co. v. 35 Atl. 893. See, also, BaUentyne v. Austin, 92 Ark. 248, 135 Am. St. Smith, 205 TJ. S. 285, 51 L. Ed. 803, Eep. 172, 122 S. W. 482; Odell v. 27 Sup. Ct. 527 (price one-seventh Cox, 151 Cal. 70, 90 Pac. 194; Nichols value; mortgage sale set aside) ; V. Eoach, 276 HI. 388, 114 N. E. 914; Smith v. Collins, 148 Ala. 672, 41 Bevins V. Lowe, 159 Ky. 439, 167 South. 825; McCaskill v'. Scotch Lum- S. W. 422;'Dotson v. Norman, 159 ber Co., 152 Ala. 349, 44 South. 405; Ky. 786, 169 ,S. W. 527; Brown v. George v. Norwood, 77 Ark. 216, 113 Trent, 36 Okl. 239, 128 Pac. 895; Am. St. Eep. 143, 7 Ann. Gas. 171, Bruner v. Cobb, 37 Okl. 228, 131 Pae. 91 S. W. 557 (judicial sale; $4,000 165; Mangold v. Bacon, 229 Mo. 459, for $5,000 property not so inadequate 130 S. W. 23 (dissenting opinion, cit- as to be set aside) ; Steinf eld v. Niel- ihg in particular note 1 to this para- sen, 12 Ariz. 381, 100 Pac. 1094 graph on question when mere in- (consider value at time of transac- adequacy of consideration will be tion); Odell v. Cox, 151 Cal. 70, 90 ground for relief); Mangold v. Pae. 194 (inadequacy of price in ex- Baeon, 237 Mo. 496, 141 S. W. 650 ecution sale— value $2,000, price 1941 CONSTEUCTrVE FRAUD. § 928 the case must be extreme, in order to call for the interposi- tion of equity. Where the inadequacy does not thus stand MeCormick v. Matin, 5 Blackf. 509; Knobb v. Lindsay, 5 Ohio, 468; Macoupin Co. v. People, 58 111. 191; Madison Co. v. People, 58 111. 456; Case V. Case, 26 Mich. 484; Byers v. Surget, 19 How. 303; Eyre v. Potter, 15 How. 42, 60; Veazie v. Williams, 8 How. 134. If the inadequacy may be so excessive as to be ground for a cancella- tion, it may, of course, be sufQcient to defeat the specific. performance of an executory contract : Eastman v. Plumer, 46 N. H. 464 ; Graham v. Pan- coast, 30 Pa. St. 89, 97; Powers v. Mayo, 97 Mass. 180; and see cases in preceding note. The rule is ordinarily stated that the inadequacy must be so gross that it is conclusive evidence of fraud. It is so laid down by earlier judges, and by Mr. Kerr. The rule had its origin at a time when fraud was gen- erally inferred by presumptions of law, and often by conclusive presump- tions. In the present condition of the law on the subject of fraud, this mode of formulating the rule seems to be erroneous. The principle is now almost universally adopted, that fraud is a fact, inferred, like other conclusions of fact, from the evidence; no rule of law can therefore be laid down as to the amount of inadequacy necessary to produce the result- ing fraud. Inadequacy of consideration may be evidence of fraud, slight or powerful, according to its amount, and other circumstances.. When it is satisfactory and decisive evidence, — when from the proof of inadequacy $26.50— not in itself ground to set v. Watts, 74 N. J. Eq. 609, 70 Atl. aside); Sehwarz v. Eeznick, 257 111. 357 (value $10,000, price $4,000; 479, 100 N. E. 900; Berry v. Levi, court says: "Quite impracticable to 107 m. 612 (two lots sold en masse define any exact ratio between value on execution for $65, value $8,000); and price as a boundary line which, Hortin v. Sedgwick, 133 Iowa, 233, when crossed, affords in itself con- J2 Ann. Gas. 337, 110 N. "W. 460 elusive evidence of fraud"); Suf- (gross inadequacy ground for infer- fern v. Butler, 19 N. J. Eq. (4 C. E. enee of fraud in execution sale); Green) 202; ^cPhaul v. Walters, 167 Wyandotte State Bank v. Murray, N. C. 182, 83 S. E. 321; Nodine v. 84 Kan. 524, 114 Pac. 847 (judicial Richmond, 48 Or. 527, 87 Pae. 775; sale); German Corporation v. Ne- Howells v. Pacific States Sav., etc., gauntee German Aid Soc, 172 Mich. Co., 21 Utah, 45, 81 Am, St. Eep. 659, 650, 138 N. W. 343; Adair v. Cum- 60 Pac. 1025; Johnson v. Johnson, min, 48 Mich. 375, 12 N. W. 495; 66 Wash. 113, 119 Pae. 22; Tausick Johnson v. Avery, 60 Minn. 262, 51 v. Tausick, 52 Wash. 301, 100 Pae. Am. St. Rep. 529, 62 N. W. 283 757; Billups v. Montenegro-Eeihms (land worth $8,000 sold at partition Music Co., 69 W. Va. 15, 70 S. K sale for $1,500); State ex rel. Beed 779; Deepwater Council No. 40, O. V." Elliott, 11-4 M!o. App. 562, 90 W. A. M. v. Eenick, 59 W. Va. 343, S. W. 122 (sale by sheriff); Worth 53 S. E. 552. § 928 EQUITY JURISPRUDENCE. 1942 alone, but is accompanied by other inequitable incidents, the the court or jury are convinced that fraud as a fact, did exist, — then the relief is granted. Instead, therefore, of repeating the vtBual formula which has been handed down for generations, that the inadequacy must be con- clusive evidence of fraud, I have said in the text that it must be satisfac- tory and decisive evidence; the former mode represented fraud as the result of a conclusive legal presumption; the latter treats it as a conclu- sion of fact drfiwn from the evidence, and is therefore in perfect har- mony with the theory which now prevails in most, if not all, of the. states. The following seems to be the true rationale of the doctrines concerning inadequacy of price. Whenever it appears that the parties have know- ingly and deliberately fixed upon any price, however great or however small, there is no occasion nor reason for interference by courts, for owners have a right to sell property for what they please, and buyers have a right to pay what they please: See Harris v. Tyson, 24 Pa. St. 347, 360, 64 Am. Dec. 661; Davidson v. Little, 22 Pa. St. 245, 247, 60 Am. Dec. 81. But where there is no evidence of such knowledge, inten- tion, or deliberation by the parties, the disproportion between the value of the subject-matter and the price may be so great as to warrant the court in inferring therefrom the fact of fraud. Such a gross inadequacy or disproportion will call for explanation, and will shift the burden of proof upon the party seeking to enforce the contract, and will require him fo show aflfirmatively that the price was the result of a deliberate and intentional action by the parties; and if the facts do prove such action, the fact of fraud will be more readily and clearly inferred. I do not mean that judges and juries are no longer, under any circumstances, aided by legal presumptions in dealing with fraud. The number of instances, however, in which legal presumptions are invoked has been very much lessened; the issue of fraud or no fraud is generally decided in the same manner as any other issue of fact. The Roman law adopted a fixed standard by which to determine all cases of inadequacy, which was one half of the real value of the subject- matter when that consisted of immovable property. If the price was less than one half of the real value, the seller could compel the buyer to elect either to rescind, restore the thing and take back the price, or to afl&rm and make up the deficiency: Code, lib. 14, tit. 44, sec. 2; and see Nott v. Hill, 2 Cas. Ch. 120, per Lord Nottingham; Burrowes v. Lock, 10 Ves. 470, 474, per Sir William Grant. A like method is found in the French law. Such arbitrary rules are entirely contrary to the spirit of our law, and our methods of administering justice. If the price was less than one half of the value of the subject-matter, and there were no circumstances showing an intention on the part of the vendor to confer a bounty or favor, the sale would doubtless be set aside. Where the circumstances 1943 CONSTRUCTIVB FRAUD. § 928 relief is much more readily granted.^ But even here the courts have established clearly marked limitations upon the exercise of their remedial functions, which should be carefully observed. The fact that a conveyance or other transaction was made without professional advice or con- sultation with friends, and was improvident, even coupled with an inadequacy of price, is not* of itself a sufficient ground for relief, provided the parties were both able to judge and act independently, and did act upon equal terms, and fully understood the nature of the transaction, and there was no undue influence or circumstance of oppres- sion.i b When the accompanying incidents are inequitable show that a favor or bounty was intended, the inference of fraud is neces- sarily destroyed; even a pure gift would h6 sustained: Whalley v. Whal- ley, 1 Mer. 436. As to the time of the inadequacy, in order that it may ever be fatal, it must exist at the concluding of the contract. If there was no inadequacy at the making of the contract, none can arise from subsequent events or change of circumstances: Mortimer v. Capper, 1 Brown Ch. 156; Batty v. Lloyd, 1 Vem. 141; Hale v. Wilkinson, 21 Gratt. 75; Lee v. Kirby, 104 Mass. 420. The old case of Savile v. Savile, 1 P. Wms. 745, was decided otherwise, but has long been overruled on this point. See, however, the somewhat remarkable case of Willard v. Tay- loe, 8 Wall. 557, which was really an instance of the price becoming in- adequate by subsequent events. This rule is subject to a certain modifi- cation in suits for the specific performance of contracts. If a plaintiff, instead of obtaining his remedy promptly as soon as he was able, should unnecessarily delay, and should not bring a suit until, by his delay or change of circumstances, the price or subject-matter had become inade- quate, a specific enforcement might and generally would be refused:* Booten v. Scheffer, 21 Gratt. 474; Whitaker v. Bond, 63 N. C. 290; Hud- son v. King, 2 Heisk, 560 ; McCarty v. Kyle, 4 Cold. 348. § 928, 1 Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Merediths v. Saunders, 2 Dow, 514; Blackie v. Clark, 15 Beav. 595; Den- §927, (i») Quoted in HendeTSon Pennybacker v. Laidley, 33 W. Va. V. Beatty (Iowa), 99 N. W. 716. 624, 11 S. E. 39; Moore v. Sawyer, §928, (a) The text is quoted in 167 Fed. 826; Hemenway v. Abbott, Bowen v. Kutzner, 167 Fed. 281, 8 Gal. App. 450, 97 Pae. 190; Vaill 93 C. C. A. 33; Moore v. Sawyer, 167 v. McPhail, 35 R. I. 412, 87 Atl. Fed. 826; Hemenway v. Abbott, 8 188; Sherman v. Glick, 71 Or. 451, Gal. App. 450, 97 Pae. 190; Hansel 142 Pac. 606; Hansel v. Norblad, 78 V. Norblad, 78 Or. 38, 151 Pac. 962. Or. 38, 151 Pac. 962 (refusing to set §928, (b) The text is quol^ed in aside attorney's compensation). § 928 EQUITY JURISPEUDENOE. 1944 and show bad faith, such as concealments, misrepresenta- tions, imdue advantage, oppression on the part of the one who obtains the benefit, or ignorance, weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like, on the part of the other, these circumstances, combined with inadequacy of price, may easily induce a court to grant relief, defensive or nffirmative.** It would not be correct to say that such facts constitute an absolute and neces- sary ground for equitable interposition. They operate to throw the heavy burden of proof upon the party seeking to enforce the transaction or claiming the benefits of it, to show that the other acted voluntarily, knowingly, inten- tionally, and deliberately, with full knowledge of the nature and effects of his acts,, and that his consent was not ob- tained by any oppression, imdue influence, or undue advan- tage taken of his condition, situation, or necessities. If the party upon whom the burden rested should succeed in thus showing the perfect good faith of the transaction, it ton V. Donner, 23 Beav. 285, 291; Toker v. Toker, 31 Beav. 629; Dvuin v. Chambers, 4 Barb. 376; Green v. Thompson, 2 Ired. Eq. 365; Juzan v. Touhnin, 9 Ala. 662, 44 Am. Dec. 448; Scovill v. Barney, 4 Or. 288. Har- rison V. Guest, 6 De Gex, M. & G. 424, 8 H. L. Gas. 481, is a very illus- trative case. An old man of seventy-one, bedridden, illiterate, without any independent professional advice, and without consulting his friends or relatives, conveyed property worth four htmdred pounds, for the consid- eration of being provided with board and lodging during the rest of his life. He lived only six weeks after the conveyance; his representatives sought to have the conveyance set aside. The evidence showed that he had refused to employ professional advice for himself, that he was able to understand the nature of the transaction, and that there were no cir- cumstances of oppression; the court held that there was not sufficient ground to impeach the conveyance. In Scovill v. Barney, 4 Or. 288, the court said that inadequacy of consideration or mental weakness, standing alone, will not warrant the interposition of equity; but when both are combined, relief will be granted. It is, perhaps, not possible to reconcile this naked proposition with the authorities. § 928, (c) The text is quoted in an inadequate consideTation, suppoa- Kirby v. Arnold, 191 Ala. 263, 68 ing she waa releasing her grand- South. 17 (grossly ignorant colored father from a criminal prosecution), woman conveyed her property for 1945 CONSTRUCTIVE FEATTD. § 928 would be sustained; if he should fail, equity would grant such relief, affirmative or defensive, as might be appro- priate.2 d There are cases, however, which theoretically § 928, 2 Deane v. Kastron, 1 Anstr. 64; Lewis v. Lord Lechmere, 10 Mod. 503; Clarkson v. Hanw^ty, 2 P. Wms. 203; Ardglasse v. Muschamp, 1 Vern. 236; Gartside v, Isherwood, 1 Brown Ch. 558; Evans v. Llewellin, 1 Cox, 333; Morse v. Royal, 12 Ves. 355, 373; Pickett v. Loggon, 14 Ves. 231; Murray v. Palmer, 2 Schoales & L. 474, 486; Falkner v. O'Brien, 2 Ball & B. 220; Griffiths v. Robins, 3 Madd. 191; Wood v. Abrey, 3 Madd. 417; Willan v. Willan, 2 Dow, 274; Collins v. Hare, 2 Bligh, N. S., 106; McDiarmid v. McDiarmid, 3 Bligh, N. S., 374; Smith v. Kay, 7 H. L. Cas. 750; Dent v. Bennett, 4 Myhie & C. 269, 273; Gibson v. Russell, 2 Younge & C. Ch. 104; Prideaux v. Lonsdale, 1 De Gex, J. & S. 433; Tate V. Williamson, L. R. 2 Ch. 65; 1 Eq. 528; Rhodes v. Bate, L. R. 1 Ch. 252; Sturge V. Sturge, 12 Beav. 229, 244; Coekell v. Taylor, 15 Beav. 103, 115; Cooke V. Lamotte, 15 Beav. 234; Grosvenor v. Sherratt, 28 Beav. 659; Summers v. Griffiths, 35 Beav. 27; Longmate v. Ledger, 2 Giff. 157; Powers V. Hale, 25 N. H. 145; Howard v. Edgell, 17 Vt. 9; Mann v. Bet- terly, 21 Vt. 326; Osgood v. Franklin, 2 Johns. Ch. 1, 24; 7 Am. Dec. 513; Hall v. Perkins, 3 Wend. 626; Kloepping v. Stellmacher, 21 N. J. Eq. 328 (mistake and inadequacy in a sheriff's sale) ; Graham v» Pancoast, 30 Pa. St. 89 (age of a party) ; Henderson v. Hays, 2 Watts, 148, 151 (intemperance and weakened mind) ; Campbell v. Spencer, 2 Binn. 133 (ditto) ; Todd v. Grove, 33 Md. 188; Brooke v. Berry, 2 Gill, 83; McKin- § 928, (d) The text is quoted in Wiley, 49 Or. 480, 90 Pae. 910 (ven- Abercombe v. Carpenter, 150 Ala. dee intoxicated, price exorbitant); 294, 43 South. 746; Storthz v. Will- tribou v. Tribou, 96 Me. 305, 52 iams, 86 Ark. 460, 111 S. W. 804; Atl. 795. See, also, Graffan v. Bur- Alfrey v. Colbert, 7 Ind. Ter. 338, gess, 117 U. S. 184, 6 Sup. Ct. 686, 104 S. W. 638; Stephens v. Oz- and cases cited (a good discussion) ; bourne, 107 Tenn. 572, 89 Am. St. Fahrney v. Kelly, 102 Fed. 403; Eep. 957, 64 S. W. 902; Stringfellow Parker v. Glenn, 72 Ga. 637; Odell V. Hanspn, 25 Utah, 480, 71 Pac. v. Cox, 151 Cal. 70, 90 Pae. 194 1052; Flook v. Armentrout's Adm'r, (execution sale, value $2,000, price 100 Va. 638, 42 S. E. 686; and cited $26.50, with excusable lack of in Cleere v. Cleere, 82 Ala. 581, 60 knowledge of levy and sale) ; Pye v. Am.Eep. 750,3South. 107; Steinfeld Pye, 133 Ga. 246, 65 S. E. 424 V.Nielsen, 15 Ariz. 424, 139 Pac. 879; (proper to charge that "great in- Balthrop v. Todd, 145 N. C. 112, 58 adequacy of price, joined with" great S. E. 996; Bruner v. Cobb, 37 Okl. disparity of mental ability in the 228, 131 Pac. 165; Brown v. Trent, contracting of a bargain, may jus- 36 Okl. 239, 128 Pae. 895; Owings tify equity in setting aside a eon- V. Turner, 48 Or. 462, 87 Pae. 160 tract") ; Bondurant v. Bondurant, (mental weakness); Fagan v. 251 111. 324, 96 N. B. 306 (in- 928 EQUITY JUBISPBUDENCE. 1946 call for the interposition of equity on account of such cir- cumstances of bad faith, as well as other forms of fraud, but in which no relief can actually be given, because the ney v. Pinckard, 2 Leigh, 149, 21 Am. Dec. 601; Clitherall v. Ogilvie, 1 Desaus. Eq. 257 (one party young and inexperienced, the other mature and cunning); Neeley v. Anderson, 2 Strob. Eq. 262; Gasque v. Small, 2 Strob. Eq. 72; Bunch v. Hurst, 3 Desaus. Eq. 273, 5 Am. Dec. 551; Maddox v. Simmons, 31 Ga. 512; Wormaek v. Rogers, 9 Ga. 60; Black- wilder V. Lovelass, 21 Ala. 371 (undue advantage of party's pecuniary necessities, — an instructive case) ; Harrison v. Town, 17 Mo. 237; Holmes V. Fresh, 9 Mo. 200; Cadwallader v. West, 48 Mo. 483 (physician and patient) ; Mitchell v. Jones, 50 Mo. 438 (mistake and inadequacy in a partition sale); Newland v. Gaines, 1 Heisk. 720; Benton v. Shreeve, 4 Ind. 66; Modisett v. Johnson, 2 Blackf. 431; McCormiek v. Malin, 5 Blaekf.'509; Eish v. Leser, 69 111. 394 (ignorance and fear of one party, concealment of value and undue advantage by the other, — a very instructive case) ; Cathcart v. Robinson, 5 Pet. 263; Byers v. Surget, 19 How. 303. When the inadequacy appears in a contract between a parent and child, or between other near relatives, the circumstances may be such that all suspicion of fraud or hardship is removed by the fact of relationship. This wouy especially be so if the one obtaining the benefit, and from whom the inadequate consideration comes, is a person who would naturally adequacy combined with irregulari- ties, though slight, in Judicial sale) ; Misener v. Glasbrenner, 221 111. 384, 77 N. E. 467 (same); Mansfield V. Wallace, 217 111. 610, 75 N. E. 682 (same); Walker v. Shepard (111.), 71 N. E. 422; Hardy v. Dyas, 203 111. 211, 67 N. E. 852; Davis v. CHeago Dock Co., 129 111. 180, 21 N. E. 830 (gross inadequacy in judicial sale, with irregularities and trifling eireumstanees indicating unfairness) ; Smith v. Huntoon, 134 111. 24, 23 Am. St. Kep. 646, 24 N. E. 971 (same); Lurton v. Eodgers, 139 111. 214, 32 Am. St. Eep. 214, 29 N. E. 866 (execution sale); Sioux City, etc., Land Co. v. Walker, 78 Iowa, 476, 43 N. W. 294 (execution sale); Wilkie v. Sassen (Iowa), 99 N. W. 124; Copper v. Iowa Trust & Savings Bank, 149 Iowa, 336, 128 N. W. 373 (execution sale); Smith V. Woodson, 29 Ky. Law Eep. 316^ 92 S. W. 980; Prater v. Peters, 31 Ky. Law Eep. 1311, 105 S. W. 102 (party old, ignorant and feeble sold land worth from $6,000 to $8,000 for $1,000; deed set aside); Foor v. Mechanics' Bank & Trust Co., 144 Ky. 682, Ann. Gas. 1913A, 714, 139 S. W. 840 (judicial sale); Bean v. Haffendorfer, 84 Ky. 685, 2 S. W. 556, 3 S. W. 138; Eattermau v. Campbell (Ky.), 80 S. W. 1155; Tan Norsdall v. Smith, 141 Mich. 355, 104 N. W. 660; Derby v. Donahoe, 208 Mo. 684, 106 S. W. 632; State ex rel. Hartley v. Innes, 137 Mo. App. 420, 118 S. W. 1168 (in- adequacy of price in judicial sale a circumstance to be considered) ; Eogers & B. H. Co. v. Cleveland B. Co., 132 Mo. 442, 53 Am. St. Rep. 494, 31 L. E. A. S35, 34 S. W. 57; Cole Co. V. Madden, 91 Mo. 585, 1947 COFSTHUCTIVE FRAUD. § 928 contract — conveyance or settlement — being executed, tlie parties cannot be restored to their original position.^ Some special rules as to the effect of a false statement of the consideration in a conveyance, and as to the evidence be a recipient of the other party's bounty :« Shepherd v. Bevin, 9 Gill, 32, 39, per Frick, J.; Hays v. Hollis, 8 Gill, 357; Haines v. Haines, 6 Md. 435; White v. Thompson, 1 Dev. & B. Eq. 493; Fripp v. Fripp, 1 Rice Eq. 84. On the other hand, in transactions between the same class of parties, the circumstances may be such as to raise a strong inference, if not even a presumption of bad faith. The fact of inadequacy in a contract between near relatives, and especially when the party obtaining the benefit is in a position of natural superiority and command over the other, — as a father and child, an elder brother and younger sister, — might raise a strong inference and even presumption of undue influence, and thus call for the interposition of a court : Whelan v. Whelan, 3 Cow. 537; and see Callaghan v. Callaghan, 8 Clark & F. 374. The questions concerning inadequacy of price accompanied by other inequitable inci- dents cannot, in practice, be easily separated from the more comprehen- sive subjects of undue influence and fiduciary -relations, and will be more fully illustrated in the subsequent paragraphs which treat of those topics. § 928, 3 The most striking illustration is that of marriage settlements, since the parties cannot be unmarried: North v. Ansell, 2 P. Wms. 619. 4 S. W. 397 (execution sale); Dick- 155 S. W. 573 (execution sale); sou v. Kempinsky, 96, Mo. 252, 9 S. Haskins v. Wallet, 63 Tex. 213 (the W. 618 (contract with person of price paid did not exceed one- weak mind); Holdsworth v. Shan- twentieth of the value, and the non, 113 Mo. 508, 35 Am. St. Eep. court held that very slight eireum- 719, 21 S. W. 85 (sheriff's sale); stances in addition would be suffl- Norris v. Clark (N. H.), 57 Atl. cient to avoid ' the sale); Allen's 334; Hedlin v. Lee, 21 N. D. 495, Adm'r v. Allen's Adm'rs, 79 Vt. 131 N. W. 390 (sale under power in' 173, 64 Atl. 1110 (inadequacy mortgage); Sherman v. Gliek, 71 coupled with mental weakness); Or. 451, 142 Pac. 606 (plaintiff, u Younger v. Meadows, 63 W. Va. woman of sixty-seven, poorly edu- 275, 59 S. E. 1087 (judicial sale) ; cated, exchanged property worth Griswold v. Barden, 146 Wis. 35, $3,000 for property worth $750, plus 130 N. W. 952 (judicial sale); Kis- $500 in cash; conveyance set aside); singer v. Zieger, 138 Wis. 368, 120 Toney v. Toney, 84 Or. 310, 165 N. W. 249 (judicial sale). Pac. 221; Stroup v. Eaymond, 183 §928, (e) John's Appeal, 102 Pa. Pa. St. 279, 63 Am. St. Kep. 758, St. 59 (husband and wife). A por- 38 Atl. 626; Kinkaid v. Eossa, 31 tion of this note is quoted in S. D. 559, Ann. Cas. 1915D, 1098, Boweu v. Kutzner, 167 Fed. 281, 93 141 N. W. 969 (execution sale); C. C. A. 33. See, also, post, f§ 962, Moore v. Miller (Tex. Civ. App.), 963, and notes. § 929 EQUITY JUEISPEUDENCB. 1948 admissible to impeach or to sustain the consideration re- cited, are collected in the foot-note.* § 929. II. Illegal Contracts and Transactions.* — In this subdivision I shall merely enumerate the most important § 928, 4 See Kerr on Fraud, 191. A false statement of the considera- tion does not necessarily vitiate a deed : Bowen v. Kirwan, Lloyd & G. 47. But it may, in some cases, invalidate the entire transaction: Bowen v. Kirwan, Lloyd & G. 47; Uppington v. Bullen, 2 Dru. & War. 184; Gibson V. RusseU, 2 Younge & C. Ch. 104. In general, where no consideration at aU is expressed in a deed, a party may prove the actual consideration to support it; and where a consideration is expressed, a party may prove any other actual consideration, if not wholly inconsistent with that stated : Hartopp V. Hartopp, 17 Ves. 184, 192; Clifford v. Turrell," 1 Younge & C. Ch. 138; on appeal, 14 L. J. Ch. 390; Nixon v. Hamilton, 2 Dru. & Walsh, 364, 387. To this general rule there is the limitation that, where the consideration expressed in a deed is impeached on account of fraud, the party claiming under the conveyance cannot sustain it by proving another consideration different from that stated: Clarkson v. Hanway, 2 P. Wms. 203; Bridgman v. Green, 2 Ves. Sr. 627; Watt v. Grove, 2 Schoales & L. 492, 501; Willan v. Willan, 2 Dow, 274. If a pecuniary consideration is stated in the deed, and is impeached," the party cannot show and rely on the consideration of blood, or love and affection : Clark- son V. Hanway, 2 P. Wms. 203; Willan v. Willan, 2 Dow, 274.* If. the recitals state a pecuniary consideration, and the operative part mentions love and affection as being in part the consideration of the deed, this dis- crepancy is not sufficient to raise a presumption of fraud : Filmer v. Gott, 4 Brown Pari. C. 230; Whalley v. Whalley, 3 Bligh, 1, 13. If the trans- action on which a deed is represented to be based, and the consideration for which it purports to be given, are stated untruly, and this untruth would operate fraudulently, the instrument may lose all of its validity in equity, even though it cannot be attacked at law: Watt v. Grove, 2 Schoales & L. 492, 504. A deed between parties, one of whom is subject to the influence of the other, should contain a fair and truthful statement of the transaction. If the statement of the consideration is untrue, the instrument cannot be upheld. The party seeking to uphold it cannot prove, in order to sustain it, that the actual consideration was partly that represented in the deed and partly something else, since this would be inconsistent with the consideration stated on the face of the instrument: §928, (*) See, however, Carty v. 41, 98 8. W. 711. Section 929 is Connglly, 91 Cal. 15, 27 Pac. 599. cited in Woodall v. Peden, 274 HI. §929, (a) Sections 929-939 are 301, 113 N. E. 608. cited in ■Wood v. Stewart, 81 Ark. 1949 CONSTRUCTIVE FRAUD. § 930 kinds of illegal contracts and transactions which may per- mit the interposition of equity, with such very brief descrip- tion as shall seem necessary. The general subject of ille- gality in the terms or the consideration, with the special rules which define its extent, limitations, and exceptions, will be found in treatises upon contracts, to which the reader is referred. The equitable jurisdiction which may be exercised on the occasion of such transactions ' is de- scribed in the following subdivision. It is sufficient at present to say that a court of equity does not aid a party to enforce an illegal transaction which is still executory, in pursuance of the principle embodied in the maxim. Ex turpi causa non oritur actio. It may, however, grant the affirma- tive relief of cancellation or injunction in such a condition, when the defense would not be available at law. If the contract has been executed by the payment of the money, conveyance or delivery of the property, and the parties have equally participated in the wrong, and are equally in fault, the court, unless compelled to do so by statute, does not generally interpose its aid. The maxims, In pari delicto, potior est conditio possidentis, and Potior est con- ditio defendentis, are then controlling. Affirmative relief is sometimes prescribed by statute, as in usurious and gam- ing contracts. When the parties are not in pari delicto, equity may give affirmative relief to the one who is com- paratively innocent. § 930. 1. Contracts Illegal Because Contrary to Statute. I place under this head those few instances in which the Aheame v. Hogan, Dru. 310; Uppington v. BuUen, 2 Dru. & War. 184; Clifford V. TurreU, 1 Younge & C. Ch. 138; Gibson v. Russell, 2 Younge & C. Ch. 104. A statement of a consideration where there was actually none, or a wrong statement of the consideration, or other suspicious cir- cumstances, may shift the burden of proof from the party attacking a deed to the one sustaining it: Watt v. Grove, 2 Schoales & L. 492, 502; Griffiths V. Robins, 3 Madd. 191; Gibson v. Russell, 2 Younge & C. Ch. 104; Aheame v. Hogan, Dru. 310; Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481. § 930 EQUITY JURISPKUDENCB. 1950 illegality is wholly or chiefly the result of statutory prohibi- tion. Very many of the contracts illegal at the common law, because opposed to public policy or to good morals, have also been brought within the domain of positive legis- lation in the various states; and a very few which are il- legal by the English common law are not generally made so by the law of this country. The important species which fall under the present head are usurious, gaming, and smuggling contracts.^ The policy of prohibiting usury has been abandoned, and the statutes concerning it repealed, in England and in several of the American states. In some of the states which still adhere to the policy, the usurious contract itself, the instrument by which it is evidenced, and all its securities, are declared to be utterly void ; in others, the stipulation for the usurious excess over the legal in- terest is alone made void ; while in others a further penalty is added to this usurious excess. ^ Although at the com- mon law certain kinds of contracts based upon wagers were not unlawful, while those made upon a gaming considera- tion were illegal, the modern legislation of England and of the United States declares all gaming and wagering agreements, and the instruments by which they are evi- denced or secured, to be illegal, null, and void.2 b The sub- § 930, 1 Waller v. Dalt, 1 Ch. Cas. 276; 1 Dick. 8; Barker v. Vansom- mer, 1 Brown Ch. 149; Scott v. Nesbit, 2 Brown Ch. 641; 2 Cox, 183; Bosanquett v. Dashwood, Cas. t. Talb. 38; Fanning v. Dunham, 5 Johns. Ch. 122, 142, 143, 9 Am. Dec. 283. §930, 2Rawden v. Shadwell, Amb. 269; Woodroffe v. Famham, 2 Vem. 291; Da Costa v. Jones, Cowp. 729; Robinson v. Bland, 2 Burr. 1077; Skipwith v. Strother, 3 Rand. 214; Dade v. Madison, 5 Leigh, 401; Wilkinson v. Tousley, 16 Minn. 299, 10 Am. Rep. 139. The ordinary so-called time contracts purporting to be for the purchase of stocks, but in reality wholly speculative, and without any intention to sell or buy spe- §930, (a) See, also, § 402. S. W. 805; and the interesting ease § 930, (b) See, also, KuM v. Gaily of Barclay v. Pearson, [1893] 2 Ch. Universal Press Co., 123 Ala. 452, 82 154, holding that a "missing word Am. St. Bep. 135, 26 South. 535, competition" was a lottery, and citing many cases (contract of sale that the court would not administer of a gambling device or machine); or distribute the fund contributed Beer v. Landman, 88 Tex. 450, 31 by the competitors. 1951 CONSTRUCTIVE FRAUD. § 931 ject of smiaggling belongs to the exclusive province of the national legislature, and forms a part of the customs reve- nue system. All contracts entered into in the course of smuggling operations, or made for the purpose of aiding, abetting, or procuring smuggling, are null and void.3 f § 931. 2. Transactions Illegal Because Opposed to Pu^- lie Policy.— A. Contracts Interfering With the Fre^^'i ^y a Marriage.— The law of England and our ow^^'^^ ^^^ ^^^_ eiflc stocks, but only to gain or lose the diflejf«r1^icy and void.* Secret agreements to marry pay^a pi^Lowe v. Peers, 4 Burr. 2225; Baker v. White, 2 Vern. 215; time' f Bradshaw, 2 Vern. 102; Woodhouse v. Shepley, 2 Atk. 535, 539, ^- ^'^Atkins V. Farr, 1 Atk. 287; Cock v. Richards, 10 Ves. 429; England *-'^l)owns, 2 Beav. 522; Phillips v. Medbury, 7 Conn. 568; Conrad v. Will- iams, 6 Hill, 444; see 2 Lead. Cas. Eq. 494^499. §931, 3 Keat v. Allen, 2 Vern. 588; Stribblehill v. Brett, 2 Vern. 445; Peyton v. Bladwell, 1 Vern. 240; Crawford v. Russell, 62 Barb. 92. § 931, 4 Such cases must depend largely upon their own special circum- stances: Gale V. Lindo, 1 Vern. 475; Redman v. Redman, 1 Vern. 348; Neville v. Wilkinson, 1 Brown Ch. 543 ; Palmer v. Neave, 11 Ves. 165. In McClurg V. Terry, 21 N. J. Eq. 225, a marriage entered into in sport was declared void. Of the same general character with the contracts men- tioned in the text are those contracts secretly made for the purpose of rendering nugatory the stipulations of marriage agreements, or the acts agreed to be done in a negotiation for a marriage, or for the purpose of defrauding either or both the spouses or their relatives: See Peyton v. Bladwell, 1 Vern. 240; Turton v. Benson, 1 P. Wms. 496; Scott v. Scott, 1 Cox, 366; Dalbiac v. Dalbiac, 16 Ves. 116, 124; Morris v. Clarkson, 1 Jacob & W. 107; Lamlee v. Hanman, 2 Vern. 499; Barret v. Wells, Pree. Ch. 131; Jones v. Martin, 3 Anstr. 882; Randall v. Willis, 5 Ves. 261; McNeill V. Cahill, 2 Bligh, 228; Stocken v. Stooken, 4 Mylne & C. 95; Bell v. Clarke, 25 Beav. 437; Kerr on Fraud, 216, 217. " §931, (b) White v. Equitable Nuptial Benefit Union, 76 Ala. 251, 62 Am. Bep. 325. 11—123 § 931 EQUITY JUEISPETJDENCB. 1952 the marriage relation as the very foundation of society. Since the true conception of marriage assumes and requires a perfectly free consent and union of the two spouses, equity has, from its earliest periods, treated all agree- ments, executory or executed, between the immediate par- ties or between third persons, which might directly or indi- >r-tly interfere in any degree with this absolute freedom, fall un«.,,5^romoting or restraining marriage, as opposed smuggling cc>n*^ad illegal, and has therefore declared them been abandoned, an4,-^ugh a court of equity will apply this in England and in severaPfeij^^OTeement the illegality may of the states which still adhe^W-fii^efined forms of these contract itself, the instrument by which^'|g|ndemnation. The all its securities, are declared to be utterly Tiage brokerage the stipulation for the usurious excess ovejn'Bonsideration, terest is alone made void ; while in others a further. Courts is added to this usurious excess. ^ Although at than espe- mon law certain kinds of contracts based upon wagers \t the not unlawful, while those made upon a gaming considei.fit- tion were illegal, the modern legislation of England an(l*i- of the United States declares all gaming and wagering agreements, and the instruments by which they are evi- denced or secured, to be illegal, null, and void.^ ^ The sub- §930, 1 Waller v. Dalt, 1 Ch. Cas. 276; 1 Dick. 8; Barker v. Vansom- mer, 1 Brown Ch. 149; Scott v. Nesbit, 2 Brown Ch. 641; 2 Cox, 183; Bosanquett v. Dashwood, Cas. t. Talb. 38; Fanning v. Dunham, 5 Johns. Ch. 122, 142, 143, 9 Am. Dec. 283. §930, 2 Rawden v. Shadwell, Amb. 269; Woodroffe v. rarnham, 2 Vem. 291; Da Costa v. Jones, Cowp. 729; Robinson v. Bland, 2 Burr. 1077; Skipwith v. Strother, 3 Rand. 214; Dade v. Madison, 5 Leigh, 401; Wilkinson v. Tousley, 16 Minn. 299, 10 Am. Rep. 139. The ordinary so-called time contracts purporting to be for the purchase of stocks, but in reality wholly speculative, and without any intention to sell or buy spe- § 930, (a) See, also, § 402. S. W. 805; and the interesting case § 930, (b) See, also, Knhl v. Gaily of Barclay v. Pearson, [1893] 2 Ch. Universal Press Co., 123 Ala. 452, 82 154, holding that a "missing word Am. St. Eep. 135, 26 South. 535, competition" was a, lottery, and citing many cases (contract of sale that the court would not administer of a gambling device or machine); or distribute the fund contributed Beer v. Landman, 88 Tex. 450, 31 by the competitors. 1953 CONRTKUCTIVE FHAUD. § 931 in restraint of marriage : While mutual promises by a man and a woman to marry each other are, of course, valid, although they are thereby prevented from marrying others, agreements not to marry at all, or not to marry any one unless it be the promisee, without any corresponding stipu- lation by that party, as well as more general forms of con- tract restraining the freedom and power of marriage, are void.2 b Eewards for marriages : Agreements to pay a reward or compensation to a parent or guardian, for pro- curing or consenting to a marriage with his daughter or - ward, are clearly void.^ Secret contracts in fraud of mar- riage: Secret agreements of any kind or form, concealed from one or both of the spouses, the object of which is to promote a particular marriage, or to induce one or both the parties to enter into a marriage, are plainly opposed to public policy and void.* Secret agreements to marry §931, 2 Lowe v. Peers, 4 Bun-. 2225; Baker v. White, 2 Vern. 215; Key V. Bradsbaw, 2 Vern. 102; Woodhouse v. Shepley, 2 Atk. 535, 539, 540; Atkins v. Farr, 1 Atk. 287; Cock v. Richards, 10 Ves. 429; England V. Downs, 2 Beav. 522; Phillips v. Medbury, 7 Conn. 568; Conrad v. Will- iams, 6 Hm, 444; see 2 Lead. Cas. Eq. 494r:499. § 931, 3 Keat v. Allen, 2 Vern. 588; StribblehiU v. Brett, 2 Vern. 445; Peyton v. Bladwell, 1 Vern. 240; Crawford v. Russell, 62 Barb. 92. § 931, 4 Such cases must depend largely upon their own special circum- stances: Gale V. Lindo, 1 Vern. 475; Redman v. Redman, 1 Vern. 348; Neville v. Wilkinson, 1 Brown Ch. 543 ; Palmer v. Neave, 11 Ves. 165. In McClurg V. Terry, 21 N. J. Eq. 225, a marriage entered into in sport was declared void. Of the same general character with the contracts men- tioned in the text are those contracts secretly made for the purpose of rendering nugatory the stipulations of marriage agreements, or the acts agreed to be done in a negotiation for a marriage, or for the purpose of defrauding either or both the spouses or their relatives: See Peyton v. Bladwell, 1 Vern. 240; Turton v. Benson, 1 P. Wms. 496; Scott v. Scott, 1 Cox, 366; Dalbiac v. Dalbiac, 16 Ves. 116, 124; Morris v. Clarkson, 1 Jacob & W. 107; Lamlee v. Hanman, 2 Vern. 499; Barret v. Wells, Prec. Ch. 131; Jones v. Martin, 3 Anstr. 882; Randall v. Willis, 5 Ves. 261; McNeill V. Cahill, 2 Bligh, 228; Stocken v. Stocken, 4 Mylne & C. 95; Bell V. Clarke, 25 Beav. 437; Kerr on Fraud, 216, 217. §931, (b) White v. Equitable Nuptial Benefit Union, 76 Ala. 251, 52 Am. Bep. 325. 11—123 § 932 EQUITY JUEISPETJDENCB. 1954 between a man and woman, for the purpose of deceiving or misleading a parent or relative of one of the parties, have been declared void.^ Analogous to marriage broker- age contracts, and depending upon the same reasons, are agreements to pay a compensation to a person for using his influence with a testator to procure a will, devise, or bequest to be made in favor of the promising party.^ '^ § 932, Agreements for a Separation, — Whatever may have been the opinion at an earlier day, it is now thor- oughly settled that agreements for a separation between husband and wife, if valid in form, made upon a sufficient consideration, and. executed by parties legally capable of contracting, are not illegal; they will even be specifically enforced in equity, by decreeing the execution of the proper deed, and by restraining either party from personally in- terfering with the other in violation of their covenants.^'* § 931, 5 Woodhouse v. Shepley, 2 Atk. 536; Cock v. Kichards, 10 Ves. 429. § 931, 6 Debenham v. Ox, 1 Ves. Sr. 276. While such contracts are clearly void, agreements between the heirs or near relatives of a testator, in anticipation of a will, stipulating to share equally the property which may be bequeathed to them, are valid, and are rather favored by courts of equity: Beckley v. Newland, 2 P. Wms. 182; Harwood v. Tooke, 2 Sim. 192 ; Wethered v. Wethered, 2 Sim. 183. § 932, 1 Wilson v. Wilson, 1 H. L. Cas. 538; 5 H. L. Cas. 40; 14 Sim. 405; Fletcher v. Fletcher, 2 Cox, 99; Sanders v. Rodway, 22 L. J. Ch., § 931, (e) See, also. Flack v. War- arda, 131 Pa. St. 209, 18 Atl. 1007; ner, 27S' 111. 368, L. E. A. I917F, 464, Biittlar v. Buttlar, 57 N. J. Eq. 645, 116 N. E. 202, citing this paragraph 73 Am. St. Eep. 648, 42 Atl. 755 of the text (contract by A, an at- (agreement to pay money for wife's torney, with B, to prevent C from support will be enforced in equity) ; disinheriting B, illegal; A cannot Archbell v. Archbell, 158 N. C. 408, recover from B the share' of the Ann. Cas. 19131), 261, 74 S. E. 327 property which A was instrumental (must be based on adequate rea- in securing for B). sons; rescinded by resumption of con- §932, (a) See In re Toell's Es- jngal relations); Montgomery v. tate, 164 Cal. 540, 129 Pae. 999; Montgomery, 41 Okl. 581, 139 Pac. Bailey v. Dillon (Mass.), 71 N. E. 288 (may control division of property 538; Clark v. Fosdiek, 118 N. Y. on divorce if fair and reasonable; if 14 16 Am. St. Rep. 733, 6 L. E. A. executed directly between husband 132 22 N. E. 1111; Com. v. Eich- and wife, not binding on latter un- 1955 CONSTRUCTIVE FBATJD. § 933 The agreement, however, must be made upon a valuable consideration accruing to the husband's benefit ;2 and un- der the strict common-law rules, a third person must be added as a trustee and contracting party on behalf of the wife, so that the stipulations on her side may be binding.^ § 933. B. Conditions and Limitations in Restraint of Marriage. — Intimately connected with contracts in re- straint of marriage, and depending upon the same prin- ciple, are conditions and limitations operating in like manner annexed to or forming part of testamentary dis- positions, or of family settlements, or similar gifts. Al- N. S., 230; Gibbs v. Harding, L. R. 5 Ch. 336; 8 Eq. 490; Besant v. Wood, L. R. 12 Ch. Div. 605; Hunt v. Hunt, 4 De Gex, F. & J. 221, 235; Mc- Crocklin v. MeCrocklin, 2 B. Men. 370. See, per contra, Aylett v. Ash- ton, 1 Mylne & C. 105; Duke of Bolton v. Williams, 2 Ves. 138.'» § 932, 2 Wilson v. Wilson, 1 H. L. Cas. 538; 5 H. L. Cas. 40; 14 Sim. 405; Wellesley v. Wellesley, 10 Sim. 256; Stephens v. Olive, 2 Brown Ch. 90; Earl of Westmeath v. Countess of Westmeath, Jacob, 126, 141; Elwor- thy V. Bird, 2 Sim. & St. 372; Hobbs v. Hull, 1 Cox, 445. §932, 3 Hope v. Hope, 26 L. J. Ch. 417; Wilkes v. Wilkes, 2 Dick. 791; Vansittart v. Vansittart, 4 Kay & J. 62. Such additional party would clearly be unnecessary in many states of this country." less just and equitable); Hartigan man, 73 Neb. 850, 11 Ann. Cas. 376, V. Hartigan, 58 W. Va. 610, 52 S. B. 103 N. W. 668 (contract intended 720 (canceling an unfair contract to facilitate divorce is void) ; Saw- entered into by wife in order to get yer v. Churchill, 77 Vt. 273, 107 sole possession of her children) ; but Am. St. Eep. 762, 59 Atl. 1014 see contra, Hill v. Hill, 74 N. H. 288, (contract contemporaneous with 124 Am. St. Kep. 966, 12 L. E. A, marriage looking to future separa- (N. S.) 848, 67 Atl. 406; Baum v. tiou and calculated to bring about Baum, 109 Wis. 47, 83 Am. St. Kep. such separation will not be speci- 854, 53 L. B. A. 650, 85 N. W. 122. An fically enforced). See, also, §935, agreement by a wife to relinquish notes. all right of support in case a divorce § 932, (b) See § 402, last note. is granted is illegal: Birch v. An- §932, (c) Commonwealth v. Eich- thony, 109 Ga. 349, 77 Am. St. Eep. ards, 131 Pa. St. 209, 18 Atl. 1007; 379, 34 S. E. 561. A contract to Winter v. Winter, 191 N. Y. 462, 16 allow a wife to procure a divorce is L. E. A. (N. S.) 710, 84 N. E. 382 illegal and void, and neither party (in New York, separation agree- can be relieved therefrom after a ment without intervention of a divorce is granted: Eacey v. Eacey trustee is valid if at the time the (Okl.), 73 Pac. 305; Davis v. Hin- parties are actually separated). § 933 EQUITY JUftlSPKTJDENCE. 1956 lliougli the subject, in some of its special applications and phases, is still more confused and uncertain than perhaps any other branch of equity jurisprudence, yet certain gen- eral rules have been established beyond all further eontro- versy.i Two propositions lie at the foundation, and are recognized by all the authorities: 1. It is ordinarily said that all conditions annexed to gifts which prohibit mar- riage generally and absolutely are void and inoperative. This, however, is a very inaccurate mode of statement, since a condition precedent annexed to a devise of land, even if in complete restraint, will, if broken, be operative and prevent the devise from taking effect. With this limi- tation all conditions in general restraint are void. Also, if a condition is not in absolute restraint, but is of such form that it will probably operate as a general prohibition, it is, under the same limitation, void.2 2. On the other § 933, 1 The direct civil-law origin of these rules, and also the differ- ence between certain dogmas of the civil law and the corresponding doc- trines of English equity, are fully explained in Stackpole v. Beaumont, 3 Ves. 89, 96, per Lord Loughborough; and in Scott v. Tyler, 2 Brown Ch. 431; 2 Dick. 712, per Lord Thurlow. § 933, 2 Scott V. Tyler, 2 Brown Ch. 431; 2 Dick. 712; 2 Lead. Cas. Eq., 4th Am. ed., 429, 475; Keily v. Monck, 3 Ridg. App. 205, 244, 247, 261; Hervey v. Aston, 1 Atk. 361 ; Stackpole v. Beaumont, 3 Ves. 89, 95 ; Rish- ton V. Cobb, 9 Sim. 615, 619; Morley v. Rennoldson, 2 Hare, 570; Con- nelly V. Connelly, 7 Moore P. C. C. 438; Long v. Dennis, 4 Burr. 2052; Maddox v. Maddox, 11 Gratt. 804; Waters v. Tazewell, 9 Md. 291. The same is true of other conditions opposed to public policy, annexed to tes- tamentary gifts; e. g., preventing husband and wife from living together, tending to procure a divorce, and the like: Tennant v. Braie, Toth. 141; Brown v. Peck, 1 Eden, 140; Wren v. Bradley, 2 De Gex & S. 49;" but see Cooper v. Remsen, 5 Johns. Ch. 459, which hardly seems to be sus- tained by the weight of authority. A condition that a legacy to a daugh- ter should cease if she became a nun has been held valid, although there was no gift over : In re Dickson's Trusts, 1 Sim., N. S., 37, 46 ; Clavering v. Ellison, 8 De Gex, M. & G. 662; 7 H. L. Cas. 707. § 933, (a) Conditions Tending to Contra, Daboll v. Moon, 88 Conn. Divorce or Separation. — See, also, ■ 3S7, Ann. Cas. 1917B, 164, L. R. A. Hawke v. Enyart, 30 Neb. 149, 27 1915A, 311, 91 Atl. 646. In this Am. St. Eep. 391, 46 N. W. 422. ease the legacy was to vest if 1957 CONSTRUCTIVE FRAUD. § 933 hand, conditions annexed to testamentary or otter gifts, in partial and reasonable restraint of marriage, are valid and operative ; such, for example, as that a devisee or lega- tee should not marry under age, or should not marry with- out the consent of parents, guardians, or trustees, or should not marry a particular person, or a person belonging to a particular religious communion.^^ In the application of these two propositions, certain special rules have been set- tled with more or less certainty, depending upon the facts of the condition being precedent or subsequent, of there being, or not, a gift over upon its breach, and of the origi- nal gift to which the condition is annexed being one of real or of personal estate.* The system which has been devel- oped is a partial compromise between the technical com- mon-law rules concerning conditions, and the doctrines of § 933, -3 Scott V. Tyler, 2 Brown Ch. 431; 2 Dick. 712; 2 Lead. Cas. Eq., 4th Am. ed., 429, 475 ; Staekpole v. Beaumont, 3 Ves. 89 ; Younge v. Furse, 8 De Gex, M. & G. 756; Allen v. Jackson, L. E. 1 Ch. Div. 399; reversing L. R. 19 Eq. 631; Desbody v. Boyville, 2 P. Wms. 547; Jervis v. Duke, 1 Vem. 19; Randal v. Payne, 1 Brown Ch. 55; Clarke v. Parker, 19 Ves. 1; Dashwood v. Bulkley, 10 Ves. 229; Lloyd v. Branton, 3 Mer. 108; Hanghton v. Haughton, 1 MoUoy, 611; Duggan v. Kelly, 10 I. R. Eq. 295; Collier v. Slaughter, 20 Ala. 263; Graydon v. Graydon, 23 N. J. Eq. 229. § 933, * I add a brief summary of these rules, together with some of the most iniportant decisions illustrating them. There is, however, a very great conflict of judicial opinion with respect to their nature, extent, and operation. Some of the ablest judges have confessed that, amid all the the legatee's wife died, if he was Ch. Div. 188; In re Whiting's Set- divorced from her, or was sepa- tlement, [1905] 1 Ch. 96; Pacholder rated from her for a year. The v. Rosenheim, 129 Md. 455, L. R. A. court supported the legacy on the 1917D, 464, and note, 99 Atl. 672; express ground that there is no pub- In re Seaman's Will, 218 N. Y. 77, lie policy in Connecticut against 112 IT. E. 576 (restraint on daugh- divoree; apparently also (as the ter's marrying a particular person, gift was to vest on separation), reasonable); see McCoy v. Flynn, none against desertion of a wife by 169 Iowa, 622, L. R. A. 1915D, 1064, her husband! It is hardy necessary 151 N. W. 465 (on settlement of to point out that the eases relied on breach of promise suit, restraint on by the court fall far short of sup- marriage for three years, unreason- porting, this amazing decision. able). § 933, (b) Jenner v. Turner, 16 § 933 EQUITY JUKISPKTJDENCE. 1958 llie Eoman law, which made void all attempts to restrict the perfect freedom of marriage; and, like most eompro- uncertainty resulting from a comparison of the decisions, each case must, to a great extent, dei^end upon its own circumstances. Whether there is or is not a gift over. — If a condition is in absolute restraint, and therefore void, it could make no difference whether there was a gift over or -.not. Where there is a gift over, and the condition is partial and. reasonable, the gift over takes effect on a breach of the con- dition: Clarke v. Parker, 19 Ves. 1, 13; Lloyd v. Branton, 3 Mer. 108, 117, 119; Stratton v. Grrymes, 2 Vern. 357; Barton v. Barton, 2 Vern. 308; Wheeler v. Bingham, 3 Atk. 364, 367; Malcolm v. O'Callaghan, 2 Madd. 349, 353; see Poole v. Bott, 11 Hare, 33. Where there is no gift over, the condition, although only partial, may be inoperative and merely iri terrorem, and this seems to be the settled rule whenever the condition is annexed to a bequest of personal estate : Hervey v. Aston, 1 Atk. 361, 375, 377; Keynish v. Martin, 3 Atk. 330; Wheeler v. Bingham, 3 Atk. 364; Pnllen v. Ready, 2 Atk. 587; Hicks v. Pendarvis, Freem. Ch. 41; Long v. Dennis, 4 Burr. 2052, 2055; Parsons v. Winslow, 6 Mass. 169, 4 Am. Dec. 107. Gifts of real or of personal estate. — In devises and other gifts of real estate, courts of equity follow the rules of the common law concerning the operation of conditions generally, and their effects upon the vesting and divesting of estates. In gifts of real estate, therefore, when a con- dition in restraint of marriage is precedent, and is broken, it prevents the estate from vesting at all, whether the restraint be absolute or partial, and whether there be a gift over or not. When the condition is subse- quent and void, it is entirely inoperative, and the donee retains the prop- erty unaffected by its breach." When the condition is subsequent and valid, on its breach the donee's estate ceases; if there is a gift over, that gift takes effect; if there is none, then it seems the heir may re-enter and take the property. Bertie v. Lord Falkland, 2 Cas. Ch. 129; 2 Vern. 333; 2 Freem. 220; Fry v. Porter, 1 Cas. Ch. 138; 1 Mod. 300; Hervey v. Aston, 1 Atk. 361; Reynish v. Martin, 3 Atk. 330; Long v. Ricketts, 2 Sim. & St. 179; Commonwealth v. Stauffer, 10 Pa. St. 350, 51 Am. Dec. 489 ; and see 2 Lead. Ca9. Eq., 4th Am. ed., 478-480 ; Eng. ed., notes to Scott V. Tyler. Gifts of personal estate. — In deciding upon the effect of the conditions when annexed to these dispositions, courts of equity have not followed the common-law doctrines concerning conditions. Where the condition is sub- sequent, and in unreasonable restraint, it is void, and the legacy becomes absolute, whether there is or is not a gift over: Morley v. Rennoldson, 2 § 933, (c) Meek v. Fox, 118 Va. daughter, gift over if she should 774, 88 S. E. 161 (devise to marry). 1959 CONSTKTJOTIVE FRAUD, § 933 mises, it has some incongruous features. If a condition is precedent and annexed to a gift of land, it operates as Hare, 570; Bellairs v. Bellairs, L. R. 18 Eq. 510* Where the condition is subsequent, partial, and reasonable, and there is a gift over, then it is operative, and on its breach the gift over takes effect.* But under the same circumstances, if there is no gift over, then the condition is regarded as inserted only in terrorem; it has no effect, and the legacy continues to be absolute, even though it be broken : Lloyd v. Branton, 3 Mer. 108, 117 ; Marples v. • Bainbridge, 1 Madd. 590; Garret v. Pritty, 2 Vem. 293; Wheeler v. Bingham, 3 Atk. 364; Waters v.' Tazewell, 9 Md. 291; Maddox v. Maddox, 11 Gratt. 804; Hoopes v. Dundas, 10 Pa. St. 75; Mcllvaine v. Gethen, 3 Whart. 575; Cornell v. Lovett, 35 Pa. St. 100; Hotz's Estate, 38 Pa. St. 422, 80 Am. Dec. 490. In the case In re Dickson's Trusts, 1 Sim., N. S., 37, 43, 44, Lord Cranworth, in a very able opinion, expressed a strong dislike for the notion of a condition being regarded as in terrorem. Where the condition annexed to a bequest of personal estate is precedent, and general in its restraint, it is absolutely void, and the legacy takes effect notwithstanding its breach : Morley v. Rennoldson, 2 Hare, 570, 579. Where the condition is precedent, and partial and reasonable, and there is a gift over, then on its breach the first legacy does not vest, and the gift over takes effect. Where the condition is precedent, and partial and reasonable, and there is no gift over, a few cases hold that the result is exactly the same as with conditions subsequent under like circumstances, namely, that it is merely in terrorem and inoperative : Reynish v. Martin, 3 Atk. 330; Keily v. Monck, 3 Ridg. App. 205, 263; Malcolm v. O'Cal- laghan, 2 Madd. 349, 353. It is now settled, however, that such a condi- tion is operative; and if broken, the legacy does not vest, whether there is a gift over or not. .Younge v. -Furse, 8 De Gex, M. & G. 756; Clifford V. Beaumont, 4 Russ. 325; Clarke v. Parker, 19 Ves. 1, 13; Knight v. Cameron, 14 Ves. 389 ; Hemmings v. Munckley, 1 Brown Ch. 303 ; and see 2 Lead. Cas. Eq. 480-482. Conditions restraining marriage hy widows. — Conditions annexed to de- vises and legacies restraining the testator's widow ' from marrying have generally been pronounced valid and operative : * Lloyd v. Lloyd, 2 Sim., N. S., 255; Grace v. Webb, 15 Sim. 384; Poole v. Bott, 11 Hare, 33; Shewell v. Dwarris, Johns. 172; Craven v. Brady, L. R. 4 Eq. 209; Par- § 933, (d) Goffe v. Goffe, 37 E. I. § 933, (t) Cited in Knight v. 542, Ann. Cas. 1916B, 240, 94 Atl. Mahoney, 152 Mass. 523, 9 U R. A. 2 (income bequeathed to daughter; 573, 25 N. E. 971. See, also*, Ben- gift over of one-half if she should nett v. Packer, 70 Conn. 357, 66 marry). Am. St. Rep. 112, 39 Atl. 739; §933, (e) In re Whiting's Settle- Chapin v. Cooke, 73 Conn. 72, 8'4 ment, [1905] 1 Ch. 96. Am. St. Rep. 139, 46 Atl. 282. § 933 EQUITY JUEISPEUDENCB. 1960 at the common law; when broken, it prevents the estate from vesting, whatever be its nature; when annexed to a sons V. Winslow, 6 Mass. 169, 4 Am. Dec. 107; Phillips v. Medbury, 7 Conn. 568; Chapin v. Marvin, 12 Wend. 538; Stroud v. Bailey, 3 Grant Cas. 310; Commonwealth v. Staufifer, 10 Pa. St. 350, 51 Am. Dec. 489; MeCuUough's Appeal, 12 Pa. St. 197; Hoopes v. Dundas, 10 Pa. St. 75; Bennett v. Robinson, 10 Watts, 348; Binnerman v. Weaver, 8 Md. 517; Gough V. Manning, 26 Md. 347; O'Neale v. Ward, 3 Har. & MeH. 93; Collier v. Slaughter, 20 Al.a. 263; Vance v. Campbell's Heirs, 1 Dana, 229 ; Holmes v. Field, 12 111. '424. When the gift is not upon condition, but the devise or legacy is limited to be during widowhood, or until she marries, the disposition is generally held to be valid : ^ Beekman v. Hud- son, 20 Wend. 53; Hotz's Estate, 38 Pa. St. 422, 80 Am. Dec. 490; Cor- nell V. Lovett, 35 Pa. St. 100; Mitchell v. Mitchell, 18 Md. 405; 29 Md. 581; Pringle v. Dunkley, 14 Smedes & M. 16; Hughes v. Boyd, 2 Sneed, 512; and see American cases supra. In some eases, however, a condition subsequent in restraint of marriage by a widow, where there was no gift over, has been held merely in terrorem: See Parsons v. Winslow, 6 Mass. 169, 4 Am. Dec. 107; Hoopes v. Dundas, 10 Pa. St. 75; Mcllvaine v. Gethen, 3 Whart. 575; Mack v. Mulcahy, 47 Ind. 68. A condition in restraint of the marriage of the widow of another person, not of the testa- tor, has been held operative. Newton v. Marsden, 2 Johns. & H. 356 ; Allen V. Jackson, L. R. 1 Ch. Div. 399. It has also beto held that a con- dition in restraint of the second marriage of a man — ^the husband of the testator's niece — is valid : Allen v. Jackson, L. R. 1 Ch. Div. 399 ; reversing L. R. 19 Eq. 631. Limitations as distinguished from conditions. — ^It appears to be the tend- ency of the English cases to draw a material distinction between condi- tions in restraint of marriage annexed to testamentary dispositions, and restraints on marriage contained in the very terms of the limitation of the estate given, and to hold such limitations valid although the restraint if imposed in the form of a condition might be void."^ See this question fully discussed in the English editor's note to Scott v. Tyler, 2 Lead. Cas. Eq. 483^85; Evans v. Rosser, 2 Hem. & M. 190; Morley v. Eennoldson, 2 Hare, 570, 580; Heath v. Lewis, 3 De Gex, M. & G. 954; Webb v. Grace, 2 Phill. Ch. 701; Potter v. Richards, 1 Jur., N. S., 462; Little v. Birdwell, § 933, (s) Cited to this effect in in Mann v. Jackson, 84 Me. 400, 30 Mann ^ v. Jackson, 84 Me. 400, 30 Am. St. Rep. 358, 16 L. R. A. 707, Am. St. Bep. 358, 16 L. R. A. 707, 24 Atl. 886. See, also, Maddox v. 24 Atl. 886. See, also, Nagle v. Yoe, 121 Md. 288, Ann. Cas. 1915B, Hirsch, 59 Ind. App. 282, 108 N. E. 1235, 88 Atl. 225; In re Miller'a 9. . WUl, 159 N. C. 123, 74 S. E. 888. § 933, (1») The distinction is made 1961 CONSTRUCTIVE FEATJD, § 933 gift of personal property, if general or unreasonable, it is wholly void, and the gift takes effect; if partial and rea- sonable, it is operative.^ When a condition is subsequent and annexed to a gift of land, if general, it is void, and although broken, the estate of the donee continues;] if partial and reasonable, it is . operative, and on its breach the estate of the donee is defeated. When a subsequent condition is annexed to a gift of personal property, if gen- eral, it is void; if partial and reasonable, and there is a gift over, it is operative, and upon its breach the interest 21 Tex. 597, 73 Am. Dec. 242; Hotz's Estate, 38 Pa. St. 422, 80 Am. Dec. 490; see, per contra, Otis v. Prince, 10 Gray, 581. In my opinion, this theory, as maintained by the English courts, is directly opposed to the spirit of equity jurisprudence. Undoubtedly the common-law rules are well settled which establish a distinction between a limitation and a condi- tion subsequent. If land is devised to a widow "for and during her widowhood, and if she marries," then over; and in another ease land is devised to a widow "for and diiring her natural life, but if she marries," then over; at the common law the nature and operation of these two dis- positions are quite different. These rules belong to the law of conveyan- cing, of future and expectant estates, of contingent remainders and con- ditional limitations; they are in the highest degree arbitrary and technical. To adopt them and apply them in equity, for the purpose of determining the validity of restraints imposed upon marriage, and especially in be- quests of personal property," seems to violate the spirit of equity jurispru- dence in dealing with kindred questions. It is the settled and familiar policy of courts of equity, except when they are prevented by some com- pulsory legal dogma, to disregard the mere form in which the intention of parties is expressed, to ascertain that intention as correctly as possible, and then to carry out the actual intention unrestricted by technical rules which relate solely to external form. If it is considered that the common- law doctrines concerning limitations and conditions in dispositions of real estate are too firmly established to be disregarded, there is certainly no necessity for extending those rules to dispositions of personal property. Such a course of decision is not only unnecessary, — it is improper; for it tends to subvert some of the fundamental principles of equity. §933, (i) Cited in Dusbiber v. S. E. 161. The greater part of Melville, 178 Mich. 601, 51 L. E. A. § 933 is quoted in McCoy v. Flynn, (N. S.) 367, 146 N. W. 208. 169 Iowa, 622, L. E. A. 1915D, 1064, §933. (j) This sentence is quoted 151 N. W. 465. in Meek v. Fox, 118 Va. 774, 88 § 933 EQIHTY JTJBISPKTJDENCE. 1962 of the first donee ceases, and the gift over takes effect; but if there is no gift over, then the condition is said to be in terrorem merely, and is inoperative^ It seems to be settled by an overwhelming weight of authority that limi- tations and conditions, precedent or subsequent, tending to restrain the second marriage of women are valid, and by the most recent decisions the saine rule has been applied to the second marriages of men.^ Where a partial and reasonable condition has been imposed, requiring the con- sent of certain persons to the marriage of a donee, courts of equity are very liberal in construing the provision so that the gift shall not be defeated by a mere formal omis- sion."^ Where the consent of three trustees or guardians is requisite, the consent of two without consulting the third is insufiScient ; but if one of the three has renounced, or has never acted, his consent is unnecessary. Where the consent of three is required, and one of them dies, the action of the other two becomes valid. And generally, "where the condition has become impossible by the person dying whose consent was necessary before marriage, it is an excuse. ' ' ^ Where the required consent has been re- § 933, 5 Clarke v. Parker, 19 Ves. 1, 15, 16; Worthington v. Evans, 1 Sim. & St. 165; Graydon v. Hicks, 2 Atk. 16; Aislabie v. Eiee, 3 Madd. § 933, (k) This portion of the text Cas. 137, 2 L. B. A. (N. S.) 545, 63 is quoted in MeCoy v. Flynn, 169 ^\ 36S (bequest of income so long Iowa, 622, L. E. A. 1915D, 1064, 151 as legatee remains unmarried, with N. W. 465; Knost v. Knost, 229 Mo. a gift over in ease of death or mar- 170, 49 L. E. A. (N. S.) 627, 129 riage, valid). S. W. 665; Robinson v. Martin, 200 §933, (1) Cited in Knost v. Knost, N. Y. 159, 93 N. E. 488 (dissenting 229 Mo. 170, 49 L. E. A. (N. S.) opinion); Phillips v. Ferguson, 85 627, 129 S. W. 665; Appleby v. Ap- Va. 509, 17 Am. St. Eep. 78, 1 pleby, 100 Minn. 408, 117 Am. St. L. E. A. 837, 8 S. E. 241 ; and cited, Eep. 709, 10 Ann. Cas. 563, 10 in Fifield v. Tan Wyck, 94 Va. 557, L. E. A. (N. S.) 590, 111 N. W. 305 64 Am. St. Eep. 745, 27 S. E. 446 (widower). See, also, In re Fitz- (same rule as to conditions against gerald'a Estate (Cal.), 119 Pac. 96. disputing will). See, also, Ke Mil- §933, (m) The text ia quoted in ler's Will, 159 N. C. 123, 74 S. E. MeCoy v. Flynn, 169 Iowa, 622, 888; Holbrook's Estate, 213 Pa. St. L. E. A. 1915D, 1064, 151 N. W. 465. 93, 110 Am. St. Eep. 537, 5 Ann. 1963 CONSTRUCTIVE FRAUD. § 934 fused, and tlie refusal is alleged to be fraudulent, or to be the result of any vicious, corrupt, or unreasonable cause or motive, a court of equity will examine into the matter, and if the fact is clearly established, it will grant relief; the court will not suffer the gift to be defeated by stich a breach of the condition. ^ § 934. C. Contracts Directly Belonging to and Affect- ing Business Relations. — It has been the policy of the law to promote the freedom of engaging in and carrying on all kinds of business which are beneficial to the public, and to maintain fairness and honesty towards the public in all business transaction. The monopolies which were so fre- quent in the early jperiods of English history resulted in most instances from the exercise of the royal prerogative or from legislation. The common law and equity would .prevent, as far as possible, all contrivances and means by which the public would be deprived of the skill, industry, or economic and productive , labor of individual citizens, or by which the public would be deceived in business deal- ings. The following are the important applications of the principle: Contracts in restraint of trade: Contracts in general restraint of trade, whatever be their form or the nature and immediate object of their stipulations, are void at law as well as in equity. The term "general" is not synonymous with "universal." The criterion is the un- reasonableness of the restraint ; and this is always a matter of law to be determined by the court. This unreasonable- ness may be, and often is, in respect to the amount of 256; Peyton v. Bury, 2 P. Wms. 626; Grant v. Dyer, 2 Dow. 93; Collett V. Collett, 35 Beav. 312, 315. . § 933, 6 Dashwood v. Lord Bulkeley, 10 Ves. 230, 245; Clarke v. Parker, 19 Ves. 1, 18. Generally, however, and in the first instance, the pei-son is not obliged to assign his reason for his refusal to consent: Clarke v. Parker, 19 Ves. 1, 22, per Lord Eldon. The English decisions concerning consent under these circumstances are very numerous. The questions are fully discussed in. the English editor's note to Scott v. Tyler, 2 Lead. Cas. Eq. 486^93. § 934 EQUITY JUKISPHTJDENCB. 1964 territory over which the restriction extends, or it may be in respect alone to the number of persons with whom the ti'ading is debarred, or in respect to the duration of the restraint. Where the agreement is thus void, a court of equity may always exercise its jurisdiction defensively, by defeating a suit brought for the enforcement of the con- tract ; or affirmatively, by granting the remedy of cancella- tion or of injunction when the defensive remedy at law would not be certain, complete, and adequate.^ * On the § 934, 1 Since the illegality does not depend upon the form of the agree- ment, it is impossible to describe the kinds of contracts which might oper- ate in a general restraint of trade within the principle. The simplest and ordinary species is a contract between A and B, whereby A agrees not to carry on a trade within a specified territory. The principle extends to combinations among workmen for the purpose of forcing a higher rate of wages from employers, by preventing others from working or being employed, etc.; analogous combinations and agreements among employers for the purpose of forcing a lower rate of wages, by stipulating not to' carry on their business, etc.; combinations and agreements by parties en- gaged in the same business to enhance prices by compelling the public to deal with themselves, and preventing it from trading with others who are engaged in the same employment; combinations by two or more parties in the same business to prevent other persons from carrying on the busi- ness, and thus to create a monopoly for themselves; similar combinations and agreements between several parties, for the purpose of preventing some of them from engaging in the business, so that the other might secure a monopoly; combinations by several parties to enhance the price of an article by temporarily withdrawing it from the market and preventing § 934, (a) Contracts in General Da-vies v. Davies, 36 Ch. Div. 359; Restraint of Trade. — This para- Baker v. Hedgecock, 39 Ch. Div. graph is cited in Tarr v. Stearman, 520; American Biscuit Co. v. KJotz, 264 111. 110, 105 N. E. 957. See, 44 Ped. 721; Pacific Postal Tel. also, Mason v. Provident Clothing Cable Co. v. Western Union Tel. & Supply Co., Ltd., [1913] App. Cas. Co., 50 Fed. 493 (contract to give 724 (H. of L.), Ann. Cas. 1914A, telegraph company an exclusive 491, reversing [1913]- 1 K. B. 65 privilege along a railroad will not (restriction on employee leaving be enforced by injunction); Indiana company wider than needed for its Mfg. Co. v. J. I. Case Threshing protection) ; Herbert Morris, Ltd., Machine Co. (C. C. Wis.), 148 Fed. V. Saxelby, [1915] 2 Ch. 57 (agree- 21 (where contract concerning use ment of servant that on leaving em- of a patent constitutes a monopoly ployment he would not engage in in restraint of trade) ; John D. Park same business for seven years); & Sons Co. v. Hartman (C. C. A. 1965 CONSTRUCTIVE FBAUD. § 934 other hand, contracts in partial restraint of trade are valid. To this end, they must be partial with respect to the terri- any dealing with it by the public in open market, often called "making a. corner"; combinations and agreements between persons engaged in the same business for the express purpose of destroying competition, and thus defeating the natural results of economic laws when left to their free operation. This last species of agreement, so common at the present day, and which is doing much to overthrow the entire system of economic science, in my opinion, falls directly within the operation of the general principle; more than any other kind, perhaps, it tends to defeat the free- dom of trade which the principle protects. The following cases are illus- trations: Mitchel V. Reynolds, 1 P. Wms. 181; 1 Smith's Lead. Cas. 705 (the leading case, in which the doctrine is carefully discussed and the pre- vious authorities are cited); Morris v. Coleman, 18 Ves. 436; Bryson v. Whitehead, 1 Sim. & St. 74; Kimberley v. Jennings, 6 Sim. 340; Kembl6 v. Kean, 6 Sim. 333; Harms v. Parsons, 32 Beav. 328; Benwell v. Inns, 24 Beav. 307; Whittaker v. Howe, 3 Beav. 383; AUsopp v. Wheatcroft, L. R. 15 Eq. 59; Rigby v. Connol, L. R. 14 Ch. Div. 482; Oregon etc. Co. V. Winsor, 20 Wall. 64; Alger v. Thacher, 19 Pick. 51, 31 Am. Dec. 119; Bowen v. Matheson, 14 Allen, 499; Taylor v. Blanchard, 13 Allen, 370; 90 Am. Dec. 203; Carew v. Rutherford, 106 Mass. 1, 8 Am. Rep. 287; Samp- son V. Shaw, 101 Mass. 145; Boutelle v. Smith, 116 Mass. Ill; Lawrence V. Kidder, 10 Barb. 641, 653 ; Stanton v. Allen, 5 Denio, 434, 49 Am. Dec. 282; Brewer v. Marshall, 19 N. J. Eq. 537, 97 Am. Dec. 679; Morris Run Ky.), 153 Fed. 24, 12 L. E. A. light company to refrain from sup- (N. S.) 135, 82 C. C. A. 158 (re- plying gas to a certain portion of versing 145 Fed. 358); Merchants' the city, though only in partial re- A.d-Sign Co. v. Sterling, 124 Cal. 429, straint of trade, will not be en- 71 Am. St. Rep. 94, 46 L. K. A. 142, forced in equity) ; Samuels v. 57 Pae. 468; Denver Jobbers' Assn. Oliver, 130 III. 73, 22 N. E. 499 V. People, 21 Colo. App. 326, 122 (agreement to effect a "corner," Pac. 404 (the people may enjoin a void) ; Lanzit v. Seftou Mfg. Co., conspiracy in restraint of trade; 184 111. 326, 75 Am. St. Eep. 171, 56 good discussion); Barrows v. Mc- N. E. 393; Wilmington City By. Co. Murty Mfg. Co., 54 Colo. 432, 131 v. Wilmington & B. S. Ky. Co. (Del. Pac. 430; Seay v. Spratling, 133 Ga. Ch.), 46 Atl. 12 (trafSc agreement 27, 65 S. B. 137 (contract without restraining competition); South limitation as to territory not to Chicago City Ey. Co. v. Calumet carry on a particular business, not Electric St. Ry. Co., 171 111. 391, 49' enforced by injunction) ; Chicago N. E. 576 (contract tending to Gas Light Co. v. Gas Light Co., 121 create monopoly will not be specifi- 111. 530, 2 Am. St. Eep. 124, 13 N. E. cally enforced) ; Union Trust & 169 (contract by a corporation to Savings Bank v. Kinloch Long Dis- abandon a public duty, as by a gas- tajice Tel. Co., 258 111. 202, Ann. Cas. § 934 EQUITY JUEISPEUDENCE. 1965 tory included; reasonable with respect to the amount of territory, the circumstances and rights, of the party bur- etc. Co. V. Barclay C. Co., 68 Pa. St. 173; Keeler v. Taylor, 53 Pa. St. 467, 91 Am. Dec. 221; Crawford v. Wiet, 18 Ohio St. 190, 98 Am. Dec. 103; Maguire v. Smock, 42 Ind. 1; Gale v. Kalamazoo, 23 Mich. 344, 9 Am. Rep. 80; Long v. Towl, 42 Mo. 545, 97 Am. Dec. 355; Callahan v. Donnolly, 45 Cal. 152, 13 Am. Rep. 172; More v. Bonnet, 40 Cal. 251, 6 Am. Rep. 621; Wright v. Eyder, 36 Cal. 342, 95 Am. Dec. 186; Rigby v. Connol, L. R. 14 Ch. Div. 482, 491 ("trades unions" held to be illegal at the common law, and still illegal except so far as their provisions and rules had been expressly authorized by statute) ; Sampson v. Shaw, 101 Mass. 145 (an agreement to "make a corner" in stocks held illegal) ; Cen- tral etc. Co. V. Guthrie, 35 Ohio St. 666 (an agreement by a voluntary association of salt manufacturers that no member should sell salt sxcept on certain conditions, void) ; Dethlefs v. Tamsen, 7 Daly, 354; Wiggins Perry Co. v. Chicago etc. R. R., 5 Mo. App. 347 (contract between common carriers to refuse shippers advantages of improvements or new facilities for transportation, void) ; Amot v. Pittston etc. Co., 68 N. Y. 558, 23 Am. Rep. 190 (an agreement between two coal-mining companies that one should take all the other should mine, and that the latter should not sell to any third persons, void) ; Craft v. McConoughy, 79 111. 346, 22 Am. Rep. 171 (a contract between several grain dealers for the purpose of forming a secret combination to control the price of grain, the cost of stor- age, and the expense of shipment, void). 1914B, 258, 45 L. E. A. (N. S.) 465, Oil Co. v. Nunnemaker, 142 Ind. 101 N. E. 535 (contract by a local 560, 51 Am. St. Eep. 193, 41 N. E. telephone company to forward all 1048; Chapin v. Brown, 83 Iowa, its long distance messages over line 156, 32 Am. St. Rep. 297, 12 L. E. A. of certain long distance company to 428, 48 N. W. 1074 (contract ereat- the exclusion of another long dis- ing monopoly); Eeeves v. Decorah tance company, invalid) ; Dunbar v. Farmers' Co-operative Society, 160 American Tel. & Tel. Co., 238 111. Iowa, 194, 44 L. E. A. (N. S.) 1104, 456, 87 N. E. 521. See, also, 224 111. 140 N. W. S44 (agreement between 9, 115 Am. St. Eep. 132, 8 Ann. Cas. members of co-operative society of 57, 79 N. E. 423 (important case on farmers to sell all their livestock to monopolies); Tarr v. Stearman, 264 the society, and if they sold to a m. 110, 105 N. E. 957 (contract by competitor to pay five cents a hun- whieh B pays A certain rentals, dredweight to the society, held il- letc, out of the profits of B's prof es- legal and unenforceable) ; Greer v. sion as dentist, and agrees on ter- Payne, 4 Kan. App. 153, 46 Pac. mination of the contract not to 190; Keene Syndicate v. Wichita practice dentistry in the locality; Gas, E. L. & P. Co. (Kan.), 76 Pac. void, since A, not being a dentist, 834; Mills v. Eessler, 87 Kan. 549, the contract is not one to secure A 125 Pac. 58; Gamewell Fire Alarm from the rivalry of B) ; Consumers' Tel. Co. v. Crane, 160 Mass. 50, 39 1967 CONSTEUCTIVE FRAUD. §934 dened and the one benefited by the restriction, and the number and interests of the public whose freedom of trad- ing is circumscribed ; and^ made upon a valuable and suffi- cient consideration. The jurisdiction of equity is generally exercised, in respect to these contracts, for the purpose of indirectly compelling their specific performance, by means of an injunction preventing their violation.^ ^ Interfering § 934, 2 Mitehel v. Reynolds, 1 Smith's Lead. Cas. 705, and notes. Such contracts are frequently made in connection with a sale of a business and good-will, the vendor stipulating that he will not carry on the same busi- Am. St. Bep. 458, 22 L. B. A. 673, 35 N. E. 98 (contract tending to monopoly); Bishop v. Palmer, 146 Mass. 469, 4 Am. St. Kep. 339, 16 N. E. 299; Hall v. Merrill Trust Co., 106 Me. 465, 138 Am. St. Eep. 355, 76 Atl. 926 (as to validity of voting trust); Western Wooden-Ware' Assn. V. Starkey, 84 Micli. 76, 22 Am., St. Eep. 686, 11 L. B. A. 503, 47 N. W. 604; Hunt v. Riverside Co-operative Club, 140 Mich. 538, 112 Am. St. Bep. 420, 104 N. W. 40 (violation of state statute) ; Retail Lumber Dealer's Ass'n v. State, 95 Miss. 337, 35 L. B. A. (N. S.) 1054 and note, 48 South. 1021 (combination of dealers not to patronize whole- salers who sell to undesirable per- sons); Mandeville v. Barman, 42 N. J. Eq. 185, 7 Atl. 37; Marvel v. Jonah, 81 N. J. Eq. 369, 86 Atl. 968-; Leonard v. Poole, 114 N. Y. 371, 11 Am. St. Eep. 667, 4 L. B. A. 728, 21 N. E. 707; Central New York Tel. & Tel. Co. V. Averill, 199 N. Y. 128', 139 Am. St. Bep. 878, 32 L. E. A. (N. S.) 494, 92 N. E. 206 (only par- tial restraint, but held void) ; Emery V. Ohio Candle Co., 47 Ohio St. 320, 21 Am. St. Eep. 819, 24 N. E. 660 (association organized for the pur- pose of increasing the price and de- creasing the production of a com- modity of general use); State v. Standard Oil Co., 49 Ohio St. 137, 34 Am. St. Eep. 541, 15 K B. A. 145, 30 N. E. 279 (agreement of stockholders to transfer stock to ■trustee, in order to create a mon- opoly, void) ; Nester v. Continental Brewing Co., 161 Pa. St. 473, 41 Am. St. Eep. 894, 24 L. E. A. 247, 29 Atl. 102, 34 Wkly. Notes Cas. 387; Boyer v. Nesbitt, 227 Pa. 398, 136 Am. St. Eep. 890, 76 Atl. 103 (pooling of stock); Francis T. Sim- mons & Co. V. Terry (Tex. Civ. App.), 79 S. W. 1103; Wiggins v. Bisso, 92 Tex. 219, 71 Am. St. Eep. 837, 47 S. W. 637 (partnership ac- counting refused where contract in restraint of trade) ; Tardy v. Creasy, 81 Va. 553, 59 Am. Eep. 676; West Virginia Transportation Co. V. Ohio River Pipe Line Co., 22 W. Va. 600, 46 Am. Eep. 527, and cases cited; Pocahontas Coke Co. v. Powhatan Coal & Coke Co., 60 W. Va. 508, 116 Am. St. Eep. 901, 9 Ann. Cas. 667, 10 L. B. A. (N. S.) 268, 56 S. E. 264; Berlin v. Perry, 71 Wis. 495, 5 Am. St. Eep. 236, 38 N. W. 82; Walsh v. Association of Master Plumbers, 97 Mo. App. 280, 71 S. W. 455 (combination to fix prices). § 934, (b) Partial and Eeasonable Bestraint of Trade. — The text is quoted in Turner v. Abbott, 116 § 934 EQUITY JUEISPETJDENCE. 1968 with bidding at auctions: Where property is to be sold at public auction, and especially where the sale is by order of a court, or is made in the course of governmental admin- istration, a secret combination and agreement among per- ness within a specified distance from the old place, or for a specified time, or will not solicit the old customers for their trade, and the like. These idnds of stipulations, if reasonable as to territory and time, will be en- forced against the vendor, often by an injunction: Catt v. Tourle, L. R. 4 Ch. 654; Harms v. Parsons, 32 Beav. 328; Leather Cloth Co. v. Lorsont, L. R. 9 Eq. 345; Carter v. Williams, L. R. 9 Eq. 678; Gravely v. Barnard, L. R. 18 Eq. 518; Altman v. Royal etc. Co., L. R. 3 Ch. Div. 228; Ginesi V. Cooper, L. R. 14 Ch. Div. 596; Rousillon v. Rousillon, L. R. 14 Ch. Div. 351; Leggott v. Barrett, L. R. 15 Ch. Div. 306 (soliciting old cus- tomers restrained) ; Perkins v. Clay, 54 N. H. 518; Dean v. Emerson, 102 Mass. 480 ; Morse etc. Co. v. Morse, 103 Mass. 73, 4 Am. Rep. 513 ; Taylor V. Blanchard, 13 Allen, 370, 90 Am. Dec. 203 ; Gilman v.. Dwight, 13 Gray, 356, 74 Am. Dec. 634; McClurg's Appeal, 58 Pa. St. 51; Keeler v. Taylor, 53 Pa. St. 467, 91 Am. Dec. 221; Gillis v. Hall, 2 Brewst. 342; Warfield V. Booth, 33 Md. 63; Guerand v. Dandele.t, 32 Md. 561, 3 Am. Rep. 164; Lange v. Werk, 2 Ohio St. 519; Hubbard v. Miller, 27 Mich. 15, 15 Am. Rep. 153; Lightner v. Menzel, 35 Cal. 452; Schwalm v. Holmes, 49 Cal. 665; Cal. Nav. Co. v. Wright, 6 Cal. 258, 65 Am. Dec. 511; Smalley v. Greene, 52 Iowa, 241, 35 Am. Rep. 267, 3 N. W. 78 (contract not to engage in law business in a certain town, valid) ; Dethlefs v. Tamsen, 7 Daly, 354 (sale of a good-will and agreement not to carry on a competing business) ; Hedge v. Lowe, 47 Iowa, 137 (sale of a business and good-will, and con- tract not to engage in the same business in a certain town for a certain Tenn. 718, 8 Ann. Cas. 150, 6 Eep. 319, 21 L. E. A. 337, 55 N. W. L. E. A. (N. S.) 892, 94 S. W. 64, 1119 (agreement between retailers and is cited in Wolf Bros. & Co. v. not to patronize wholesalers who Hamilton-Brown Shoe Co., 206 Fed. sell to rivals, valid); Manchester & 611, J24 C. C. A. 409, opinion of Lawrence R. E. v. Concord E. E., 66 Hook, J.; Harris v. Theus, 149 Ala. N. H. 100, 49 Am. St. Eep. 582, 9 133, 123 Am. St. Eep. 17, 10 L. E. A. L. E. A. 689, 20 Atl. 383 (contract (N. S.) 204, 43 South. 131; Eake- between railroads to prevent corn- straw V. Lanier, 104 Ga. 188, 69 petition is not necessarily illegal, Am. St. Eep. 154, 30 S. E. 735, and at common law, the rates estab- quoted in Eobinson v. Suburban lishcd being not unreasonable). See, Brick Co. (C. C. A.), 127 Fed. 804. also. Central New Tork Tel. & TeL See, also, Bowling v. Taylor, 40 Fed. Co. v. Averill, 199 N. Y. 128, 139 404; Moore, etc., Hdw. Co. v. Hard- Am. St. Eep. 878, 31 Ii. E. A. (N. S.) ware Co., 87 Ala. 206, 13 Am. St. 494, 92 N. E. 206; Cropper v. Davis, Eep. 23, 6 South. 41; Bohn Mfg. Co. 243 Fed. 310 (contract of employ- v. HoUis, 54 Minn. 223, 40 Am. St. ment). 1969 CONSTEXTCTIVE FRAUD. §934 sons interested in bidding, whereby they stipulate to re- frain from bidding in order to prevent competition and to lower the selling price of the property, is illegal, ac- cording to the uniform course of decision in this country. time, valid) ; Goodman v. Henderson, 58 Ga. 567 (agreement to withdraw from the purchasing of hides in a particular market, valid) ; Curtis v. Gokey, 68 N. Y. 300 (agreement by a retiring partner not to engage in the business at the place for a certain time, or so long as the other shall continue the business, valid) ; Ellis v. Jones, 56 Ga. 504 (a contract not to carry on a certain trade within a specified town will be enforced)." Analogous to the sale of a good-will is the sale of a trade secret, or secret recipe or process of manufacture, with an agreement by the vendor not to use the secret in his business, or not to make or vend articles by its ers' Co-operative Society, 160 Iowa, 194, 44 L. R. A. (N. S.) 1104, 140 N. W. 844; Mills v. Eessler, 87 Kan. 549, 125 Pac. 58 (physician sold business and agreed not to practice within five hundred miles of city where he had lived; held valid agreement) ; United Shoe Maeh. Co. V. Kimball, 193 Mass. 351, 79 N. E. 790; Timmerman v. Dever, 52 Mich. 34, 50 Am. Rep. 240, 17 N. W. 230; Thompson v. Andrus, 73 Mich. 551, 41 N. W. 683; National Benefit Co. V. Union Hospital Co., 45 Minn. 272, 11 L. R. A. 437, 47 N. W. 806 (an instructive case) ; Kronschnabel- Smith Co. V. Kronschnabel, 87 Minn. 230, 91 N. W. 892; Southworth v. Davison, 105 Minn. 119, 16 Ann. Cas. 253, and note, 19 L. E. A. (N. S.) 769, 118 N. W. 363 (contract not to engage in business sold valid, though unlimited in time) ; Mitchell v. Branhan (Mo. App.), 79 S. W. 739; Artistic Porcelain Co. v. Boch, 76 N. J. Eq. 533, 74 Atl. 680 (con- tract unlimited as to space, but lim- ited to five years, held reasonable) ; Diamond Match Co. v. Boeber, 106 N. Y. 473, 60 Am. Rep. 464, 13 N. B. 419 (an important case, in which the tendency of modern decisions to §934, (c) Restrictive Agreements on Sale of Business. — See, also, § 1344, note, and Baines v. Geary, 35 Ch. Div. 154; Badische, etc., Fabrik v. Schote, [1892] 3 Ch. 447; Nordenfelt v. Maxim-Nordenfelt Co., [1894] App. Cas. 535 (laying down the modern English rule that protection to the covenantee is the sole criterion of reasonableness, if the contract is not injurious to the public); Mills v. Dunham, [1891] 1 Ch. 576; Robinson v. Suburban Brick Co. (C. C. A.), 127 Fed. 804 (quoting the text and note) ; Carter V. Ailing, 43 Fed. 208 (fact that re- striction is unlimited as to the terri- tory over which it extends does not necessarily render it unreasonable); A. Booth & Co. V. Davis, 127 Fed. 875; Robbins v. Welch, 68 Ala. 393; Smith V. Webb, 176 Ala. 596, 40 L. R. A. (N. S.) 1191, 58 South. 913; Gregory v. ffpieker, 110 Cal. 150, 52 Am. St. Rep. 70, 42 Pac. 576; Bar- rows V. McMurty Mfg. Co., 54 Colo. 432, 131 Pac. 430 (contract not to engage in glass business in Colorado for ten years as incident to sale of business, held valid); Linn County Abstract Co. v. Beechley (Iowa), 99 N. W. 702; Beeves v. Deeorah Farm- 11—124 §934 EQUITY JUBISPKUDENCB. 1970 The stipulations of the buyer to pay compensation to the others in consideration of their promise not to bid, or to share the property with them, are void, and the sale itself, made as the result of the combination, is also tainted with the frauds, and will be set aside at the suit of the vendor. ^ ® Where, in pursuance of its general policy of letting con- means,, and the like. Such a contract will be enforced by enjoining its violation: Bryson v. Whitehead, 1 Sim. & St. 74; Benwell v. Inns, 24 Beav. 307; Peabody v. Norfolk, fe Mass. 452, 96 Am. Dec, 664; Vickery V. Welch, 19 Pick. 523.* § 934, 3 The English courts are said to have taken a different view, and to have held such a transaction valid : Galton v. Emuss, 1 Coll. C. C. 243 ; In re Carew's Estate, 26 Beav. 187. The rule established by the American courts is certainly a reasonable and just one. A secret combination as a relaxation of the doctrine is pointed out; a covenant permitting the sale of a manufactured article only in Nevada and Montana wag held not to be in general restraint) ; Tode V. Gross, 127 N. T. 480, 24 Am. St. Rep. 475, 13 K R. A. 652, 28 N. E. 469; Smith's Appeal, 113 Pa. St. 579, 6 Atl. 251; Kradwell v. TMesan, 131 Wis. 97, 111 N. W. 233 (purchase by an individual of a stockholder's interest in a corpora- tion affords a suflScient considera- tion for a contemporaneous agree- ment by the seller not to engage in the business carried on by the cor- poration). In Eakestraw v. Lanier, 104 Ga. 188, 69 Am. St. Rep. 154, 30 S. B. 735, a distinction is made between contracts binding one not to engage in a learned profession, and those which bind one who has sold the good-will of a business not to engage in a similar business. The court says that in the former case there must be a reasonable limit of time, while in the latter it is not necessary. § 934, (d) See, also, i 1340, note. §934, (e) Interference With Bid- ding at Auctions. — See, also, Mil- haus V. Sally, 43 S. G. 318, 49 Am. St. Eep. 834, 21 S. E. 268, 885; Camp V. Bruce, 96 Va. 521, 70 Am. St. Eep. 873, 43 L. R. A. 146, 31 S. E. 901 (specific performance re- fused); McMuUen v. Hoffman, 174 U. S. 639, 19 Sup. Ct. 839 (account- ing refused) ; Venner v. Denver Union Water Co., 40 Colo. 212, 122 Am. St. Rep, 1036, 92 Pae. 623 (agreement to make joint purchase or to convey to a third person not illegal unless object was to stifle competition). Compare Henderson V. Henrie, 61 W. Va. 183, 11 Ann. Oas. 741, 56 S. B. 369, and Coal & Coke By. Co. v. Marple, 70 W. Va. 136, Ann. Cas. I&ISD, 959, 38 L. R. A. 719, 73 S. B. 261. In sup- port of the text, see Hendricks v. Calloway, 211 Mo. 536, 111 S. W. 60 (foreclosure sale; effect on redemp- tion) ; Mansfield v. Wallace, 217 111. 610, 75 N. E. 682; Carr v. Graham, 128 Ga. 622, 57 S. E. 875; Lohr v. George, 65 W. Va. 241, 64 S. E. 609; Brady ' v. Carteret Realty Co., 67 N. J. Eq. 641, 110 Am. St. Rep. 502, 3 Ann. Cas. 421, and note, 60 Atl. 938 (illegal to chill bidding as by expressing opinion adverse to title 1971 CONSTRUCTIVE FRAUD. § 934 tracts for public works or for supplies to the lowest bidder, the governmental officers issue proposals for bids, a secret combination and agreement among contractors, to refrain from bidding and to prevent competition, falls under the same rule, and is equally illegal.* s Employment of puf- fers :>i The secret employment, by the vendor, of one or described is intrinsically much worse than the employment of "puffers" by the vendor: Jones v. Caswell, 3 Johns. Cas. 29, 2 Am. Dec. 134; Doolin V. Ward, 6 Johns. 194; Troup v. Wood, 4 Johns. Ch. 228; Hawley v. Cramer, 4 Cow. 717; Brisbane v. Adams, 3 N. Y. 129; Gardiner v. Morse, 25 Me. 1404 Guliek v. Ward, 10 N. J. L. 87, 18 Am. Dec. 389; Hamilton V. Hamilton, 2 Rich. Eq. 355, 46 Am. Dec. 58; Johnston v. La Motte, 6 Rich. Eq. 347; Grant v. Lloyd, 12 Smedes & M. 191, Newman v. Meek, 1 Freem. Ch. 441; Dudley v. Little, 2 Ohio, 508, 15 Am. Dec. 575; Plaster V. Burger, 5 Ind. 232; Wooton v. Hinkle, 20 Mo. 290; Piatt v. Oliver, 2 McLean, 267; Cocks v. Izard, 7 Wall. 559; Slater v. Maxwell, 6 Wall. 268; Trist v. Child, 21 Wall. 441. In connection with this rule, there are decisions which hold that a mere agreement of persons interested in the bidding, for the purpose of having them all share in the property when bid off by one of their number, and not for the purpose of preventing competition, is not open to the objection of illegality, but is valid. This is probably all that the English courts meant to decide in the cases cited supra: Kearney v. Taylor, 15 How. 494; Phippen v. Stickney, 3 Met. 384, 387; Goode v. Hawkins, 2 Dev. Eq. 393; National Bank of the Metropolis V. Sprague, 20 N. J. Eq. 159.* § 934, 4 In such a case, the stipulations among the parties to the arrangement for compensation to those who withhold their bids, or for a share in the contract when awarded, are clearly void, and the contract itself awarded by means of such .combination might be set aside : Weld v. Lancaster, 56 Me. 453; Atcheson v. Mallon, 43 N. Y. 147, 3 Am. Rep. 678; People V. Stephens, 71 N. Y. 527; Stevens v. Perrier, 12 Kan. 297; Swan V. Chorpenning, 20 Cal. 182; and eases in last note. of judgment debtor). It is held §934, (f) See, also. Starkweather that a statement made at the sale v. Jenner, 216 U. S. 524, 17 Ann. by a party in interest that tends to Cas. 1167, 54 L. Ed. 602, 30 Sup. prevent others from bidding may Ct. 382. vitiate the sale, although such state- § 934, (g) Pendleton v. Ashury ment is true: Herndon v. Gibson, 38 (Mo. App.), 78 S. W. 651. See, also, S. C. 357, 37 Am. St. Eep. 765, 20 Citizens' Nat. Bank of Chiekasha v. L. R. A. 545, 17 S. K. 145 (state- Mitchell, 24 Okl. 488, 20 Ann. Cas. ment by purchaser that she is a 371, 103 Pac. 720. widow, dependent on the premises § 934, (h) The text, as to employ- for support) ; Carson v. Law, 2 ment of puffers, is cited in McMil- Eich. Eq. 296. Ian v. Harris, 110 Ga. 72, 78 Am. § 934 EQUITY JURISPRUDENCE. 1972 more persons — called "puffers" — to make fictitious and collusive bids at an auction, and thus to enhance the price by an apparent competition, is clearly a wrong against the bona fide bidders and against the one who finally becomes the purchaser. Whether it is absolutely illegal has given rise to a conflict of decision between the courts of law and of equity; and, strangely enough, the courts of law have been more equitable, more strict in maintaining good faith, than those of equity. A vendor can always protect him- self against sacrifice by announcing, as one of the conditions of the sale, that he reserves the right to start the bidding by naming an "upset" price as the minimum, or the right to bid generally, or the right to withdraw the property. In regard to puffing, two cases may arise : 1. Where the sale is made without any preliminary . announcement at all ; 2. Where it is announced to be without reserve.. In the first case, the rule is settled at law that any puffing — the employment of even one puffer — ^is illegal, and renders the sale voidable, at the option of the purchaser.^ Courts of equity, in this case, allowed one puffer; in other words, puffing to the extent of one fictitious bidder did not render .the sale voidable.® If the vendor transgressed this limit, §934, 5 Thornett v. Haines, 15 Mees. & "W. 367, 372, per Parke, B.; Crowder v. Austin, 3 Bing. 368; Fuller v. Abrahams, 3 Brod. & B. 116; 6 Moore, 316; Green v. Baverstock, 14 Com. B., N. S., 204; Howard v. Castle, 6 Term Rep. 642; Bexwell v. Christie, Cowp. 395; Towle v. Leavitt, 23 N. H. 360, 55 Am. Dec. 195; Trust v. Delaplaine,' 3 E. D. Smith, 219; Staines v. Shore, 16 Pa. St. 200, 55 Am. Dec. 492; Faucett v. Currier, 115 Mass. 20; Williams v. Bradley, 7 Heisk. 54. This rule is approved by Chancellor Kent, in 2 Com. 538, 539 (5th ed.). § 934, 6 Although this rule was settled, it has been applied very reluc- tantly in recent decisions, and the tendency is evident, both in England and in the United States, to bring the equity rule into an agreement with the legal one, even in the absence of any statute : Bramley v. Alt, 3 Ves. 620 ; Smith v. Clarke, 12 Ves. 477; Woodward v. Miller, 2 Coll. C. C. 279; Flint V. Woodin, 9 Hare, 618; Woods v. Hall, 1 Dev. Eq. 415. St. Eep. 93, 48 L. E. A. 345, 35 S. B. by some one who has no authority 334. In this case the court states to discharge the bidder, the sale is that where the puffer is employed valid. 1973 CONSTEUCTIVE FEATJD. § 934 and employed more than one puffer, the transaction became illegal at equity as well as at law ; the fictitious competition was a fraud upon the bona fide bidders, which rendered the sale voidable^ In the second place, where an announce- ment is made that "the sale will be without reserve," or words to that effect, this is a pledge by the vendor that the competition shall be absolutely free; the employment of any puffing — one or more puffers — renders the sale void- able in equity as well as at law, and of course defeats a specific performance.^ The subject is now regulated in England by a recent statute. ^ Fraudulent trade-marks: Another illustration of frauds upon the public in business dealings consists in the use of fraudulent trade-marks. The whole doctrine of infringement of trade-marks is based upon the notion of misleading the public; but this phase §934, 7Thornett v. Haines, 15 Mees. & W. 367, 372, per Parke, B.; Bramley v. Alt, 3 Yes. 620; Conolly v. Parsons, cited 3 Ves. 625; Smith V. Clarke, 12 Ves. 477; Woodward v. Miller, 2 Coll. C. C. 279; Flint v. Woodin, 9 Hare, 618; Meadows v. Tanner, 5 Madd. 34; Robinson v. Wall, 10 Beav. 61; 2 Phill. Ch. 372; Mortimer v. Bell, L. R. 1 Ch. 10; Dimmoek V. Hallett, L. R. 2 Ch. 21; Wood v. Hall, 1 Dev. Eq. 415; Morehead v. Hunt, 1 Dev. Eq. 35 ; Nat. Bank of Metropolis v. Sprague, 20 N. J. Eq. 159 ; Davis v. Petway, 3 Head, 667, 75 Am. Dec. 789 ; Williams v. Brad- ley, 7 Heisk. 54; Wicker v. Hoppock, 6 Wall. 94; Veazie v. Williams, 8 How. 134; 3 Story, 611, 622; Fed. Cas. No. 16,907. It is probable that most American courts of equity would now disregard this distinction be- tween one puffer and more than one.* § 934, 8 Thomett v. Haines, 15 Mees. & W. 367, and cases cited; Robin- son V. Wall, 2 Phill. Ch. 372, 375, per Lord Cottenham ; Meadows v. Tan- ner, 5 Madd. 34; Mortimer v. Bell, L. R. 1 Ch. 10; Dimmoek v. Hallett, L. R. 2 Ch. 21; Gilliat v. Gilliat, L. R. 9 Eq. 60; Veazie v. Williams, 8 How. 134; 3 Story, 611, 622, Fed. Cas. No. 16,907.1 § 934, 9 30 & 31 Vict., c. 48. This statute recites that different rules have prevailed in law and equity, and that the same rule should regulate both jurisdictions. It makes the employment of puflBng unlawful in every case, unless the right to do so has been expressly reserved: See Gilliat v. Gilliat, L. R. 9 Eq. 60. §934, (») See the authorities re- §934, (J) See, also, Flannery v. viewed at length in Peck v. List, 23 Jones, 180 Pa. St. 338, 57 Am. St. W. Va. 338, 48 Am. Rep. 398. Rep. 648, 36 Atl. 856. § 934 EQUITY JUKISPKUDENCE. 1974 of the subject I do not at present touch upon.'^ The fraud now referred to is that of the original proprietor of the trade-mark, whose alleged right is invaded by an infringer, and who seeks the protection of courts. If a trade-mark contains a falsehood on its face, deceiving the public, and giving the goods a character and reputation which they do not possess nor deserve, or if the business of the pro- prietor is itself illegal, or is knowingly carried on by him in a false and deceptive manner, the trade-mark is in fact a fraud upon the public; no protection will be given to the proprietor against an infringement. It is added, how- ever, that a false representation by the proprietor, as to a matter wholly collateral to his trade-mark, does not affect his right to a remedy either in equity or at law.i** Con- § 934, 10 Leather Cloth Co. v. American Leather etc. Co., 11 H. L. Cas. 523, 542; Pidding v. How, 8 Sim. 477; Perry v. Truefitt, 6 -Beav. 66; riavel V. Harrison, 10 Hare, 467; Marshall v. Ross, L. R. 8 Eq. 651; Lee V. Haley, L. R. 5 Ch. 155, 158; Ford v. Poster, L. R. 7 Ch. 611; Singer Mfg. Co. V. Wilson, L. R. 2 Ch. Div. 434; Siegert v. Pindlater, L. R. 7 Ch. Div. 801; Orr v. Johnston, L. R. 13 Ch. Div. 434; Civil Service etc. Co. V. Dean, L. R. 13 Ch. Div. 512; Boulnois v. Peake, L. R. 13 Ch. Div. 513, note; Fetridge v. WeUs, 4 Abb. Pr. 144; 13 How. Pr. 385; Curtis v. Bryan, 2 Daly, 312, 317; Palmer v. 'Harris, 60 Pa. St. 156; 100 Am. Dec. 557; Heath v. Wright, 3 Wall. Jr. 141.1 § 934, (k) See § 1354. St. 526. But mere statements of § 934, (1) Fraudulent Trade- opinion as to curative properties, or marks. — A proprietary medicine as to the cause of a disease, con- label which, falsely states that the eerning which there is a conflict of medicine is put up by a physician expert opinion, are not false repre- will not be protected by injunction: sentations, within the meaning of Lemke v. Dietz (Wis.), 98 N. W. the rule, even though somewhat 936. To the same effect, see Man- sweeping, or even extravagant: hattan Med. Co. v. Wood, 108 IT. S. Newbro v. Undeland (Neb.), 96 N. 218, 2 Sup. Ct. 436, and cases cited W. 635. Likewise, an injunction (misstatement as to name and will not issue to protect a trade- place) ; Siegert v. Abbott, 61 Md. name which is calculated to de- 276, 48 Am. Eep. 101 (same); Pre- ceive the public: Worden v. servaline Mig. Co. v. Heller Chem. California Fig Syrup Co., 187 U. S. Co., 118 Fed. 103 (misstatement as 516, 23 Sup. Ct. 161; Messer v. The to patent); Uri v. Hirsch, 123 Fed. Fadettes, 168 Mass. 140, 60 Am. St. 568; Kenny v. Gillet, 70 Md. 574, 17 Kep. 371, 46 N. E. 407. A party Atl. 499; Buckland v. Bice, 40 Ohio who has simulated another's trade- 1975 CONSTRUCTIVE FRAUD. § 934 tracts opposed to the policy of some statute prescribing modes of certain business dealings. ^^ Contracts of trading with alien enemies.^^ § 934, 11 These cases depend each upon their own circumstances. Such statutes often prescribe the kinds of business which can be transacted by monetary corporations and associations, the methods of transacting, etc.: In re Arthur Average Ass'n, L. E. 10 Ch. 542; In re South Wales etc. Co., L. R. 2 Ch. Div. 763; Sykes v. Beadon, L. R. 11 Ch. Div. 170, 183, 197; Smith V. Anderson, L. R. 15 Ch. Div. 247 (overruling Sykes v. Beadon on one point); Rigby v. Connol, L. R. 14 Ch. Div. 482, 491; Johnson v. Shrewsbury etc. R'y, 3 De Gex, M. & Q. 914, per Eaiight Bruce, L. J.; Aubin v. Holt, 2 Kay & J. 66, 70; Carey v. Smith, 11 Ga. 539, 547; Kelly V. Devlin, 58 How. Pr. 487; Clarke v. Olnaha etc. R. R., 5 Neb. 314; Christian Union v. Yount, 101 U. S. 352; Oscanyan v. Winchester etc. Co., 15 Blatchf. 79; Fed. Cas. No. 10,600.™ § 934, 12 Seaman v. Waddington, 16 Johns. 510, opinion of Chancellor Kent, and authorities cited by him; Clements v. Yturria, 81 N. Y. 285; Robinson v. Internat. Life Ins. Co., 42 N. Y. 54, 66, 1 Am. Rep. 400; Woods V. Wilder, 43 N. Y. 164, 3 Am. Rep. 684; Bank of N. 0. v. Mat- thews, 49 N. Y. 12; Clements v. Graham, 24 La. Ann. 446; Hanauer v. Doane, 12 Wall. 342; Hanauer v. Woodruff, 15 Wall. 439; Montgomery mark is in no condition to complain 409, 24 Pae. 164 (contract to locate of a £hird party for simulating the mining claim contrary to United trade-mark that he himself is using States statute); Moffatt v. Bulson, in fraud of the original owner's 96 Gal. 106, 31 Am. St. Eep. 192, 30 rights: Parlett v. Guggenheimer, 67 Pac. 1022 (agreement to sell home- Md. 542, 1 Am. St. Rep. 416, and stead entry before final proof); note. The principle is extended in Carley v. Gitchell, 105 Mich. 38, 55 McVey v. Brendel, 144 Pa. St. 235, Am. St. Rep. 428, 62 N. W. 1003 27 Am. St. Rep. 625, 13 L. R. A. (violation of land laws) ; Third Nat. 377, 22 Atl. 912, 29 Wkly. Notes Exchange Bank of Sandusky, Ohio, Cas. 1, where the court refused to v. Smith, 17 N. M. 166, 125 Pae. 632 protect a cigarmakers' union in its (violation of United States statute right to a label which stigmatized relative to entry on public lands); all cigarmakers not members of the Prince v. Gosnell, 19 Okl. 175, 92 union. Pac. 164 (contract relative to home- § 934, (m) Anderson v. Carkins, stead lands) ; McMillan v. Wright, 135 U. S. 483, 10 Sup. Ct. 905 (con- 56 Wash. 114, 105 Pac. 176. One tract against the policy of the who takes leases of Indian lands United States land laws); Dial v. knowing them to be illegal is not Hair, 18 Ala. 798, 54 Am. Dec. 179 entitled to* an injunction against (specific performance of agreement the government ousting him in any to sell land when title should be way it sees fit: Beck v. Flournoy acquired from government, re- Live-Stock & E. E. Co., 65 Fed. 30, fused); Mitchell v. Cline, 84 Gal. 12 C. C. A. 497, 27 U. S. App. 618. § 935 EQUITY JURISPBtTDENCE. 1976 § 935. D. Contracts Affecting Public Relations. — Con- tracts made for the purpose of unduly controlling or affect- ing official conduct, or the exercise of legislative, adminis- trative, and judicial functions, are plainly opposed to public policy. They strike at the very foundations of government, and tend to destroy that confidence in the integrity and dis- cretion of public official action which is essential to the pres- ervation of civilized society. The principle is universal, and is applied without any reference to the mere outward form and alleged purpose of the transaction. If a contract does unduly interfere with governmental functions, or with the relations of the citizen towards his own government in any of its departments, whether the interference be direct or indirect, such agreement is illegal, whatever form it may have assumed.^ It is impossible, therefore, to mention all the instances which properly come within this principle. The following are some of the most important species: Contracts for the procurement of office: All agreements which interfere with the integrity, discretion, or freedom of the electing or appointing power are illegal.^ ^ Con- V. Unifed States, 15 Wall. 395; United States v. Grossmayer, 9 Wall. 72; The Ouachita Cotton, 6 Wall. 521; Sprott v. United States, 20 WaU. 459; United States v. Lapene, 17 WaU. 602; Carlisle v. United States, 16 WaU. 147, 151; United States v. Huckabee, 16 WaU. 414; Titus v. United States, 20 WaU. 475; Desmare v. United States, 93 U. S. 605; Whitfield v. United States, 92 U. S. 165. § 935, 1 This group contains many varieties : contracts directly with the appointing power, for the purpose of obtaining the office by means of any reward, compensation, or consideration; contracts by which the applicant agrees to pay compensation to another, or to share the emoluments with him, Lq consideration of his procuring the office; contracts between oppos- ing candidates, by which, in consideration that one withdraws, or aids the other,, the latter stipulates to pay a compensation, or to share the emolu- ments. The form is immaterial wherever the purpose is to procure an § 935, (a) The text is quoted in another person permanently in Davis V. Janeway (Okl.), 155 Pae. place as an officer of the corpora- 241. tion is illegal) ; Basket v. Moss, 115 §935, (h) West v. Camden, 135 N. C. 448, 44 Am. St. Eep. 463, 48 TJ. S. 507, 10 Sup. Ct. 838 (contract L. E. A. 842, 20 S. E. 733. by director of a corporation to keep 1977 CONSTRUCTIVE FRAUD. § 935 tracts interfering with legislative proceedings: Where a private statute, or a statute directly affecting private rights, is pending before the legislature, a secret agreement between parties interested, which, if disclosed, might have determined the action of the legislature, — as, for example, an agreement by one party to withdraw his opposition in consideration of a compensation to be paid by the other, — • has been held a fraud upon legislation, and therefore void.^ office by private interference with the freedom and integrity of the ap- pointing body. The principle applies to private offices in corporations, etc., as well as to public governmental offices : Hartwell v. Hartwell, 4 Ves. 811; Wallis v. Duke of Portland, 3 Ves. 494; Stevens v. Bagwell, 15 Ves. 139; Osborne v. Williams, 18 Ves. 379; Law v. Law, 3 P. Wms. 391; Cas. t. Talb. 140; Morris v. MacCuUock, 2 Eden, 190; Hanington v. Du Chatel, 1 Brown Ch. 124; Boynton v. Hubbard, 7 Mass. 112, 119; Ferris v. Adams, 23 Vt. 136; Becker v~ Ten Eyck, 6 Paige, 68; Hunter v. Nolf, 71 Pa. St. 282; Meguire v. Corwine, 101 U. S. 108 (contract by which A agrees to procure B's appointment as counsel in certain suits against the United States, and B agrees to give A half of the fee obtained, held void) ; Hager V. Catlin, 18 Hun, 448; Gaston v. Drake, 14 Nev. 175, 33 Am. Rep. 548 (agreement to share the salary of a public office in consideration that one party shall use his influence to secure the other's election, void) ; Reed v. Peper etc. Co., 2 Mo. App. 82 (agreement by which A was to receive part of the salary of certain officers, in consideration of his forbearing to use his influence and efforts to procure a repeal of the statute creating the offices, void) ; Guernsey v. Cook, 120 Mass. 501 (contract for the sale of stock for the purpose of procuring one of the parties to be elected treas- urer of the corporation, illegal). § 935, 2 The most recent English decisions, however, have modified this conclusion, by requiring not merely a secret agreement, but one which it was the duty of the parties to disclose to the legislature : Vauxhall Bridge Co. V. Earl Spencer, 2 Madd. 356; Jacob, 64; Simpson v. Lord Howden, 1 Keen, 583; 3 Mylne & C. 97; 9 Clark & F. 61; 10 Ad. & E. 793; Earl of Shrewsbury v. North Staffordshire R'y, L. E. 1 Eq. 593; and see Mangles v. Grand Dock C. Co., 10 Sim. 519. It has been held that where a statute has been procured by actual fraud upon the legislature, equity may relieve, not by setting aside the statute or declaring it void, but by depriving the wrong-doers of the advantages acquired thereby, treating themi as trustees; etc. This doctrine must, I think, be confined within very narrow limits: See Williamson v. Williamson, 3 Smedes & M. 715, 41 Am. Dec. 636; State v. Reed, 4 Har. & McH. 6. § 935 EQUITY JUKISPKUDENCE. 1978 The doctrine finds its most important application in dealing with contracts for the purpose of procuring legislation. All agreements, in every possible form, for the purpose of securing or using private and personal influeiice with members of a legislature, or of securing or using led) or and services, with legislators privately, personally, and indi- vidually, for the object of obtaining legislation either public or private, are in the highest degree contrary to the funda- mental theory of free legislative action.^ Contracts inter- fering with executive proceedings: These are subject to the same general rules which apply to similar agreements concerning legislation. All agreements, whether made with officials or with third persons, which directly or indirectly control or interfere with the due exercise of executive and § 935, 3 Our law permits a private citizen to endeavor to iafluence a legislature, and to obtain the enactment of a statute, in an open, public manner, by arguments directed to the whole body or to -a committee, in the same manner as arguments are presented to a court by counsel. To this end, agreements for the employment of an agent or attorney, upon a compensation, to argue before the legislature or its committees, 'or to col- lect facts, reasons, etc., and present them openly to all the legislature or to its proper cormnittees, are valid. Agreements which go beyond this line, and stipulate for private services to be rendered by dealing with individual legislators privately and personally, have been uniformly con- demned by courts of the highest authority. The varieties of such agree- ments are very mmaerous. The following cases furnish illustrations : Ed- ward V. Grand June. R'y, 1 Mylne & C. 650; Marshall v. Baltimore & 0. R. R., 16 How. 314 (a leading case; the opinion of Grier, J., is an able discussion of the doctrine) ; Frost v. Inhabitants of Belmont, 6 Allen, 152; Sedgwick v. Stanton, 14 N. Y. -289; Nickelson v. Wilson, 60 N. Y. 362; Mills v. Mills, 40 N. Y. 543, 100 Am. Dec. 535; Rose v. Truax, 21 Barb. 361; Smith v. Applegate, 23 N. J. L. 352; Clippinger v. Hepbaugh, 5 Watts & S. 315, 40 Am. Dec. 519; Miles v. Thome, 38 Cal. 335, 99 Am. Dec. 384; Powell v. Maguire, 43 Cal. 11; McBratney v. Chandler, 22 Kan. 692, 31 Am. Eep. 213 (where the services are partly those of- an attorney and partly of a lobbyist, but blended as a single employment, the entire contract is void)." § 935, (e) See, also, Hazelton v. tion) ; Houlton r. Niehol, 93 Wis. Steekels, 202 V. S. 71, 6 Ann. Cas. 393, 57 Am. St. Eep. 928', 33 L. E. A. 217 and note, 50 L. Ed. 939, 26 Sup. 166, 67 N. "W. 715. Ct. 567 (contract to secure legisla- 1979 CONSTRUCTIVE PEAXJD. §935 administrative functions as prescribed or regulated by law, are clearly illegal.*^ Contracts interfering with judicial § 935, 4 This group includes contracts with officers themselves stipulat- ing for the omission or violation of their ofBcial duties, or stipulating for compensation other or greater than the fees provided by law for the per- formance of their duties ; contracts with third persons stipulating for their influence in procuring administrative acts to be done or omitted, and the like: Cooth v. Jackson, 6 Ves. 12, 31, 35; Methwold v. Walbank, 2 Ves. Sr. 238; Tool Co. v. Norris, 2 Wall. 45; Trist v. Child, 21 Wall. 441; Nichols V. Mudgett, 32 Vt. 546; Robinson v. Kalbfleisch, 5 Thomp. & C. 212; Cook v. Freudenthal, 80 N. Y. 202; Hatzfleld v. Gulden, 7 Watts, 152, 31 Am. Dec. 750; Winpenny v. French, 18 Ohio St. 469; Edwards v. Estell, 48 Cal. 194; Pac*kard v. Bird, 40 Cal. 378; Swan v. Chorpenning, 20 Cal. 182; Spence v. Hai-vey, 22 Cal. 337, 83 Am. Dec. 69; Kelly v. Devlin, 58 How. Pr. 487; Macon v. Huff, 60 Ga. 221; Berryman v. Cin- cinnati etc. R'y) 14 Bush, 755 (contract with an officer of a railroad com- pany to use his influence to procure the railroad to be located in a par- ticular place, void) ;* St. Louis v. St. Louis et<3. Co., 5 Mo. App. 484 (an agreement by a corporation not to exercise a portion of the franchises granted to it for public purposes is invalid) ; Western U. T. Co. v. Chicago etc. E. R., 86 111. 246, 29 'Am. Eep. 28; Western U. T. Co. v. Atlantic etc. T. Co., 7 Biss. 367; Fed. Cas. No. 17,445 (contracts between a railroad and telegraph company giving exclusive right of way and of use are valid) ; Denison v. Crawford Co., 48 Iowa, 211 (agreement between a county and its agent for special services and compensation held valid) ; Reed v. Peper etc. Co., 2 Mo. App. 82; Stanton v. Embrey, 93 U. S. 548 § 935, (d) The text is quoted in agrees not to avail himself of the Davis V. Janeway (Okl.), 155 Pae. statutory mode of enforcing the col- 241. See, also, Oseanyan v. Arms Co., lection of his fees, void). 103 U. S. 261 (a contract entered mco § 935, (e) Woodstock Iron Co. v. by a consul-general of a foreign Extension Co., 129 TJ. S. 643, 9 Sup. government, residing in this conn- Ct. 402 (an agreement by which try, whereby, in consideration of a agents of a railroad company may stipulated percentage, he agreed to acquire gain by inducing the corn- use his influence in favor of a pany unnecessarily to lengthen the manufacturing company with an road, and thus impose a burden on agent of his government sent to the public, illegal) ; McCoweu. v. examine and report in regard to the Pew, 153 Cal. 735, 15 Ann. Cas. 630, purchase of arms for it) ; Hawkeye 21 L. E. A. (N. S.) 800, 96 Pac. 893 Ins. Co. V. Brainard, 72 Iowa, 130, (contract by which a railroad is in- 33 N. W. 603 (contract whereby an duced to select a particular route officer agrees to accept a less or not illegal if not prejudicial to pub- greater compensation than that pre- lie interests), scribed by statute, or whereby he § 935 EQUITY JUKISPBUDENCE. 1980 proceedings : All agreements directly or indirectly prevent- ing or controlling the due administration of justice are opposed to the universal and most elementary principles of public policy. Whatever be their form and immediate purpose, and however innocent may be the motives of the parties, they are plainly invalid. ^ * (an agreement to pay counsel a contingent fee for legitimate professional services in prosecuting a claim against the United States is valid) ; Fowler V. Donovan, 79 III. 310 (an agreement between several persons to con- tribute and pay for a substitute for such of them as should be drafted into the United States mUitary service is valid) ; Marsh v. Russell, 66 N. Y. 288; Caton v. Stewart, 76 N. C. 357; Ashbumer v. Parrish, 81 Pa. St. 52; and see eases of contracts made colore officii^ in the next following note. § 935, 5 Under this head are included agreements with judicial ofHcers relating to and controlling their judicial action; with third persons stipu- lating for their personal influence in procuring judicial action; contracts to remove witnesses, or in any manner to prevent them from testifying; or to remove, conceal, suppress, or in any way prevent the production of documentary or other evidence at an expected trial ; agreements to procure witnesses to testify to a certain state of factsj agreements to indemnify sheriffs and other executive officers of a court for a willful violation or neglect of their official duty; and a great variety of others: Ferris v., Adams, 23 Vt. 136; Cook v. Freudenthal, 80 N. Y. 202; Winter v. Kinney, § 935, (f ) The text is quoted in defend persons for criminal offenses Wood V. Stewart, 81 Ark. 41, 98 — violations of prohibitory liquor S. W. 711. See, also, Gugolz v. laws — ^whieh were, in contemplation Gehrkens, 164 Cal. 596. 43 L. B. A. of the parties, to be committed in (N. S.) 577, 130 Pac. 8 (contract by the future, void) ; Olson v. Lamb, which executor agreed to help 56 Neb. 104, 71 Am. St. Eep. 670, widow have will set aside) ; Eaeey 76 N. W. 433 (stifling competition V. Kaeey (Okl.), 73 Pac. 305 (agree- at judicial sale); Davis v. Hinman, ment for divorce, invalid); Good- 73 Neb. 850, 11 Ann. Cas. 376 and rich V. Tenney, 144 HI. 422, 36 note, 103 N. W. 668 (contract in- Am. St. Eep. 459, 19 L. E. A. 371, tended to facilitate divorce void); 33 N. E. 44 (contract to procure Groehowski v. Grochowski, 77 Neb. false evidence, invalid); Moyer v. 506, 15 Ann. Oas. 300, 13 L. E. A. Cantieny, 41 Minn. 242, 42 N. W. (N. S.) 484, 109 N. W. 792 (contract 1060 (a contract to secure a pardon, not to contest a will is not against improper methods not being con- public policy); Camp v. Bruce, 96 templated, valid); Bowman v. Phil- Va. 521, 70 Am. St. Eep. 873, 43 lips, 41 Kan. 364, 13 Am. St. Eep. L. E. A. 146, 31 S. E. 901 (contract 292, 3 L. E. A. 631, 21 Pae. 23D (an to stifle bidding at judicial sale will agreement by attorneys at law to not be specifically enforced). 1981 CONSTEXJCTIVE FEAXJD. § 936 § 936. 3. Contraets Opposed to Good Morals. — ^It is un- necessary to discuss the meaning of the phrase contra bonos mores, since the doctrine is familiar. It is enough to say that all agreements in which the consideration past or future, or the executory terms stipulating for acts to be done or omitted, are contrary to good morals, are illegal and void in equity, and with a very few exceptions at the common law. This doctrine applies in equity, whatever be the external form of the contract, or its immediate pur- pose, or the particular nature of its illegality. Among the most important and familiar illustrations are the following : Contracts based upon the consideration, either past or future, of illicit sexual intercourse, or stipulating for such future intercourse, or in any manner promoting or furnish- ing opportunities for unlawful cohabitation or prostitu- tion ; 1 a contracts which constitute or amount to champerty 1 N. Y. 365; Richardson v. Crandall, 48 N. Y. 348; Barnard v. Viele, 21 Wend. 88; People v; Meighan, 1 Hill, 298 (cases of bonds taken colore officii) ; Dawkins v. Gill, 10 Ala. 206; Odineal v. Barry, 24 Miss. 9; Valen- tine V. Stewart, 15 Cal. 387, 404, 405, and eases cited; Patterson v. Donner, 48 Cal. 369, 379; Speck v. Dausman, 7 Mo. App. 165 (agreement between the parties to a pending divorce suit held void) ; Hamilton v. Hamilton, 89 111. 349 (ditto) ; Comstock v. Adams, 23 Kan. 513, 33 Am. Rep. 191 (an agreement not to disturb a decree for divorce wrongfully granted, invalid) ; Bradley v. Coolbaugh, 91 111. 148 (a special agreement among the creditors of an absconding debtor, providing for judicial proceedings in the name of one for the benefit of all, held valid) ; Averbeck v. Hall, 14 Bush, 505 (a contract to endeavor to procure the dismissal of a criminal prosecution, void); Breathwit v. Rogers, 32 Ark. 758; Lindsay v. Smith, 78 N. C. 328, 24 Am. Rep. 463; Mahler v. Phoenix Ins. Co., 9 Heisk. 399; Veramendi v. Hutchins, 48 Tex. 531; Laing v. McCall, 50 Vt. 657; Wight V. Rindskopf, 43 Wis. 344; Ecker v. Bohn, 45 Md. 278; Ecker v. McAllis- ter, 45 Md. 290; Glenn v. Mathews, 44 Tex. 400. § 936, 1 All contracts providing for future illicit intercourse, and all unsealed contracts upon the consideration of past intercourse, were void §936, (a) See Chateau v. Singla, (8 Dick.) 259, 31 Atl. 394 (bill to 114 Cal. 91, 55 Am. St. Eep. 63, 33 compel restoration of stock given in Ii. E. A. 750, 45 Pac. 1015 (partner- consideration of illicit relations can- ship to let furnished apartments for not be sustained) ; Vincent v. Mor- purposes of prostitution); Watkins iarty, 31 App. Div. 484, 52 N. Y. v. Nugen (Ga.), 45 S. E. 262; Supp. 519. Brindley v. Lawton, 53 N. J. Eq. § 936 EQUITY JUEISPEUDENCE. 1982 or maintenance, these being highly criminal at the common law;2^ contracts, executed or executory, given upon the consideration of or stipulating for the compounding a fel- at law as well as in equity. On account of the arbitrary effect given to a seal, contracts based upon the consideration of past intercourse, if sealed, were not void at the common law; and this fact furnished an occasion for the exercise of the equitable jurisdiction in canceling such instruments, since there was no defense at law. In most of the states where the common-law effect of the seal has been abrogated, or where a seal is not conclusive evidence of consideration, this technical distinction can no longer exist: Bengon v. Nettlefold, 3 Macn. & G. 94, 102, 103; Batty v. Chester, 5 Beav. 103; Smyth v. Griflan,.13 Sim. 245; Hill v. Spencer, Amb. 641, 836; Gray v. Mathias, 5 Ves. 286; and cases cited ante, § 402, note 1. In the same class are leases of premises for the purpose of being used as houses of prostitution, or for other known illegal objects : Newby V. Sharpe, L. R. 8 Ch. Div. 39; Riley v. Jordan, 122 Mass. 231; Marlatt v. Warwick, 19 N. J. Eq. 439; Cutler v. Tuttle, 19 N. J. Eq. 549, 562; Sweet V. Tinslar, 52 Barb. 271; D'Wolf v. Pratt, 42 111. 198; Smith v. White, L. R. 1 Eq. 626. § 936, 2 The common-law rules concerning champerty and maintenance have been greatly modified in the United States, and to a large extent abrogated. Many agreements concerning litigations, legal controversies, and disputed claims, which were condemned by the ancient law, are not only sustained by the modem law of this country, but are of frequent occurrence. The good policy of the change may well be doubted. Many other ancient common-law rules, which modern civilization came to regard as merely arbitrary and oppressive, are found by experience, after their abolishment, to have been wise, and based upon the unchangeable facts of human nature: Powell v. Knowler, 2 Atk. 224; Straehan v. Brander, 1 Eden, 303; cited 18 Ves. 127, 128; Stevens v. Bagwell, 15 Ves. 139; Wallis V. Duke of Portland, 3 Ves. 494; Reynell v. Sprye, 1 De Gex, M. & G. 660 ; Knight v. Bowyer, 2 De Gex & J. 421 ; Strange v. Brennan, 15 Sim. 346; Hilton v. Woods, L. R. 4 Eq. 432; Sprye v. Porter, 7 El. & B. 58; 3 Jur., N. S., 330; Grell v. Levy, 16 Com. B., N. S., 73; Earle v. Hop- wood, 9 Com. B., N. S., 566; 7 Jur., N. S., 775; Stanton v. Embrey, 93 U. S. 548; Ballard v. Carr, 48 Cal. 74 (agreement giving counsel an in- terest in or a part of the property to be recovered, as a contingent fee for his services in a litigation, valid) ; Hoffman v. Vallejo, 45 Cal. 564 (ditto) ; Dorwin v. Smith, 35 Vt. 69; Thurston v. Percival, 1 Pick. 415; Arden v. Patterson, 5 Johns. Ch. 44; Thalimer v. Brinkerhoff, 20 Johns. 386; Slade V. Rhodes, 2 Dev. & B. Eq. 24; Holloway v. Lowe, 7 Port. 488; Brown v. § 936, (b) The text is cited in S. E. 421 (common-law rules in force Roller V. Murray, 107 Va. 527, 59 in Virginia). 1983 COKSTBtrCTr?E FKAITD. §936 ony, the forbearance to prosecute for a crime, or the aban- donment of a pending criminal prosecution.^ * Beauchamp, 5 T. B. Mon. 413, 17 Am. Dec. 81; Bryant v. Hill, 9 Dana, 67; Cardwell v. Sprigg, 7 Dana, 36; Wilhite v. Roberts, 4 Dana, 172; Coquillard v. Bearss, 21 Ind. 479, 83 Am. Dec. 362; Martin v. Veeder, 20 Wis. 466.= § 936, 3 This illegality affects not only the main agreement, but aU col- lateral securities given upon such consideration, such as notes, bonds, mort- gages, etc.: Johnson v. Ogilby, 3 P. Wms. 277; Shaw v. Reed, 30 Me. 105; Harrington v. Bigelow, 11 Paige, 349; Atwood v. Fisk, 101 Mass. 363; Swartzer v. Gillett, 1 Chand. 207, 209, 210; Averbeck v. Hall, 14 Bush, 505; Lindsay v. Smith, 78 N. C. 328, 24 Am. Rep. 463 (an agreement upon a single consideration to do certain acts, not of themselves illegal, and to stop a criminal prosecution, is wholly void) ; Laing v. McCall, 50 Vt. 657 §936, (c) Champertous: James v. Kerr, 40 Ch. Div. 449; Blackwell v. Webster, 29 Fed. 614; Ackert v. Barker, 131 Mass. 436 (contin- gent fee); Gargano v. Pope (Mass.), 69 N., E. 343 (same); Casserleigh v. Wood (C, C A.) 119 Fed. 309 (specific performance re- fused although court of law might not regard contract as champer- toue). See, also, Holland v. Shee- han, 108 Minn. 362, 17 Ann. Oas. 687, 23 L. E. A. (N. S.) 510, 122 N. W. 1 (contract by layman to hunt up accident eases and bring them to a lawyer, against public policy; IngersoUv. Coal Creek Coal Co., 117 Tenn. 263, 119 Am. St. Rep. 1003 and note, 10 Ann. Oas. 829, 9 L. E. A. (N. S.) 2S2, 98 S. W. 178 (contract to pay fees to attorney not enforced, because contract was solicited). Not champertous: Tor- renee v. Shedd, 112 111. 466; Ware's Adm'rs v. Kussell, 70 Ala. 174, 45 Am. Rep. 82; Gilman v. Jones, 87 Ala. 691, 4 L. R. A. 113, 5 South. 785; Brown v. Bigne, 21 Or. 260, 28 Am. St. Eep. 752, 14 L. R. A. 745, 28 Pac. 11. § 9365- (d) The text is cited in Gorringe v. Eeed, 23 Utah, 120, 90 Am. St. Rep. 692, 63 Pac. 902, and in Colby v. Title Ins. & Trust Co., 160 Cal. 632, Ann. Cas. 1913A, 515, 35 L. R. A. (N. S.) 813, 117 Pac. 913. See, also, Eock v. Mathews, 35 W. Va. 531, 14 L. R. A. 508, 14 S. E. 137; Davis v. Smith, 68 N. H. 253, 73 Am. St. Rep. 584, 44 Atl; 344; Treadwell v. Torbert, 119 Ala. 279^ 72 Am. St. Rep. 918, 24 South. 54 (compounding a felony) ; Mack V. Campeau, 69 Vt. 558, 60 Am. St. Rep. -948, 38 Atl. 149 (suppression of criminal prosecution); Moore v. Adams, 8 Ohio (8 Ham.), 372, 32 Am. Dec. 723 (agreement not to prosecute); George v. Curtis, 45 W. Va. 1, 30 ■&. E. 69 (agreement not to prosecute); Goodrum v. Mer- chants & Planters' Bank, 102 Ark. 326, Ann. Cas. 1914A, 511, 144 S. W. 198'; Meredith v. Knox (Del.), 83 Atl. 703 (bond given to compromise an action for statutory rape void) ; Jourdan v. Burstow, .76 N. J. Eq. 55, 139 Am. St. Rep. 741, 74 Atl. 124; but see Meredith v. Knox (Del.), 83 Atl. 703 (bond in bas- tardy proceedings). § 937 EQUITY JtTRISPBTJDENCE. 1984 §937. III. Equitable Jurisdiction in Case of Illegal Contracts — Usurious Contracts.* ■.— Equitable relief is granted against usurious contracts, whether executory or executed, since, from considerations of public policy, the two parties are not regarded as standing in pari delicto. While the contract is executory, equity will not aid the creditor in enforcing it. If, therefore, suit is brought upon such an agreement, the borrower may set up the usury as a defense, without paying or offering to pay the amount actually borrowed, or legal interest thereon, and a recovery will be entirely defeated. Equity will never assist a party to carry into effect his own intentional violation of the law.^ (a contract of sale of chattels made in order to prevent a prosecution for forgery is void) ; Wight v. Rindskopf, 43 Wis. 344 (an agieement to com- promise a criminal case arising under the United States internal revenue laws will not be enforced in the state courts)." As illustrations of some- what analogous contracts which are not illegal, see Breathwit v. Rogers, 32 Ark. 758 (a promise not to bring a civil action for damages on account of a tort which is also a crime, is a valid consideration of a contract, pro- vided no promise is involved not to prosecute or give evidence of the crime);* Mahler v. Phcenix Ins. Co., 9 Heisk. 399; Ecker v. Bohn, 45 Md. 278; Ecker v. MeAUister, 45 Md. 290. § 937, 1 Mason v. Gardiner, 4 Brown Ch. 436 ; Fanning v. Dunham, 5 Johns. Ch. 122, 9 Am. Dec. 283; Hart v. Goldsmith, 1 Allen, 145; Smith V. Robinson, 10 Allen, 130; Union Bank v. Bell, 14 Ohio St. 200; Sporrer v. Eifler, 1 Heisk. 633, 636; Kukner v. Butler, 11 Iowa, 419; Spain v. Hamilton, 1 Wall. 604; O'Neil v. Cleveland, 30 N. J. Eq. 273 (one of two executors loaned money of the estate on bond and mortgage, reserving visury, which he appropriated to his own use; on a foreclosure by the executors on behalf of the estate, held that the usury could be set up as a defense) ; Powers v. Chaplain, 30 N. J. Eq. 17 (defendant in a fore- closure suit was let in to answer, on terms which precluded him from § 936, (e) See, also, Given's Ap- such a contract, a promise not to peal, 121 Pa. St. 260, 6 Am. St. Eep. prosecute criminally is by implica- 795, 15 Atl. 468. tion involved, the contract is in- §936, {') See, also, Barrett v. valid: Jones v. Merionethshire, etc., Weber, 125 N.' Y. 18, 25 N. E. 1068; Soe., [1891] 2 Ch. 587; affirmed, Moog V. Strang, 69 Ala. 98; Good- [1892] 1 Ch. 173. See, further, last Tum V. Merchants & Planters' Bank, note under § 402. 102 Ark. 326, Ann. Gas. 1914A, 511, § 937, (a) Sections 937-941 of the 141 S. W. 198; Meredith v. Knox text are cited in Beer v. Landman, (Del.), 83 Atl. 703; but where, in 88 Tex. '450, 31 S. W. 805. 1985 CONSTRUCTIVE FEAUD. § 937 It is well settled that courts of equity will go farther, and will give all the affirmative relief which is just to the bor- rower. If the contract is executory, the borrower may obtain the remedy of a surrender and cancellation of the securities which he has given for the usurious loan.^ t> If the contract is executed, he may recover back the usurious amount paid in excess of the sum actually borrowed, and legal interest thereon.^ « This affirmative interposition of the court is subject, however, to the principle that the plain- tiff must himself do equity. It is a firmly settled rule, in the absence of contrary statutes, that where a borrower, who has not already paid the debt, brings a suit for affirma- tive relief against a usurious contract,^ he can obtain the remedy only upon the condition of repaying, or offering to repay, the sum which is justly and equitably due to his creditor, — the amount actually loaned and legal interest. setting up usury as a defense; usury was shown by the evidence. Held, that the plaintiff could only recover the amount justly and equitably due). § 937, 2 Peters v. Mortimer, 4 Edw. Ch. 279. § 937, 3 Bosanquett v. Dashwood, Cas. t. Talb. 38, 41; Rawden v. Shad- well, Amb. 269; Fanning v. Dunham, 5 Johns. Ch. 122, 142, 143, 144, 9 Am. Dec. 283; Davis v. Demming, 12 "W. Va. 246; Morrison v. Miller, 46 Iowa, 84; Gantt v. Grindall, 49 Md. 310 (where the usurious interest already paid and the installments of the principal paid together equal or exceed the amount of the actual loan secured by a usurious mortgage, equity wUl restrain any suit or proceeding to foreclose the mortgage). See, also, cases cited in the next note. In one or two states, by reason of a statutory requirement, it seems that the borrower can recover back the entire sum which has been paid, and not merely the usurious excess. Wherever the usurious loan is concealed under the appearance of a pre- tended sale, equity will look at the real transaction, and give relief by set- ting aside the sale: Waller v. Dalt,' 1 Ch. Cas. 276; 1 Dick. 8; Barny v. Beak, 2 Ch. Cas. 136; Barker v. Vansommer, 1 Brown Ch. 149. §937, (b) See, also, Thomas v. v. Thomas, 67 Miss. 777, 7 South. Burnee, 223 Mass. 311, 111 N. E. 503; Moseley v. Brown, 76 Va. 419. 871 (no matter what shift or device In stating an account between the was used to conceal the usury). parties, credit will be allowed upon §937, (e) The text is quoted in the principal for whatever usurious Blaisdell v. Steinfeld, 15 Ariz. 155, interest has been paid: Norvell v. 137 Pae. 555. See, also, Dickerson Hedrick, 21 W. Va. 523. n— 125 § 937 EQUITY JUBISPBUDENCE. 1986 The absence of such, an offer is ground for defeating the suit.* ^ Since the illegality of usury is wholly the creature of legislation, the provisions of the statute must furnish the rule determining the extent, limits, and occasion of relief. It results from a just interpretation of the legisla- tion that the right to complain is a personal one, belonging only to the borrower and his representatives; no other party is entitled to relief, defensive or affirmative. The doctrine is therefore generally settled, that where land subject to a usurious mortgage is conveyed to a grantee who assumes the payment thereof as a part of the consid- eration of the cojiveyance, he cannot set up the usury either as a defense to a foreclosure or as a ground for a cancella- tion of the security. The same is true of any transferee of property who, as a part of the transaction, assumes pay- ment of a usurious debt. For the same reason a subsequent mortgagee or encumbrancer cannot defeat a prior encum- §937, 4 Mason v. Gardiner, 4 Brown Ch. 436; Tanning v. Dunham, 5 Johns. Ch. 122, 142, 143, 144, 9 Am. Dec. 283; Rogers v. Rathbun, 1 Johns. Ch. 367; Williams v. Fitzhugh, 37 N. Y. 444; Ballinger v. Edwards, 4 Ired. Eq. 449; Ware v. Thompson, 13 N. J. Eq. 66; Whitehead v. Peek, 1 Ga. 140; Noble v. Walker, 32 Ala. 456; Ruddell v. Ambler, 18 Ark. 369; Sporrer v. Eifler, 1 Heisk. 633, 636; Alden v. Diossy, 16 Hun, 311; Pur- nell V. Vaughan, 82 N. C. 134; Campbell v. Murray, 62 Ga. 86; Pickett V. Merchants' Nat. Bank, 32 Ark. 346; Morrison v. Miller, 46 Iowa, 84. The same principle has been applied to a lender seeking to reform a usurious security in a state where the statute only avoided the excess of illegal interest: Corby v. Bean, 44 Mo. 379. In one or two states the statute requires courts of equity to grant affirmative relief to the borrower, without imposing any condition as above described: Bissell v. Kellogg, 60 Barb. 617; and see Cooper v. Tappan, 4 Wis. 376.« §937, (d) See §391; Mathews v. 142 N. W. 553; Cook v. Patterson, Wtirner, 6 Fed. 461; Grider v. 103 N. C. 130, 9 S. E. 402; Carver Driver, 46 Ark. 50; Whatley v. Bar- v. Brady, 104 N. C. 220, 10 S. E. 565. ker, 79 Ga. 790, 4 S. E. 387; Holden §937, (e) See, also. Turner y. Land & Livestock Co. v. Interstate Turner, 80 Va. 379; Missouri, K. & Trading Co., 87 Kan. 221, L. K. A. T. Co. v. Krumseig, 77 Fed. 32, 40 1915B, 492, 123 Pac. 733 (suit to U. S. A. 620 (Minnesota); Hender- have deed declared a mortgage) ; son v. Tolmau, 129 Mo. App, 498, Neurath v. Hecht, 62 Md. 221; Van- 109 S, W. 76. dervelde v. Wilson, 176 Mich. 185, 1987 CONSTEUCTIVB FEAUD. § 937 brance or procure it to be set aside upon allegations of its usurious character.^ ^ § 937, 5 The reasons for these conclusions given by different courts in the following cases are not always the same; but they are not conflicting: De Wolf V. Johnson, 10 Wheat. 367, 392; Green v. Kemp, 13 Mass. 515, 575, 7 Am. Dec. 169; Shufelt v. Shufelt, 9 Paige, 137, 145, 37 Am. Dec. 381; Cole V. Savage, 10 Paige, 583; Post v. Dart, 8 Paige, 639, 641; Morris v. Floyd, 5 Barb.- 130; Sands v. Church, 6 N. Y. 347; Merchants' Ex. Bank v. Commercial etc. Co., 49 N. Y. 635, 643; Knickerbocker Life Ins. Co. V. Nelson, 78 N. Y. 137, 150, and cases cited; Barthet v. Elias, 2 Abb. N. C. 364; Spaulding v. Davis, 51 Vt. 77; Citizens' Bank v. Cook, 61 Ga. 177; Lee v. Stiger, 30 N. J. Eq. 610; Reed v. Eastman, 50 Vt. 67 (a purchaser of the mortgaged property cannot set up the defense) ; McGuire v. Van Pelt, 55 Ala. 344 (nor an assignee of the mortgagor) ; Pickett V. Merchants' Nat. Bank, 32 Ark. 346 (nor a third person who has assumed the debt) ; Lamoille Co. Nat. Bank v. Bingham, 50 Vt. 105, 28 Am. Rep. 490 (nor can a surety avail himself of usury paid by his principal) ; Ready v. Huebner, 46 Wis. 692, 32 Am. Rep. 749 (a subse- quent mortgagee cannot set up usury in a prior mortgage as a defense thereto) ; Bensley v. Homier, 42 Wis. 631 (nor can a subsequent judg- ment creditor). It seems, however, under the statutes of some states, that a subsequent mortgagee, when made a defendant in a suit to enforce a prior mortgage given by his mortgagor, may allege usury thereon as a defense : See Union etc. Sav. Inst. v. Clark, 59 How. Pr. 342, In the recent ease of Knickerbocker Life Ins. Co. v. Nelson, 78 N. Y. 137, A gave a usurious § 937, (f) Grantee Subject to Assn., 155 Ky. 59, 48 L. E. A. (N. S.) Usurious Mortgage. — The text is 840, 159 S. W. 609; Schmidt v. quoted in Swope v. Jordan, 107 Gaukler, 156 Mich. 243, 120 N. W. Tenn. 166, 54 S. W. 52; and cited, 746 (claim of usury can only be set to the effect that one assuming a up by the injured party and is not mortgage cannot set up usury, in assignable); Scull v. Idler, 79 N. J. Frost v. Pacific Sav. Co. (Or.), 78 Eq. 466, 81 Atl. 743; Higbee v. Pac. 814. See Lea v. Feamster, 21 Aetna Bldg. & Loan Ass'n, 26 Old. W. Va. 108, 45 Am. Eep. 549; Nance 327, Ann. Cas. 1912B, 223, 109 Pac. V. Gregory, 6 Lea, 343, 40 Am. Rep. 236; Stuckey v. Middle States 41; Scanlan v. Grimmer, 71 Minn. Loan, Bldg. & C. Co., 61 W. Va. 74, 351, 70 Am. St. Eep. 326, 74 N. W. 123 Am. St. Eep. 97. 8 L. E. A. 146. See, also, First Nat. Bank of (N. S.) 814,55 S. E. 996; Chenoweth Atwood V. Drew, 226 111. 622, 117 v. National Bldg. Ass'n, 59 W. Va. Am. St. Eep. 271, 10 L. E. A. (N. S.) 653, 53 S. E. 559. Compare Grove 857, 80 N. E. 1082 (when grantee v. Great Northern Loan Co., 17 not estopped from questioning N. D. 356, 138 Am. St. Eep. 707, 116 usury in the mortgage).; Burnett v. N. W. 345; Horner v. Nitsch, 103 Young Men's Building & Loan >Id.'498, 63 AtL 1052. § 938 EQUITY JUBISPBXJDENCE. 1988 § 938. Gaming Contracts.^ — ^In gaming contracts, unlike usurious loans, it cannot be said that one party takes ad- vantage of the necessities of the other, who is in vinculis; both act freely and are in pari delicto; the general maxims therefore apply.'' While the contract is still executory, a court of equity will not aid the creditor to enforce -it, the illegality being a perfect defense in equity as well as at law.i After the agreement has been executed by the loser's pajnnent of the money, or by a conveyance of land or other property, equity will not interfere on his behalf and decree a recovery back of the money paid, or a cancellation of the conveyance or assignment, unless perhaps there were circumstances of fraud, oppression, duress, and the like, in procuring the payment or transfer, which would of them- selves be a sufficient ground for equitable interposition distinct from the mere illegality.^ c Finally, as long as mortgage on certain land; he afterwards conveyed the land subject to the mortgage to B, who assumed to pay it as "part of the purchase price of the premises"; B then conveyed the same land to C, subject to the mort- gage, who in like manner assumed its payment; finally, C reeonveyed the land to A, but this conveyance was not subject to the mortgage. The mortgagee brought suit to enforce the mortgage, but asked no relief against B and C, and made no allegations showing that he had accepted the agree- ments between A and them. Held, that A was not debarred from setting up the defense of usury and defeating the action.. See, also, Hetfield v. Newton, 3 Sand. Ch. 564; Hartley v. Harrison, 24 N. Y. 170, 173; Seher- merhorn v. Tahnan, 14 N. T. 93 ; Cope v. Wheeler, 41 N. Y. 303.s §938, IBosanquett v. Dashwood, Cas. t. Talb. 38, 41; Adams v. Gay, 19 Vt. 358; Spaulding v. Preston, 21 Vt. 9, 50 Am. Dec. 68; Adams v. Barrett, 5 Ga. 404; Gotwalt v. Neal, 25 Md. 434; Pope v. Chafee, 14 Kich. Eq. 69; and cases in the two following notes. § 938, 2 There were a few early dicta, and perhaps decisions, opposed to this conclusion ; but they have been overruled : Bosanquett v. Dashwood, § 937, (e) Brooks v. Todd, 79 Ga. § 938, (b) The text is quoted in 692, 4 S. E. 156. Stewart v. Wright, 147 Fed. 321, 77 §938, (a) Sections 938-942 are C. C. A. 499, dissenting opinion of cited in Futch v. Sanger (Tex. Civ. Sanborn, J. App.), 163 S. W. 597. Sections § 938, (c) The text is cited to this 938-940 are cited in Hall v. Ed- effect in Beer v. Landman, 88 Tex. wards (Tex. Civ. App.), 194 S. W. 450, 31 S. W. 805. See, also. Smith 674. V. Kammerer, 152 Pa. St. 98, 25 Atl. 1989 CONSTEUCTIVE FBATJD. § 938 the contract is still executory, equity has jurisdiction to aid the losing party by ordering the written agreement and other securities to be surrendered up and canceled, and by granting the ancillary remedy of injunction to restrain their negotiation, transfer, or enforcement; and when the circumstances are such that the defensive remedy at law would not be equally certain, complete, and adequate, this jurisdiction ought to be and will be exercised. This con- clusion is sustained by the highest authority, and is in per- fect accord with principle. ^ e Cas. t. Talb. 38, 41; R&wden v. Shadwell, Amb. 269; Thomas v. Cromise, 16 Ohio, 54; Cowles v. Raguet, 14 Ohio, 38, 55; Adams v. Gay, 19 Vt. 358; Spaulding v. Preston, 21 Vt. 9, 50 Am. Dec. 68; Gotwalt v. Neal, 25 Md. 434; Adams v. Barrett, 5 Ga. 404; Pope v. Chafee, 14 Eieh. Eq. 69; Paine v. France, 26 Md. 46; Weakley v. Watkins, 7 Humph. 356, 357; and see Solinger v. Earle, 82 N. Y. 393, 397, 399. Where money is loaned expressly to enable the borrower to pay a gambling debt, it may be re- covered back: Ex parte Pyke, L. R. 8 Ch. Div. 754, 756, 757.* § 938, 3 See Adams's Equity, 360, 361, 362, (m. p. 175), where this doc- trine is expressly stated. Judge Story also lays down the same rule in the most positive manner: Eq. Jur., sec. 303; Rawden v. Shadwell, Amb. 165 (where a mortgage is assigned considered); Jamieson v. Wallace, to secure a gambling debt, and such 167 HI. 388, 59 Am. St. Rep. 302, 47 assignment is an executed contract, N. E. 762 (stock gambling); Pearce no relief); Albertson v. Laughlin, v. Poote, 55 Am. Rep. 414, 113 111. 173 Pa. St. 525, 51 Am. St. Rep. 777, 228 (same) ; Lester v. Buel, 49 Ohio 34 Atl. 216; Baxter v. Deneen St. 240, 34 Am. St. Rep. 556, 30 (Md.), 57 Atl. 601 (no injunction to N. E. 821 (same). See Berns v. prevent the withdrawal of money Shaw, 65 W. Va. 667, 23 L. R. A. from a bank when object of injune- 522, 64 S. E. 930 (equity has juris- tion is to enforce a gambling con- diction to recover money lost in tract); Stewart v. Parnell, 147 Pa. gaming independent of statute). St. 523, 23 Atl. 838, 29 Wkly. Notes § 938, (d) It is said that advances Gas. 537; Central Trust & S. D. Co. made by a broker who has no in- V. Kespass, 112 Ky. 606, 99 Am. St. terest in the stock gambling con- Rep. 317, 66 S. W. 421 (no account- tract are recoverable by him: Haw- ing of profits of partnership for a ley v. Bibb, 69 Ala. 52; but see Har- gaming business). By the statutes vey v. Merrill, 150 Mags.l, 15 Am. of several states, the loser is St. Rep. 159, 5 L. R. A. 200, 22 authorized to recover the money or N. E. 49. pther property from the winner: §938, (e) The text is cited to this See Williamson v. Majors, 169 Eed. effect in Tantum v. Arnold, 42 N. j; 754, 95 C. C. A. 186 (Miss, statute Eq. 63, 6 Atl. 316; quoted, Kahn v. § 939 EQUITY JURISPKUDBITCE. 1990 § 939. Other Illegal Contracts.^ — I have already, in the former volume, stated and illustrated the general rules which determine when relief will or will not he given in cases of ordinary illegal contracts. Without repeating 269; Woodroffe v. Farnham, 2 Vern. 291. In Lord Portarlington v. Soulby, 3 Mylne & K. 104, the plaintiff had given a bill of exchange for money lost in gaming, which had been transferred to the defendant under such circumstances that he was not a bona fide holder without notice. Plaintiff sought to have the bill surrendered and canceled and the defend- ant enjoined from negotiating it and suing on it at law. The lord chan- cellor held that the jurisdiction was settled beyond a doubt, that the plain- tiff was entitled to maintain the suit, and he continued an injunction which had been granted. In Wynne v. Callander, 1 Russ. 293, 296, 297, plain- tiff lost money at play to defendant, and gave bills of exchange therefor; when they fell due he renewed them by giviug others in their place. He brought a suit to have the latfer securities surrendered and canceled. The master of rolls granted the relief as asked, and the existence of the juris- diction was hardly denied by counsel, and was regarded by the court as unquestionable. The master of rolls expressly declared the plaintiff parti- ceps criminis, and for that reason, and because of his delay in suing, re- fused to give him costs. In Osbaldiston v. Simpson, 13 Sim. 513, securi- ties given by the plaintiff in a gaming transaction were decreed to be given up and canceled, the vice-chancellor treating the jurisdiction as firmly settled, See, also, Chapin v. Dake, 57 111. 295, 11 Am. Rep. 15. In Skipwith V. Strother, 3 Rand. 214, it was held that a court of equity may enjoin a judgment recovered at law on a gaming contract. This decision necessarily involves the whole doctrine. If the creditor may be restrained from enforcing a judgment, he may certainly be restrained from proceed- ing upon the contract to obtain a judgment; and if the remedy of injunc- tion is conceded, the jurisdiction to order a surrender and cancellation cannot be consistently denied. Whenever the loser's contract is no longer executory, but he has performed it by conveying land or other property, the case is entirely different; to relieve him would be a violation of the general maxim. A cancellation of the conveyance is then properly denied : Cowles V. Raguet, 14 Ohio, 38, 55 ; Thomas v. Cronise, 16 Ohio, 54. If in these or other cases courts have gone farther, and held that equity has no power to cancel an executory gaming security, they have clearly misappre- Walter, 46 OHo St. 195, 20 N. E. given in consideration of sale of i303. See, also, Kuhl v. Gaily XJni- gambling machine), versal Press Co., 123 Ala. 452, 82 § 939, (a) This paragraph is cited Am. St. Eep. 135, 26 South. 535 generally in Eoller v. Murray, 107 (cancellation of note and mortgage Va. 527, 59 S. E. 421; Prudential 1991 CONSTEUCTIVE FRAUD. § 939 what was there said, I purpose to explain tlie meaning and effect of the three maxims which limit the exercise of the equitable jurisdiction, and to ascertain and formulate, if possible, such conclusions as shall be sustained both by prin- ciple and by authority.^ These maxims are. Ex turpi causa non oritur actio, In pari delicto melior est conditio possi- dentis, or In pari delicto melior est conditio defendentis. What is meant by the "condition" of the possessor, or the defendant, which is so much "better" — or, as the maxim sometimes reads, "stronger" {potior)^tha,t it will not be disturbed? Plainly, it is not the condition merely of an executory contract having been made and subsisting be- tween the parties; the maxim does not refer to the condi- tion of the executory contract which has been entered into remaining unaltered and unmolested ; otherwise the setting up the illegality as a defense would be prohibited, for it would directly violate the maxim. The defense is always allowed, and this necessarily disturbs the condition of the contract. The "condition" referred to in the maxim is clearly the condition of the parties with respect to their property rights created by or resulting from the contract. If the contract is still executory, the promisor is left un- disturbed in the possession of the money or other property which he agreed to pay or transfer;^ if the contract has bended and misapplied the general maxim, and have reached a conclusion opposed to authority as well as to principle. Of course, the equitable jurisdiction to grant the affirmative relief of cancellation -will not be exer- cised whenever the losing party might have a perfect, certain, and ade- quate remedy at law by way of defense; it is therefore peculiarly appro- priate when the gaming securities consist of negotiable instruments. It has not, however, been entirely confined to that species of securities. § 939, 1 Sections 401, 402, 403, and notes. Life Ins. Co. v. Pearson (Tex. Civ. Hall v. Edwards (Tex. Civ. App.), App.), 188 S. W. 513. Sections 194 S. W. 674; and cited to this 939-942 are cited in Basket v. Moss, point in Drinkall v. Movius State 115 N. C. 448, 44 Am. St. Kep. 463, Bank, 11 N. D. 10, 95 Am. St. Rep. 48 L. E. A. 842, 20 S. E. 733. 693, 57 L. R. A. Ul, 88 N. W. 724. §939, (b) The text is quoted in § 940 EQUITY JUBISPEXJDENCE. 1992 been executed, the promisee is left undisturbed in the pos- session of the money or other property which has been paid or conveyed to him. This is the true meaning of the maxim, and it involves no requirement that the contract, as a mere executory instrument, should remain unmolested ; it deals solely with the rights flowing, or which would flow, from the agreement.^ The form, therefore, which correctly expresses the thought is, Melior est conditio possidentis; " defendentis" is appropriate only when regarded as equivalent to possidentis. The foregoing analysis is not a mere verbal discussion. Upon the true signification given to "condition," in the maxim, depends to a great extent the doctrine concerning affirmative equitable relief against illegal contracts. § 940. In Pari Delicto — General Rules. — ^The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its spe- cific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or dam- ages for its violation. The rule has sometimes been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other. This doctrine, though true in the main, is subject to limitations and excep- tions which it is the special object of the present inquiry to determine. 1 * As applications of this principle, the f oUow- § 940, 1 Bosanquett v. Dashwood, Cas. t. Talb. 38; Neville v. Wilkinson, 1 Brown Ch. 543, 547; cited Jacob, 67; Rawden v. Shadwell, Amb. 269; Astley V. Eeynolds, 2 Strange, 915; Smith v. Bromley, 2 Doug. 696, 697, 698; Osborne v. Williams, 18 Ves. 379; St. John v. St. John, 11 Ves. 526, 535, 536; Knowles v. Haughton, 11 Ves. 168; Rider v. Kidder, 10 Ves. §939, (c) The text is quoted in v. Porter (Tex. Civ. App.), 194 Kahn v. Walton, 46 Ohio St. 195, 20 S. W. 981; and cited in Snipes v. N. E. 203. Kelleher, 31 Wash. 386, 72 Pac. 67. § 940, (a) The text is quoted in See, also, Gibbs v. Baltimore Gaa Hobbs V. Boatright, 195 Mo. 693, Co., 130 U. S. 405, 9 Sup. Ct. 553; 113 Am. St. Rep. 709, 5 L. E. A. Samuels v. Oliver, 130 HI. 73, 22 (N. S.) 906, 93 S. W. 934; Mitchell N. E. 499; Gould v. Kendall, 15 1993 CONSTRUCTIVE FBATJD. § 940 ing rules may be regarded as settled, where the parties are in pari delicto: If the contract has been voluntarily exe- cuted and performed, a court of equity will not, in the absence of controlling motives of public policy to the con- trary, grant its aid by decreeing a recovery back of the money paid or property delivered, or a cancellation of the conveyance or transfer. 2 b As long as the contract is exec- 360, 366; Thomson v. Thomson, 7 Ves. 470; East I. Co. v. Neave, 5 Ves. 173, 181, 184; Watts v. Brooks, 3 Ves. 612; Sharp v. Taylor, 2 PhiU. Ch. 801; Batty v. Chester, 5 Beav. 103; Smith v. White, L. R. 1 Eq. 626; Newby v. Sharpe, L. R. 8 Ch. Div. 39; Sykes v. Beadon, L. R. 11 Ch. Div. 170; York v. Merritt, 77 N. C. 213; Shaw v. Carlile, 9 Heisk. 594; In- habitants of Worcester v. Eaton, 11 Mass. 368, 375-379; Wells v. Smith, 13 Gray, 207, 74 Am. Dec. 631; Harvey v. Varney, 98 Mass. 118; Har- rington V. Bigelow, 11 Paige, 349 ; Sweet v. Tin^lar, 52 Barb. 271 ; Solin- ger V. Earle, 82 N. Y. 393; Marlatt v. Warwick, 19 N. J. Eq. 439; Cutler V. Tuttle, 19 N. J. Eq. 549, 562; Ownes v. Ownes, 23 K J. Eq. 60; Roman V. Mali, 42 Md. 513; Jones v. Gorman, 7 Ired. Eq. 21; Logan v. Gigley, 11 Ga. 243; Gait v. Jackson, 9 Ga. 151; Adams v. Barrett, 5 Ga. 404; D'Wolf V. Pratt, 42 111. 198; and see cases under preceding paragraphs concerning various illegal contracts. §940, 2 Solinger v. Earle, 82 N. Y. 393, 397, 399; Shaw v. Carlile, 9 Heisk. 594; York v. Merritt, 77 N. C. 213. See, also, cases cited in the last note, under the preceding paragxaphs, and ante, under § § 401, 402. Several of the decisions referred to were rendered in actions at law; but as these rules prevail alike in equity and at law, such cases are authorities. Neb. 549, 19 N. W. 483; EUicott v. Equitable Nuptial Benefit Union, 76 Chamberlin, 38 N. J. Eq. 604, 48 Ala. 251, 52 Am. Eep. 325; Tread- Am. Eep. 327; Leonard v. Poole, well v. Torbert, 119 Ala. 279, 72 114 N. Y. 371, 11 Am. St. Eep. 667, Am. St. Eep. 918, 24 Sotith. 54; 4 L. E. A. 728, 21 N. E. 707; Kahn Pacific Debenture Co. v. Coldwell, V. Walter, 46 OMo St. 195, 20 N. E. 147 Cal. 106, 81 Pac. 314 (judg- 203; Davis v. Sitting, 65 Tex. 497; ment taken by default on a cause Horn V. Star Eoundry Co., 23 W. Va. arising out of a lottery transaction, 522. not relieved against); Euis v. §940, (b) Executed Illegal Con- Branch, 138 Ga. 150, 42 L. E. A. tract not Eescincled. — See, also, (N. S.) 1198, and note, 74 S. E. 1081 Equitable Life Assur. Soc. v. (cBilling bidding at judicial sale, Wetherill (C. C. A.), 127 Fed. 947; where defendant in execution was Farrington v. Stucky, 165 Fed. 325, m pari delicto) ; Watkins v. Nugen 91 C. C. A. 811; Cleveland, C. C. & (Ga.), 45 S. E. 262; Beard v. White St. L. By. Co. V. Hirscli, 204 Fed. (Ga.), 48 S. E. 400 (deed upon im- 849, 123 C. C. A. 145; White v. moral consideration); Brady v. §940 EQUITY JTJEISPBUDENCE. 1994 titory, it cannot be enforced in any kind of action brought directly upon it; the illegality constitutes an absolute de- fense.3 " As an application of the same doctrine merely § 940, 3 Ibid. There are a few apparent exceptions or limitations. If money has been illegally borrowed and used by a corporation with the assent of its stockholders, the corporation may be estopped from setting up the illegality as a defense to a suit by the creditor : In re Cork etc. R'y, Huber, 197 HI. 291, 90 Am. St. Eep. 161, 64 N. E. 264; Jolly v. Graham, 222 111. 550, 113 Am. St. Eep. 435, 78 N. E. 919 (deed made in fraud of wife); Blake v. Ogden, 223 HI. 204, 79 N. E. 68 (deed executed to de- prive state of inheritance taxes) ; Lines v. Willey, 253 HI. 440, 97 N. E. 843 (conveyance made to en- able grantees to vote at a drainage district election, at which they could not lawfully vote unless they actually owned land) ; Otis v. Free- man, 199 Mass. 160, 127 Am. St. Kep. 476, 85 N. E. 168 (deed upon immoral consideration) ; Downey v. Charles F. S. Gove Co., 201 Mass. 251, 131 Am. St. Eep. 398, 87 N. E. 597; Eyan v. Miller, 236 Mo. 496, Ann. Cas. 1912D, 5-10, 139 S. W. 128 (purchase of stock in pursuance of scheme to defraud public) ; Jourdan v. Burstow, 76 N. J. Eq. 55, 139 Am. St. Eep. 741, 74 Atl. 124 (con- veyance in satisfaction of embezzle- ment) ; Brindley v. Lawton, 53 N. J. Eq. (8 Dick.) 259, 31 Atl. 394; Piatt v. Elias, 1S6 N. Y. 374, 1]6 Am. St. Eep. 558, 9 Ann. Cas. 780, 11 L. E. A. (N. S.) 554, 79 N. E. 1 (conveyance on immoral consideration); Sparks v. Sparks, 94 N. G. 527; Moore v. Adams, 8 Ohio (8 Ham.), 372, 32 Am. Dec. 723; Markley v. Mineral City, 58 Ohio St. 430, 65 Am. St. Eep. 776, 51 N. E. 28; Edwards v. Boyle, 37 Okl. 639, 133 Pac. 233; Nester v. Continental Brewing Co., 161 Pa. St. 473, 24 L. E. A. 247, 29 Atl. 102, 34 Wkly. Notes Cas. 387; Jackson V. Thomson, 222 Pa. 232, 70 Atl. 1095 (trustee cannot avoid his own fraudulent deed); Teoli v. Nardo- lillo, 23 B. I. 87, 49 Atl. 489; Boy V. Harney Peak Tin Min. etc. Mfg. Co., 21 S. D. 140, 130 Am. St. Eep. 706, 9 L. E. A. (N. S.) 529, 110 N. W. 106; Booker v. Wingo, 29 S. C. 116, 7 S. E. 49; Eock v. Mathews, 35 W. Va. 531, 14 L. E. A. 508, 14 S. E. 137; George v. Curtis, 45 W. Va. 1, 30 S. E. 69. §940, (c) Executory Illegal Con- tract not Enforced. — The text is quoted in Mitchell v. Porter (Tex. Civ. App.), 194 S. W. 9*81. See, also, Casserleigh v. Wood (C. C. A.), 119 Fed. 309; Barnsdall v. Owen, 200 Fed. 519, 118 C. C. A. 623 (ob- ject of contract to deceive the government, specific performance denied); Dial v. Hair, 18 Ala. 798, 54 Am. Dec. 179; Wood v. Stewart, 81 Ark. 41, 98 S. W. 711; Butler v. Agnew, 9 Cal. App. 327, 99 Pac. 395 (fraudulent agent seeking account of profits); Whitley v. MeConnell, 133 Ga. 738, 134 Am. St. Eep. 223, 27 L. E. A. (N. S.) 287, 66 S. E. 933 (lottery scheme); Proctor v. Piedmont Portland Cement & Lime Co., *134 Ga. 391, 67 S. E. 942; Glennville Inv. Co. v. Grace, 134 Ga. 572, 29 L. E. A. (N. S.) 758, 68 S. E. 301 (contest over lottery prize); Chicago Gas Light Co. v. Gas Light Co., 121 lU. 530, 2 Am. 1995 CONSTRUCTIVE FEAUD. §940 in a different form, while the agreement is executory, courts of equity may relieve the debtor or promising party by ordering the written instrument and other securities to be L. R. 4 Ch. 748; In re Magdalena St. Nav. Co., Johns. 690.* Where the contract has been executed, the party in possession of the proceeds or profits may be unable to set up the illegality to defeat an action for an accounting, or to recover the proceeds, brought by a third person entitled to the money : Gilliam v. Brown, 43 Miss. 641 ; Harvey v. Varney, 98 Mass. 118; Sykes v. Beadon, L. R. 11 Ch. Div. 170, 193, 197, per Jessel, M. R.; Worthington v. Curtis, L. R. 1 Ch. Div. 419, 423; Davies v. London etc. Co., L. R. 8 Ch. Div. 469, 477; Thomson v. Thomson, 7 Ves. 470; Tenant V. EUiott, 1 Bos. & P. 3; Farmer v. Russell, 1 Bos. & P. 296; Sharp v. Taylor, 2 Phill. Ch. 801; Joy v. Campbell, 1 Sehoales & L. 328, 339; McBlair v. Gibbes, 17 How. 232, 237; Brooks v. Martin, 2 Wall. 70, 81; Tracy v. Tahnage, 14 N. Y. 162, 67 Am. Dec. 132; and see ante, vol. 1, § 403, and note.* It should be observed that the defense of illegality is allowed from motives of public policy, rather than from a regard for the St. Rep. 124, 13 N. B. 169; South Chicago City Ey. Co. v. Calumet Electric St. By. Co., 171 111. 391, 49 N. E. 576; Perry v. United States School Furniture Co., 232 111. 101, 83 N. E. 444 (judgment creditor, whose judgment was obtained on a contract in violation of the anti- trust law, cannot have creditor's bill against fraudulent grantee of judgment debtor); Africani Home Purchase & Loan Ass'n v. Carroll, 267 111. 380, 108 N. E. 322 (specific performance of ultra vires contract refused) ; City School Corporation V. Hickman, 47 Ind. App. 500, 94 N. E. 828 (no reformation); Gil- christ V. Hatch (Ind. App.), 100 N. E. 473; American Mut. Life Ins. Co. V. Mead, 39 Ind. App. 215, 79 N. E. 526 (ignorance of law does not take life insurance contract, il- legal because of lack of insurable interest, out of the rule); Garrett V. Kansas City Coal Min. Co., 113 Mo. 330, 35 Am. St. Rep. 713, 20 S. W. 965; Gilmore v. Thomas, 252 Mo. 147, 158 S. W. 577 (reformation refused); Brooks v. Cooper, 50 N. J. Eq. 761, 35 Am. St. Rep. 793, 21 L. R. A. 617, 26 Atl. 978; Volney V. Nixon, 68 N. J. Eq. 605, 60 Atl. 189 (contract for illegal issue of stock); Third Nat. Exchange Bank V. Smith, 17 N. M. 166, 125 Pac. 632; Vandegrift v. Vandegrift, 226 Pa. St. 254, 18 Ann. Cas. 404, 75 Atl. 365 (no right to accounting when partnership illegal); Camp v. Bruce, 96 Va. 521, 70 Am. St. Rep. 873, 43 L. R. A. 146, 31 S. E. 901; McMillan v. Wright, 56 Wash. 114j 105 Pac. 176. § 940, (d) See, also, ante, § 819. §940, (e) The leading case of Brooks V. Martin, 2 Wall. 70, was a bill in equity for an account of profits between the parties under an executed partnership contract for the purchase and location of soldiers' land warrants, "con- fessedly against public policy," as well as in violation of the ex- press provisions of an act of Con- gress; but the court held that the partner in whose hands the profits § 940 EQUITY JUEISPKUDEITCB. 1996 surrendered and canceled, and by granting tlie ancillary remedies of injunction, discovery, and the like. Whenever the circumstances are such that the defensive remedy at law would not be equally certain, perfect, and adequate, this jurisdiction will be exercised. The equitable relief so conferred does not violate the general maxim concerning interests of the objecting party. Wlien a person, having actively partici- pated in the Ulegal transaction, and having obtained all the benefit of it from the other party, refuses to perform his own executory undertak- ing, and sets up the illegality as a defense, his position, considered by itself, is unjust, but the law sustains it out of regard to the interests of society. The objection comes in appearance from the individual liJgant, but in reality from society — the state — speaking through the courts: See Holman v. Johnson, Cowp. 341, 343, per Lord Mansfield ; Wood v. Griffith, 1 Swanst. 43. In a suit for the specific enforcement of a contract, there- fore, if the illegality is not alleged, but is first disclosed by the evidence, the court will itself pursue the inquiry, and dismiss the suit upon the fact being established: Parken v. Whitby, Turn. & R. 366; Evans v. Richard- son, 3 Mer. 469. In respect to the certainty with which the illegality must be established, in order to be a defense in equitable suits on the con- tract; there is some discrepancy of opinion. By one theory, the agree- ment must appear with reasonable certainty, to be legal; by the other, the illegality must be clearly shown by convincing evidence. In Johnson v. Shrewsbury etc. R'y, 3 De Gex, M. & G. 914, 923, Knight Bruce, L. J., saidi "The court must be satisfied that there was not a reasonable ground for contending that it [i. e., the contract] is illegal or against the policy were could not refuse to account for 444, 36 L. K. A. 838 and note, 134 pr divide them, on the ground of the S. W. 940 (accounting of partner- illegal character of the original con- ship with defendant, with whom tract] So, a railroad which has plaintiff maintained immoral rela- nsed the roadbed, rolling stock and tions, the partnership being at an ■equipments of another railroad un- eiid); Cheuvront v. Horner, 62 W. der a contract in violation of a Va. 476, 59 S. E. 964 (accounting by statute against the consolillation of principal against agent, who has re- competing railroads, cannot set up ceived money, the fruit of an illegal the illegality of the contract as a contract, for use of principal); Hall defense to a bill in equity for an v. Edwards (Tex. Civ. App.), 194 accounting and a return of the S. W. 674. But compare Citizens' property: Manchester & L. E. R. v. Nat. Bank of Chickasha v. Mitchell, Concord E. E., 66 N. H. 100, 130- 24 Okl. 488, 20 Ann. Cas. 371, 103 133, 49 Am. St. Rep. 582, 587-591, Pac. 720 (accounting between part- 9 Ii. R. A. 689, citing many cases. ners). .See, also, Mitchell v. Fish, 97 Ark. 1997 CONSTBUCTIVE PBATJD. § 940 parties in pari delicto; on the contrary, it carries that maxim into effect.* It has already been shown that the maxim, rightly interpreted, does not require the condition of the parties, with respect to the subsisting executory con^ tract, to remain unchanged and undisturbed. The remedy of cancellation or injunction, under the circumstances, is simply the equitable proceeding identical with the setting up the illegality as a defense to defeat a recovery at law, and thus to get rid of the contract as a binding executory obligation. The parties are left undisturbed as to their property right-s.* s of the law." In Aubin v. Holt, 2 Kay & J. 66, 70, Page Wood (Lord Hatherley), V. C, said: "The agreement must be legal or illegal; and it is not within the discretion of the court to refuse specific performance because an agreement savors of illegality; it must be shown to be illegal." The latter opinion would seem, upon principle, to be the correct one. § 940, 4 The setting aside gaming contracts, heretofore considered, is merely a particular instance of this general rule : See ante, § 938, and cases cited. Mr. Adams lays down this rule in the most positive manner. Speaking of illegal contracts, he says : "Its invalidity wUl be a defense at law, while it remains unexecuted; and, pari ratione, if its illegal character' be not apparent on the face of it, will be a ground for cancellation in § 940, (f ) Quoted in Basket v. 191, citing cases (cancellation of Moss, 115 N. iC. 448, 44 Am. St. bonds issued ultra vires and con- Bep. 463, 48 L. R. A. 842, 20 S. E. trary to statute); Hamilton v.. 733; and in Mitchell v. Porter (Tex. Wood, 55 Minn. 482, 57 N. W. 208'. Civ. App.), 194 S. W. 981. And see See, also, Foley v. Greene, 14 R. I. Harvey v. Linville Imp. Co., 118 618, 51 Am. Eep. 419; Gargano v. N. C. 693, 54 Am. St. Eep. 749, 32 Pope (Mass.), 69 N. E. 343; Me- L. K. A. 265, 24 S. E. 489 (injunc- Cuteheon v. Merz Capsule Co., 71 tion granted to prevent illegal Fed. 787, 31 L. E. A. 415, 19 C. C. A. pooling of stock under an agree- 108, and cases cited (injunction ment). against enforcement of an uuexe- § 940, (g) The text is quoted in cuted contract to join an unlawful Missouri, E. & T. Co. v. Krumseig, combination; an important case). 77 Fed. 32, 40 TJ. S. A. 620; Phillips In pursuance of the rule stated in V. Bradford, 147 Ala. 346, 41 South. the text, equity may perpetually en- 657; Kahn v. Walton, 46 Ohio St. join suit upon an illegal note, al- 195, 20 N. E. 203, and in Mitchell V. though the defense of illegality Porter (Tex. Civ. App.), 194 S. W. could be made in an action at law 981; and cited in Booker v. Wingo, upon the note: Booker v. Wingo, 29 29 ,S. C. 116, 7 S. E. 49; Gunnison S. C. 116, 7 S. E. 49. Gas & W. Co. V. Whitaker, 91 Fed. § 941 EQUITY JtTKISPETJDElirCE. 1998 § 941. In Pari Delicto — Limitation on the General Rules. To the foregoing rules there is an important limitation. Even where the contracting parties are in pari delicto, the courts may interfere from motives of public policy. When- ever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him.* In pursuance of this principle, and in compliance with the demands of a high public policy, equity may aid a party equally guilty with his opponent, not only by canceling and ordering the surrender of an executory agreement, but even by setting aside an executed contract, conveyance, or transfer, and decreeing the re- covery back of money paid or property delivered in per- formance of the agreement. The cases in which this limi- equity. ... So long as the contract continues executory, the maxim of in pari delicto does not apply; for the nature of the contract would be a defense at law, and the decree of cancellation is only an equitable mode of rendering that defense effectual" : Batty v. Chester, 5 Beav. 103 ; W V. B , 32 Beav. 574. In such cases the party can obtain and should ask nothing but a mere cancellation. If his allegations show that he still relies upon the provisions of the illegal contract for any relief growing out of it, whether specific performance, reformation, or pecuniary re- covery, the court will refuse aU' aid : Batty v. Chester, 5 Beav. 103. In W — ■ — - V. B , 32 Beav. 574, a mortgage given upon a grossly immoral consideration was ordered to be surrendered up and canceled at the suit of the mortgagor. It cannot be denied that this view has been rejected by certain American cases, which seem to show some misconception of the meaning and effect of the general maxim. See remarks ante, in note under § OSS.** "Where an assignment was made for an illegal purpose, and "where the purpose for which the assignment was made is not carried into execution, and nothing is done under it, the mere intention to effect an illegal object does not deprive the assignor of his right to recover the property back from the assignee who has given no consideration for it" : Symes v. Hughes, L. R. 9 Eq. 475, 479; Davies v. Otty, 35 Beav. 208. In such cases equity will not permit the assignee to work a fraud and retain the property himself by setting up the statute of frauds as a defense: Haigh v. Kaye, L. R. 7 Ch. 469; Lincoln v. Wright, 4 De Gex & J. 16. §940, (l») Shipley v. Eeasoner, 80 Bank (Colo.), 162 Pae. 321; Hobbs Iowa, 348, 45 N. W. 1077. v. Boatright, 195 Mo. 693, 113 § 941, (a) The text is quoted in Am. St. Rep. 709, 5 L. B. A (N. S.) Dregmau v. Morgan County Nat. 906, 93 S. W. 934. 1999 CONSTETTCTIVE FEATJD. § 941 tation may apply and the affirmative relief may thus be granted include the class of contracts which are intrinsi- cally contrary to public policy, — contracts in which the ille- gality itself consists in their opposition to public policy, and any other species of illegal contracts in which, from their particular circumstances, incidental and collateral motives of public policy require relief .1 ^ § 941, 1 It is. not asserted that in all contracts wHcli are illegal because opposed to public policy relief will thus be given to a party in pari de- licto; but simply that in this class of contracts the limitation finds its special field of operation. The equitable remedies of borrowers in usuri- ous contracts are a familiar illustration. Marriage-brokerage contracts are another, the cases holding that money paid in pursuance of their stipu- lations may be recovered back: Reynell v. Sprye-, 1 De Gex, M. & G-. 660, 679, per Knight Bruce, L. J.; Benyon v. Nettlefold, 3 Macn. & Q. 94, 102, 103; Hill V. Spencer, Amb. 641; Rider v. Kidder, 10 Ves. 360, 366; Smith V. Bruning, 2 Vem. 392 ; Goldsmith v. Buning, 1 Eq. Gas. Abr. 89 ; Roberts V. Roberts, 3 P. Wms. 66, 74; Morris v. MacCullock, 2 Eden, 190; Amb. 432; Hatch v. Hatch, 9 Ves. 292, 298; St. John v. St. John, 11 Ves. 526, 535, 536; Smith v. Bromley, cited 2 Doug. 696, 697, 698; Eastabrook v. Scott, 3 Ves. 456; Cullingworth v. Loyd, 2 Beav. 385, 390, note; McNeill V. CaTiill, 2 Bligh, 228; Bellamy v. Bellamy, 6 Fla. 62, 103; Weakley v. Watkins, 7 Humph. 356; and see ante, § 403, and note. § 941, (b) The text is quoted in the unwarranted use of plaintiff's Stewart v. Wright, 147 Fed. 321, 77 stock quotations in "bucket shop" C. C. A. 499; Dunbar v. American transactions, where it was shown Tel. & Tel. Co., 238 111. 456, 87 N. E. that the greater part of the trans- 521; Prudential Life Ins. Co. v. actions in the plaintiff's exchange Pearson (Tex. Civ. App.), 188 S. W. were of the same illegal character 513; Meech v. Lee, 82 Mich. 274, 46 (but see Board of Trade v. L. A. N. W. 383; Gorringe v. Eeed, 23 Kinsey Co. (C. C. A.), 130 Fed. 507). Utah, 120, 90 Am. St. Rep. 692, 63 Further citations of text: American Pac. 902; Basket v. Moss, 115 N. C. Mutual Life Ins. Co. v. Mead, 39 448, 44 Am. St. Rep. 463, 48 L. R. A. Ind. App. 215, 79 N. E. 526; Bendet 842, 20 S. E. 733. Cited, in Mis- v. Ellis, 120 Teun. 277, 127 Am. St. souri, K. & T. Co. v. Krumseig Rep. 1000, 18 L. R. A. (N. S.) 114, (■C. C. A.), 77 Fed. 32 (usurious con- 111 S. W. 795 (illegal assignment of tract); Daniels v. Benedict, 50 Fed. insurance policy, accounting of 847; Kahn v. Walton, 46 Ohio St. proceeds by assignee) ; Berns v. 195, 20 N. B. 203; Board of Trade Shaw, 65 W. Va. 667, 23 L. R. A. V. O'Dell Commission Co., 115 Fed. (N. S.) 522, 64 S. E. 930 (gaming); 574, 58'8, holding that the principle Cleveland, C. C. & St. L. E. Co. v. of the text did not support an ap- Hirsch, 204 Fed. 849, 123 C. C. A. plication for an injunction against 145; Michener v. Watts, 176 Ind. §942 EQUITY JTJKISPBUDENCB. 2000 § 942. Not in Pari Delicto,* — ^Lastly, when the contract is illegal, so that both parties are to some extent involved in the illegality, — in some degree affected with the unlawful taint, — ^but are not in pari delicto, — ^that is, both have not, with the same knowledge, willingness, and wrongful in- tent, engaged in the transaction, or the undertakings of each are not equally blameworthy, — a court of equity may, in furtherance of justice and of a sound public policy, aid the one who is comparatively the more innocent, and may grant him full affirmative relief, by canceling an executory contract, by setting aside an executed contract, conveyance, or transfer, by recovering back money paid or property delivered, as the circumstances of the case shall require, and sometimes even by sustaining a suit brought to enforce the contract itself, or if this be impossible, by permitting him to recover the amount justly due, by means of an ap- 376, 36 K E. A. (N. S.) 142, 96 N. E. 127; Tucker v. Cox, 101 S. C. 473, 86 S. E. 28. See, also. Cox v. Donnelly, 34 Ark. 762 (contract in violation of the homestead act) ; Noxubee County Hardware Co. v. City of Macon, 90 Miss. 636, 43 South. 304; Eaaton Nat. Bank v. American Brick & Tile Co., 70 N. J. Eq. 732, 10 Ann. Cas. 84, 8 L. E. A. (N. S.) 271, 64 Atl. 917; Lone Star Salt Co. V. Blount, 49 Tex. Civ. App. 138, 107 S. W. 1163 (contract un- lawful under anti-trust laws); Car- nagie Trust Co. v. Security Life Ins. Co., Ill Va. 1, 21 Ann. Cas. 1287, 31 L. E. A. (N. S.) 1186, 68 S. E. 412 (voting trust). Marriage brokerage contracts: Duval v. Well- man, 124 N. T. 158, 26 N. E. 343; see, however, White v. Equitable, etc., Union, 76 Ala. 251, 52 Am. Eep. 325. If the party equally in guilt is given a right of action by statute, a court of equity will not refuse relief based on a judgment recovered in the statutory action: Pierstofl v. Joyes, 86 Wis. 128, 39 Am. St. Eep. 881, 56 N. W. 735 (creditor's bill based on judgment in bastardy proceedings). That a trustee may sue in his representa- tive capacity to recover trust prop- erty, although he colluded with the defendant in the breach of trust, see Wetmore v. Porter, 92 N. T. 76; Zimmerman v. Kinkle, 108 N. Y. 287, 15 N. E. 407. § 942, (a) This paragraph is quoted, in full, in Dunbar v. Ameri- can Tel. & Tel. Co., 238 111. 456, 87 N. E. 521; American Mutual Life Ins. Co. V. Mead, 39 Ind. App. 215, 79 N. E. 526; Breyfogle v. Bowman, 157 Ky. 62, 162 S. W. 787. The paragraph is cited in Burton v. M) The author's note is § 943, (e) The text is quoted in quoted in McKnatt v. McKnatt Eiehter v. Riohter, 180 Ala. 218, 60 (Del.), 93 Atl. 367. South. 880. § § 944, 945 EQUITY JUEISPRXJDENCE. 2008 § 944. I. Transactions Void or Voidable With Persons Totally or Partially Incapacitated. — The incapacities em- braced under this head are either total or partial. They may be created by the policy of the law, such as coverture and infancy; they may be intellectual, such as ins,anity, mental weakness, intoxication ; they may result from exter- nal forces, physical or moral, such as duress, undue influ- ence, pecuniary necessity; or they may inhere in the very position and circumstances of the parties, such as sailors, expectant heirs, and reversioners. In several instances, which are placed under this head because they are gov- erned by the same doctrine and rules, it must be admitted that the term "incapacity" can be used only by way of analogy.^ * § 945. Coverture. — ^At the common law, married women were without the capacity to bind themselves by contract, and their agreements were, in general, void in equity as well as at law. With respect to their equitable separate property, however, married women are regarded by equity, independently of statutes, in many respects as though they were single ; they- are permitted to deal with such estate, and to make contracts concerning it; and such contracts are enforced by courts of equity against the property, though not against the married women personally.^ Cover- § 944, 1 In other words, there is no true "incapacity" ; the term is ap- plied only to these rDstances because the condition of the parties is analo- gous to that of persons who are affected by some real incapacity, and they are all governed by the same rules. The nature and extent of several of the most important incapacities mentioned in this division are fully dis- cussed in treatises upon contracts and upon persons. I shall describe them only so far as may be necessary to indicate the equitable rules con- cerning them, and to show the mode of exercising the equitable jurisdic- tion. Among these are coverture, infancy, insanity, non compos mentis, intoxication, duress, etc. § 945, 1 Hulme v. Tenant, 1 Brown Ch. 16; 1 Lead. Cas. Eq., 4th Am. • ed., 679; Murray v. Barlee, 3 Mylne & K. 209, 220; Johnson v. Gallagher, § 944, (a) This paragraph is cited Smith (Tex. Civ. App.), 190 S. W. in Atchison, T. & S. F. By. Co. v. 761. 2009 CONSTRUCTIVE FEAUD. § 945 ture, however, is no excuse, in equity, for fraud; in other words, the fraud of a married woman will furnish an oc- casion for appropriate equitable relief, and the fact that the fraudulent party is a married woman will not prevent such relief. 2 a Infancy: The incapacity of infants to enter into binding contracts is the same in equity as m law ; but such contracts are generally voidable only, and may there- fore be ratified after the infant attains his majority. Fraud, however, will prevent the disability of infancy from being made available in equity. If an infant procures an agreement to be made- through false and fraudulent repre- sentations that he is of age, a court of equity will enforce his liability as though he were adult, and may cancel a conveyance or executed contract obtained by f raud.^ « 3 De Gex, JF. & J. 494. The subject of married women's contracts in equity is treated in a subsequent chapter. The modem legislation con- cerning married women's property and contracts has made great changes in the rules which originally prevailed at law and in equity. An abstract of this legislation will be given in the subsequent chapter mentioned above. § 945, 2 The relief may be defensive, by defeating a suit brought by the married woman ; or it may be afOrmative, as setting aside a fraudulent conveyance or agreement ; pecuniary relief would not be given against her, personally, on account of her fraud, unless permitted by the modem legis- lation: Savage v. Foster, 9 Mod. 35; Vaughan v. Vanderstegen, 2 Drew. 363, 379; Sharpe v. Foy, L. R. 4 Ch. 35; In re Lush's Trasts, L. R. 4 Ch. 591; McHenry v. Davies, L. R. 10 Eq. 88; Jones v. Kearney, 1 Dm. & War. 134; Hobday v. Peters, 28 Beav. 354; Sohmitheimer v. Eiseman, 7 Bush, 298; Curd v. Dodds, 6 Bush, 681; Sexton v. Wheaton, 8 Wheat. 229. The American decisions are conflicting on the question, how far a married woman is estopped by fraud from alleging her coverture. In addition to those cited ante, in the section on estoppel,'* see Keen v. Cole- man, 39 Pa. St. 299, 80 Am. Dec. 524; Glidden v. Strapler, 52 Pa. St. 400; Bank of United States v. Lee, 13 Pet. 107; Drake v. Glover, 30 Ala. 382. § 945, 3 Ex parte Unity Bank, 3 De Gex & J. 63 ; Nelson v. Stocker, 4 De Gex & J. 458, 464; Cory v. Gerteken, 2 Madd. 40; Wright v. Snowe, 2 De Gex & S. 321; Hannah v. Hodgson, 30 Beav. 19, 25; Overton v. § 945, (a) The text is cited to this § 945, (o) Infant's Misrepresenta- point in Michael v. Moore, 157 N. 0. tion of His Age. — The text is 462 73 S. E. 104. quoted in Eice v. Beyer, 108 Ind. §945, (b) See § 814. 472, 58 Am. Kep. 61, 9 N. E. 420 §946 EQUITY JUBISPRUDENCE. 2010 § 946. Insanity. — In general, a lunatic, idiot, or person completely non compos mentis is incapable of giving a true consent in equity, as at law; Ms conveyance or contract is invalid, and will generally be set aside.^ * While this rule Banister, 3 Hare, 503; Clarke v. Cobley, 2 Cox, 173; Lempriere v. Lange, L. R. 12 Ch. Div. 675 (lease obtained by fraud set aside). In Martin v. Gale, L. R. 4 Ch. Div. 428, a deed given by an infant to secure the repay- ment of money advanced for necessaries was held voidable, although he ■was liable for the money actually loaned; and see Ex parte Taylor, 8 De Gex, M. & G. 254. An infant may be estopped from asserting his title, when he has intentionally concealed it : Savage v. Poster, 9 Mod. 35. § 946, 1 Manning v. Gill, L. R. 13 Eq. 485; I'rice v. Berrington, 3 Macn. & G. 486; Gibson v. Soper, 6 Gray, 279, 66 Am. Dec. 414; Arnold v. Rieh- mond Iron Works, 1 Gray, 434; AUis v. Billings, 6 Met. 415, 39 Am. Dec. 744; Howe v. Howe, 99 Mass. 88; Ingraham v. Baldwin, 9 N. Y. 45; Beals V. See, 10 Pa. St. 56, 49 Am. Dec. 573; BenseU v. ChanceUor, 5 Whart. (under the reformed procedure, the equity rule on this subject appears to have supplanted the legal rule); Alfrey v. Colbert, 7 Ind. Ter. 338, 104 S. W. 688; cited in Watson v. Euderman, 79 Conn. 687, 66 Atl. 515 (citing eases pro and con as to mis- representation of infant's age) ; Commander v. Brazil, 88 Miss. 668, 9 L. E. A. (N. S.) 1117, 41 South. 497; Hayes v. Parker, 41 N. J. Eq. 632, 7 Atl. 511; International Land Co. V. Marshall, 22 Okl. 693, 19 L. R. A. (N. S.) 1056, 98 Pac. 951 (long review of cases). See, also, Fowler v. Alabama Iron & Steel Co., 164 Ala. 414, 51 South. 393; Putnal V. Walker, 61 Fla. 720, 36 L. R. A. (N. S.) 33, and note, 55 South. 844; Sackett v. Asher (Ky.), 22 L. R. A. (N. S.) 453, 112 S. W. 833; Barr v. Packard Motor Car Co., 182 Mich. 612, 148 N. W. 761; Lake v. Perry, 95 Miss. 550, 49 South. 569; Conn V. Boutwell, 101 Miss. 353, 58 South. 105 (right of infant to avoid con- veyance is paramount, and may be exercised against a tana fide pur- chaser) ; Kirkham v. Wheeler-Os- good Co., 39 Wash. 415, 4 Ann. Cas. 532 and note, 81 Pac. 869; William- son v. Jones, 43 W. Va. 562, 64 Am. St. Rep. 891, 38 L. R. A. 694, 27 S. E. 411; Grauman, Marx & Cline Co. v. Krienitz, 142 Wis. 556, 126 N. W. 50 (infant must have reached an age of actual discretion and there must have been more than mere failure to impart informa- tion). §946, (a) In re Walker, [1905] 1 Ch. 160 (a lunatic, so found, even during a lucid interval cannot exe- cute a valid deed; explaining early cases, and pointing out distinction between deed and will of adjudged lunatic) ; Jacks v. Estee, 139 Cal. 507, 73 Pac. 247; Penington v. Thompson, 5 Del. Ch. 328; Helberg V. Schumann, 150 111. 12, 41 Am. St. Rep. 339, 37 N. E. 99; Fecht v. Freeman, 251 111. 84, 95 N. E. 1043 (if grantee had notice of the in- capacity, deed may be set aside without restoration of the con- sideration, which has been lost or squandered) ; Amos v. American Trust & Sav. Bank, 221 HI. 100, 77 2011 CONSTRUCTIVE FEAUD. §946 is generally true, the mere^f act that a party to an agreement was a lunatic will not operate as a defense to its enforce- ment, or as ground for its cancellation. A contract exe- cuted or executory made with a lunatic in good faith, with- 371, 376, 34 Am. Dec. 561; Ballard v. McKenna, 4 Rich. Eq. 358; Frazer V. Frazer, 2 Del. Ch. 260; Breekenridge v. Ormsby, 1 J. J. Marsh. 236, 19 Am. Dec. 71; Ashcraft v. De Armond, 44 Iowa, 229; Kneleamp v. Hid- ding, 31 Wis. 503. As to defense of the mortgagor's lunacy set up in a foreclosure suit, and the right to have the issue tried at law, see Jacobs V. Eichards, 5 De Gex, M. & G. 55. A conveyance will not be set aside, on the ground of the grantor's lunacy, as against a bona fide purchaser: Ashcraft v. De Armond, 44 Iowa, 229.* Several of these eases hold that the deeds of lunatics are voidable only, and not void: Freed v. Brown, 55 Ind. 310. N. E. 462 (same); Jordan t. Kirk- patrick, 251 HI. 116, 95 N. B. 1079 (return of consideration not neces- sary when not received by lunatic, but by agent) ; Barkley v. Barkley, 182 Ind. 322, L. R. A. 1915B, 678, 106 N. E. 609; Warfield v. Warfield, 76 Iowa, 633, 41 N. W. 883, Lom- bard V. Morse, 155 Mass. 136, 14 L. B. A. 273, 29 N. E. 205; Eaynett V. Balus, 54 Mich. 469, 20 N. W. 533; De Vries v. Crofoot, f48 Mich. 183, 111 N. W. 775; Eeagan v. Mur- ray, 176 Mich. 231, 142 N. W. 545 (burden of proof on one seeking to cancel deed because of incapacity of grantor) ; Eicketts v. Jolliff, 62 Miss. 440; Collins v. Topjin (N. J. Ch.), 55 Atl. 124, and cases cited; Sprinkle v. Wellborn, 140 N. C. 163, 111 Am. St. Eep. 827, 3 L. E. A. (N. S.) 174, 52 S. E. 666 (contract with insane person is presumed to be fraudulent, without evidence of actual imposition) : Beeson v. Smith, 149 N. C. 142, 62 S. E. 888 (deed not void, but voidable, where no formal adjudication of insanity); Smith V. Eyan, 191 N. Y. 452, 123 Am. St. Rep. 609, 14 Ann. Cas. 505, 19 L. E. A. (N. S.) 461, 84 N. E. 402 (if party not judicially declared incompetent, deed not void but voidable) ; Crawford v. Seovell, 94 Pa. St. 48; Brothers v. Bank of Kaukauna, 84 Wis. 381, 36 Am. St. Eep. 932, 54 N. W. 786. §946, (i») Bona Fide Purchaser. Arnett's Committee v. Owens, 23 Ky. Law Eep. 1409, 65 S. W. 151; Odom V. Eiddick, 104 N. C. 515, 17 Am. St. Eep. 686, 7 L. E. A. 118, 10 S. E. 609; Chamblee v. Brough- ton, 120 N. C. 170, 27 S. E. Ill; Sprinkle v. Wellborn, 140 N. C. 163, 111 Am. St. Eep. 827, 3 L. E. A. (N. S.) 174, 52 S. E. 666 (but grantor in such a case may proceed against his immediate grantee for a personal judgment); Maas v. Dun- myerj 21 Okl. 434, 96 Pac. 591; Jackson v. Counts, 106 Va. 7, 54 S. E. 870. But see Hull v. Louth, 109 Ind. 315, 58 Am. Eep. 405, 10 N. E. 270; Dewey v. AUgire, 37 Neb. 6, 40 Am. St. Eep. 468, 55 N. W. 276 (it is not necessary to re- turn any part of the consideration to such purchaser); Gray v. Turley, 110 Ind. 254, 11 N. B. 40; Mitchell V. Inman (Tex. Civ. App.), 156 S. W. 290. § 946 EQUITY JXJKISPETJDEKCE. 2012 out any advantage taken of his position, and for his own benefit, is valid both in equity and at law.^ c And where a conveyance or contract is made in ignorance of the in- sanity, with no advantage taken, and with perfect good faith, a court of equity will not set it aside, if the parties cannot be restored to their original position, and injustice would be done.3 ^ The conveyance or agreement of a mono- maniac will be defeated or set aside, if it is the result of his insane delusion.* The nature and extent of mental § 946, 2 Ex parte Hall, 7 Ves. 261, 264; Selby v. Jackson, 6 Beav. 192, 204; Nelson v. Duneombe, 9 Beav. 211; Snook v. Watts, 11 Beav. 105; Stedman v. Hart, Kay, 607; Fitzgerald v. Reed, 9 Smedes & M. 94. § 946, 3 NieU v. Morley, 9 Ves. 478, 482; Sergeson v. Sealy, 2 Atk. 412; Price v. Berrington, 3 Maen. & G. 486; Manby v. Bewicke, 3 Kay & J. 342; Campbell v. Hooper, 3 Smale & G. 153; Williams v. Wentworth, 5 Beav. 325; Jacobs v. Richards, 18 Beav. 300; Yauger v. Skinner, 14 N. J. Eq. 389; Carr v. Holliday, 5 Ired. Eq. 167. Tor an, exception, see Elliot V. Ince, 7 De Gex, M. & G. 475. § 946, 4 There has been some discrepancy among the decisions on this subject. A few English cases, adopting a supposed medical theory that there is no such condition as monomania, hold that a person laboring under any single insane delusion is to be regarded as wholly insane, and his contracts as therefore voidable. The latest decisions lay down the rule as given in the text, and also its converse, — that a conveyance or agree- ment which does not appear to be the result of the delusion is valid and binding: Jenkins v. Morris, L. R. 14 Ch. Div. 674, following Banks v. Goodfellow, L. R. 5 Q. B. 549, and Boughton v. Knight, L. R. 3 P. & M. §946, (c) See, also, post, % 1300; 73. See, also, Peck v. Bartelme, Ehodes v. Rhodes, 44 Ch. D. 94. 220 lU. 199, 77 N. E. 216; Abbott § 946, (d) When Contract or Oon- v. Creal, 5g Iowa, 175, 9 N. W. 115; veyance not Set Aside. — This por- Nutter v. Des Moines Life Ins. Co., tion of the text is quoted in Grib- 156 Iowa, 539, 136 N. W. 891; ben V. Maxwell, 34 Kan. 8, 55 Am. Burch v. Nicholson, 157 Iowa, 502, Kep. 233, 7 Pae. 584, and cited in 137 N. W. 1066 (purchaser ignorant Odom V. Eiddick, 104 N. C. 515, 17 of insanity and could not be put Am. St. Rep. 686, 7 L. R. A. 118, 10 m statu quo) ; Brown v. Cory, 9 S. E. 609; Bank v. Sneed, 97 Tenn. Kan. App. 702, 59 Pac. 1097; Schaps 120, 56 Am. St. Rep. 788, 34 L. R. A. v. Lehner, 54 Minn. 208, 55 N. W. 274, 36 S. W. 716; National Metal 911; Sprinkle v. Wellborn, 140 N. C. Edge Box Co. v. Vanderveer, 85 Vt. 163, 111 Am. St. Rep. 827, 3 L. R. A. 488, Ann. Cas. 1914D, 865, 42 (N. S.) 174, 52 S. E. 666; West v. L, R. A. (N. S.) 343, 82 Atl. 837; Seaboard Air Line Ey., 151 N. C. Loman v. Paulliu (Okl.), 152 Pac. 231, 65 S. E. 979. 2013 CONSTETJCTIVE PKAXJD. § 947 capacity and incapacity are the same at law and in equity. 5 § 947. Mental WeaJiness. — It is well settled that there may be a condition of extreme mental weakness and loss of memory, either congenital, or resulting from old age, sickness, or other cause, and not being either idiocy or lunacy, which will, without any other incidents or accom- panying circumstances, of itself destroy the person's testa- mentary capacity, and a fortiori be ground for defeating or setting aside his agreements and conveyances. ^ It is 64, and Smee v. Smee, 49 L. J. P. & M; 8, and overruling Waring v. "War- ing, 6 Moore P. C. C. 341, and Smith v. Tebbetts, L. R. 1 P. & M. 398. The case of Jenkins v. Morris, L. R. 14 Ch. Div. 674, decided by the vice- chancellor and the court of appeal, is a full discussion of the subject and very remarkable in its facts. S^ee also Creagh v. Blood, 2 Jones & L. 509; Dew V. Clarke, 5 Russ. 163, 167; Steed v. Galley, 1 Keen, 620; Boyce v. Smith, 9 Gratt. 704, 60 Am. Dec. 313. The same rule has been applied in this country to wills : Seamen's P. Soc. v. Hopper, 33 N. Y. 619 ; Clapp V. PuUerton, 34 N. Y. 190, 90 Am. Dec. 681; Thompson v. Thompson, 21 Barb. 107; Stanton v. Wetherwax, 16 Barb. 259; Lathrop v. Am. Bd. of For. Miss., 67 Barb. 590; Mill's Appeal, 44 Conn. 484.« § 946, 5 Bennett v. Vade, 2 Atk. 324, 327, per Lord Hardwicke; Osmond V. Fitzroy, 3 P. Wms.-130; Manby v. Bewicke, 3 Kay & J. 342. § 947, 1 It is undoubtedly difficult to formulate any rule for determin- ing the amount of this mental weakness. The following has been adopted by the highest authority, and is clearly just: "Had the testator a dispos- ing memory? "Was he able, without prompting, to recollect the property he was about to bequeath, the manner of distributing it, and the objects of his bounty? To sum up the whole in the most simple and intelligible form, "Were his mind arid memory sufficiently sound to enable him to know and to understand the business in which he was engaged at the time when he executed the will?" If any of these questions must be answered in the negative, if such an amount of mind and memory does not exist, then there is no testamentary capacity : Den ex dem. Stevens v. Vancleve, 4 "Wash. C. C. 262, 267, 268; Harrison v. Rowan, 3 Wash. C. C. 580, 585, 586; Parish Will Case, 25 N. Y. 9, and cases cited." The same rule §946, (e) See, also, Eiggs T. aside of a conveyance: Lewis v. American Tract Society, 95 N. T. Arbuckle, 85 Iowa, 335, 16 L. E. A. 503. Monomania which does not 677, 52 N. W. 237. extend to the matter in question is § 947, (a) gee, also, Campbell v. not sufficient to warrant the setting Campbell, 130 111. 466, 6 L. R. A. § 947 EQUITY JXJKISPRTJDENCE. 2014 equally certain that mere weak-mindedness, whether nat- ural or produced by old age, sickness, or other infirmity, unaccompanied by any other inequitable incidents, if the ■* person has sufficient intelligence to understand the nature of the transaction, and is left to act upon his own free will, is not a sufficient ground to defeat the enforcement of an executory contract, or to set aside an executed agreement applies to conveyances and other agreements inter vivos: Ball v. Mannin, 3 Bligh, N. S., 1; Coleman v. Frazer, 3 Bush, 300; Shaw v. Dixon, 6 Bush, 644; Shakespeare v. Markham, 72 N. Y. 400* Undoubtedly the line is very difficult to draw between this extreme condition of mental weakness and actual lunacy on one- side, and mere weak-mindedness on the other; each case must largely depend upon its own facts; and some of the early cases refused to lay down any rule: Osmond v. Mtzroy, 3 P. Wms. 129; Bennett v. Vade, 9 Mod. 312, 315; Bell v. Howard, 9 Mod. 302; Manby v. Bewicke, 3 Kay & J. 342; Harrod v. Harrod, 1 Kay & J. 4, 7; Hudson v. Beauchamp, 3 Bligh, 20, note; Addis v. Campbell, 4 Beav. 401; Longmate v. Ledger, 2 Griff. 157, 163; Jackson v. King, 4 Cow. 207, 15 Am. Dec. 354; Clarke v. Sawyer, 3 Sand. Ch. 351, 357. Not- withstanding the difficulty, there is certainly such a condition of mental weakness and want of memory, which of itself, without any undue influ- ence, unfairness, or other incident, will be ground for the interposition of equity and its relief, either defensive or affirmative : See cases in next two notes. 167, 22 N. E. 620; Eussell v. Car- making a deed does not show men- penter, 153 Mich. 170, 116 N. W. tal capacity); Best v. House (Ky.), 989; Wampler v. Harrell, 112 Va. 113 S. W. 849; Terry v. Terry, 170 635, 72 S. E. 135. Mieh. 330, 136 N. W. 448; Pritchard §947, (>») Definition of Mental v. Hutton, 187 Mich. 346, 153 N. W. Weakness. — All. of the foregoing 705; Chadwell v. Eeed, 198 Mo. part of this note quoted in Hemen- 359, 95 S. W. 227 (holds verdict of way v. Abbott, 8 Cal. App. 450, 97 jury advisory only); West v. West, Pae. 190. See, also, Eeese v. Shutte, 84 Neb. 169, 120 N. W. 925; Bond v. 133 Iowa, 681, 108 N. W. 525; Branning Mfg. Co., 140 N. C. 381, Swartwood v. Chance, 131 Iowa, 52 S. E. 929; Du Bose v. Kell, 90 714, 109 N. W. 297; Fitzgerald v. S. C. 196, 71 S. E. 371; Caddell v. Allen, 240 111. 80, 88 N. E. 240; Mc- Caddell, 62 Tex. Civ. App. 461, 131 Laughlin v. McLaughlin, 241 111. S. W. 432, citing this paragraph of 366, 89 N. E. 645; Greene v. Max- the text; Cason v. Cason, 116 Tenn. well, 251 111. 335, 36 L. E. A. (N. S.) 173, 93 S. W. 89; Allen's Adm'r v. 418, 96 N. E. 227; Noble v. Noble, Allen's Adm'rs, 79 Vt. 173, 64 Atl. 255 111. 629, 99 N. E. 631 (mere fact 1110; King v. Davis, 60 Vt. 502, 11 that grantor comprehends he is Atl. 727. 2015 CONSTRXrCTIVK PBAUD. § 947 or conveyance.2 c If ^ as is frequently if not generally the case, the mental weakness and failure of memory are ac- § 947, 2 If a court can see that there were no ineqtlitable incidents, such as undue influence, great ignorance and want of advice, very inadequate price, and the like, it will not interfere merely because one party pos- sessed very much less intelligence than the other, nor because the transac- tion is not one which the court in all respects approves: Ball v. Mannin, 3 Bligh, N. S., 1; Osmond v. Fitzroy, 3 P. Wms. 129; Lewis v. Pead, 1 Ves. 19; Pratt v. Barker, 1 Sim. 1; 4 Russ. 507; Clark v. Malpas, 31 Beav. 80; Prideaux v. Lonsdale, 1 De Gex, J. & S. 433; Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Stone v. Wilbern, 83 111. 105; Pickerell v. Morss, 97 111. 220; Graham v. Castor, 55 Ind. 559; MuUoy v. Ingalls, 4 Neb. 115; Cowee v. Cornell,- 75 N. Y. 91, 99, 100, 31 Am. Rep. 428; Paine v. Roberts, 82 N. C. 451; "Wellemin v. Dunn, 93 111. 511; Bever- ley v. Walden, 20 Gratt. 147; Mann v. Betterly, 21 Vt. 326; Howe v. Howe, 99 Mass. 88; Ex parte Allen, 15 Mass. 58; Stiner v. Stiner, 58 Barb. 643; Hyer v. Little, 20 N. J. Eq. 443; Lozear v. Shields, 23 N. J. Eq. 509; Aiman v. Stout, 42 Pa. St. 114; Dean v. Fuller, 40 Pa. St. 474; Graham v. Pancoast, 31 Pa. St. 89; Nace v. Boyer, 31 Pa. St. 99; Greer v. Greers, 9 Gratt. 330, 332; Rippy v. Gant, 4 Ired. Eq. 543; Thomas v. Sheppard, 2 McCord Eq. 36, 16 Am. Dec. 632; Oldham v. Oldham, 5 Jones Eq. 89; Graham v. Little, 3 Jones Eq. 152; Long v. Long, 9 Md. 348; Prewitt v. Coopwood, 30 Miss. 369; Killian v. Badgett, 27 Ark. 166; Darnell v. Rowland, 30 Ind. 342; Wray v. Wray, 32 Ind. 126; Gratz v. Cohen, 11 How. 1, 19; Harding v. Handy, 11 Wheat. 103. §947, (o) Transactions Upheld. — Clarke v. Hartt, 56 Ma. 775, 47 Text quoted in Hemenway v. Ab- Souti. 819; Kimball v. Cuddy, 117 bott, 8 Cal. App. 450, 97 Pao. 190; 111. 213, 7 N. E. 589; Burt v. Quisen- Mitehell v. Muteh (Iowa), 164 berry, 132 111. 385, 24 N. E. 622; N. W. 212; text and note 2 quoted Shea v. Murphy, 164 III. 614, 56 in Loman v. Paulliu (Okl.), 152 Am. St. Kep. 215, 45 N. E. 1021; Pae. 73; text cited in Eogers v. Argo v. CoflSn, 142 111. 368, 34 Am. Cunningham, 119 Ark. 466, 178 St. Rep. 86, 32 N. E. 679; Beaty v. S. W. 413; Sprinkle V. Wellborn, 140 Hood, 229 El. 562, 82 N. E. 350; N. C. 163, 111 Am. St. Kep. 827, 3 Martin v. Harsh, 231 HI. 384, 13 L. E. A. (N. S.) 174, 52 S. E. 666. L. E. A. (N. S.) 1000, 83 N. E. 164; See, also, Sawyer v. White (G. C. Sears v. Vaughan, 230 111. 572, 82 A.), 122 Fed. 223; President, etc., of N. E. 881; Eiordan v; Murray, 249 Bowdoin College v. Merritt, 75 Fed. 111. 517, 94 N. E. 947; Baker v. 480; Oxford v. Hopson (Ark.), 83 Baker, 239 111. 82, 87 N. E. 868; S. W. 942; Boggianna v. Anderson, Sargent v. Roberts, 265 111. 210, 106 78 Ark. 420, 94 S. W. 51; Green v. N. E. 805; Crooks v. Smith (Iowa), Hulse, 57 Colo. 238, 142 Pae. 416; 99 N. W. 112; Nowlen v. Nowlen Eeeve v. Bonwill, 5 Del. Ch. 1; (Iowa), 98 IST. W.. 383; Paulus v. §947 EQUITY aXJEISPEUDBlTCE, 2016 companied by other inequitable incidents, and are taken nndue advantage of through their means, equity not only may but will interpose with defensive or affirmative re- lief.3d Finally, in a case of real mental weakness, a pre- § 947, 3 Where mental weakness, not of itself sufiScient to destroy capa^ city, is accompanied by undue influence, inadequacy of price, taking ad- vantage of pecuniary necessities, ignorance and want of advice, misrepre- sentations or concealments, and the like, a contract or conveyance procured by their combined means will be defeated or set aside; it is not a simple presmnption of invalidity which thus arises, but the presumption has be- Eeed (Iowa), 96 N. W. 757; Harri- Bon V. Otley, 101 Iowa, 652, 70 N. W. 724; Altig v. Altig, 137 Iowa, 420, 114 N. W. 1056; Mer- chants' Nat. Bank v. Soesbe, 138 Iowa, 354, 116 N. W. 123; Slaughter V. McManigal, 138 Iowa, 643, 116 N. W. 726; Nixon v. Klise, 160 Iowa, 238, 141 N. W. 322; Stouffer V. Wolfkill, 114 Md. 603, 80 Atl. 300; Hymau v. Wakeham (Mieh.), 94 N. W. 1062; Eeagan v. Murray, 176 Mieh. 231, 142 N. W. 545; Lane V. Lane, 160 Mich. 492, 125 N. W. 365; Masterson v. Sheahan (Mo.), 186 S. W. 524; Merarland v. Brown (Mo.), 193 S. W. 800; Haeker v. Hoover, 89 Neb. 317, 131 N. W. 734; Dundee Chemical Works v. Connor, 46 N. J. Eq. 576, 20 Atl. 50; Dean v. Dean, 42 Or. 290, 70 Pac. 1039; Brugman v. Brugman, 93 Neb. 408, 140 N. W. 781; Hodges v. Wilson, 165 N. C. 323, 81 S. E. 340; Lamb v. Perry, 169 N. C. 436, 86 S. E. 179; Moorhead v. Scovel, 210 Pa. 446, 60 Atl. 13; Vaill v. Me- Phail, 35 R. I. 412, 87 Atl. 188'; Seville v. Jones, 74 Tex. 148, 11 S. W. 1128; Cox V. Combs, 51 Tex. Civ. App. 346, 111 S. W. 1069; Stringfellow v. Hanson, 25 Utah, 480, 71 Pac. 1052; Howard v. How- ard, 112 Va. 566, 72 S. E. 133; Dela- plaiu v. Grubb, 44 W. Va. 612, 67 Am. St. Eep. 788, 30 S. E. 201; Teter v. Teter, 59 W. Va. 449, 53 S. E. 779; Bade v. Feay, 63 W. Va. 166, 61 S. E. 348; Black v. Post, 67 W. Va. 253, 67 S. E. 1072. §947, (d) Mental Weakness and InequitalJle Incidents. — The text is cited to this effect in Bennett v. Bennett (Neb.), 91 N. W. 409; Dingman v. Eomine, 141 Mo. 466, 42 S. W. 1087, and in HoUaday v. Rich, 92 Neb. 91, 137 N. W. 988. See, also, Kilgore v. Cross, 1 Eed. 578; West v. Whittle, 84 Ark. 490, 106 S. W. 955; Richards v. Donncr, 72 Cal. 207, 13 Pac. 584; Elmstedt v. Nicholson, 168 IJl. 580, 58 N. E. 381; Ashmead v. Reynolds, 134 Ind. 139, 39 Am. St. Eep. 238, 33 N. E. 763; Frush V. Green, 86 Md. 494, 39 Atl. 863; Williams v. Williams, 63 Md. 371 (a remarkable case); Loder v. Loder, 34 Neb. 824, 52 N. W. 814; Thorp V. Smith, 63 N. J. Eq. 70, 51 Atl. 437; Krause v. Krause (N. J. Eq.), 55 Atl. 1095; Hammell v. Hyatt, 59 N. .T. Eq. 174, 44 Atl. 953; Hodges V. Wilson, 165 N. C. 323, 81 S. E. 340; Manuel v. Paulter, 25 Okl. 59, 108 Pac. 749; Polt v. Polt, 205 Pa. St. 139, 54 Atl. 577; Hoeh V. Hoeh, 197 Pa. St. 387, 47 Atl. 351; Ziegler v. Shuler, 87 S. C. 1, 68 S. E. 817; Caddell v. Caddell, 62 Tex. Civ. App. 461, 131 S. W. 432; Kelly V. Smith, 73 Wis. 191, 41 N. W. 69. 2017 CONSTRUCTIVE FBATJD. § 947 sumption arises against the validity of the transaction, and the burden of proof rests upon the party claiming the bene- fit of the conveyance or contract to show its perfect fair- ness and the capacity of the other party.'* ^ come established. Of course, in the vast majority of instances, the mental weakness is wrought upon through such inequitable instrumentalities, in order to obtain a contract or conveyance for an inadequate consideration: Huguenin v. Baseley, 14 Ves. 273; Boyse v. Rossborough, 6 H. L. Cas. 2; Nottidge V. Prince, 2 Giff. 246; Baker v. Monk, 33 Beav. 419; Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Moore v. Moore, 56 Cal. 89; Boston v. Balch, 69 Mo. 115; White v. White, 89 111. 460; Wad- dell v. Lanier, 62 Ala. 347; AUore v. Jewell, 94 U. S. 506; Bogie v. Bogie, 41 Wis. 209; Bainter v. Fults, 15 Kan. 323; Harris v. Wamsley, 41 Iowa, 671; Mead v. Coombs, 26 N. J. Eq. 173; Lavette v. Sage, 29 Conn. 577; Whelan v. Whelan, 3 Cow. 537; Hutchinson v. Tindall, 3 N. J. Eq. 357; Hetriek's Appeal, 58 Pa. St. 477; Brady's Appeal, 66 Pa. St. 277; Hunt V. Moore, 2 Pa. St. 105 ; Highberger v. Stiffler, 21 Md. 338, 83 Am. Dec. 593; Brogden v. Walker, 2 Har. & J. 285; Maddox v. Simmons, 31 Ga. 512; Rumph v. Abercrombie, 12 Ala. 64; Hill v. McLaurin, 28 Miss. 288; Tracey v. Sacket, 1 Ohio St. 54, 59 Am. Dec. 610; Harding v. Handy, 11 Wheat. 103. § 947, 4 Longmate v. Ledger, 2 Giff. 157, 164 ; Kempson v. Ashbee, L. R. 10 Ch. 15; Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Shakespeare v. Markham, 72 N. Y. 400; Cowee v. Cornell, 75 N. Y. 91, 99, 100, 31 Am. Bep. 428; Graves v. White, 4 Baxt. 38; Bogie v. Bogie, 41 Wis. 209; Galpin v. Wilson, 40 Iowa, 90; Wartemberg v. Spiegel, 31 Mich. 400; Whelan v. Whelan, 3 Cow. 537; Brice v. Brice, 5 Barb. 533, 549; Highberger v. Stiffler, 21 Md. 338, 83 Am. Dec. 593; Marshall v. Billingsly, 7 Ind. 250; Martin v. Martin, 1 Heisk. 644, 653; Allore v. Jewell, 94 U. S. 506. The whole subject of weakness of mind § 947, (e) Burden of Proof in Dickson v. Kempinsky, 96 Mo. 252, Cases of Mental Weakness. — The 9 S. W; 618; Brummond v. Krause, 8 ' text is quoted .;n Boyd v. ^^oyd, 123 N. D. 573, 80 "N. W. 686. See, fur- Ark. 134, 184 S. W. 838 (deed exe- ther, Sellers v. Knight, 185 Ala. 96, outed by very sick man, kept alive 64 South. 329; Noban v. Shoup, 171 for several days on strychnine and Mich. 191, 137 N. W. 75; Groff v. caffeine). The text is cited to this Stitzer, 75 N. J. Eq. 452, 72 Atl. effect in Wilkinson v. Sherman, 45 970; Drake v. Man, 81 N. J. Eq. N. J. Eq. 421, 18 Atl. 228. See, 201, 86 Atl. 261; Grimminger v. Al- also, Jones v. Thompson, 5 Del. Ch. derton, 85 N. J. Eq. 425, 96 Atl. 80; 374; Sands v. Sands, 112 111. 225; Baur v. Cron, 71 N. J. Eq. 743, 66 Crawford v. Hoeft, 58 Mich. 1, 23 Atl. 585; Schindler v. Parzoo, 52 N: W. 27, -24 N. W. 645; Gates v. Or. 452, 97 Pac. 755;' Hattie v. Pot- Cornett, 72 Mich. 420, 40 N. W. 740; ter, 54 Wash. 170, lOa Pac. 1023. 11—127 § 948 EQUITY JTJEISPETJDENCB. 2018 § 948. Persons in Vinculis. — ^Analogous to the condition of mental weakness is that of pecuniary or other necessity and distress. Whenever one person is in the power of another, so that a free exercise of his judgment and will would be impossible, or even difficult, and whenever a per- son is in pecuniary necessity and distress, so that he would be likely to make any undue sacrifice, and advantage is taken of such condition to obtain from him a conveyance or contract which is unfair, made upon an inadequate con- sideration, and the like, even though there be no actual duress or threats, equity may relieve defensively or affir- matively.^ ^ Persons illiterate or ignorant: By the same is practically involved with undue influence. See Huguenin v. Baseley, 2 Lead. Cas. Eq., 4th Am. ed., 1156, 1174, 1192, 1242, for a discussion in the editor's notes. Many eases partly turning upon mental weakness will be found under the succeeding paragraphs of this subdivision. § 948, 1 Relief will be granted in such cases with great caution. If it appears that, notwithstanding his necessitous condition, the party acted knowingly and intelligently, with a full comprehension of the situation, of his own acts, and of their consequences, and no undue pressure was used, equity will not interpose, even though the consideration is inade- quate : See ante, paragraphs on inadequacy of consideration. A presump- tion of invalidity arises from the circumstances, but that presumption may be overcome: Johnson v. Nott, 1 Vem. 271; Kemeys v. Hansard, Coop. 125; WUliams v. Bayley, L. R. 1 H. L. 200, 218; Gould v. Okeden, 4 § 948, (a) The text is quoted in 120 Am. St. Eep. 87, 106 S. W. 964 Buford V. Louisville, etc., R. E. Co., (a man who had killed another, was 82 Ky. 286; Dingman v. Eomine, charged with murder and threat- 141 Mo. 466, 42 S. W. 1087; and ened with mob violence, was under cited in Cowen v. Adams, 78 Fed. great excitement, and a few days 536, 47 TJ. S. App. 676. The text is later committed suicide, conveyed cited and followed in Herzog v. Gip- to lawyers nearly all his estate) ; son, 170 Ky. 325, 185 S. W. 1119; Harris v. Gary, 112 Va. 362, Ann. cited, also, in Atchison, T. & S. F. Cas. 1913A, 1350, 71 S. E. 551 Ey. Co. V. Smith (Tex. Civ. App.), (duress of property). The mere 190 S. W. 761 (mere distressed eon- fact that the bargain was uncon- ditiou of employee making settle- seionable and made under business ment of claim no basis by itself for necessity was held insufBcient in rescission). See, also, Brown v. Miles v. Dover Furnace Iron Co., Hall, 14 E. I. 249, 51 Am. Kep. 375; 125 N. Y. 294, 26 N. E. 261; Carley James v. Kerr, 40 Ch. Div. 449; v. Tod, 83 Hun, 53, 31 N. Y. Supp. Piadall v. Waterman, 84 Ark. 575, 635. 2019 CONSTEUCTIVE FEAUD. § 948 analogy, where a person is illiterate or ignorant of the nature and extent of his own rights, or ignorant of the nature of the transaction in which he is engaging, and acts without professional or other advice, and advantage is taken of his condition to obtain a conveyance or contract upon an inadequate consideration, or otherwise unfair, equity will relieve by setting it aside or defeating its en- forcement. The relief is granted on the ground that there was not an intelligent and free consent; if the circumstances show such consent, equity wUl not interf ere.^ ^ Brown Pari. C. 198; Farmer v. Farmer, 1 H. L. Cas. 724; Boyse v. Ross- borough, 6 H. L. Cas. 2; Hetrick's Appeal, 58 Pa. St. 477; Blackwilder V. Loveless, 21 Ala. 371; Neilson v. McDonald, 6 Johns. Ch. 201; French V. Shoemaker, 14 Wall. 314; and see 2 Lead. Cas. Eq., 4th Am. ed., 1230. §948, 2 Stanley v. Robinson, 1 Russ. & M. 527; Helsham v. Langley, 1 Younge & C. Ch. 175;' Baker v. Monk, 4 De Gex, J. & S. 388; Clark v. Malpas, 4 De Gex, F. & J. 401; Harrison v. Gu^st, 6 De Gex, M. & G. 424; 8 H. L. Cas. 481; Lyons v. Van Riper, 26 N. J. Eq. 337; Connelly V. Fisher,, 3 Tenn. Ch. 382; Hawkins v. Hawkins, 50 Cal. 558; Fish v. Leser, 69 111. 394; Gasque v. Small, 2 Strob. Eq. 72. Relief is granted in this case also with the greatest caution. Courts of equity have not in England, and much less in this country, adopted a rule that a conveyance or contract cannot be valid unless made with professional advice: Light- foot V. Heron, 3 Tounge & C. 586; Haberdashers' Co. v. Isaac, 3 Jur., N. S., 611. In applying the rules contained in the above paragraph and in the preceding one, it should be remembered that in all of them the spe- cial circumstances — ^mental weakness, necessities, ignorance, etc. — are as- sumed to show the absence of a free consent, a free act of the will. The mere fact, therefore, that a party was very old, or illiterate, or sick, or in pecuniary necessity, will not invalidate a transaction, or be a ground for setting aside or defeating a contract, even though made upon an in- adequate consideration and without advice, provided the evidence shows that he was competent to form an independent judgment, that he really knew the nature and effect of the transaction in which he was engaged, §948, (b) Persons Illiterate or mortgage invalid); Winfield Nat. Ignorant. — The text is quoted in Bank v. Croco, 46 Kan. 620, 26 Pae. Alfrey v. Colbert, 7 Ind. Ter. 338, 939. See, also, Yarbrough v. Har- 104 S. W. 638. See post, § 953; ris, 168 Ala. 332, Ann. Cas. 1912A, Green v. Wilkie, 98 Iowa, 74, 60 702, 52 South. 916 (deed by igno- Am. St. Eep. 184, 36 L. K. A. 434, rant old colored woman to white and notes, 66 N. W. 1046 (note and business man). § 949 EQUITY JXTBISPRXJDENCE. 2020 § 949. Intoxication. — ^Intoxication wMch merely exhila- rates, and does not materially affect the understanding and the "will, does not constitute a defense to the enforcement of an executory agreement, and much less is it any ground for affirmative relief, i ^ An intoxication which is absolute and complete, so that the party is for the time entirely de- prived of the use of his reason, and is wholly unable to com- prehend the nature of the transaction and of his own acts, is a sufficient ground for setting aside or granting other appropriate affirmative relief against a conveyance or con- tract made while in that condition, even in the absence of any fraud, procurement, or, undue advantage by the other party.2 b Where the intoxication is not thus absolute and and acted in it intelligently and deliberately. To impeach such a trans- action requires proof of actual fraud or coercion. Courts do not set aside conveyances and contracts simply because the judges may regard them unfavorably: Lewis v. Pead, 1 Ves. 19; Harrison v. Guest, 6 De Gex, M. & G. 424; 8 H. L. Gas. 481; McNeill v. Cahill, 2 Bligh, 228; Curson v. Belworthy, 3 H. L. Gas. 742; Hunter v. Atkins, 3 Mylne & K. 113; Pratt v. Barker, 1 Sim. 1; Price v. Price, 1 De Gex, M. & G. 308; Hovenden v. Lord Annesley, 2 Schoales & L. 607, 639; Murray v. Palmer, 2 Schoales & L. 474, 486; Cooke v. Lamotte, 15 Beav. 234; Ramsbottom v. Parker, 6 Madd. 6; Cowee v. CorneU, 75 N. T. 91, 99, 100, 31 Am. Rep. 428. §949, ILightfoot v. Heron, 3 Younge & C. 586; Shaw v. Thackray, 1 Smale & G. 537; Cavender v. Waddingham, 5 Mo. App. 457; Shackelton V. Sebree, 86 111. 616. § 949, 2 There are some early dicta that equity would never grant affirmative relief to a party on the ground of his own intoxication, how- § 949, (a) The text is cited in Goody v. Goody, 39 Okl. 719, Thaekrat v. Haas, 119 U. S. 501, 7 L. B. A. 1915E, 465, 136 Pae. 754. Sup. Ct. 311. See, also, Watson v. See, also, Boggs v. HoUoway, 158 . Doyle, 130 HI. 415, 22 N. E. 613; Ala. 286, 47 South. 1017; Swan v. Lewis V. Davis (Ala.), 73 South. . Talbot, 152 Gal. 142, 17 L. B. A. 419. An habitual drunkard is not (N. S.) 1066, 94 Pac. 238; Hale v. necessarily an incompetent- person: Stery, 7 Colo. App. 165, 42 Pac. ."igS; Ealston v. Turpin, 25 Fed. 18; Martin v. Harsh, ^31 111. 384, 13 Wright v. Fisher, 65 Mich. 275, 8 L. R. A. (N., S.) 1000, 83 N. E. 164; Am. St. Rep. 886, 32 N. W. 605; Moetzel & Muttera v. Koch (Iowa), Van Wyek v. Brasher, 81 N. Y. 260; 97 N. W. 1079; Power v. King, 18 Burnham v. Burnham (Wis.), 97 N. D. 600, 138 Am. St. Rep. 784, 21 N. W. 176. Ann. Cas. 1108, 120 X. W. 543 §949", (b) The text is cited in (cases cited and discussion). 2021 coNSTaucTivE fraud. § 949 complete, but is still sufficient to materially affect and inter- fere with the person's reason, judgment, and will, but is not procured nor taken advantage of unfairly by the other party, the doctrine is settled that a court of equity will hot interfere in behalf of either of the parties to a contract •which is made while one of them is in such a condition.^ « Finally, although the intoxication was only partial, if the other party produced it by his contrivance, and then took advantage of it, or made it the opportunity for acts of im- ever complete, unless it was accompanied by conduct positively inequitable of the other party. The rule seems now to be settled, however, as stated in the text: Cooke v. Clay worth, 18 Ves. 12; Shackelton v. Sebree, 86 111. 616; Johnson v. Phifer, 6 Neb. 401; Bates v. Ball, 72 111. 108; Prentice V. Achorn, 2 Paige, 30; Hutchinson v. Brown, 1 Clarke Ch. 408; Crane v. Conklin, 1 N. J. Eq. 346, 22 Am. Dec. 519; Wigglesworth v. Steers, 1 Hen. & M. 70, 3 Am. Dec. 602; French v. French, 8 Ohio, 214, 31 Am. Dec. 441; Phillips v. Moore, 11 Mo. 600. If a person is thus completely intoxicated, a party openly dealing with him must, of course, perceive his condition ;" it would seem that the party knowingly taking the conveyance or contract under these circumstances was necessarily chargeable with inequitable conduct. § 949, 3 The court will not specifically enforce an executory contract against the intoxicated party at the .suit of the other, nor will it set aside a conveyance or contract at the suit of the intoxicated party or his repre- sentatives ; the parties are left to their remedies at law. This rule is xn application of the maxim in pari delicto, etc. : Johnson v. Medlicott, 3 P. Wms. 131, note ; Cory v. Cory, 1 Ves. Sr. 19 ; Cooke v. Clayworth, 18 Ves. 12; Say v. Barwick, 1 Ves. & B. 195; Shackelton v. Sebree, 86 111. 616; Schramm v. O'Connor, 98 111. 539; Johnson v. Phifer, 6 Neb. 401; Bates V. Ball, 72 111. 108; Lavette v. Sage, 29 Conn. 577; Maxwell v. Pittenger; 3 N. J. Eq. 156; Selah v. Selah, 23 N. J. Eq. 185; Clifton v. Davis, 1 Pars. Cas. 31; Futrill v. Futrill, 6 Jones Eq. 61; Morrison v. McLeod, 2 Dev. & B. Eq. 221; Harbison v. Lemon, 3 Blackf. 51, 23 Am. Dec. 376; Dunn v. Amos, 14 Wis. 106, and cases in next note. §949, (e) The text is cited in (N. S.) 1000, 83 N. E. 164; Power Cook V. Bagnell Timber Co., 78 v. King, 18 N. D. 600, 138 Am. St. Ark. 47, 8 Ann. Cas. 251, 94 S. W. Eep. 784, 21 Ann. Cas. 1108, 120 695. See, also, Sellers v. Knight, N. W. 543; Tonn v. Lament, 56 185, Ala. 96, 64 South. 329; Martin Minn. 216, 57 N. W. 478. V. Harsh, 231 111. 384, 13 L. R. A. § 950 EQUITZ JUBISPEUDENCB. 2022 position, Tinfairness, and a fortiori fraud, equity will grant full affirmative relief.^ ^ § 950. Duress. — ^Whenever a conveyance or contract is obtained by actual duress, equity will grant relief, de- fensively or affirmatively, by cancellation, injunction, or_ otherwise, as the circumstances may require. In determin- ing what constitutes duress, — what force or threats, — equity follows the law. Courts of equity undoubtedly grant relief in many classes of instances where there is no legal duress, and where the wronged party would perhaps be remediless at the common law, but these cases properly belong to the head of ' ' undue influence, " i * § 949, 4 Cory v. Cory, 1 Ves. Sr. 19; Cooke v. Clayworth, 18 Ves. 12; Say V. Barwick, 1 Ves. & B. 195; Butler v. Mulvlhill, 1 Bligh, 137; Light- foot V. Heron, 3 Younge & C. 586; Shaw v. Thaekray, 1 Smale & G. 537; Nagle V. Baylor, 3 Dru. & War. 60; Addis v. Campbell, 4 Beav. 401; Mar- tin V. Pyoroft, 2 De Gex, M. & G. 785, 800; O'Connor v. Rempt, 29 N. J. Eq. 156; Crane v. Conklin, 1 N. J. Eq. 346, 22 Am. Dec. 519; Prentice V. Achorn, 2 Paige, 30; Lavette v. Sage, 29 Conn. 577; Calloway v. Wither- spoon, 5 Ired. Eq. 128; Freeman v. Dwiggins, 2 Jones Eq. 162; Griffith v. Ered. Co. Bank, 6 Gill & J. 424; PhiUips v. Moore, 11 Mo. 600. The ease of Pittenger v. Pittenger, 3 N. J. Eq. 156, contains dicta conflicting with the course of authority. Courts of equity are extremely cautious in grant- ing any relief on the ground of intoxication, and they will seldom give the remedy of cancellation, unless there was conduct plainly inequitable by the other party ; to do so would require a very strong case in which the evidence was most convincing. Experience shows that a man may be very much intoxicated and still be shrewd, hard in driving a bargain, and in every way competent to manage his own business : See Schramm v. O'Con- nor, 98 111. 539. § 950, 1 Nicholls v. NiehoUs, 1 Atk. 409 ; Roy v. Duke of Beauford, 2 Atk. 190; Thornhill v. Evans, 2 Atk. 330; Hawes v. Wyatt, 3 Browne Ch. 156 ; Evans ^. Llewellin, 1 Cox, 333, 340 ; Lamplugh v. Lamplugh, 1 Dick. §949, (d) The text is cited in Cornet v. Cornet, 248 Mo. 184, 154 MUler V. Sterringer, 67 W. Va. 169, S. W. 121. 25 L. E. A. (N. S.) 596, 66 S. E 228; Seanlon v. Connor, 168 Mich. 133, 133 N. W. 931 (defendant in. duced plaintiff to become intoxi § 950, (a) Eice v. Henderson. Boyd Lumber Co. (Ala.), 73 South. 70; Morrill v. Nightingale, 93 Cal. 452, 27 Am. St. Eep. 207, 28 Pac. cated and then to convey property 1068; Patterson v. Gibson, 81 Ga. worth $2,000 for $700). See, also, 802, 12 Am. St.. Eep. 356, 10 S. E. 2023 CONSTRUCTIVE FRAUD. § 951 § 951. Undue Influence. — Where there is no* coercion amounting to duress, but a transaction is the result of a 411; Talleyrand v. Boulanger, 3 Ves. 447; Underliill v. Horwood, 10 Ves. 209, 219; Pickett v. Loggon, 14 Ves. 215; Peel v. ■ , 16 Ves. 157; Middleton v. Middleton, 1 Jacob & W. 94; Gubbins v. Creed, 2 Schoales & L. 214; Williams v. Bayley, L. R. 1 H. L. 200; Reed v. Exmn, 84 N. C. 430 ; Sharon v. Gager, 46 Conn. 189 ; Singer Mfg. Co. v. Rawson, 50 Iowa, 634; Thurman v. Burt, 53 111. 129; Harshaw v. Dobson, 64 N. C. 384; Jones V. Bridge, 2 Sweeny, 431. Acknowledgments of deeds by married woman obtained by duress : Louden v. Blythe, 16 Pa. St. 532, 55 Am. Dec. 627; Michener v. Cavender, 38 Pa. St. 334, 337, 80 Am. Dec. 486; McCand- less V. Engle, 51 Pa. St. 309. It is sometimes difficult to determine whether the controlling influence amounts to actual, physical, or moral coercion : See Ramsbottom v. Parker, 6 Madd. 5 ; Middleton v. Sherburne, 4 Younge & C. 358, 389; Rhodes v. Bate, L. R. 1 Ch. 252. In determin- ing what constitutes duress, equity adopts the legal definition and rules: Miller v. Miller, 68 Pa. St. 486 ; McLin v. Marshall, 1 Heisk. 678. Law- ful arrest or imprisonment, or prosecution of the party himself, or threats of such lawful arrest, imprisonment, prosecution, or litigation directed against the party himself, do not constitute duress; the same is true of many other species of threats. Threats of prosecution, etc., against a near relative of the party who executes a contract in consequence thereof may be duress.* In the following cases there was held to be no duress: 9; Gilmore v. Hunt, 137 Ga. 272, 73 St. Eep. 524, 57 N. W. 101, a deed S. E. 364; Kwentsky v. Sirovy, 142 executed under duress was held to Iowa, 385, 121 N. W. 27; Wilson v. be voidable merely. Calhoun, 170 Iowa, 111, 151 N. W. § 950, (b) Threats of Prosecution, 1087; Winfield Nat. Bank v. Croeo, etc., Against Relative. — Martin v. 46 Kan. 620, 26 Pac. 939; Goodrich Evans, 163 Ala. 657, 50 South. 997 V. Shaw, 72 Mich. 109, 40 N. W. (threat of prosecution of plaintiff's 187; Bentley v. Kobson, 117 Mich. son); Burton v. McMillan, 52 Ma. 691, 76 N. W. 146; Meech v. Lee, 469, 120 Am. St. Eep. 220, 11 Ann. 82 Mieh. 274, 46 N. W. 383; Lappin Cas. 380, 8 L. E. A. (N. S.) 991, 42 V. Crawford, 221 Mo. 380, 120 S. W. South. 849 (threat of imprisonment 605; HuUhoTst v. Scharner, 14 Neb. of husband); Swint v. Carr, 76 Ga. 57, 17 N. W. 259; Avakian v. Ava- 322, 2 Am. St. Eep. 44; Kronmeyer kian, 69 N. J. E.q. 89, 60 Atl. 521 v. Buck, 258 111. 586, 45 L. E. A. (equity may annul a marriage con- (N. S.) 1182, 101 N. E. 935 (threat tract entered into by duress); of prosecution for embezzlement of Piekenbrock " v. Smith, 43 Okl. 585, a few dollars) ; Winfield Nat. Bank 143 Pao. 675; Galusha v. Sherman, v. Croco, 46 Kan. 620, 26 Pac. 939; 105 Wis. 263, 47 L. E. A. 441, 81 State Bank v. Hutchinson, 62 Kan. N. W. 495. In Miller v. Minor 9, 61 Pac. 443; Williamson-Halsel- Lumber Co., 98 Mich. 163, 39 Am. Prazier Co. v. Ackerman, 77 Kan. §951 EQUITY JXJEISPRXJDENCE. 2024 moral, secial, or domestic force exerted upon a party, con- trolling the free action of his will and preventing any true Wright V. Remington, 41 N. J. L. 48, 32 Am. Eep. 180 (threats of a hus- band to kill himself if his wife did not sign his note as a surety) ; Heaps \r. Dunham, 95 111. 583; Compton v. Bunker Hill Bank, 96 111. 301, 36 Am. Rep. 147; Smillie v. Titus, 32 N. J. Eq. 51; State v. Harney, 57 Miss. 863; Tooker v. Sloan, 30 N. J. Eq. 394; Fogg v. Union Bank, 4 Baxt. 530; Landa v. Obert, 45 Tex. 539; Davis v. Luster, 64 Mo. 43; Plant v. Gunn, 2 Woods, 372; Smith v. Rowley, 66 Barb. 502; Mayhew v. Phoenix Ins. Co., 23 Mich. 105; Dixon v. Dixon, 22 N. J. Eq. 91; Seymour v. Pres- cott, 69 Me. 376; Fulton v. Loftis, 63 N. C. 393 (duress after a contract is made is not ground for relief)." In the proposed Civil Code of New York the following definitions are given of duress and menace, which have been adopted by the CivU Code of California: N. T. Civ. Code, sec. 754; Cal. Civ. Code, sec. 1569: "Duress consists in, — 1. Unlawful confinement of the person of the party, or of the hus- 502, 20 L. E. A. (N. S.) 484, and note, 94 Pac. 807 (threat of prose- cution of son; guilt or innocence of sou not material) ; Benedict v. Eoome, 106 Mich. 378, 64 N. W. 193; Bell v. Campbell, 123 Mo. 1, 45 Am. St. Eep. 505, 25 S. W. 359; Turner v. Overall, 172 Mo. 271, 72 S. W. 644; Hensinger v. Dyer, 147 Mo. 219, 48 S. W. 912; Hargreaves V. Korcek, 44 Neb. 660, 62 N. W. 1086; Beindorf v. Kaufman, 41 Neb. 824, 60 N. W. 101; Nebraska Cen- tral Building & Loan Ass'n v. Me- Candless, 83 Neb. 536, 120 N. W. 134 (threat of prosecution of hus- band); Ball V. Ball, 79 N. J. Eq. 170, 37 L. E. A. (N. S.) 539, 81 Atl. 724; Schoener v. Lissauer, 107 N. T. 112, 13 N. E. 741; Adams v. Irving National Bank, 116 N. T. 606, 15 Am. St. Eep. 447, 6 L. E. A. 491, 23 N. E. 7; Anderson v. Kelley (Old.), 156 Pae. 1167; Eostad v. Thorsen, 83 Or. 489, L. E. A. 1917D, 1170, 163 Pae. 423, 987; Foley v. Greene, 14 E. I. 618, 51 Am. Eep. 419; Coffman v. Lookout Bank, 5 Lea, 232, 40 Am. Eep. 31; Perkins V. Adams, 17 Tex. Civ. App. 331, 43 S. W. 529; Gorringe v. Eeed, 23 Utah, 120, 90 Am. St. Eep. 692, 63 Pac. 902. For a full discussion of the effect of such, threats, see note to City National Bank v. Kusworm, 88 Wis. 188, 43 Am. St. Eep. 880, 26 L. E. A. 48, 59 N. W. 564. §950, (c) -No Duress.— See, also, Connolly v. Bouck, 174 Fed. 312, 98 C. C. A. 184 (refusal to make ' ad- vances under old agreement unless new agreement signed does not con- stitute duress) ;Wood v. Craft, 85 Ala. 260, 4 South. 649; Goodrum v. Merchants & Planters' Bank, 102 Ark. 326, Ann. Cas. 1914A, 511, 144 S. W. 198; Cooper v. Chamberlin, 78 Cal. 450, 21 Pae. 14, and cases cited (threats of tax collector to sell property for a void tax do not constitute duress); Dear v. Var- num, 80 Cal. 86, 22 Pac. 76; Sim- mons V. Sweeney, 13 Cal. App. 283, 109 Pac. 265 (threat to withhold a legal right which party had an ade- quate remedy to enforce) ; Post v. 2025 CONSTKUCTIVE FEATJD, §951 consent, equity may relieve against the transaction, on the ground of undue influence, even though there may be no band or wife of such party, or of an ancestor, descendant, or adopted child of such party, husband, or wife" ; citing Foshay v. Ferguson, 5 Hill, 154 ; Bates V. Butler, 46 Me. 387; Eadie v. Slimmon, 26 N. Y. 9, 82 Am. Dec. 395; MeClintick v. Cummins, 3 McLean, 158. "2. Unlawful detention of the property of any such person" (conceded to be contrary to the weight of authority). "3. Conflinement of such person, lawful in form, but fraudulently obtained, or fraudulently made, unjustly harassing or oppres- sive"; citing Strong v. Grannis, 26 Barb. 122; Richardson v. Duncan, 3 N. H. 508; Watkins v. Baird, 6 Mass. 511, 4 Am. Dec. 170; Severance v. Kimball, 8 N. H. 386. N. T. Civ. Code, sec. 755 ; Cal. Civ. Code, sec. 1570 : "Menace consists in a threat, — 1. Of such duress as is specified in subdivisions one and three of the last section"; citing Eadie v. Slimmon, 26 N. Y. 9, 82 Am. Dec. 395; Whitefield v. Longfellow, 13 Me. 146. "2. Or of unlawful and violent injury to the person or property of any such person as is specified in the last section; or 3. Of injury to the character of any such person." This last subdivision is conceded to be new legislation. First Nat. Bank, 138 111. 559, 28 N. E. 978; Hintz v. Hintz, 222 111. 248, 78 N. E. 565 (acts of violence took place some time before the deed, hence no fear of bodily harm) ; Lewis v, Doyle, 182 Mich. 141, 148 N. W. 407; Green v. Scran- age, 19 Iowa, 461, 87 Am. Dec. 447; Russell V. Diu-tam, 17 Ky. Law Bep. 35, 303, 29 S. W. 635;' Detroit Nat. Bank v. Blodgett, 115 Mich. 160, 73 N. W. 120, 885; Prichard v. Sharp, 51 Mich. 432, 16 N. W. 798; Wood V. Kansas City Home Tele- phone Co., 223 Mo. 537, 123 S. W. 6 (threat to refuse to comply with a contract); Ott v. Pace, 43 Mont. 82, 115 Pac. 37 (threat to forfeit stock under terms of a contract); XTnangst v. Southwick, 80 Neb. 112, 113 N. W. 989; Sanford v. Sorn- borger, 26 Neb. 295, 41 N. W. 1102; Ball V. Ward, 76 N. J. Eq. 8, 74 Atl. 158 (threat of lawful prosecution) ; Barrett v. Weber, 125 N. Y. 18, 25 N. E. 1068; Girty v. Standard Oil Co., 1 App. Div. 224, 37 N. Y. Supp. 369 (threat by husband to commit suicide unless wife signed certain papers, not); Englert v. Dale, 25 N. D. 587, 142 N. W. 169 (threat to arrest son for an offense which he kad in fact committed); Guinn V. Sumpter Valley H. Co., 63 Or. 368, 127 Pac. 987 (deed executed by wife to secure a debt justly owing by husband) ; Page v. Cranford, 43 S. C. 193, 20 S. E. 972; Loud v. Hamilton (Tenn.), 51 S. W. 140, 45 L. E. A. 400; Ward v. Baker (Tex. Civ. App.), 135 S. W. 620 (threat of losing property) ; Wolff v. Bluhm, 95 Wis. 257, 60 Am. St. Eep. 115, 70 N. W. 73 (threat to prosecute unless provision is made for ille- gitimate child is not) ; Crookshanks V. Bansherger (W. Va.), 92 S. E. 78; York v. Hinkle, 80 Wis. 624, 27 Am. St. Eep. 73, 50 N. W. 895. Belief not granted against a bona fide purchaser: Moog v. Strang, 69 Ala. 98; Vancleave v. Wilson, 73 Ala. 387; Gardner v. Case, 111 Ind. 494, 13 N. E. 36. ' §951 EQUITY JUKISPEUDENCE. 2026 invalidity at law.* In the vast majority of instances, undue influence naturally has a field to work upon in the condition or circumstances of the person influenced, which render him peculiarly susceptible and yielding, — ^his dependent or fiduciary relation towards the one exerting the influence, his mental or physical weakness, his pecuniary necessities, his ignorance, lack of advice, and the like. All these cir- cumstances, however, are incidental, and not essential.'' Where an antecedent fiduciary relation exists, a court of equity will presume confidence placed and influence ex- erted; where there is no such fiduciary relation, the con- § 951, (a) This portion of the text is quoted in Detroit Nat. Bank v. Blodgett, 115 Mich. 160, 73 N. W. 120, 885; also, in Eiggs v. Gillespie, 241 Fed. 311; Parker v. Hill, 85 Ark. 36.3, 108 S. W. 208; Bounds v. Cole- man (Tex. Civ. App.), 189 S. W. 1086. This section is cited in Ealston v. Turpin, 25 Fed. 18; Bowen v. Kutzner, 167 Fed. 281, 93 C. C. A. 33; Eddy v. Eddy, 168 Fed. 590, 93 C. C. A. 586; Adams v. Cowen, 177 U. S. 471, 20 Sup. Ct. 668; Cowen v. Adams, 78 Fed. 536, 47 U. S. App. 676; Burton v. Mc- Millan, 52 Fla. 469, 120 Am. St. Kep. 220, 11 Ann. Cas. 380, 8 L. K. A. (N. S.) 991, 42 South. 849; Reeves V. Howard, 118 Iowa, 121, 91 N. W. 896; Dingman v. Eomine, 141 Mo. 466, 42 S. W. 1087; Pritehard v. Hutton, 187 Mich. 346, 153 Mo. 705; Mowry v. Norman, 204 Mo. 173, 103 S. W. 15; Holt V. Holt, 23 Okl. 639, 102 Pae. 187; Gidney v. Chappell, 26 Okl. 737, 110 Pae. 1099. See, also, Jefferson v. Bust, 149 Iowa, 594, 128 N. W. 954; Brugmau v. Brugman, 93 Neb. 408, 140 N. W. 781. The following eases bear on a definition of undue influence and evidence thereof: Alcorn v. Alcorn, 194 Fexl. 275; Boggianna v. Ander- son, 78 Ark. 420, 94 S. W. 51; Stroup V. Austin, 180 Ala. 240, 60 South. 879; Kline v. Kline, 14 Ariz. 369, 128 Pae. 805; Spencer v. Mer- win, 80 Conn. 330, 68 Atl. 370; Sears V. Vaughan, 230 111. 572, 82 N. E. 881; Eiordan v. Murray, 249 HI. 517, 94 N. E. 947; Howard v. Farr, 115 Minn. 86, 131 N. W. 1071; Bur- nett V. Smith, 93 Miss. 566, 47 South. 117; Wherry v. Latimer, 103 Miss. 524, 60 South. 563, 642; Cur- tice V. Dixon, 74 N. H. 386, 68 Atl. 587; Hacker v. Hoover, 89 Neb. 317, 131 N. W. 734; Wain v. Meirs, 80 N. J. Eq. 488, 85 Atl. 260; Baur v. Cron, 71 N. J. Eq. 743, 66 Atl. 585; Myatt V. Myatt, 149 N. C. 137, 62 S. E. 887; Du Bose v. Kell, 90 S. C. 196, 71 S. E. 371; Jenkins v. Rhodes, 106 Va. 564, 56 S. E. 332; Hoover v. Neff, 107 Va. 441, 59 S. E. 428; Howard v. Howard, 112 Va. 566, 72 S. E. 133; Teter v. Teter, 59 W. Va. 449, 53 S. E. 779; Woodville v. Woodville, 63 W. Va. 286, 60 S. E. 140; Ritz V. Eitz, 64 W. Va. 107, 60 S. E. 1095; Bade v. Feay, 63 W. Va. 166, 61 S. E. 348; Black v. Post, 67 W. Va. 253, 67 S. E. 1072. §951, (b) The text is quoted in Riggs V. Gillespie, 241 Fed. 311, Rounds V. Coleman (Tex. Civ. App.), 189 S. W. 1086. 2027 . CONSTRUCTIVE FEAUD. § 951 fidence and influence must be proved by satisfactory ex- trinsic evidence ; the rules of equity and the remedies which it bestows are exactly the same in each of these two cases. The doctrine of equity concerning undue influence is very broad, and is based upon principles of the highest morality. It reaches every case, and grants relief "where influence is acquired and abused, or where confidence is reposed and betrayed." ^ " It is specially active and searching in deal- §951, 1 Smith v. Kay, 7 H. L. Cas. 750, 779, per Lord Kingsdown; Huguenin v. Baseley, 14 Ves. 273; 2 Lead. Cas. Eq., note of Eng. ed., 1156, 1174r-1176, 1189-1191; note of Am. ed., 1192-1215. The subject of undue influence is intimately connected with that of fiduciary relations; particular illustrations will be given in the next succeeding subdivision. It is impossible to formulate a single definition which shall embrace all forms and phases of undue influence ; each case must largely depend upon its own circumstances.* The following propositions, however, embody the doctrine. The conveyance or agreement must be that of the party him- self; his own voluntary disposition. If such influence be exerted upon him, such mental, moral, or physical coercion employed towards him, that the act is not really his own, but is another's, then it is voidable. But within this limit there is no objection to argument, persuasion, or even influence, brought to bear upon a party, provided his mind is able to act and is left free to decide and act upon the considerations which are ad- dressed to it, so that the agreement is really his own voluntary act. Still, persuasions and other such conduct by the one benefited are always looked upon as suspicious; they throw upon him the burden of showing that the other party acted freely. The question frequently arises on the probate of wills. In Hall v. Hall, 37 L. J. P. & M. 40; L. R. 1 P. & M. 481, Mr. Justice Wilde laid down the rules in a most admirable manner which apply to the execution of instruments inter vivos as well as to wills: "To make a good will, a man must be a free agent, but all influences are not unlaw- ful. Persuasion appeals to the affections or ties of kindred, to a senti- ment of gratitude for past services or pity for future destitution, or the §B5i; (c) This portion of the Am. St. Rep. 734, 21 S. W. 499; text is quoted, in Parker v. Hill, 85 Davis v. Strange's Executor, 86 Va. Ark. 363, 108 S. W. 208; Sims v. 808, 8 L. K. A. 261, 11 S. E. 406 Sims, 101 Mo. App. 407, 74 S. W. (confidential relation of child and 449;^ Fisher v. Bishop, 108 N. T. parent); Stringfellow v. Hanson, 25 25, 2 Am. St. Bep. 357, 15 N. E. Utah, 480, 71 Pac. 1052 (same.) 331; Bounds v. Coleman (Tex. Civ. §951, (d) This portion of the App.), 189 S. W. 1086; and cited, note is quoted In Alcorn v. Alcorn, Maddox v. Maddox, 114 Mo. 35, 35 194 Fed. 275. § 951 EQUITY juKispBUDBiTCB. . 2028: ing with gifts, but is applied, when necessary, to con- veyances, contracts executory and executed, and wills.i like. These are all legitimate, and may be fairly pressed on a testator. On the other hand, pressure of whatever character, whether acting on the fears or the hopes, if so exerted as to overpower the volition without con- vincing the judgment, is a species of restraint under which no valid will can be made. Importunity or threats such as the testator has not the courage to resist; moral command asserted, and yielded to for the sake of peace and quiet, or of escaping from distress of mind or social discom- fort, — these, if qarried to a degree in which the free play of the testator's judgment, discretipn, or wishes is overborne, will constitute undue influ- ence, though no force is either used or threatened. In a word, a testator may be led, not driven, and his wUl mast be the offspring of his own volition, and not that of another." See also, illustrating undue influence in obtaining wills, where the will was held invalid. Parish Will Case, 25 N. T. 9; Tyler v. Gardiner, 35 N. Y. 55fl; Christy v. Clarke, 45 Barb. 529;* where the wiH was sustained: Gardiner v. Gardiner, 34 N. Y. 155; Horn V. Pullmann, 72 N. Y. 268; Meeker v. Meeker, 75 lU. 260; Barnes V. Barnes, 66 Me. 286.* The following eases are illustrations of undue influence in other trans- actions : B Dent v, Bennett, 4 Mylne & C. 269 ; BiUage v. Southee, 9 Hare, § 951, (e) See, also, Hartman v. son v. Bust, 149 Iowa, 594, 128 Striekler, 82 Va. 225. N. W. 954; Wiltsey v. Wiltsey, 153 §951, (*) Mackall v. Maekall, 135 Iowa, 455, 133 N. W. 665; Frush v. XT. S. 171, 10 Sup. Ct. 705; Meyer Green, 86 Md. 494, 39 Atl. 863; V. Jacobs, 123 Fed. 900; Somers v. Central Bank v. Copeland, 18 Md. McCready, 96 Md. 437, 53 Atl. 1117; 305, 81 Am. Dec. 597; Williams v. Schmidt v. Schmidt, 47 Minn. 457, Williams, 63 Md. 371; Cherbonnier 50 N. W. 598'; Crossan v. Crossan, v. Evitts, 56 Md. 276; Eau v. Von 169 Mo. 631, 70 S. W. 136; Maddox Zedlitz, 132 Mass. 164 (defense to V. Maddox, 114 Mo. 35, 35 Am. St. suit on contract); Lyons v. Elstou, Eep. 734, 21 S. W. 499 (citing the 211 Mass. 478, 98 N. E. 93; Hopkins text: confidential relationship not v. Ormsby, 149 Mich. 598, 113 N. W. proved); Herster r. Herster, 122 281; Graham v. Bureh, 44 Minn. 33, Pa. St. 239, 9 Am. St. Rep. 95, 16 46 N. W. 148; Slingerland v. Atl. 342; Carter v. Carter, 82 Va. Slingerland, 109 Minn. 407, 124 624. N. W. 19; Munson v. Carter, 19 Neb. §951, (g) Undue Influence, In- 293, 27 N. W. 208; Hansen v. stances. — • Bank of Montreal v. . . Stuart, [1911] A. C. (Priv. Coun.) §951, (i) The text is quoted in 120; Blmstedt v. Nicholson, 186 111. Dowie v. Driscoll, 203 111. 480,-68 580, 58 N. B. 381; Ashmead v. Eey- N. E. 56; in Parker v. Hill, 85 Ark. nolds, 134 Ind. 139, 39 Am. St. Eep. 363, 108 S. W. 208; and in Bounds 238. 33 N. E. 763; Fitch v. Beiser, v. Coleman (Tex. Civ. App.), 189 79 Iowa, 34, 44 N. W. 214; JefEer- S. W. 1086. 2029 CONSTRUCTIVE FEATJD. § 952 § 952. Sailors. — ^From the peculiar qualities which, as is well known, belong to sailors as a class, from the circum- 534, 540; BeanlWd v. Bradley, 2 Smale & G. 339; Wright v. Vanderplank, 8 De Gex, M. & Q. 133, 137; Prideaux v. Lonsdale, 1 De Gex, J. & S. 433; In re Metcalfe's Trusts, 2 De Gex, J. & S. 122; Toker v. Toker, 3 De Gex, J. & S. 487; Skiottowe v. Williams, 3 De Gex, F. & J. 535; Tomson v. Judge, 3 Drew. 386; Broun v. Kennedy, 33 Beav. 133; Hoghton v. Hogh- ton, 15 Beav. 278; Cooke v. Lamotte, 15 Beav. 234; Casborne v. Barsham, 2 Beav. 76; Lyon v. Home, L. R. 6 Eq. 655 (a striking case) ; Baker v. Loader, L. R. 16 Eq. 49; Everitt v. Everitt, L. R. 10 Eq. 405; Rhodes v. Bate, L. R. 1 Ch. 252; Turner v. Collins, L. R. 7 Ch. 329, Ellis v. Barker, L. R. 7 Ch. 104; Moxom v. Payne, L. R. 8 Ch. 881; Kempson v. Ashbee, L. R. 10- Ch. 15; Fulham v. McCarthy, 1 H. L. Cas. 703; Savory v. King, 5 H. L. Cas. 627; Smith v. Kay, 7 H. L. Cas. 750; Dalton v. Dalton, 14 Nev. 419; Moore v. Moore, 56 Cal. 89; Biglow v. Leabo, 8 Or. 147; Wad- dell V. Lanier, 62 Ala. 347; Mulock v. Mulock, 31 N. J. Eq. 594; Thornton v. Ogden, 32 N. J. Eq. 723; Miller v. Simonds, 5 Mo. App. 33; Graves V. White, 4 Baxt. 38; Leighton v. Orr, 44 Iowa, 679 (a very instructive case); Davis v. Dunne, 46 Iowa, 684; Ranken v. Patton, 65 Mo. 378; Bivins V. Jamigaii, 3 Baxt. 282; Bailey v. Woodbury, 50 Vt. 166; Yard V. Yard, 27 N. J. Eq. 114; Ross v. Ross, 6 Hun, 80; Bailey v., Litten, 52 ^Ala. 282; Mead v. Coombs, 26 N. J. Eq. 173; Lyons v. Van Riper, 26 N. J. Eq. 337; Brock v. Barnes, 40 Barb. 521; Wistar's Appeal, 54 Pa. St. 60; Greenfield's Estate, 14 Pa. St. 489, 507; Todd v. Grove, 33 Md. 188; Turner v. Turner. 44 Mo. 535; Taylor v. Taylor, 8 How. 183. In the following cases it was held there was no undue influence:'' Paine v. Roberts, 82 N. C. 451; McClure v. Lewis, 4 Mo. App. 554; Crowe v. Peters, 63 Mo. 429; HoUocher v. HoUocher, 62 Mo. 267 (an instructive case, showing what kind of influence is not undue) . Berthelson, 19 Neb. 433, 27 N. W. Champeau v. Champeau, 132 Wis. 423; Bennett v. Bennett (Neb.), 91 136, 112 N. W. 36 (deals also with N. W. 409; Loder v. Loder, 34 Neb. burden of proof). 824, 52 N. W. 814; Haydock v. Hayr §951, (t) No Undue Influence. — dock, 33 N. J. Eq. 494; Krause v. Sawyer v. White (C. C. A.), 122 Kraiise (N. J. Eq.), 55 Atl. 1095; Fed. 223; President, etc., of Bow- Holland v. John, 60 N. J. Eq. 435, doin College v. Merritt, 75 Fed. 480; 46 Atl. 172; Hammell .v. Hyatt, 59 Alcorn v. Alcorn, 194 Fed. 275; N. J. Eq. 174, 44 Atl. 953; Hart v. Stroup v. Austin, 180 Ala. 240, 60 Hart, 57 N. J. Eq. 543, 42 Atl. 153; South. 879; Hawthorne v. Jenkins, White V. Daly (N. J. E'q.), 58 Atl. 182 Ala. 255, Ann. Cas. 1915D, 707, 929; Slack v. Eees (N. J. Eq.), 59 62 South. 505; Whitten v. MeFall, Atl. 466; Aldridge v. Aldridge, 120 122 Ala. 619, 26 South. 131; Dona- N. Y. 614, 24 N. E. 1022; Disch v. hoe v. Chicago Cricket Club, 177 Timm, 101 Wis. 179, 77 N. W. 196; 111. 351, 52 N. E. 351; Latimer v. §952 EQUITY JUBISPEUDENCE. 2030 stances in which they are placed, and the temptations to which they are exposed, courts and legislatures have long treated them as almost non sui juris, as analogous to in- fants or expectant heirs, and therefore as, in some respects, wards of court. It seems to be settled that equity has juris- diction over contracts by sailors concerning wages made with their employers, and concerning the disposition of their prize money made with- third persons, and will scru- tinize such agreements with the utmost vigilance, and will cancel them if they are at all unfair, one-sided, or other- wise inequitable.! §952, IHow V. Weldon, 2 Ves. Sr. 516, 518; Taylour v. Eochfort, 2 Ves. Sr. 281 J Baldwin v. Rochford, 1 Wils. 229. If this jurisdiction was Latimer, 174 HI. 418, 51 N. E. 548; Kimtall V. Cuddy, 117 HI. 213, 7 N. E. 589; Burt v. Quisenberry, 132 111. 385, 24 N. E. 622; Shea v. Mur- phy, 164 111. 614, 56 Am. St. Eep. 215J 45 N. E. 1021; Guild v. Hall, 127 HI. 523, 20 N. E. 665; Bishop v. Hilliard, 227 HI. 382, 81 N. E. 403; Fitzgerald v. Allen, 240 HI. 80, 88 N. E. 240; Lord v. E-eed, 254 111. 350, Ann. Oas. 1913C, 139, 98 N. E. 553 (undue influence cannot be in- ferred from illicit relations alone) ; Smith V. Kopitzki, 254 HI. 498, 98 N. E. 953; Sargent v. Boberts, 265 111. 210, 106 N. E. 805; Crooks v. Smith (Iowa), 99 N. W. 112; Mal- low V. Walker, 115 Iowa, 238, 91 Am. St. Bep. 158, 88 N. W. 452; Wright's Ex'r v. Wright, 32 Ky. Law Kep. 659, 106 S. W. 856; Best V. House (Ky.), 113 S. W. 849 (grantor's illicit relations with mother of grantees raises no pre- sumption of- undue influence) ; Henry v. Leech, 123 Md. 436, 91 Atl. 694; Nelson v. Wiggins, 172 Mich. 191, 137 N. W. 623; Wise V. Schwartzwelder, 54 Md. 292; Holmes v. Holmes, 129 Mich. 412, 95 Am. St. Eep. 444, 89 N. W. 47; Hyman v. Wakeham (Mich.), 94 N. W. 1062; Kichardson v. Smart, 152 Mo. 623, 75 Am, St. Eep. 488, 54 S. W. 542; Fitzpatriek v. Weber, 168 Mo. 562, 68 S. W. 913; Cohron V. Polk, 252 Mo. 261, 158 S. W. 603; Earle v. N. & N. B. H. Co., 36 N. J. Eq. 188; Thorp v. Smith, 63 N. J. Eq. 70, 51 Atl. 437; Coombe's Ex'r V. Carthew, 59 N. J. Eq. 638, 43 Atl. 1057; Anderson v. Anderson, 17 N.D. 275,115 N.W. 836; In re Hol- man's Estate, 42 Or. 345, 70 Pae. 908; Dean v. Dean, 42 Or. 290, 70 Pac. 1039; Bevels v. Bevels, 64 S. C. 256, 42 S. E. Ill; Winn v. Winn (Tex. Civ. App.), 80 S. W. 110; Chadd V. Moser, 25 Utah, 369, 71 Pac. 870; Stringfellow v. Hanson, 25 Utah, 480, 71 Pae. 1052; Hay- ward V. Tacoma Savings Bank & Trust Co., 88 Wash. 542, 153 Pac. 352; Delaplain v. Grubb, 44 W. Ta. 612, 67 Am. St. Eep. 788, 30 S. E. 201; Hale v. Cole, 31 W. Va. 576, 8 S. E. 516; Erwin v. Hedrick, 52 W. Va. 537, 44 S. E. 165; Crook- shanks V. Bausbargor (W. Va.), 92 S. E. 7S; Meyer v. Arends, 126 Wis. 603, 106 N. W. 675. 2031 CONSTRUCTIVE PBAUD. § 953 § 953. Expectants, Heirs, and Reversioners.* — Expectant beirs, reversioners, and holders of other expectant inter- ests stand in a position different from that of all other persons sui juris, and a special jurisdiction for their pro- tection has long been vrell established. This jurisdiction rests upon two distinct foimdations. In the first place, heirs, reversioners, and other expectants, during the life- time of their ancestors and life tenants, are considered as peculiarly liable to imposition, and exposed to the tempta- tion and danger of sacrificing their future interests, in order to meet their present wants. Being sometimes in actual, but more often in imaginary, distress, they do not stand upon an equal footing with those who deal with them concerning their expectant estates, and such persons are in a position to take advantage of- their condition, and to dictate ineqiiitable and even extravagantly hard terms in any contract of loan or purchase which may be made. In the second place, the dealings of heirs and reversioners with their expectant interests are often a gross violation of the moral if not legal duties which they owe to their ancestors and life tenants who are the present owners of the property, and from or through whom their future es- tates will come, and may be a virtual fraud upon the rights of those parties. Equity, therefore, treats such dealings with expectant interests as a possible fraud upon the heirs and reversioners who are immediate parties to the trans- action, and as a virtual fraud upon their ancestors, life tenants, and other present owners. Upon these two con- ever exercised by the American courts of equity, — which I think is .very doubtful from the absence of reported cases, and from the fact that mat- ters of foreign commerce belong exclusively to the cognizance- of the national government, — ^it has been made obsolete by the stringent legisla- tion of Congress for the protection of sailors which may be enforced by the United States courts. ^953, (a) This paragraph is 68 N. J. Eq. 108, 59 Atl. 1036; In re quoted in Elliott v. Leslie, 124 Ky. Thompson's Estate, 26 S. D. 576, 553, 124 Am. St. Rep. 418, 99 S. W. Ann. Cas. 1913B, 446, 128 N. W. 619, and cited in Dixon v. Bentley, 1127. § 953; EQUITY JXJRISPEUDENCE. 2032 sideratiohs the equitable jurisdiction is founded. The rule is well settled that all conveyances, sales, and charges, and contracts of sale or charge, of their future and ex- pectant interests made by heirs, reversioners, and other expectants during the lifetime of their ancestors or life tenants, upon an inadequate consideration^ will be relieved against in equity, and either wholly or partially set aside. In this instance, fraud is inferred from mere inadequacy of consideration. All dealings by such expectants are not necessarily and absolutely voidable. But in every such conveyance or contract with an heir, reversioner, or ex- pectant, a presumption of invalidity arises from the trans- action itself, and the burden of proof rests upon the pur- chaser or other party claiming the benefit of the contract to show affirmatively its perfect fairness, and that a full and adequate consideration was paid, — that is, the fair market value of the property, and not necessarily the value as shown by the life-tables.^ If he succeeds in overcom- ing the presumption by showing these facts, the transac- tion will stand; otherwise it will beset aside. It is not necessary to shpw as a condition of relief that the heir or reversioner was an infant, or that he was in a condition of actual distress when the bargain was made. A court of equity presumes distress. The very fact of the sale or charge shows prima facie that he was not in a position to make his own terms, and that he submitted to have them dictated to him by the other party. The foregoing rules assume,- simply, that there was an inadequacy of considera- tion, without any further element of fraud. If, in addi- tion, the circumstances show actual fraud, misrepresenta- tions, or concealments, oppression, taking undue advantage of real necessities, or other unfair, inequitable dealing by the party who acquires the expectant interest, a court of equity will grant full relief without regard to any pre- • § 953, (b) This portion of the text 179; also in Elliott v. Leslie, 124 is quoted in, McClure v. Eaben, 125 Ky. 553, 134 Am. St. Rep. 418, 99 Ind. 139, 9 L. R. A. 477, 25 N. E. S. W. 619. 2033 cowStkugtivb fraud. § 953 sumption.i " Whenever a conveyance, sale, or contract for sale is set aside in this manner on the sole ground of in- §953, lEarl of Chesterfield v. Jansseu, 2 Ves. Sr. 125; 1 Lead. Cas. Eq., Eng. ed. note, 773, 809-825; Am, ed. note, 825-836. The subject is fully discussed and the authorities examined in these notes. The Ameri- can editor cites and comments upon the American decisions, especially those which have departed from the doctrine as generally settled. Al- though the subject is of great importance in England, it has compara- tively little practical interest in the United States. I have not deemed it necessary, therefore, to enter into any extended discussion of the more spe- cial rules and limitations; it seemed sufficient to state the general conclu- sions, and to cite the important authorities. The following cases illustrate the doctrine, and show how it has been applied by the American courts : Earl of Aylesford v. Morris, L. R. 8 Ch. 484; Tyler v. Yates, L. R. 11 Eq. 265; 6 Ch. 665; Miller v. Cook, L. R. 10 Eq. 641; In re Slater's Trusts, L. R. 11 Ch. Div. 227; Perfect v. Lane, 3 Be Gex, F. & J. 369; Webster V. Cook, L. R. 2 Ch. 542, 546; Edwards v. Burt, 2 De Gex, M. & G. 55; O'Rorke v. Bolingbroke, L. R. 2 App. C. 814-834; Savery v. King, 5 H. L. Cas. 627; Aldborough v. Trye, 7 Clark & F. 436; Shelly v. Nash, 3 Madd. 232, 235; Fox v. Wright, 6 Madd. Ill; Gowland v. De Faria, 17 Ves. 20, 24; Peacock v. Evans, 16 Ves. 512; Davis v. Marlborough, 2 Swanst. 108, 154; Edwards v. Browne, 2 Coll. C. C. 100; Hincksman v. §953, (c) The text is cited in 940; McKinney v. Pinckard, 2 In re Wickersham's Estate, 138 Gal. Leigh, 149, 21 Am. Dec. 601. See, 355, 70 Pac. 1076; In le Garcelon, further. In re Eichardson's Estate, 104 Gal. 584, 43 Am. St. Eep. 953, 236 Pa. St. 136, 84 Atl. 670 (inade- 32 L. E. A. 595, 38 Pac. 414. See, quacy of consideration resulting also, Fry v. Lane, L. E. 40 Ch. Div. fxom a subsequent event, viz., the 315 (citing these cases of mere death of a life tenant, does not Ten- undervalue, in addition to several der the transaction voidable, when of those mentioned by the author: at the time of the assignment the Wiseman v. Beak, 2 Vern. 121; value of the interest was con- Berkley-Preeman. V. Bishop, 2 Atk. jeetured); Moore v. Norristown 39; Earl of Portmore v. Taylor, 4 Trust Co., 243 Ped. (Pa.) 931 (as- Sim. 182; Boothby v. Boothby, 1 signment of remainder upheld, con- Macn. & 6. 604, 15 Beav. 212; Pos- sideration adequate). The state- ter V. Eoberts, 24 Beav. 467; Ben- ments contained in the notes to Mc- you V. Cook, L. R. 10 Ch. 389) ; Call v. Hampton, in 56 Am. St. Eep. McClure v. Baben, 125 Ind. 139, 9 339, and in 33 L. R. A. 266, to the L. E. A. 477, 25 N. E. 179, 133 Ind. effect that in America mere inade- 507, 36 Am. St. Eep. 558, 33 N. B. quacy of consideration is not suffi- 275; Bacon v. Bonham, 33 N. J. Eq. cient in this class of cases, are 614; In re Fritz's Estate, 160 Pa. St. hardly sustained by the authorities 156, 28 Atl. 642; Read v. Mosby, 87 there cited. Tenn. 759, 5 L. R. A. 122, 11 S. W. 11—128 § 953 EQUITY JUKISPKUDENCE. 2034 adequacy of consideration, the relief is granted only upon condition tliat the sum actually paid or loaned, with inter- est thereon, is refunded; and the court will so frame its decree, if necessary, that the conveyance or sale, instead of being immediately and absolutely canceled, shall stand as security for the amount which, it is adjudged, should be Smith, 3 Russ. 433, 435; King v. Hamlet, 4 Sim. 223; 2 Mylne & K. 456; 3 Clark & F. 218; Newton v. Hunt, 5 Sim. 511; Roberts v. Tunstall, 4 Hare, 257; Bromley v. Smith, 26 Beav. 644; Jenkins v. Pye, 12 Pet. 241; Larrabee v. Larrabee, 34 Me. 477; Poor v. Hazleton, 15 N. H. 564; Boyn- ton V. Hubbard, 7 Mass. 112; Trull v. Eastman, 3 Met. 121, 37 Am. Dec. 126; Fitch v. Fitch, 8 Pick. 480; Varick v. Edwards, 1 HofE. Ch. 382; Power's Appeal, 63 Pa. St. 443; Davidson v. Little, 22 Pa. St. 245, 252, 60 Am. Dec. 81; Mastin v. Marlow, 65 N. C. 695; Butler v. Haskell, 4 Desaus. Eq. 651; Nimmo v. Bavis, 7 Tex. 26; Needles v. Needles, 7 Ohio St. 432, 70 Am. Dec. 85; Lowry v. Spear, 7 Bush. 451; Meriweather v. Herran, 8 B. Mon. 162. In some cases the doctrine seems to have been rejected or only partially adopted:* See Mayo v. Carrington, 19 Gratt. 74; Cribbins v. Markwood, 13 Gratt. 495, 67 Am. Dec. 775. In Parmelee V. Cameron, 41 N. Y. 392, a sale of a legacy payable in future made by an improvident and dissipated legatee was sustained. Since the relief is based in part upon the ground that the sale by an heir or reversioner is a constructive fraud upon the ancestor, it has been held that if a father knew of his son's design to dispose of his expectancy, and did not dissent, the transaction would not come within the general rule, and would be upheld: King v. Hamlet, 4 Sim. 223; 2 Mylne & K. 456, 473. In this case Lord Brougham expresses a very strong opinion in favor of the exception. But, as in many other instances. Lord Brougham's opinion has not been sustained. It is settled, at least in England, that the mere fact of the ancestor's assent, approval, or even assistance will not prevent the court from giving relief. The doctrine is established to secure the rights of heirs and reversioners, and t^eir rights cannot be defeated by the action of the ancestor. This view seems to be in strict accordance with principle: Earl of Aylesford v. Morris, L. R. 8 Ch. 484, 491, per Lord Selborne; see also King v. Savery, 1 Smale & G. 271; 5 H. L. Cas. 627; Talbot v. Staniforth, 1 Johns. & H. 484; Jenkins v. Stet- son, 9 Allen, 128; McBee v. Myers, 4 Bush, 356. If, however, the trans- action is a fair family or other arrangement for the benefit of all parties §853, (d) Lee v. Lee, 2 Duvall, 1057 (rule recognized as to expect- 134. See, also, MoAdams v. Bailey, ancies, rejected as to contingent 169 Tnd. 518, 124 Am. St. Eep. 240, interests). 13 L. E. A. (N. S.) 1003, 82 N. E. 2035 CONSTKUCTIVE FKAUD. § 953 repaid.2 In analogy with this general doctrine concerning dealings with expectant interests, courts of equity have extended a protection to young, inexperienced, and improvi- dent heirs, by relieving against other kinds of unconscion- able bargains which they may have made, and by reduc- ing the claims against them to a reasonable amount.^ interested, in which the ancestor or life tenant joins, and in which there is no undue influence, it will not be set aside on the ground of inadequacy: •Tweddell v. Tweddell, Turn. & R. 13; Lord v. JefEkins, 35 Beav. 7; Shelly V. Nash, 3 Madd. 232 .« § 953, 2 This particular rule is a fine illustration of the maxim. He who seeks equity must do equity, and is based upon the plainest principles of right and justice. Those few' American decisions which have departed from it have so far failed to appreciate the essential conceptions of equity: In re Slater's Trusts, L. R. 11 Ch. Div. 227; Tyler v. Yates, L. R. 11 Eq. 265; 6 Ch. 665; Miller v. Cook, L. R. 10 Eq. 641; Bawtree v. Wat- son, 3 Mylne & K. 339; Wharton v. May, 5 Ves. 27, 68; Peacock v. Evans, 16 Ves. 512; Croft v. Graham, 2 De Gex, J. & S. 155; Boynton v. Hub- bard, 7 Mass. 112 ; Boyd v. Dunlap, 1 Johns. Ch. 478 ; Williams v. Savage Mfg. Co., 1 Md. Ch. 306; 3 Md. Ch. 418; but see Small v. Jones, 6 Watts & S. 122; Seylar v. Carson, 69 Pa. St. 81. A modern English statute enacts that no purchase, made iona fide, of a reversionary interest shall be set aside merely on the ground of under- value: 31 & 32 Vict., c. 4. It is held that as this statute is confined to fair purchases, the equitable doctrine concerning unfair transactions, and the jurisdiction to relieve heirs and reversioners who have been actually imposed upon, is left unaltered: In re Slater's Trusts, L. R. 11 Ch. Div. 227; Earl of Aylesford v. Morris, L. R. 8 Ch. 484; Tyler v. Yates, L. R. 11 Eq. 265; 6 Ch. 665; Miller v. Cook, L. R. 10 Eq. 641;* nor are the doctrine and jurisdiction affected by the repeal of the usury laws: Id.; and Croft v. Graham, 2 De Gex, J. & S. 155. §953, 3 Thus where unscrupulous persons, taking advantage of such expectants, and furnishing them means for extravagance and dissipation, have sold them goods at outrageous prices, j)r loaned them money at out- rageous rates of interest, even when there are no statutes against usury, courts of equity have reduced the securities given for such claims to a fair amount: Croft v. Graham, 2 De Gex, J. & S. 155; Bill v. Price, 1 Vem. 467; Lamplugh v. Smith, 2 Vem. 77; Whitley v. Price, 2 Vem. 78; Brooke v. Galley, 2 Atk. 34, 35; Freeman v. Bishop, 2 Atk. 39. I venture to § 953, (e) And see Hoyt v. Hoyt, Ch. Div. 315. See Dixon v. Bentley, 61 Vt. 413, 18 Atl. 313. 68 N. J. Eq. 108, 59 Atl. 1036, opin- §953, (f) Fry v. Lane, L. E. 40 ion of Pitney, V. C. § 954 EQUITY JtTEISPEUDENCE. 2036 § 954. Post Obit Contracts. — In strict analogy to the equitable relief against sales of expectancies, and depend- ing upon the same reasons, is that against post obit con- tracts. A post obit contract is an agreement made by an expectant heir, successor, devisee, or legatee, whereby, in consideration of a smaller sum loaned, he promises to pay to the creditor a much larger sum, exceeding in amount the principal and lawful interest, upon the death of the person from whom he expects the inheritance, succession, or bequest, provided he himself should survive such per- son. Such an instrument is clearly an imposition upon the debtor, since it necessarily takes advantage of his actual or supposed necessities. It is also a gross fraud upon the ancestor or testator; it offers a premium upon his death; being a wagering contract, it renders the cred- itor's interests dependent upon his speedy death. Post obit contracts, and all other instruments essentially the same though differing in form, will be set aside. In grant- ing this relief, as in the similar case of dealings with ex- pectancies, where there are no special circumstances of unfairness or imposition-, and the inadequacy of considera- tion is the sole ground of interference, the court will re- quire a repayment to the lender of what is justly due, and may permit the security to stand for such amount until it is repaid.! doubt whether this relief would be given by the courts of the American states unless the circumstances of a ease showed actual fraud. The Eng- lish policy of protecting ancestral estates has never prevailed in this country. §954i 1 Chesterfield v. Janssen, 2 Ves. Sr. 125, 157; 1 Lead. Cas. Eq., 4th Am. ed., 773, 809, 825; Wharton v. May, 5 Ves. 27; Curling v. Town- shend, 19 Ves. 628; Fox v. Wright, 6 Madd. Ill; Davis v. Duke of Marl- borough, 2 Swanst. 174; Crowe v. Ballard, 3 Brown Ch. 117, 120; Gwynne V. Heaton, 1 Brown Ch. 1, 9; Earl of Aldborough v. Trye, 7 Clark & F. 436, 462, 464; Bernal v. Donegal, 3 Dow, 133; 1 Bligh, N. S., 594; In re Slater's Trusts, L. R. 11 Ch. Div. 227; Earl of Aylesford v. Morris, L. R. 8 Ch. 484; Pennell v. Millar, 23 Beav. 172; Benyon v. Fitch, 35 Beav. 570; Boynton v. Hubbard, 7 Mass. 112 (the opinion of Pai-sons, C. J., contains 2037 CONSTKTJOTIVE FEATJD. § 955 § 955. II. Transactions Presumptively Invalid Between Persons in Fiduciary Relations.^ — ^It is of the utmost im- portance to obtain an -accurate conception of the exact cir- cumstances under which the equitable principle now to be examined applies; otherwise the entire discussion of the doctrine will be confused and imperfect. In the various instances described in the preceding paragraphs there has been an actual undue influence consciously and designedly exerted upon a party who was peculiarly susceptible to external pressure on account of his mental weakness, old age, ignorance, necessitous condition, and the like. The existence of any fiduciary relation was unnecessary and immaterial. The undue influence being established as a fact, any contract obtained or other transaction accom- plished by its means is voidable, and is set aside Without the necessary aid of any presumption. The single circum- a full and admirable discussion of the doctrine concerning this class of contracts) ; and see Freme v. Brade, 2 De Gex & J. 582. Where an expectant heir or successor, upon a present consideration, makes a secret agreement to convey or pay to the creditor a large but uncertain portion of the estate which he may inherit or succeed to in case he survives his parent or other ancestor, such contract is equally obnoxious to the equitable doctrine, and will be set aside: Boynton v. Hubbard, 7 Mass. 112; but an agreement by such an heir or successor, made with the consent of his ancestor, and for a fair consideration, to convey the prop- erty which may afterwards come to him by descent or succession, is valid : Pitch V. Fitch, 8 Pick. 480; as to fair and valid agreements among ex- pectant heirs or successors to share the property which may come to them, see Hyde v. White, 5 Sim. 524; Wethered v. Wethered, 2 Sim. 183; Har- wood V. Tooke, 2 Sim. 192; Beckley v. Newland, 2 P. Wms. 182; Trull V. Eastman, 3 Met. 121, 123, 37 Am. Dec. 126.» How far the various classes of agreements described in the foregoing paragraphs may be rati- fied, confirmed, and thus made valid, is considered at the close of the next subdivision upon fiduciary relations. § 954, (a) See, also, Edler v. valuable services and avoided a law- Frazier, 174 Iowa, 46, 156 N. W. suit, not within the condemnation 182 (agreement for contingent fee of the rules of the text). of twenty per cent of the total § 955. (a) Sections 955 et seq. are amount heirs would get on death of cited in Keith v. Killam, 35 Fed. widow, when attorney rendered 243, 246. § 956 EQUITY JUEISPBUDENCE, 2038 stance now to be considered is the existence of some fidu- ciary relation, some relation of confidence subsisting be- tween two parties. No mental weakness, old age, igno- rance, pecuniary distress, and the like, is assumed as an element of the transaction; if any such fact be present, it is incidental, not necessary, — immaterial, not essential.^ Nor does undue influence form a necessary part of the cir- cumstances, except so far as undue influence, or rather the ability to exercise undue influence, is implied in the very conception of a fiduciary relation, in the position of superiority occupied by one of the parties over the other, contained in the very definition of that relation. This is a most important statement, not a mere verbal criticism. Nothing can tend more to produce confusion and inaccuracy in the discussion of the subject than the treatment of actual undue influence and fiduciary relations as though they con- stituted one and the same doctrine.*^ § 956. The General Principle. — It was shown in the pre- ceding section that if one person is placed in such a fidu- ciary relation towards another that the duty rests upon him to disclose, and he intentionally conceals a material fact with the purpose of inducing the other to enter into an agreement, such concealment is an actual fraud, and the agreement is voidable without the aid of any presumption. We are now to view fiduciary relations under an entirely different aspect; there is no intentional concealment, no misrepresentation, no actual fraud. The doctrine to be § 955, (b) The text is quoted in Stephens v. Collison, 249 111. 225, 94 Nichols V. McCarthy, 53 Conn. 299, N. E. 664; Hill v. Hall, 191 Mass. 55 Am. Eep. 105, 23 Atl. 93. 253, 77 N. E. 831; Pritchard v. Hut- §955, (c) The text is quoted in ton, 187 Mich. 346, 153 N. W. 705; Thomas v. Whitney, 186 111. 225, 57 Holt v. Holt, 28 Okl. 639, 102 Pae. N. E. 808; Beach v. Wilton, 244 HI. 187; Thomas v. Thomas, 27 Okl. 784, 413, 91 N. E. 492; Gilmore v. Lee, Ann. Cas. 1912C, 713, 35 L. R. A. 237 111. 402, 127 Am. St. Eep. 330, (N. S.) 124, 109 Pac. 825, 113 Pac. 86 N. E. 568; and cited in Cowen v.. 1058 (husband and wife; review of Adams (C. C. A.), 78 Fed. 536, 552, cases); Stringfellow v. Hanson, 25 47 U. S. App. 676; Hemenway v. Utah, 480, 71 Pae. 1052; Cheuvront Abbott, 8 Cal. App. 450, 97 Pac. 190; v. Cheuvront (W. Va.), 46 S. E. 233. 2039 CONSTBXJCTIVE FKAtTD. § 956 examined arises from the very conception and existence of a fiduciary relation. While equity does not deny the possibility of valid transactions between the two parties, yet because every fiduciary relation implies a condition of superiority held by one of the parties over the other, in every transaction between them by which the superior party obtains a possible benefit, equity raises a presump- tion against its validity, and casts upon that party the burden of proving affirmatively its compliance with equi- table requisites, and of thereby overcoming the presump- tion.^ One principle underlies the whole subject in all its applications; and this principle may be stated in a nega- tive and in an affirmative form. Its negative aspect can- not be better expressed than in the following language of a most able judge in a recent decision: "The broad prin- ciple on which the court acts in cases of this description is, that wherever there exists such a confidence, of what- ever character that confidence may be, as enables the per- son LQ whom confidence or trust is reposed to exert influ- ence' over the person trusting him, the court will not allow any transaction between the parties to stand, unless there has been the fullest and fairest explanation and communi- cation of every particular resting in the breast of the one who seeks to establish a contract with the person so trust- ing hun."i The principle was affirmatively stated with § 956, 1 Tate v. Williamson, L. R. 1 Eq. 528, 536, per Page Wood, V. C. (Lord Hatherley) ; and see Cowee v. Cornell, 75 N. Y. 91, 99, 100, 31 Am. Bep. 428, per Hand, J. In the passage last cited the learned judge has mingled up the doctrine concerning simple fiduciary relations with that concerning actual undue influence or oppression. §956, (a) The text is quoted in Crawford v. Crawford, 24 Nev. 410, Noble's Adm'r v. Moses, 81 Ala. 56 Pae. 94; Butler v. Prentiss, 158 530, 60 Am. Eep. 175, 1 South. 217; N. Y. 49, 52 JST. E. 652; cited. Beach Odell V. Moss, 130 Cal. 352, 357, 62 v. Wilton, 244 111. 413, 91 N. E. 492; Pac. 555; Curtis v. Armagast, 158 Gilmore v. Lee, 237 111. 402, 127 Iowa, 507, 138' N. W. 873; Peterson Am. St. Eep. 330, 86 N. E. 568; V. Budge, 35 Utah, 596, 102 Pac. 211 Stephens v. CoUison, 249 111. 225, 94 (physician and patient); Branch v. N. E. 664; Hill v. Hall, 191 Mass. Buckley, 109 Va. 784, 65 S. E. 652; 253, 77 N. E. 831; Pritchard v. Hut- § 956 EQUITY JXJEISPRTJDENCE. 2040 equal accuracy in tlie same case on appeal, as follows: "The jurisdiction exercised by courts of equity over the dealings of persons standing in certain fiduciary relations has always been regarded as one of a most salutary de- scription. The principles applicable to the more familiar relations of this character have been long settled by many well-kaown decisions, but the courts have always been care- ful not to fetter this useful jurisdiction by defining the exact limits of its exercise. Wherever two persons stand in such a relation that, while it continues, confidence is necessarily reposed by one, and the influence which nat- urally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the con- fiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such con- fidential relation had existed." ^^ Courts of equity have § 956, 2 Tate v. Williamson, L. R. 2 Ch. 55, 60, 61, per Lord Chelms- ford. In Rhodes v. Bate, L. R. 1 Ch. 252, 257, Turner, L. J., laid down some most important corollaries of the general principle, and distinguished it from the doctrine concerning undue influence exerted upon persons weak-minded, etc. : "I take it to be a well-established principle of this court that persons standing in confidential relation towards others cannot entitle themselves to hold benefits which those others may have conferred upon them, unless they can show to the satisfaction of the court that the persons by whom the benefits have been conferred had competent and in- dependent advice in conferring them. This, in my opinion, is a settled ton, 187 Mich. 346, 153 N. W. 705; §956, (b) The text is quoted in Balthrop v. Todd, 145 N. C. 112, 58 Keith v. Kellam, 35 Fed. 243, 246; S. E. 996; Holt v. Holt, 23 Okl. 639, Cheuvront v. Cheuvront (W. Va.), 102 Pae. 187; Clough v. Dawson, 69 46 S. E. 233; Stuart v. Hauser Or. 52, 133 Pae. 345, 138 Pac. 233; (Idaho), 72 Pae. 719, 727; Ewing v. Shea's Appeal, 121 Pa. St. 302, 1 Ewing, 33 Okl. 414, 126 Pae. 811; Ii. E. A. 422, 15 All. 629; Kyle v. Thomas v. Thomas, 27 Okl. 784, Perdue, 95 Ala. 579, 10 South. 103; Ann. Cas. 1912C, 713, 35 L. E. A. Cowen V. Adams (C. C. A.), 78 (N. S.) 124, 109 Pac. 825, 113 Pac. Fed. 536, 552, 47 U. S. App. 676; 1058; Branch v. Buckley, 109 Va. Stringfellow v. Hanson, 25 Utah, 784, 65 S. E. 652; Salhingcr v. 480, 71 Pae. 1052; Heekscher v. Salhinger, 56 Wash. 134, 105 Pac. Blanton (Va.), 66 S. E. 859. 236. 2041 CONSTRXJCTIVE FEAUD. § 956 carefully refrained from defining the particular instances of fiduciary relations in such a manner that other and per- haps new cases might be excluded. It is settled by an over- whelming weight of authority that the principle extends to every possible case in which a fiduciary relation exists as general principle of the court, and I do not think that either the age or the capacity of the person conferring the benefit, or the nature of the benefit conferred, affects the principle. Age and capacity are considera- tions which may be of great importance in cases in wMch the principle does not apply; but I think they are but of little, if any, importance in cases to which the principle is applicable. They may afford a sufficient protection in ordinary cases, but they can afford but little protection in cases of influence founded upon confidence. And, as to the nature of the benefit, the injury to the party by whom the benefit is conferred cannot depend upon its nature." Also, at p. 260 : "I think that where a relation of confidence is once established, either some positive act or some com- plete case of abandonment must be shown in order to determine it. The mere fact that the relation is not called into action is not, I think, suffi- cient of itself to determine it, for this may well have arisen from there having been no occasion to resort to it.'' In BUlage v. Southee, 9 Hare, 534, 540, it was said : "No part of the jurisdiction of the court is more useful than that which it exercises in watching and controlling transac- tions between persons standing in a relation of confidence to each other; and, in my opinion, this part of the jurisdiction of the court cannot be too freely applied, either as to the persons between whom, or the circum- stances in which, it is applied. The jurisdiction is founded on the prin- ciple of correcting abuses of confidence, 'and I shall have no hesitation in saying it ought to be applied, whatever be the nature of the confidence reposed, or the relation of the parties between whom it has subsisted. I take the principle to be one of universal application, and the cases in which the jurisdiction has been exercised, — those of trustee and cestui que trust, guardian and ward, attorney and client, surgeon and patient, — to be merely instances of the application of the principle. ... It is said that the plaintiff intended to be liberal, and that this court would not prer vent him from being so, and no doubt it would not if such were his inten- tion. But intention imports knowledge, and liberality irnports the absence of infloience; and where a gift is set up between parties standing in a confidential relation, the onus of establishing it by proof rests upon the party who has received the gift." In the frequently quoted case of Hatch v. Hatch, 9 Ves. 292, Lord Eldon said: "This case proves the wisdom of the court in saying that it is almost impossible, in the course of the con- nection of guardian and ward, attorney and client, trustee and cestui que trust, that a ti^ansaction shall stand, purporting to be bounty for the exe- § 957 EQUITY JTJEISPRUDENCE. 2042 a fact, in which there is confidence reposed on one side, and the resulting superiority and influence on the other. The relation and the duties involved in it need not be legal; it may be moral, social, domestic, or merely personal." § 957. Two Classes of Cases.^^ — There are two classes of cases to be considered, which are somewhat different in their external forms, and are governed by different special rules, and which still depend upon the single general prin- ciple. The first class includes all those instances in which the two parties consciously and intentionally deal and ne- gotiate with each other, each knowingly taking a part in the transaction, and there results from their dealing some conveyance, or contract, or gift. To such cases the prin- ciple literally and directly applies. The transaction is not cution of an antecedent duty." In Smith v. Kay, 7 H. L. Cas. 750, Lord Kingsdowne said, the equitable principle applied in all transactions where "influence has been acquired and abused, in which confidence has been reposed and betrayed." Lord Cranworth also said that the familiar cases of parent and child, guardian and ward, attorney and client, are only in- stances of a broad and widely applicable principle. See also Bennett v. Austin, 81 N. Y. 308, 332, 333, per Rapallo, J.; Young v. Hughes, 32 N. J. Eq. 372; Emigrant Co. v. County of Wright, 97 U. S. 339; Huguenin V. Baseley, 14 Ves. 273; 2 Lead. Cas. Eq., 4th Am. ed., 1156, 1174, 1192. §956, (c) The text is quoted in Rogers, 97 Md. 573, 55 Atl. 450; Smith V. Goethe, 147 Gal. 725, 82 Tompkins v. HoUiater, 60 Mich. Pae. 384; McKnatt v. MeKnatt 470, 27 N. W. 651 (fiduciary bene- (Del.), 93 Atl. 367; Beach v. Wil- fiting by mistake of law); Harrop ton, 244 ni. 413, 91 N. E. 492; Eoby v. Cole, 85 N. J. Eq. 32, 95 Atl. 378; V. Colehour, 135 HI. 300, 25 N. E. Thomas v. Thomas, 27 Okl. 784, 777; Walker v. Shepard, 210 111. Ann. Cas. 1912C, 713, 35 L. R. A. 100, 71 N. E. 422; Irwin v. Sample (N. S.) 124, 109 Pae. 825, 113 Pae. (HI.), 72 N. E. 687; Thomas v. 1058; Branch v. Buckley, 109 Va. Thomas, 27 Okl. 784, Ann. Cas. 784, 65 S. E. 652; Salhinger v. 1912C, 713, 35 L. E. A. (N. S.) 124, Salhinger, 56 Wash. 134, 105 Pae. 109 Pae. 825, 113 Pae. 1058; Branch 236. See, also-. Mors v. Pesterson, V. Buckley, 109 Va. 784, 65 S. E. ' 261 El. 532, 104 N. E. 216. 652; Salhinger v. Salhinger, 56 §957, (a) This paragraph is cited, Wash. 134, 105 Pae. 236; and cited generally, in Bowen v. Kutzner, 167 in Phillips v. Bradford, 147 Ala. Fed. 281, 93 C. C. A. 33; Eddy v. 346, 41 South. 657; Price's Adm'r v. Eddy, 168 Fed. 590, 93 C. C. A. 586. Thompson, 84 Ky. 228; Kogers v. 2043 CONSTRUCTIVE FKATJD. § 957 necessarily voidable, it may be valid; but a presumption of its invalidity arises, wMch can only be overcome, if at all, by clear evidence of good faith, of full knowledge, and of independent consent and action.^ The second class in- cludes all those instances in which one party, purporting to act in his fiduciary character, deals with himself in his private and personal character, without the knowledge of his beneficiary, as where a trustee or agent to sell sells the property to himself. Such transactions are voidable at the suit of the beneficiary, and not merely presumptively or prima facie invalid.'' Nevertheless this particular rule is only a necessary application of the single general principle. The circumstances show that there could not possibly be the good faith, knowledge, and free consent required by the principle, and therefore the result which is a rebuttable presumption in the first class of transactions becomes a con- clusive presumption in the second. The transaction^ be- longing to the first class may be gifts, or agreements and conveyances upon valuable consideration. The principle is applied with great emphasis and rigor to gifts, whether they are simple bounties, or purport to be the effects of liberality based upon antecedent favors and obligations. ^ ^ § 957, 1 Huguenin v. Baseley, 14 Ves. 273; 2 Lead. Cas. Eq. 1156, 1174, 1192; Fulham v. McCarthy, 1 H. L. Cas. 703; Savery v. King, 5 H. L. Cas. 627; Prideaux v. Lonsdale, 1 De Gex, J. & B. 433; Wright v. Vander- plank, 8 De Gex, M. & G. 133; Hoghton v. Hoghton, 15 Beav. 278; Broun § 957, (b) The text is quoted in § 957, (c) The text is quoted in Nichols V. McCarthy, 53 Conn. 299, Frink v. Koe, 70 Cal. 276, 312, 11 55 Am. Eep. 105, 23 Atl. 93; Curtis Pae. 820; Branch v. Buckley, 109 V. Armagast, 158 Iowa, 507, 138 Va. 784, 65 S. E. 652; cited in N. W. 873; Branch v. Buckley, 109 Price's Adm'r v. Thompson, 84 Ky. Va, 784, 65 S. E. 652; cited in 228, 1 S. W. 408; Shaw v. Crandon Eogers v. Rogers, 97 Md. 573, 55 State Bank, 145 Wis. 639, 129 N. W. Atl. 450; Golson v. Dunlap, 73 Cal. 794. 157, 160, 44 Pao. 576; Shea's Appeal, §957, (d) The text is quoted in 121 Pa. St. 302, 1 L. E. A. 422, 15 Nichols v. McCarthy, 53 Conn. 299, Atl. 629; Hamilton v. Allen, 86 Neb. 55 Am. Eep. 105, 23 Atl. 93; Zeigler 401, 28 L. R. A. (N. S.) 723, 125 v. Shuler, 87 S. C. 1, 68' S. E. 817; N. W. 610; Shaw v. Crandon State Branch v. Buckley, 109 Va. 784, 65 Bank, 145 Wis. 639, 129 N. W. 794. S. E. 652; cited, Davis v. Strange's § 957 EQUITY JURISPRTJDEIirCE. 2044 Contracts, executory or executed, made upon a valuable consideration are not, perhaps, scrutinized with quite so much severity as gifts, but they are subjected to the op- eration of the same principle, and must conform to its requirements.^ Having thus explained the general nature and scope of the principle, I -shall now describe its appli- cation to the most important and familiar forms of fldu- V. Kennedy, 33 Beav. 133; 4 De Gex, J. & S. 217; Tomson v. Judge, 3 Drew. 306; Morgan v. Minett, L. R. 6 Ch. Div. 638, and eases cited; Lyon V. Home, L. E. 6 Eq. 655; Everitt v. Everitt, L. R. 10 Eq. 405; Turner V. Collms, L. R. 7 Ch. 329; Rhodes v. Bate, L. R. 1 Ch. 252; Brock v. Barnes, 40 Barb. 521; Wistar's Appeal, 54 Pa. St. 60; Greenfield's Estate, 14 Pa. St. 489, 507; Todd v. Grove, 33 Md. 188; Turner v. Turner, 44 Mo. 535; Taylor v. Taylor, 8 How. 183; Jenkins v. Pye, 12 Pet. 241, 253; and see PaEi v. Turner, 101 Mass. 494. Testamentary gifts stand upon a somewhat different footing ; that is, they may be valid, while a gift inter vivos between the same parties might be void: Hindson v. Weatherill, 5 De Gex, M. & G. 301.« § 957, 2 Huguenin v. Baseley, 2 Lead. Gas. Eq. 1156, 1174, 1192; Pox v. Mackreth, 2 Brown Ch. 400; 2 Cox, 320; 1 Lead. Cas. Eq. 188, 212, 237; Gibson v. Jeyes, 6 Ves. 266; Hatch v. Hatch, 9 Ves. 292; Griffiths v. Robins, 3 Madd. 191 ; Revett v. Harvey, 1 Sim. & St. 502 ; Carey v. Carey, 2 Schoales & L. 173; Gresley V. Mousley, 4 De Gex & J. 78; 3 De Gex, F. & J. 433 ; Edwards v. Meyrick, 2 Hare, 60 ; Tate v. Williamson, L. R. 2 Ch. 55; 1 Eq. 528; Young v. Hughes, 32 N. J. Eq. 372; Kline v. Kline, 57 Pa. St. 120, 98 Am. Dec. 206 ; Norris v. Tayloe, 49 111. 17, 95 Am. Dec. 568; Roekafellow v. Newcomb, 57 111. 186; Turner v. Turner, 44 Mo. 535; Bayliss v. Williams, 6 Cold. 440; McCormick v. Malin, 5 Blackf. 509; Harkness v. Eraser, 12 Fla. 336, 341. Ex'r, 86 Va. 808, 8 L. B. A. 261, 11 Otis, 91 Ala. 279, 24 Am. St. Eep. S. E. 406; and Armstrong v. Mor- 904, 8 South. 286, overruling Moore row (Wis.), 163 N. W. 179. See, v. Spier, 80 Ala. 129, and citing also, Jenkins v. Jenkins, 66 Or. 12, many cases; Huteheson v. Bibb, 142 132 Pac. 542. For the rule requir- Ala. 586, 38 South. 754; In re ing independent advice to sustain a Smith's Will, 95 N. T. 516, 523; gift from beneficiary to trustee, see Tyson v. Tyson, 37 Md. 583; Monta- posi, §958; to sustain a gift from gue v. Allan's Ex'r, 78 Va. 592, 49 client to attorney, see post, § 960. Am. Eep. 384; Parfit v. Lawless, §957, (e) The proponent of the L. E. 2 Pro. & D. 462; see Rich- will must exercise some active inter- mond's Appeal, 59 Conn. 226, 21 ference in the preparation or exeeu- Am. St. Rep. 85, and cases collected tion of the will in order to raise a in the note, 22 Atl. 82. presumption against it: Bancroft v. 2045 CONSTKTJCTIVE FEAUD. § 958 ciary relations, and its effects upon the rights and liabili- ties of the parties thereto. § 958. Trustee and Beneficiary. ^ — ^As the general powers, duties, and liabilities of trustees will be more fully dis- cussed in a subsequent chapter, I shall at present simply state in the briefest manner those rules growing out of the fiduciary relation which regulate their dealings with their beneficiaries. i In the first place, when the trustee deals with the trust property, but not directly with the cestui que trust, and without the latter 's intervention : The rule, is inflexibly established that where, in the manage- ment and performance of the trust, trust property of any description, real or personal property, or mercantile as- sets is sold, the trustee cannot, without the knowledge and consent of the cestui que trust, directly or indirectly be- come the purchaser. Such a purchase is always voidable, and will be set aside on behalf of the beneficiary, unless he has affirmed it, being sui juris, after obtaining full knowledge of all the facts. It is entirely immaterial to the existence and operation of this rule that the sale is intrinsically a fair one, that no undue advantage is ob- tained, or that a full consideration is paid, or even that the price is the highest which could be obtained. The policy of equity is to remove every possible temptation from the trustee. The rule also applies alike where the sale is private, or at auction, where the purchase is made directly by the trustee himself, or indirectly through an agent, where the trustee acts simply as agent for another person, and where the purchase is made from a co-trustee. Finally, the rule extends with equal force to a purchase made under like circumstances by a trustee from himself. A trustee acting in his fiduciary character, and without §958, 1 See Huguenin v. Baseley, 2 Lead. Cas. Eq. 1156, 1180, 1228; Fox V. Mackreth, 1 Lead. Cas. Eq., 4th Am. ed., 188, 212, 237. § 958, (a) This paragraph ia cited, kept by executor in ignorance of .generally, in Eddy v. Eddy, 168 right to elect). ■Ped. 590, .93 C. C. A. 586 (widow § 958 EQUITY JURISPRUDENCE. 2046 the intervention of the beneficiary, cannot sell the trust property to himself, nor buy his own property from him- self for the purposes of the trust.2 ^ In the second place, § 958, 2 Fox V. Maekreth, 1 Lead. Gas. Eq., 4th Am. ed., 188, 212, 237; Lewis V. Hillman, 3 H. L. Gas. 607; Hamilton v. Wright, 9 Glark & F. Ill; Aberdeen R'y Go. v. Blaikie, 1 Maeq. 461; In re Bloye's Trust, 1 Macn. & G. 488; Knight v. Majoribanks, 2 Macn. & G. 10; Parkinson v. Hanbury, 2 De Gex, J. & S. 450; Ingle v. Richards, 6 Jur., N. S., 1178; Ridley v. Ridley, 34 L. J. Ch. 462; Franks v. BoUans, 37 L. J. Ch. 148, 155 ; Grover v. Hugell, 3 Russ. 428 ; Gregory v. Gregory, Coop. 201 ; Baker V. Carter, 1 Younge & C. 250; Woodhouse v. Meredith, 1 Jacob & W. 204, 222; Ex parte Laeey, 6 Ves. 625; Ex parte James, 8 Ves. 337, 348; Ex parte Bennett, 10 Ves. 381, 394; Randall v. Errington, 10 Ves. 423; Attorney-General v. Earl of Clarendon, 17 Ves. 491, 500 ; Tracy v. Colby, 55 Gal. 67; Tracy v. Craig, 55 Gal. 91; Scott v. Umbarger, 41 Gal. 410; Union Slate Go. v. Tilton, 69 Me. 244; Connolly v. Hammond, 51 Tex. 635; Paine v. Irwin, 16 Hun, 390; Michoud v. Girod, 4 How. 503; Stephen v. Beall, 22 WaU. 329; Wormley v. Wormley, 8 Wheat. 421; Caldwell v. Taggart, 4 Pet. 190 ; Freeman v. Harwood, 44 Me. 195 ; Dyer v. ShurtlefE, 112 Mass. 165, 17 Am. Rep. 77; Brown v. CoweU, 116 Mass. 461; Smith v. Frost, 70 N. Y. 65; Fulton v. Whitney, 66 N. Y. 548; Star Fire Ins. Co. V. Palmer, 41 N. Y. Sup. Ct. 267; Woodruff v. Boyden, 3 Abb. N. G. 29; De Caters v. Le Ray de Ghaumont, 3 Paige, 178 ; Child v. Brace, 4 Paige, 309; Campbell v. Johnston, 1 Sand. Ch. 148; Gram v. Mitchell, 1 Sand. Gh. 251 ; Cumberland Coal Co. v. Sherman, 30 Barb. 553 ; Johnson v. Ben- nett, 39 Barb. 237; Romaine v. Hendrickson, 27 N. J. Eq. 162 (see this' case for an accurate statement of the rule and its reasons) ; Wakeman v. Dodd, 27 K J. Eq. 564; McGinn v. Shaeflfer, 7 Watts, 412; Mason v. Martin, 4 Md. 124; Wasson v. English, 13 Mo. 176; Ringgold v. Ringgold, 1 Har. & G. 11; Brothers v. Brothers, 7 Ired. Eq. 150; McCants v. Bee, 1 McCord Eq. 383, 16 Am. Dec. 610 ; James v. James, 55 Ala. 525 ; Nar- cissa V. Wathan, 2 B. Mon. 241; Higgins v. Gurtiss, 82 HI. 28; Bush v. Sherman, 80 111. 160; Munn v. Burges, 70 lU. 604; Roberts v. Moseley, 64 Mo. 507; Schwarz v. Wendell, Walk. Ch. 267." Purchase at auction: § 958, (b) This portion of the text at bankruptcy sale) ; Linsley v. is cited in French v. Woodruff, 25 Strang, 149 Iowa, 690, 126 N. W. Colo. 339, 54_Pac. 1015; Elting v. 941, 128 N. W. 932; Cornet v. Cor- Pirst Nat. Bank, 173 111. 368, 50 net, 269 Mo. 298, 190 S. W. 333. N. E. 1095; Mallory v. Mallory- §958, (c) Trustee cannot Pur- Wheeler Co., 61 Conn. 135, 23 Atl. chase the Trust Property — General 70S; In re Frazin & Oppenheim, 181 Bule. — See, also, J. H. Lane & Co. Fed. 307, 104 C. C. A. 529 (pur- v. Maple Cotton Mill, 232 Fed. 421, chase by appraiser, through agent, 146 C. C. A. 415 (purchase by trus- 2047 CONSTRUCTIVE PEAUD. §958 where the trustee deals, with respect to the trust, directly with his beneficiary: A purchase by a trustee from his Adams v. Sworder, 2 De Gex, J. & S. 44; Grover v. Hugell, 3 Russ. 428; Lawrence v. Galsworthy, 3 Jur., N. S., 1049; Sanderson v. Walker, 13 Ves. 601; Ex parte Bennett, 10 Ves. 381, 393; Campbell v. Walker, 5 Ves. 678; Ex parte James, 8 Ves. 337, 348; Michoud v. Girod, 4 How. 503, Davoue v. Fanning, 2 Johns. Ch. 252; Bellamy v. Bellamy, 6 Fla. 62.«i At judicial sale: Ex parte Bennett, 10 Ves. 381, 393; Roberts v. Moseley, tees of eorporation after its dissolu- tion) ; Bank of Wetumpka v. Walk- ley, 169 Ala. 648, 53 South. 830; Bank of Pine Bluff v. Levi, 90 Ark. 166, 118 S. W. 250 (purchase by ad- ministrator) ; Granger v. Richards, 154 Gal. 478, 9S Pae. 528 (purchase by one of three executors); Linsley V. Strang, 149 Iowa, 690, 126 N. W. 941, 128 K. W. 932 (immaterial that the sale is made by a person spe- cially appointed for that purpose, or that his purchase is approved by the court) ; Fricker v. Amerieus Mfg. & Imp. Co., 124 Ga. 165, 52 S. E. 65; Baker v. Lane (Ky.), 118 S. W. 963; McGary's Heirs v. McGary, 32 Ky. Law Eep. 314, 105 S. W. 891 (purchase by administrator); Prewitt V. Morgan's Heirs (Ky.), 119 S. W. 174; Stark v. Love, 128 Mo. App. 24, 106 S. W. 87; Swift V. Craighead, 76 N. J. Eq. 339, 75 Atl. 975 (payment of adequate price by trustee does not preclude rescis- sion) ; Van Alstyne v. Brown, 77 N. J. Eq. 455, 78 Atl. 678 (purchase by executrix) ; Cresse v. Loper, 72 N. J. Eq. 784, 65 Atl. 1001 (fidu- ciary need not be trustee in strict sense); Marr v. Marr, 73 N. J. Eq. 643, 133 Am. St. .Eep. 742, 70 Atl. 375, reversing 72 N. J. Eq. 797, 66 Atl. 182 (purchase by director of a corporation); Creveling v. Fritts, 34 N. J. Eq. 134; Harrington v. Erie Co. Savings Bank, 101 N. Y. 257, 4 N. E. 346 (legal title acquired by subsequent bona fide purchaser, sale cannot be avoided) ; Kenworthy v. Equitable Trust Co., 218 Pa. St. 286, 67 Atl. 469; McCallum v. Grier, 86 S. C. 162, 138 Am. St. Bep. 1037, 68 S. E. 466; Stewart v. Baldwin, 86 Wash. 63, 149 Pac. 662 (purchase by administrator at his own sale); Ennis v. New World Life Ins. Co., 97 Wash. 122, 165 Pac. 1091. For certain modifications of the rule in Texas, as regards purchases by executors and administrators, see Erskine v. La Baum, 3 Tex. 417; Allen v. Gillette, 127 U. S. 596, 8 Sup. Ct. 1331; in South Carolina, see Anderson v. Butler, 31 S. C. 1S3, 5 L. R. A. 166, 9 S. E. 797; in Ala- bama, see Schloss v. Brightman, 195 Ala. 540, 70 South. 670. § 958, (d) Purchase at Auction. — Broder v. Conklin, 121 Cal. 282, 53 Pac. 699; Randolph v. Vails, 180 Ala. 82, 60 South. 159 (purchase by administrator) ; Kenworthy v. Equi- table Trust Co., 218 Pa. St. 286, 67 'Atl. 469. See Hayes v. Hall, 18S Mass. 510, 74 N. E. 935; Barker v. Jackson, 90 Miss. 621, 44 South. 34 (tax oflScer purchasing at tax sale). But where the trustee has an inter- est to protect by bidding at a sale of the trust property, and he makes special application to the court for permission to bid, which, upon the hearing of all the parties interested, is granted by the court, then he can make a purchase which is valid and §958 EQUITY JUEISPRUDENCE. 2048 cestui que trust, even for a fair price and witliout any un- 64 Mo. 507; Tracy v. Colby, 55 Cal. 67; Tracy v. Craig, 55 Cal. 91 (pur- chase by a probate judge by whom the sale had been ordered, and by whom the sale would in regular course of proceedings be confirmed, — a most extraordinary case) ; Jewett v. Miller, 10 N. Y. 402, 61 Am. Dec. 751; Van Epps v. Van Epps, 9 Paige, 237; Eisk v. Sarber, 6 Watts & S. 18.* Purchase made indirectly through a third person : Adams v. Sworder, 2 De Gex, J. & S. 44; Sanderson v. Walker, 13 Ves. 601; Scott v. Um- barger, 41 Cal. 410; James v. James, 55 Ala. 525; Higgins v. Ciirtiss, 82 binding upon all the parties inter- ested, and under which he can ob- tain a perfect title: Scholle v. Scholle, 101 N. Y. 172, 4 N. E. 334 (citing De Caters v. Chaumont, 3 Paige, 178; Gallatin v. Cunning- ham, 8 Cow. 361; Davoue v. Fan- ning, 2 Johns. Ch. 251; Bergen v. Bennett, 1 Caines, 20; Chapin v. Weed, 1 Clark Ch. 469; Colgate v. Colgate, 23 N. J. Eq. 372; Frone- berger v. Lewis, 79 N. C. 426; Faucett v. Paueett, 1 Bush, 511, 89 Am. Dec. 639; Miehoud v. Girod, 4 How. 503; CampbeU v. Walker, 5 Ves. Jr. 678; Farmer v. Dean, 32 Beav. 327). See, also, Plant v. Plant, 171 Cal. 765, 154 Pac. 1058 (trustee may buy at partition sale, directed hy court of equity, with provision that any party may buy; since it is not trustee's own sale, but is conducted by persons ap- pointed by the court); Sykes v. Kruse, 49 Colo. 560, 113 Pac. 1013 (trustee may acquire title at' judicial sale of trust property not brought about by himself); Hard- wieke v. Wurmser (Mo. App.), 180 S. W. 455 (where trustee has an in- dividual interest in the trust prop- erty to protect, and the cestui que trust refuses to buy, the trustee can buy the trust property at a judicial sale with which he had nothing to do) ; Schloss v. Brightman, 195 Ala. 540, 70 South. 670. §958, (e) Purchase at Judicial Sale.— Powell v. Powell, 80 Ala. 11; Crawford v. Tribble, 69 6a. 519; Price's Adm'r v. Thompson, 84 Ky. 219, 1 S. W. 408 (purchase by court commissioner at sale under execu- tion in his favor); Martin v. Wyn- coop, 12 Ind. 266, 74 Am. Dec. 209 (administrator cannot purchase on execution in his favor) ; Carson v. Marshall, 37 N. J. Eq. 213; Deegan V. Gapner, 44 N. J. Eq. 339, 15 Atl. 819; Dodge v. Stevens, 94 N. Y. 215; Hamilton v. Dooly, 15 Utah, 280, 49 Pac. 769, and cases cited; Winans V. Winans, 22 W. Va. 678, 688 (pur- chase by commissioner appointed by decree to sell the land). See, also, In re Frazin & Oppenheim, 181 Fed. 307, 104 C. C. A. 529 (purchase by appraiser at bankruptcy sale) ; Bead V. Eeynolds, 100 Md. 284, 59 Atl. 669 (rule not applied where prop- erty purchased was not part of trust estate) ; Eoderer v. Fox, 84 N. J. Eq. 359, 94 Atl. 393 (court will not ratify purchase by trustee at partition sale) ; Tuttle v. Tuttle, 146 N. C. 484, 125 Am. St. Eep. 481, 59 S. E. 1008 (partition sale, pur- chase by commissioner for parti- tion) ; Nona Mills Co. v. Wingate, 51 Tex. Civ. App. 609, 113 S. W. 182 (purchase at guardian's sale by judge who must pa=s on validity of sale); Bell County v. Felts (Tex. Civ. App.), 120 S. W. 1065 (pur- 2049 CONSTRUCTIVE FBATJD. §958 due advantage, or any other transaction between them by 111. 28 ; Davoue v. Fanning, 2 Johns. Ch. 252 ; Beeson v. Beeson, 9 Pa. St. 279; Dorsey v. Dorsey, 3 Har. & J. 410.' Purchase by trustee as agent for a third person: Ex parte Bennett, 10 Ves. 381; Gregory v. Gregory, Coop. 201, North Bait. etc. Ass'n v. Caldwell, 25 Md. 420, 90 Am. Dec. 67.S Purchase from a co-trustee: Whichcote v. Lawrence, 3 Ves. 740; chase by judge); Nugent v. Nugent, [1908] 1 Ch. 546, 14 Am. & Eng. Ann. Gas. 76 (purchase by receiv- er). But see Thompson v. Buffalo Land & Coal Co., 77 W. Va. 782, 88 S. E. 1040 (purchase by judge who signed decree of sale). § 958, (f ) Purchase Made Through a Third Person. — See, also, J. H. Lane & Co. v. Maple 'Cotton Mill, 232 Fed. 421, 146 C. C. A. 415; Mc- Gaughey v. Brown, 46 Ark. 25 (purchase by agent of adminis- trator) ; Scott V. Sierra Lumber Co., 67 Cal. 71, 7 Pac. 131; Broder v. Conklin, 121 Cal. 282, 53 Pac. 699 (purchase by attorney of assignee for creditors) ; French v. Woodruff, 25 Colo. 239, 54 Pac. 1015; Houston T. Bryan, 78 Ga. 181, 6 Am. St. Kep. '252, 1 S. E. 252; Miller v. Rich, 204 111. 444, 68 N. E. 488; Kitten- house V. Smith, 255 111. 493, 99 N. E. 657 (purchase for administrator) ; Mettler v. Warner, 249 lU. 341, 94 N. E. 522 (purchase for executor) ; Comegys v. Emeriek, 134 Ind. 148, 39 Am. St. Eep. 2-15, 33 N. E. 899; Spurlock V. Spurlock, 161 Ky. 248, 170 S. W. 605 (purchase for execu- tor); Manning v. Mulrey, 192 Mass. 547, 78 N. E. 551 (purchase for administrator); Witte v. Storm, 236 Mo. 470, 139 S. W. 384; Dun- can V. Home Co-operative Co., 221 Mo. 315, 120 S. W. 733; Gilmore v. Thomas, 252 Mo. 147, 158 S. W. 577 (executor); Bassett v. Shoe- maker, 46 N. J. Eq. 538, 19 Am. St. Eep. 435, 20 Atl. 52 (purchase for trustee's wife); People v. Open n— 129 Board, etc., Co., 92 N. T. 98' (such a transaction appearing in chain of title renders title defective); Scot- tish-American Mtg. Co. V. Clowney (S. C), 49 S. E. 569 (trustee's wife); Stewart v. Baldwin, 86 Wash. ' 63, 149 Pac. 662 (purchase for admiijistrator) ; Enight v. Watts, 26 W. Va. 175, 203; Winans V. Winans, 22 W. Va. 678, 688; Hay- mond V. Hyer (W. Va.), 92 S. E. 854 (executor). The trustee is disabled from repurchasing from one _ to whom he has agreed to sell, so long as the legal title remains in him- self: Wing & Evans v. Hartupee (C. C. A.), 122 Fed. 897; Parker v. McKenna, L. K. 10 Ch. App. 96; Williams v. Scott, [1900] A. C. 499, 507; Delves v. Gray, [1902] 2 Ch. 606; Cook v. Berlin Woolen Co., 43 Wis. 433; O'Connor v. Flynn, 57 Cal. 293 (executor repurchases be- fore sale is confirmed). For cases where, in the absence of fraud, re- purchases by trustees who had sold the estate were upheld, see Welch v. McGrath, 59 Iowa, 519, 528, 529, 10 N. W. 810, 13 N. W. 639; Staples V. Staples, 24 Gratt. (Va.) 225; Wayland v. Crank's Ex'r, 79 Va. 602, 608; Foxworth v. -White, 72 Ala. 224 (but such transaction will be closely scrutinized). § 958, (s) See, also, Gibson v. Barber, 100 N. C. 192, 6 S. E. 766 (purchase at a sale under a power of sale in a mortgage, by an agent of the mortgagee, in behalf of a third party, voidable). §958 EQUITY JUEISPBUDEIirCB. 2050 which the trustee obtains a benefit, is generally voidable, Cumberland Coal Co. v. Sherman, 30 Barb. 653; Ringgold v. Ringgold, 1 Har. & G. 11. The rule is also settled, where not abrogated by statute, that an encumbrancer witB a power of sale in selling under the power becomes a trustee for the sale, and, as such, cannot directly or through an agent purchase the property: Downes v. Grazebrook, 3 Mer. 200, per Lord Eldon; In re Bloye's Trust, 1 Macn. & G. 488, 494, 495; Waters v. Groom, 11 Clark & F. 684; Hyndman v. Hyndman, 19 Vt. 9, 46 Am. Dec. 171; Slee v. The Manhattan Co., 1 Paige, 48; Hendricks v. Robinson, 2 Johns. Ch. 283, 311; Dobson v. Racey, 3 Sand. Ch. 60; Campbell v. McLain, 51 Pa. St. 200; Tennant v. Trenchard, L. R. 4 Ch. 537.'' Al- § 958. (i>) Purchase by Mortgagee or Other Encumtarancer With Power of Sale. — See, also, Martinson v. Clowes, 21 Ch. D. 857 (secretary of mortgagee building society pur- chases for himself) ; Warner v. Jacob, 20 Ch. D. 220; Whiteomb v. Minchin, 5 Madd. 91; Hodson v. 'Deans, [1903] 3 Ch. 647; Farrar. v. Farrars, Ltd., 40 Div. 409; Nutt V. Easton, [1S99] 1 Ch. 873 (defin- ing trust relationship of mortgagee with power of sale) ; MeCall v. Mash, 89 Ala. 489, 18 Am. St. Kep. 147, 7 South. 770 (mortgagor's right to avoid the sale is not as- signable); Martinez v. Lindsey, 91 Ala. 334, 8 South. 787 (assignee of the mortgage cannot purchase) ; Palmer v. Young, 96 Ga. 246, 51 Am. St. Rep. 136, 22 S. E. 928 (such purchase voidable but not void) ; Nichols V. Otto, 132 HI. 91, 23 N. B. 411 (purchase by third person on behalf of mortgagee, voidable) ; Wetherell y. Johnson (HI.), 70 N. E. 229 (as to purchase by pledgee with power of sale) ; Houston v. National M. B. & L. Ass'n, 80 Miss. 31, 92 Am. St. Eep. 565, 31 South. 540 (right to avoid the sale is assign- able), and note, 92 Am. St. Rep. 576-585; Very v. Eussell, 65 N. H. 646, 23 Atl. 522, and cases cited; Dawkins v. Patterson, 87 N. C. 384 (mortgagor's right waived by agreement); Howell v. Pool, 92 N. C. 450; Gibson v. Barber, 100 N.'C. 192, 6 S. E. 766 (purchase by mortgagee's ^ agent in behalf of a third party, voidable) ; Shew v. Call, 119 N. C. 450, 56 Am. St. Rep. 678, 26 S. E. 33; Owens v. Branning Mfg. Co., 168 N. C. 397, 84 S. E. 389 (purchase by assignee of mort- gage); Warren v. Suaman, 168 N. C. 457, 84 S. E. 760 (purchase by mort- gagee through an agent"); Muller v. McCann (Okl.), 151 Pae. 621 (pur- chase by mortgagee through an agent); Thomas v. Gilbert, 55 Or. 14, Ann. Cas. 1912A, 516, 101 Pac. 393, 104 Pac. 888 (purchase by pledgee at his own sale). In Texas the rule is repudiated: Bohn v. Davis, 75 Tex. 24, 12 S. W. 837; Howards v. Davis, 6 Tex. 183; Scott v. Mann, 33 Tex. 725. But authority to purchase may be expressly conferred in the mortgage upon the mortgagee: Knox v. Armistead, 87 Ala. 511, 13 Am. St. Rep. 65, 5 L. R. A. 297, 6 South. 311; Gamble v. Caldwell, 98 Ala. 577, 12 South. 424; Ward v. Ward, 108 Ala. 278, 19 South. 354; Matthews v. Daniels (Ark.), 21 S. W. 469; Macy V. Southern, etc., Ass'n, 102 Ga. 812, 30 S. E. 430; Lathrop v. Tracy, 24 Colo. 382, 65 Am. St. Rep. 229, 51 Pac. 486; Galvin v. Newton, 19 R. I. 176, 36 Atl. 3. See Mueller v. Becker, 263 Mo. 165, 172 S. W. 322 (though 2051 CONSTRUCTIVE FEAUD. §958 and will be set aside on behalf of the beneficiary; it is at least prima facie voidable upon the mere facts thus stated. 3 k There is, however, no imperative rule of equity though the purchase be set aside, still, if it was fair, the court may allow the trustee for his payments and advances and improvements when he acted in good faith: Mulford v. Minch, 11 N. J. Eq. 16, 64 Am. Dec. 472; Mason v. Martin, 4 Md. 124; and see Paine v. Irwin, 16 Huu, 390.* After the trust has been completely ended, the former trustee may pur- chase: Munn V. Burges, 70 lU. 604; Bush v. Sherman, 80 111. 160 .J § 958, 3 In Ex parte Lacey, 6 Ves. 625, 627, Lord Eldon gave the prac- tical reason for this stringent rule: "It is founded upon this, that though you may see in a particular case that the trustee has not made advantage, it is utterly impossible to examine, upon satisfactory evidence in the power under terms of deed of trust trustee had right to purchase, transaction will be jealously scrutinized). A cestui que trust under a trust deed to secure debts may purchase at the trustee's sale, there being in that case no such conflict of duty and in- terest as when a mortgagee pur- chases at his own sale: Smith v. Black, 115 U. S. 308, 6 Sup. Ct. 50; Easton v. German-American Bank, 127 TJ. S. 532, 8 Sup. Ct. 1297; Cop- sey v. Sacramento Bank, 133 Cal. 659, 85 Am. St. Rep. 238, 66 Pac. 7, 204 (though cestui was a bank of which the trustees were directors; a dangerous and indefensible prece- dent); Springfield, etc., Co. v. Dono- van, 147 Mo. 622, 49 S. W. 500; Monroe v. Fuchtler, 121 N. C. 101, 28 S. E. 63. §958, (1) See, also, O'Connor v. Flynn, 57 Cal. 293. § 958, (J) "Apart from any cir- cumstances of doubt or suspicion, there is no rule of the court that a person, who Has ceased for twelve years to be a trustee of an instru- ment which contains a trust for sale, cannot become a purchaser of the trust property": In re Boles & British Land Cos. Contract, [1902] 1 Ch. 244. See, also, Halper v. Wolfl, 82 Conn. 552, 74 Atl. 890. And a sale is not voidable merely because, when entered upon, the purchaser had the power to become trustee of the property purchased, — as when he is an executor who has not proved the will which relates to the property, — when in fact he never does become trustee: Clark v. Clark, 9 App. Cas. (Priv. Coun.) 733; Bowden v. Pierce, 73 Cal. 459, 14 Pac. 302, 15 Pac. 64. § 958, (k) Transaction With Bene- ficiary, Whereby Trustee Benefits, Generally Voidable. — The text is quoted in Nichols v. McCarthy, 53 Conn. 299, 55 Am. Eep. 105, 23 Atl. 93; Butman v. Whipple (E. I.), 57 Atl. 379; State v. Culhane, 78 Conn. 622. 63 Atl. 636; Branch v. Buck- ley, 109 Va. 784, 65 S. E. 652 (con- veyance to trustee without advice set aside); cited, Golson v. Dunlap, 73 Cal. 157, 162, 14 Pac. 576; Cowen V. Adams (C. C. A.), 78 Fed. 536, 552, 47 TJ. S. App. 676; Adams v. Cowen, 177 U. S. 471, 20 Sup. Ct. 668; cited, also, in Byrne v. Jones, 159 Fed. 321, 90 C. C. A. 101 (must be full disclosure) ; H. B. Cart- wright & Bro. V. United States Bank & Trust Co. (N. M.), 167 Pac. § 958 EQUITY JUKISPBUDENCE. 2052 that a transaction between the parties is necessarily, in every instance, voidable. It is possible for the trustee to overcome the presumption of invalidity. If the trustee can show, by. unimpeachable and convincing evidence, that the beneficiary, being sui juris, had full information and com- plete understanding of all the facts concerning the prop- erty and the transaction itself, and the person with whom he was dealing, and gave a perfectly free consent, and that the price paid was fair and adequate, and that he made to the beneficiary a perfectly honest and complete disclosure of all the knowledge or information concerning the property possessed by himself, or which he might, with reasonable diligence, have possessed, and that he has ob- tg,ined no undue or inequitable advantage, and especially if it appears that the beneficiary acted in the transaction upon the independent information and advice of some in- telligent third person, competent to give such advice, then the transaction will be sustained by a court of equity.^ ^ of the court (by whicli I mean in the power of the parties), in ninety- nine eases out of a hundred, whether he has made advantage or not": Lloyd V. Attwood, 3 De Gex & J. 614; Campbell v. Walker, 5 Ves. 678, 682; 13 Ves. 601; Randall v. Errington, 10 Ves. 423; Hamilton v. Wright, 9 Clark & F. Ill, 123, 125; Ingle v. Richkrds, 28 Beav. 361; Tatum v. McLellan, 5D Miss. 1; Clarke v. Deveaux, 1 S. C. 172, 184; Smith v. Town- shend, 27 Md. 368, 92 Am. Dec. 637; Spencer and Newbold's Appeal, 80 Pa. St. 317, 332; Parshall's Appeal, 65 Pa. St. 224; Wistar's Appeal, 54 Pa. St. 60; Diller v. Brabacker, 52 Pa. St. 498, 91 Am. Dec. 177. § 958, 4 The independent advice of a third person does not seem to be an essential feature in purchases for a fair consideration ; but it does seem 436 (must be full and fair disclos- Mo. 184, 154 S. W._121. As to ade- ure in advance by director contract- quacy of the price, see Golson v. ing with coTporation). See, also, Duulap, 73 Cal. 157, 14 Pac. 576. Schneider v. Schneider (Iowa), 98 Duty of complete disclosure by the N. W. 159; Hickman v. Stewart, 69 trustee: See Dongan v. Maepher- Tex. 255, 5 S. W. 833; Kogers v. son, [1902] A. C. 197 (it makes no Brightman, 189 Ala. 228, 66 South. difference how the trustee obtained 171 (widow and executor); Staple- his information); Waldrop v. Lea- ton v. Haight, 135 Iowa, 564, 113 man, 30 S. C. 428, 9 S. E. 466; Lud- N. W. 351 (executor and bene- ingtou v. Patton, 111 Wis. 208, 86 ficiary); Parks v. Brooks, 188 Mich. N. W. 571 (a very important caae). 645, 155 N. W. 450 (devisee and ad- § 958, (1) Transaction With Bene- ministratoT) ; Cornet v. Cornet, 248 ficiary, When Sustained.— The text 2053 CONSTRUCTIVE FRAUD. §958 The doctrine is enforced with the utmost stringency when the transaction is in the nature of a bounty conferred upon the trustee, — a gift or benefit without full consideration. Such a transaction will not be sustained, unless the trust to be indispensable in transactions having the nature of gifts, whereby the trustee obtains some benefit, — as, for example, a release of claims against the trustee given by the cestui que trust as a bounty: Lloyd v. Attwood, 3 De Gex & J. 614. Some of the eases speak of "terminating the trust, " " ceasing to be trustee, " " shaking off the character of trus- tee," and the like. These expressions plainly do not mean that the trust relation should have been finally ended and dissolved. They are especially applicable to transactions in the nature of gifts, and then refer to the independent advice of a third person, upon which the beneficiary acts, so "that the trustee is not pro hoc vice dealing in his capacity of truetee. When applied to purchases, the expressions simply mean that the bene- ficiary must have complete information and unbiased judgment, and must give a free and full consent. The rule given in the text was well stated in the important case of Coles v. Trecothick, 9 Ves. 234, 246: "A trustee may buy from the cestui que trust, provided there is a clear and distinct contract, ascertained to be such after a jealous and scrupulous examina- ia quoted in Nichols v. McCarthy, ton, 16 Cal. App. 424, 117 Pac. 563; 53 Conn. 299, 55 Am. Rep. 105, 23 Atl. 93; Collier v. Collier, 137 Ga. 658, Ann. Cas. 1913A, 1110, 74 S. B. 275 (sale by legatee to executor); Fidelity Trust Co. v. Butler, 28 Ky. Law Kep. 1268, 91. S. W. 676; Lins- ley V. Strang, 149 Iowa, 690, 126 N. W. 941, 128 N. W. 932; Branch V. Buckley, 109 Va. 784, 65 S. B. 652; Ludington v. P'atton, 111 Wis. 208; 86 N. W. 571, 581. The trans- action was upheld in Williams v. Powell, 66 Ala. 20, 41 Am. Kep. 742; Colton v. Stanford, 82 Cal. 351, 16 Am. St. Eep. 137, 23 Pac. 16 (an important case) ; Miggett's Appeal, 109 Pa. St. 520. See, also, Byrne v. Jones, 159 Fed. 321, 90 C. C. A. 101, reversing 149 Fed. 457; Boddie v. Ward, 151 Ala. 198, 44 South. 105 (no presumption against transac- tion, as trustee got no benefit); Flowers v. Flowers, 84 Ark. 557, 120 Am. St. Kep. 84, 106 S. W. 949 (sale to administrator); Smith v. Elder- Copeland v. Bruning, 44 Ind. App. 405, 87 N. E. 1000, 88 N. E. 877; Heath v. Tucker, 153 Mo. App. 356, 134 S. W. 572; Jackson v. First State Bank, 21 S. D. 484, 113 N. W. 876. The situation in Colton v. Stanford, supra, is thus summarized in the opinion of the court (82 Cal. 351, 16 Am. St. Eep. 150, 23 Pae. 16): "Here, therefore, we have a case in which — assuming the exist- ence of a fiduciary relation, and that the presumptions as to con- fidence and the burden of proof are as claimed by. appellant — the undis- puted facts show that there was ab- solutely no confidence reposed by the beneficiary, but that she acted exclusively upon the advice of sev- eral disinterested experts and pro- fessional friends, specially selected to investigate and counsel her, be- cause of their ability and famil- iarity with the affairs of the trus- tees with whom she was dealing, §958 EQUITY JUBISPRUDENCE. 2054 relation was for the time being completely suspended, and the benefii^ary acted throughout upon independent advice, and upon the fullest information and knowledge.™ tion of all the cireumstanees, that the cestui que trust intended the trus- tee should buy; and there is no fraud, no concealment, no advantage taken by the trustee of information acquired by him in the character of trus- tee": Ex parte Bennett, 10 Ves. 381, 394; Ex parte Lacey, 6 Ves. 625; Ex parte James, 8 Ves. 337, 348; Morse v. Royal, 12 Ves. 355; Kandall V. Errington, 10 Ves. 423; Downes v. Grazebrook, 3 Mer. 200, 208; Knight V. Majoribanks, 2 Maen. & G. 10; Luff v. Lord, 11 Jur., N. S., 50; Denton V. Donner, 23 Beav. 285; Ayliffe v. Murray, 2 Atk. 58; Clarke v. Swaile, 2 Eden, 134; Spencer and Newbold's Appeals, 80 Pa. St. 317; Villines V. Norfleet, 2 Dev. Eq. 167; Bryan v. Duncan, 11 Ga. 67; Kennedy v. Kennedy, 2 Ala. 571 ; Richardson v. Spencer, 18 B. Mon. 450 ; Marshall ■ V. Stephens, 8 Humph. 159, 47 Am. Dec. 601; SaUee v. Chandler, 26 Mo. 124. and who acted towards her in the highest good faith. To hold that, under such circumstances, a con- tract entered into by the parties compromising and settling disputes of the most doubtful character and value cannot stand if it subse- quently appear that the trustee did not impart to the cestui que trust, not only all the knowledge of the transactions of which he was pos- sessed, but all that he might have acquired by diligent and careful search, would be to place an abso- lute embargo upon all settlements of disputed questions between parties holding trust relations, although equity favors the amicable adjust- ment of claims which, like those in- volved in this settlement, bid fair to become a fruitful source of liti- gation." §958, (m) Gift to Trustee.— The text is quoted in Nichols v. Mc- Carthy, 53 Conn. 299, 55 Am. Eep. 105, 23 Atl. 93; Branch v. Buckley, 109 Va. 784, 65 S. E. 652. See, also, Pish v. Fish, 235 111. 396, 85 N. E. 662 (trustee has burden of proof to show independent advice or other facts showing that parties were dealing at arm's-length) ; Smith v. Schopper, 86 N. J. Eq. 107, 97 Atl. 52. The necessity of independent advice to the beneficiary is well illustrated in the important ease of AUcard v. Skinner, 36 Ch. D. 145, the facits of which are summarized post, in note (c), § 963. Bowen, L. J., states (p. 189, fC) that the question is not one of the "rights of the donor," but of "the duties of the donee, and the obligations which are imposed upon the conscience of the donee by tBe principles of this court." The duty of independent advice is "a fetter placed upon the conscience of the recipient of the gift, and one which arises out of public policy and fair play." In the recent case of Powell v. Powell, [1900] 1 Ch. 243, where a gift from a child just of age to his parent was involved, it was held that "it is not enough that he should have independent advice unless he acts upon that advice; it is the duty of a solicitor independently advising an intending settlor to protect him against himself, and not merely 2055 CONSTKUCTIVE FBAUD. § 959 § 959. Principal and Agent.^ — Equity regards and treats this relation in the same general manner, and with nearly the same strictness, as that of trustee and benefi- ciary.'* The underlying thought is, that an agent should not unite his. personal and his representative characters in the same transaction ; and equity will not permit him to be exposed to the temptation, or brought into a situation where his own personal interests conflict with the interests of his principal, and with the duties which he owes to his prin- cipal. ^ In dealings without the intervention of his prin- cipal, if an agent for the purpose of selling property of the principal purchases it himself, or an agent for the pur- pose of buying property for the principal buys it from him- §959, 1 Neuendorff V. World etc. Ins. Co., 69 N. Y. 389; Wilbur v. Lynde, 49 Cal. 290, 19 Am. Rep. 645; Tynes v. Grimstead, 1 Tenn. Ch. 508; Dbdd v. Wakeman, 26 N. J. Eq. 484; Krutz v. Fisher, 8 Kan. 90; Fisher v. Krutz, 9 Kan. 501 ; Grumley v. Webb, 44 Mo. 444, 100 Am. Dec. 304. For the same reason, an agent cannot, unless expressly authorized by both, act as such for two principals whose interests are conflicting; a contract thus made without the knowledge and consent of each would not be enforced, and might be canceled: New York Cent. Ins. Co. v. Nat. Protect. Ins. Co., 14 N. Y. 85; Greenwood v. Spring, 54 Barb. 375; Lloyd V. Colston, 5 Bush, 587; Draughon v. Quillen, 23 La. Ann. 237; Scribner V. Collar, 40 Mich. 375, 29 Am. Rep. 541.« against the personal influences of Beard, 102 N. T. 508, 7 N. E. 553. the donee in the particular trans- The above passage of the text is action; and if his advice is not ac- quoted (without acknowledgment cepted, he should decline to act fur- in Mallory v. Mallory- Wheeler Co., ther for the intending settlor." As 61 Conn. 135, 23 Atl. 708, by An- to the necessity of independent ad- drews, C. J. (contract of corpora- vice to support a gift from client tion director). This paragraph is to attorney, see post, § 960 and cited in Commonwealth 8. S. Co. v. notes. American Shipbuilding Co., 197 § 959, (a) The section is cited Fed. 780 (secret payment by one generally in McEwen v. Gotthelf, party to a contract to the agent of 31 S. D. 180, 140 N. W. 264 (one the other party; contract may be tenant in common acting as agent rescinded); and in Lind v. Webber, for the other). 36 Nev. 623, 50' L. R. A. (N. S.) § 959, (b) The text is quoted in 1046, 134 Pac. 461, 135 Pac. 139, 141 Hemenway v. Abbott, 8 Cal. App. Pac. 458. See, also, Mastin v. 450, 97 Pac. 190. Noble, 157 Fed. 506, 85 C. C. A. 98; § 959, (e) Agent Acting for Two Bone v. Hayes, 154 Cal. 759, 99 Pac. Principals. — See, also, Murray v. 172 (agent to purchase receiving § 959 EQUITY JURISPEUDENCE. 2056 self, either directly or through the instrumentality of a third person, the sale or purchase is voidable; it will al- ways be set aside at the option of the principal ; the amount of consideration, the absence of undue advantage, and other similar features are wholly immaterial; nothing will de- feat the principal's right of remedy except his own con- firmation after full knowledge of all the f acts.^ * Passing § 959, 2 As in the case of trustees, this rule applies alike to private sales, auction sales, and judicial sales: In re Bloye's Trust, 1 Macn. & G. 488, 495 • Walsham v. Stainton, 1 De Gex, J. & S. 678; Kimber v. Barber, L. R. 8 Ch. 56; Lewis v. Hillman, 3 H. L. Gas. 607; Tyrrell v. Bank of London, 10 H. L. 'Gas. 26; Gharter v. Trevelyan, 11 Glark & F. 714; , Ex parte Gore, 6 Jur. 1118; 7 Jur. 136; Hichens v. Gongreve, 4 Russ. 562, 577; Taylor v. Salmon, 4 Mylne & G. 134; Gillett v. Peppercorne, 3 Beav. 78; Lowther v. Lowther, 13 Ves. 95, 103; Murphy v. O'Shea, 2 Jones & L. 422; East India Go. v. Henchman, 1 Ves. 287; Massey v. Davies, 2 Ves. 317; Bentley v. Graven, 18 Beav. 75; Barker v. Harrison, 2 GoU. G. G. 546 ; Lees v. Nuttal, 2 Mylne & K. 819 ; also, agent to settle a debt of his principal cannot purchase it, or any security of it, for his own benefit: Garter v. Palmer, 8 Glark & F. 657; 11 Bligh, N. S., 397; Gane v. Lord Allen, 2 Dow, 289, 294; Reed v. Norris, 2 Mylne & G. 361; Hobday v. Peters, 28 Beav. 349; Neuendorff v. World etc. Ins. Go., 69 N. Y. 389; Bain v. Brown, 56 N. Y. 285; Taussig v. Hart, 49 N. Y. 301; Bennett v. Austin, 81 N. Y. 308; Gonkey v. Bond, 36 N. Y. 427; 34 Barb. 276; Gard- ner V. Ogden, 22 Barb. 327,. 78 Am. Dec. 192 (subagent) ; Moore v. Moore, 5 Barb. 256; Dobson v. Racey, 8 Barb. 216 (ratified); Bank of Orleans V. Torrey, 7 Hill, 260; 9 Paige, 649, 662; Bridenbacker v. Lowell, 32 Barb. bonus from seller is a. trustee there- Homme Mining Co., 152 Fed. 333, 81 of for Ms principal); Sternberger v. C. 0. A. 441; Blank v. Aronson, 187 Young, 73 N. J. Eq. 586, 75 Atl. Fed. 241, 109 C. C. A. 327; Enslen v. 807; Hanna v. Haynes, 42 Wash. Allen, 160 Ala. 529, 49 South. 430 284, 84 Pac. 861 (agent of pur- (purchase at a mortgage foreclos- chaser receiving commission from ure); Adams v. Sayre, 70 Ala. 318; seller, ground for rescission) ; American Mortgage Co. v. Will- Miranovitz v. Gee, 163 Wis. 246, 157 iams, 103 Ark. 484, 145 S. W. 234; N. W. 790. Mabry v. Eandolph, 7 Cal. App. 421, §959, (d) Agent Selling to, or 94 Pac. 403 (agent sella his own Buying From, Himself. — The text is property to principal); Butler v. quoted in Bennett v. Glaspell, 15 Agnew, 9 Cal. App. 327, 99 Pac. N. D. 239, 107 N. W. 45. See, also, 395; De Mallagh v. De Mallagh, 77 Warren v. Burt, 58 Fed. 101, 3 C. C. Cal. 126, 19 Pac. 256; Eeed v. A. 105, 12 XT. S. App. 591; Gunn v. Aubrey, 91 Ga. 435, 44 Am. St. Rep. Black, 60 Fed. 151, 8 C. C. A. 534, 49, 17 S. E. 1022 (sale to agent's 19 IT. S. App. 477; Steinbeck V. Bon wife); Tyler v. Sanborn, 128 111. 2057 CONSTRTJCTIVB FEAUD. § 959 to dealings connected with the principal's intervention, in any contract of purchase or sale with the principal, or other transaction by which the agent obtains a benefit, a presumption arises against its validity which the agent must overcome; although this presumption is undoubtedly 9 ; Davoue v. Fanaing, 2 Johns. Ch. 253 ; Van Epps v. Van Epps, 9 Paige, 237; Hughes v. Washington, 72 111. 84; Tewksbury v. Spruance, 75 111. 187; Eldridge v. Walker, 60 111. 230; JefEries v. Wiester, 2 Saw. 135.; Wilbur V. Lyn-de, 49 Cal. 290, 19 Am. Rep. 645; Rubidoex v. Parks, 48 Cal. 215; Hardenbergh v. Bacon, 33 Cal. 356, 377; Hunsacker v. Sturgis, 29 Cal. 142, 145; Armstrong v. Elliott, 29 Mich. 485; Ruckman v. Berg- holz, 37 N. J. L. 437; Tynes v. Grimstead, 1 Tenn. Ch. 508; Barziza v. Story, 39 Tex. 354; Rogers v. Lockett, 28 Ark. 290; Grumley v. Webb, 44 Mo. 444, 100 Am. Dec. 304; Baker v. Whiting, 1 Story, 218, 241 (by a subagent) ; Caldwell v. Sigoumesy, 19 Conn. 37; Banks v. Judah, 8 Conn. 145; Marshall v. Joy, 17 Vt. 546; Ingle v. Hartman, 37 Iowa, 274; Scott V. Freeland, 7 Smedes & M. 409, 45 Am. Dec. 310 ; and see many of the American cases cited under the preceding paragraph, concerning simi- lar purchases by trustees. In Scott v. Mann, 36 Tex. 157, it seems to be held that an agent to sell property at auction may bid for it on behalf of a third person. This conclusion is directly opposed to the English decisions, and seems to be, plainly opposed to the rule that a person can- not act as agent for two principals whose interests are antagonistic. 136, 15 Am. St. Kep. 97, 4 L. E. A. 223 Mo. 688, 135 Am. St. Rep. 531, 218. 21 N. E. 193 (same); Stemm v. 122 S. W. 1022; Witte v. Storm, 236 Gavin, 255 111. 480, 99 N. E. 663 Mo. 470, 139 S. W. 384; Porter v. (purchase by agent through a third Woodruff, 36 N. J. Eq. 174; Heck- person) ; Voorhees v. Campbell, 275 seher v. Edenborn, 203 N. T. 210, 111. 292, 114 N. E. 147 (sale by agent 90 K. E. 441; Pisk v. Waite, 53 Or. to principal of agent's property at 142, 99 Pac. 283 (purchase through overvalue, agent representing that a sub-agent); Eodman v. Manning, property was a third person's); 53 Or. 336, 20 L. E. A. (N. S.) 1158, O'Meara v. Lawrence, 159 Iowa, 99 Pae. 657, 1135 (broker to sell "448, 141 N. W. 312; Schneider v. land cannot sell to himself if to Ms Schneider (Iowa), 98 N. W. 159; knowledge property was worth more Fry V. Piatt, 32 Kan. 62, 3 Pac. 781 than the price named by the priu- (sale to agent's partner); Kimball cipal); Green v. Hugo, 81 Tex. 452, V. Kanney, 122 Mich. 160, 80 Am. St. 26 Am. St. Eep. 824, 17 S. W. 79; Eep. 548, 46 L. E. A. 40i3; 80 N. W. Clark-Boice Lumber Co. v. Duncan 992; Backus v. Cowley, 162 Mich. (Tex. Civ. App.), 143 S. W. 644; 585, 127 N. W. 775 (purchase at tax Cantwell v. Nunn, 45 Wash. 536, 88 sale); Montgomery v. Hundley, 205 Pac. 1023; Hay v. Long, 78 Wash. Mo. 138, 11 L. E. A. (N. S.) 122 and 616, 139 Pae. 761 (lease to agent's . note, 103 S. W. 527; Meek v. Hurst, wife). § 959 EQUITY JURISPRXJDENOB. 2058 not so weighty and strong as in the case of a trustee.^ The mere fact that a reasonable consideration is paid, and that no undue advantage is taken, is not of itself suflficient. Any unfairness, any underhanded dealing, any use of knowledge not communicated to the principal, any lack of the perfect good faith which equity requires, renders the transaction voidable, so that it will be set aside at the option of the priacipal.3 * If, on the other hand, the agent imparted all §959, 3Walsham v. Stainton, 1 De Gex, J. & S. 678; Haygarth v. Wearing, L. R. 12 Eq. 320; Donaldson v. Gillot, L. R. 3 Eq. 274; Panama etc. Tel. Co. v. India Rubber etc. Co., L. R. 10 Ch. 515, 526; Tyrrell v. Bank of London, 10 H. L. Cas. 26; Charter v. Trevelyan, 11 Clark & F. 714; Murphy v. O'Shea, 2 Jones & L. 422; WUson v. Short, 6 Hare, 366, 383; Gillett v. Peppercome, 3 Beav. 78; Clarke v. Tipping, 9 Beav. 282; Hobday v. Peters, 28 Beav. 349; Wentworth v. Lloyd, 32 Beav. 467; Byrd V. Hughes, 84 111. 174, 25 Am. Rep. 442; Jeffries v. Wiester, 2 Saw. 135; Wilbur V. Lynde, 49 Cal. 290, 19 Am. Rep. 645; Ingle v. Hartman, 37 Iowa, 274; Rubidoex v. Parks, 48 Cal. 215; Weeks v. Downing, 30 Mieh. 4; Uhlieh v. Muhlke, 61 111. 499; Wilson v. Wilson, 4 Abb. App. 621; Young V. Hughes, 32 N. J. Eq. 372; Condit v. Blaokwell, 22 N. J. Eq. 481; Comstock v. Comstock, 57 Barb. 453; Norris v. Tayloe, 49 111. 17, 95 Am. Dec. 568; Green v. Winter, 1 Johns. Ch. 26, 60, 7 Am. Dec. 475; Brown v. Post, 1 Hun, 303; Cleveland Ins. Co. v. Reed, 1 Biss. 180; McMahon v. McGraw, 26 Wis. 614; White v. Ward, 26 Ark. 445; Gillen- waters v. Miller, 49 Miss. 150. In the recent case of Panama etc. Tel. Co. V. India Rubber etc. Co., L. R. 10 Ch. 515, James, L. J., laid down the following general rule: "I take it to be clear that any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal, cognizable in this court. That I believe to be a clear proposition, and I take it to be equally clear that the de- frauded principal, if he come in time, is entitled, at his option, to have the contract rescinded, or if he elects not to have it rescinded, to have such other adequate relief as the court may think right to give him." § 959, (e) The text is quoted in closure of facts bearing on the Hemenway v. Abbott, 8 Cal. App. future value of the property); 450, 97 Pae. 190. Clifford v. Armstrong, 176 Ala. 441, §959, (f) Transaction Directly 5S South. 430 (duty of utmost good With Principal, must 'be Fair, etc. — faith) ; Curry v. King, 6 Cal. App. The text is quoted in Eoehester v. 568, 92 Pae. 662; Dickinson v. Levering, 104 Ind. 562, 4 N. E. 203; Stevenson, 142 Iowa, 567, 120 N. W. Van Dusen v. Bigelow (N. D.), 100 324; Kurt v. Moscrift (Kan.), 167 N. W. 723. See, also, Keith v. Kel- Pae. 1065 (purchasing agent buys lam, 35 Fed. 243 (duty of full dis- from principal, concealing fact that 2059 CONSTRUCTIVE FRAUD. § 959 M^ own knowled^ge concerning the matter, and advised his principal with candor and disinterestedness, as though he himself were a stranger to the bargain, and paid a fair price, and the principal on his side acted with full knowl- edge of the subject-matter of the transaction and of the person with whom he was dealing, and gave a full and free consent, — if all these are affirmatively proved, the pre- sumption is overcome, and the transaction is valid.* 8 These general doctrines are applied under every variety of circumstances, and to every kind of transaction. As illus- trations, when an agent has, during his employment, dis- §959, 4 Lewis v. Hillman, 3 H. L. Cas. 607; Charter v. Trevelyan, 11 Clark & F. 714, 732; Rothschild v. Brookman, 5 Bligh, N. S., 165; Cane V. Lord Allen, 2 Dow. 289, 294; Lord Selsey v. Ehoades, 1 Bligh, N. S., 1; 2 Sim. & St. 41; Clarke v. Tipping, 9 Beav. 282; Dally v. Wonham, 33 Ceav. 154; Lowther v. Lowther, 13 Ves. 95, 103; Woodhouse v. Meredith, 1 Jacob & W. 204; Watt v. Grove, 2 Schoales & L. 492; Molony v. Ker- nan, 2 Dru. & "War. 31; Mulhallen v. Marum, 3 Dru. & War. 317; Murphy V. O'Shea, 2 Jones & L. 422, 425; Barker v. Harrison, 2 Coll. C. C. 546; In re Bloye's Trust, 1 Maen. & G. 488; Walker v. Carrington, 74 111. 446; Young V. Hughes, 32 N. J. Eq. 372; Wilson v. Wilson, 4 Abb. App. 621; Brown v. Post, 1 Hun, 303; Pamam v. Brooks, 9 Pick. 212; Marshall v. Joy, 17 Vt. 546; Moore v. Mandlebaum, 8 Mich. 433; Fisher's Appeal, 34 Pa. St. 29 ; and see cases in last preceding note. he had better offer); Tucker v. Os- 1046; Thome v. Brown, 63 W. Va. bourn, 101 Md. 613, 61 Atl. 321; 603, 60 S. E. 614 (suppression of in-' Hegenmyer v. Marks, 37 Minn. 6, 5 formation). Am. St. Rep. 808, 32 N. W. 785 §959, (g) The text is quoted in (agent authorized to sell at fixed Van Duseu v. Bigelow (N. D.), 100 price, and to take for his oommis- N. W. 723; quoted and followed in sion all that the property might Eochester v. Levering, 104 Ind. 562, bring above that price; it is his 4 K. B. 203. See, also, Kerby v. duty to disclose a fact, afterwards Kerby, 57 Md. 345; Crosby v. Dor- discovered, greatly enhancing the ward, 248 111. 471, 140 Am. St. Rep. value of the property); Smith v. 230, 94 N. E. 78; Douglass v. Moore, 142 N. C. 277, 7 L. R. A. Lougee, 147 Iowa, 406, 123 N. W. (N. S.) 684, 55 S. E. 275 (presump- 967 (duty to disclose offers for or tion of fraud arises); Le Gendre v. values placed on property); Drefahl Byrnes, 44 N. J. Eq. 372, 14 Atl. 621 v. Security Savings Bank, 132 Iowa, (rule applies strictly to gift from 563, 107 N. W. 179; Vaill v. Mc- parent to child acting as parent's Phail, 35 K. I. 412, 87 Atl. 188 agent) ; Darlington's Estate, 147 Pa. (confidential relation not shown). St. 624, 30 Am. St. Rep. 776, 23 Atl. § 959 EQUITY JTJBISPEUDENCB. 2060 covered a defect in his principal's title, he cannot, after the agency is ended, use such knowledge for his own bene- fit; much less can he do so while the agency exists.^ Nor is an agent employed to purchase or to sell, or in any other business, permitted to make profits for himself in the transaction, unless by the plain consent of his employer; for all such profits wrongfully made he must account to his principal ; ^ i and if he has taken the legal title to prop- § 959, 5 One of the most common instances of such conduct is the agent's acquiring a tax title to his principal's property for his own bene- fit; this proceedmg is always invalid: Ringo v. Binns, 10 Pet. 269; Eogers V. Lockett, 28 Ark. 290; Krutz v. Fisher, 8 Kan. 90; Fisher v. Krutz, 9 Kan. 501; McMahon v. McGraw, 26 Wis. 614."» § 959, 6 De Bussche v. Alt, L. R. 8 Ch. Div. 286; Imperial etc. Asso- ciation V. Coleman, L. R. 6 H. L. 189; Tyrrell v. Bank of London, 10 H. L. Cas. 26, 39; Walsham v. Stainton, 1 De Gex, J. & S. 678; East India Co. V. Henchman, 1 Ves. 287; Massey v. Davis, 2 Ves. 317; Ex parte Hughes, 6 Ves. 617; Benson v. Heathem, 1 Younge & C. 326, 342; Beck V. Kantorowicz, 3 Kay & J. 230; Bentley v. Craven, 18 Beav. 75; Max- well V. Port Tenant etc. Co., 24 Beav. 495; Ritchie v. Couper, 28 Beav. 344; Moinett v. Days, 1 Baxt. 431; Dodd v. Wakeman, 26 N. J. Eq. 484; Coursin's Appeal, 79 Pa. St. 220; Wilson v. Wilson, 4 Abb. App. 621; Gillenwaters v. Miller, 49 Miss. 150; Taussig v. Hart, 49 N. Y. 301; Grum- ley V. Webb, 44 Mo. 444, 100 Am. Dec. 304; Leake v. Sutherland, 25 Ark. 219; Bunker v. Miles, 30 Me. 431, 50 Am. Dec. 632; Church v. Ster- ling, 16 Conn. 388; Reed v. Warner, 5 Paige, 650; Bruce v. Davenport, 36 Barb. 349; Gardner v. Ogden, 22 N. Y. 327, 78 Am. Dec. 192; Myer's Appeal, 2 Pa. St. 463; Keighler v. Savage Mfg. Co., 12 Md. 383, 71 Am. Dec. 600; Kanada v. North, 14 Mo. 615; Knabe v. Temot, 16 La. Ann. 13. § 959, (i) Agent Acquiring Tax- tax sale when he has no duty as to title. — Day v. Davey (Mich.), 93 paying taxes). N. W. 256; Backus v. Cowley, 162 §959, (i) Secret Profits. — See, Mieh. 585, 127 N. W. 775; Collins v. also, Hegenmyer v. Marks, 37 Minn. Hoffman, 62 Wash. 278, 113 Pac. 6, 5 Am. St. Eep. 808, 32 N. W. 785, 625. That an agent who was not ante, note (f); McKinley v. Will- responsible for a tax sale of the iams, 74 Fed. 94, 20 C. C. A. 312, 36 principal's property may acquire U. S. App. 749; Walker v. Pike the tax title after his discharge, see County Land Co., 139 Fed. 609, 71 Bemis v. Plato, 119 Iowa, 127, 93 C. C. A. 593 (action to recover N. W. S3. See, also, Steinbeck v. secret profits); Conner v. Craig, 216 Bon Homme Min. Co., 152 Fed. 333, Fed. 729, 132 C. C. A. 639; Lindsey 81 C. C. A. 141 (agent may buy at Lumber Co. v. Mason, 165 Ala. 194, 2061 CONSTRUCTIVE FBATJD. 959 erty in violation of his fiduciary duty, equity will treat Wra as a trustee thereof for his principal.'^ i A gift by a pria- § 959, 7 Reitz v. Reitz, 80 N. Y. 538; Bennett v. Austin, 81 N. Y. 308; Gardner v. Ogden, 22 N. Y. 327, 78 Am. Dec. 192; Smith v. Stephenson, 45 Iowa, 645; Barziza v. Story, 39 Tex. 354; Krutz v. Fishej-, 8 Kan. 90; Fisher v. Krutz, 9 Kan. 501; McMahon v. McGraw, 26 Wis. 614; Mat- thews V. Light, 32 Me. 305; Pillsbury v. Pillsbury, 17 Me. 107; Church V. Sterling, 16 Conn. 388; Parkist v. Alexander, 1 Johns. Ch. 394; Burrell V. Bull, 3 Sand. Ch. 15 ; Blount v. Robeson, 3 Jones Eq. 73 ; Hargrave v. King, 5 Ired. Eq. 430; Wellford v. Chancellor, 5 Gratt. 39; McKinley v. Irvine, 13 Ala. 681 ; Moore v. Mandlebaum, 8 Mich. 433 ; Massie v. Watts, 6 Cranch, 148. See post, Constructive Trusts. 51 South-. 750; Clifford v. Arm- strong, 176 Ala. 441, 58 South. 430; Bone V. Hayes, 154 Cal. 759, 99 Pae. 172 (agent to purchase receiving bonus from seller is trustee) ; Smith V. Elderton, 16 Cal. App. 424, 117 Pae. 563 (agent for purchase of stock obtained it for half the price set by principal); Forlaw v. Augusta Naval Stores Co., 124 Ga. 261, 52 S. E. 898; Sternberger v. Young, 73 N. J. Eq. 586, 75 Atl. 807 (agent to sell conspired with purchaser to induce sale at low price in consideration of large benefits to be received by agent) ; Kuntz v. Tonnele, 80 N. J. Eq. 373, 84 Atl. 624 (secret commission) ; Choctaw, O. & G. E. Co. V. Sittel, 21 Okl, 695, 97 Pae. 363 (speculation by agent in subject-matter of agency); Saw- yer V. Issenhuth, 31 S. D. 502, 141 N. W. 378; Easterly y. Mills, 54 Wash. 356, 28 L. E. A. (N. S.) 952, 103 Pae. 475. See, also, supra, note (e), cases cited. §959, (j) Agent Takes Title in Violation of Duty. — The text is cited in Leader Pub. Co. v. Grant Trust & Savings Co., 182 Ind. 651, 108 N. E. 121 (where officers of a corporation take title in their own name to property conveniently de- signed for the use of the business of the corporation and occupied by it, they are prima facie trustees and the transaction is potentially fraud- ulent). See post, § 1050; Iroquois Iron Co v Kruse (C. C. A.), 241 Ted. 433; forlaw v. Augusta Naval Stores Co., 124 Ga. 261, 52 S. E. 898 (agent taking renewal of lease for himself) ; Davis v. Hamlin, 108 111. 39, 48 Am. Eep. 541 (confi- dential agent of a lessee obtains a renewal of the lease for himself); Stewart v. Duffy, 116 111. 47, 6 N. E. 424 (confidential agent cannot take a, conveyance of outstanding interest in principal's property with- out a full disclosure to principal); Eox v. Simons,, 251 111. 316, 96 N. B. 233 (where agent, who was to give his whole time to purchasing of oil leases for principal, purchases leases for himself, he has burden to show principal's consent with full knowl- edge of every fact known to agent^ and perfect good faith) ; Eose v. Hayden, 35 Kan. 106, 57 Am. Eep. 145, 10 Pae. 554, and cases cited (an agent to negotiate for the pur- chase of land, who buys the same with his own money, treated as trustee of the land for the princi- pal) ; Bryan v. M'Naughton, 38 Kan. 98, 16 Pae. 57 (same); Hill v. Coburn, 105 Me. 437, 75 Atl. 67; Johnson v. Hayward, 74 Neb. 157, 12 Ann. Cas. 800, and note, 5 §959 EQUITY JUEISPEtTDENCB. 2062 cipal to his agent may be valid and be sustained, if tbe abso- lute good faith, knowledge, and intent of both the parties is clearly established. ^ After the agency has been ended, and the fiduciary relation has ceased, the foregoing rules no longer operate ; the parties may deal with each other in the sarne manner as any other persons.^ ^ § 959, 8 The equitable rule concerning gifts between principal and agent does not seem to be as stringent as that which regulates the similar deal- ings of trustees and their beneficiaries : ^ Hunter v. Atkins, 3 Mylne & K. U3; Nieol v. Vaughan, 1 Clark & F. 495; Hobday v. Peters, 28 Beav. 349. §959, 9 Scott V. Dunbar, 1 Molloy, 442; Trevelyan v. Charter, 4 L. J. Ch. 209; Bucher v. Bucher, 86 111. 377. Even then, however, a former agent is not permitted to use special knowledge, which he acquired by L. E. A. (N. S.^ 112, 102 N. W. 1058, 107 N. W. 384; Eogers v. Genung, 76 N. J. Eq. 306, 74 Atl. 473; Harrop v. Cole, 85 N. J. Eq. 32, 95 Atl. 378 (purchase with his own money in his own name by agent employed to buy real estate); Dowd V. Holbrook, 152 N. C. 547, 67 S. E. 1060; Eees v. Egan (Okl.), 166 Pao. 1038 (agent uses principal's money to purchase for himself) ; Johnson v. Knappe, 24 S. D. 407, 123 N. W. 857; Brookings Land & Trust Co. V. Bertness (S. D.), 96 N. W. 97; Trice v. Comstoek, 121 Fed. 620, 61 L. K. A. 176, 57 C. C. A. 646 (an agent of real estate brokers, employed to assist them in negotiating a sale of land owned by third parties, and deriv- ing through such employment in- formation as to the value of the land, cannot, after his employment has ceased, and while his former principals are still negotiating for the land, purchase from the owners; such purchase renders him a con- structive trustee for his principals) ; Winn V. Dillon, 27 Miss. 494. It is the rule in England, however, that where an agent employed by parol to purchase for his principal pur- chases in his own name and with his own money, no trust results to the principal: James v. Smith, [1891] 1 Ch. 384. §959, (t) Gift by Principal to Agent. — See, to this effect, Ealston V. Turpin, 25 Fed. 7, 18, afSrmed, 129 XT. S. 663, 9 Sup. Ct. 420; also, Adair v. Craig, 135 Ala. 332, 33 South. 902. The text at note 8 is quoted in Hemenway v. Abbott, 8 Cal. App. 450, 97 Pac. 190, and note 8 is quoted in Zimmerman v. Fres- hour, 107 Md. 115, 15 Ann. Cas. 1048, 16 L. E. A. (N. S.) 1087, 69 Atl. 796 (mere absence of independ- ent advice does not avoid gift; English and other cases examined). See, also, Moseley v. Johnson, 144 N. C. 257, 56 S. E. 922; Smith v. Moore, 149 N. C. 185, 62 S. E. 892; Hobart's Adm'r v. Vail (Taylor v. Vail), 80 Vt. 152, 66 Atl. 820 (gift sustained). §959, (1) The text is cited to this effect in Burwell v. Burwell (Va.), 49 S. E. 68. See, also. Brown V. Mercantile Trust Co., 87 Md. 377, 40 Atl. 256; Hermann v. Hall, 217 Fed. 947, 133 C. C. A. 619. 2063 CONSTRUCTIVE FEAUD. § 960 §960. Attorney and Client.^ — The courts of England have unif ornaly watched all the dealings between attorneys or barristers and their clients with the closest scrutiny, and have established very rigorous rules concerning them. ' It must be conceded that this equitable doctrine has been to a considerable extent ignored, and these rules have been greatly modified in their application, by the courts in sev- eral of the American states. While the fact must be ad- mitted, it cannot be too much deplored.^ In regard to gifts, the rule is definitely settled, "although it may not always have been followed by American courts, that no gift from a client to his attorney, made while the relation is still sub- sisting, is valid. In order that a gift from a client to his own attorney may be sustained, the donee must not only show affirmatively the perfect good faith of the transaction, the absence of any pressure or influence on his own part, the complete knov/ledge, intention, consent, and freedom of means of his agency, to benefit himself at the expense of the former prin- cipal: Carter v. Palmer, 8 Clark & ¥. 657; Holman v. Loynes, 4 De Gex, M. & G. 270.™ § 960, 1 1 venture the suggestion that no single circumstance has done more to debase the practice of the law in the popular estimation, and even to lower the lofty standard of professional ethics and self-respect among members of the legal profession itself, in large portions of our country, than the nature of the transactions, often in the highest degree cham- pertous, between attorney and client, which are permitted, and which have received judicial sanction. It sometimes would seem that the fiduciary relation and the opportunity for undue infiuence, instead of being the grounds for invalidating such agreements, are practically regarded rather as their excuse and justification.'' §959, (m) See, to this effect, r. Eossen, 12 Gal. App. 623, 107 Trice v. Com'stock, 121 Fed. 620, 61 Pae. 560; Kelley v. Scliwing- L. E. A. 176, 57 C. C. A. 646; Eobb hammer, 78 N. J. Eq. 437, 79 Atl. V. Green, [1895] 2 Q. B. 315, 317- 260. 320; Luddy's Trustee v. Peard, 33 §960, (1>) The above observations Ch. D. 500. See, also, Kurt v. of the author are quoted with ap- Moscrift (Kan.), 167 Pac. 1065. proval in Elmore v. Johnson, 143 111. § 960, (a) This paragraph is cited, 513, 525, 36 Am. St. Eep. 401, 404, generally, in MuUep v. Johnson, 157 21 L. K. A. 366, 32 N. E. 413. Ala. 262, 47 South. 584; Sanguinetti § 960 EQUITY JTJEISPKUDBNCB. 2064 action on the donor's part, but it must also appear that, ipro hac re, — that is, in all the dealings connected with the gift itself, — the relation of attorney and client between the two parties had been suspended, by nieans of iadependent advice furnished to the client by some disinterested and competent third person, through which the client was in- structed and upon which he acted. Whatever may be the other circumstances, unless it be shown that the client, in conferring his bounty, had the benefit of such independent counsel and advice, the gift must fail.2 In regard to pur- § 960, 2 The language, "the relation must have terminated," or "must have ceased to exist," etc., is found in some of the cases. This does not mean that the business connection between the donor and the donee must have been fully and finally ended, and the attorney discharged entirely from his employment. It simply means, as stated in the text, that in the dealing concerning the gift itself, the attorney must not be acting as attor- ney for the client, but some other attorney or competent "adviser must be called in. The rule as given in the text is firmly established in England. The latest decision is Morgan v. Minett, L. R. 6 Ch. Div. 638. A client had given three releases and conveyances to Minett, who had long been his confidential attorney and friend. The evidence showed, beyond a ques- tion, that the donor fully knew and comprehended the nature of the trans- action, and intended to confer the bounty. The donor, however, had no other adviser in the transaction, and counseled with no one except the donee, Minett. The gift was declared invalid and the instruments can- celed. The court said (p. 645) : "The law I take to be as plainly settled on the subject as any law existing in this country, that while the relation of solicitor and client subsists, the solicitor cannot take a gift from his client. ... [p. 646] : It is not said that the relation prevents a client bestowing his bounty upon his solicitor, but what the law requires is, that, considering the enormous influence which a solicitor in many cases must have over his client, in order to give validity and effect to a dgnation from a client to his solicitor, that relation must be severed. The parties must be, as one of the eases says, at arms' -length. The relation must have ceased to exist. If that can once be established, there is an end to the influence; whatever the influence may have been before need not be in- quired into ; the influence does not exist where that state of circumstances is brought about, and then the client may as well give to the solicitor as give to any other person. The degree of influence need not be inquired into. The fact of the influence is enough, if it be established. You can- not inquire how much influence there was; it is enough, in the contempla- tion of the law, that the influence existed, that there is a possibility that 2065 CONSTEUCTIYE FRAUD. § 960 chases, sales, and other similar contracts between the at- torney and client, the rule is not so stringent. Such species it may be abused; and the rule is not a bard one upon a solicitor. A client inclined to bestow bounty upon his solicitor is at perfect liberty to do it, and the solicitor is at perfect liberty to accept it, but both of them must act under circumstances which preclude the possibility of suspicion, for suspicion is enough." The court reviewed the prior cases, and espe- cially the often quoted case of Hunter v. Atkins, 3 Mylne & K. 113, in which Lord Brougham argued that a gift to an attorney stood on the same footing as a purchase by him. These views of Lord Brougham were mere dicta, and had been often criticised and repudiated, and were opposed to the whole current of authority. The correctness of the rule laid down in Tomson v. Judge, 3 Drew. 306, was expressly affirmed. See, also, Broun V. Kennedy, 4 De Gex, J. & S, 217; Middleton v. Welles, 1 Cox, 112; 4 Brown Pari. C. 245; Hatch v. Hatch, 9 Ves. 292; Lady Ormond v. Hutch- inson, 13 Ves. 47; Wright v. Proud, 13 Ves. 136; Montesquieu v. Sandys, 18 Ves. 302; In re Holmes's Estate, 3 Giff. 337, 345; Gibbs v. Daniel, 4 Gift. 1; O'Brien v. Lewis, 4 GifE. 221; Wood v. Downes, 18 Ves. 120; Goddard v. Carlisle, 9 Price, 169; Greenfield's Estate, 14 Pa. St. 489, 506; and see Berrien v. McLane, 1 HofE. Ch. 421; Brock v. Barnes, 40 Barb. 521." In Nesbit v. Lockman, 34 N. Y. 167, while the general rule was admitted, a gift to a managing clerk of the donor's attorney was sustained upon the particular circumstances. A distinction exists between gifts inter § 960, («) Gift from Client to At- ceased also." In the recent case of torney.— See, also, Willis v. Barron, Wright v. Carter, [1903] 1 Ch. 27, [1902] A. C. 271, aflBrming [1900] the duty of the solicitor who is 2 Ch. 121 (benefit conferred by called in to give independent advice client upon near relative of soli- was considered, and this rule laid citor) ; Wright v. Carter, [1903] 1 down: "The solicitor does not dis- Ch 27, reviewing many cases; Liles charge his duty by satisfying him- V. Terry, [1895] 2 Q. B. 679 (gift self simply that the donor under- to solicitor in trust for client dur- stands and wishes to carry out the ing life, and thereafter in trust for particular transaction. He must solicitor's wife, who was the client's also satisfy himself that the gift is niece, to her separate use, void- one that it is right and proper for able-, requisite of independent ad- the donor to make under all the vice is a "hard and fast rule of circumstances; and if he is not so equity"). In Holman v. Loynes, 4 satisfied, his duty is to advise his De Gex, M. & G. 270; it is stated client not to go on with the transac- that "gifts from clients to their at- tion, and to refuse to act further torneys can be maintained only, for him if he persists": BoUes v. when not only the relation has O'Brien, 63 Ma. 342, 354, 59 South, ceased, but the influence may 133. See, also, on' the adviser's rationally be supposed to have duty, note (m), § 958, ) Gift, etc., by Child to master, 75 Iowa, 64, 39 N. W. 183 Parent. — See, also, De Witte v. Ad- (gift upheld) ; Williams v. Williams, disop, [1899] 80 Law T. (N. S.) 63 Md. 371; Whitridge v. Whit- 207; Noble's Adm'r v. Moser, 81 ridge, 76 Md. 54, 24 Atl. 645; Ash- Ala. 530, 60 Am. Eep. 175, 1 South. ton v. Thompson, 32 Minn. 25 (cit- 217 (adult daughter pays father's ing the text) ; Bickerstaff v. Marlin, debts; in the very instructive opin- 60 Miss. 509, 45 Am. Eep. 418 (gift ion of Stone, C. J., the author's upheld) ; Albert v. Haeberly, 68 comment on Jenkins v. Pye is ex- N. J. Eq. 664, 111 Am. St. Eep. 652, pvcssly approved) ; Cooley v. String- 61 Atl. 380 (gift to stepmother fellow, 164 Ala. 460, 51 South. 321; shortly after majority) ; Fritz v. Giers v. Hudson, 102 Ark. 232, 143 Fritz, 80 N. J. Eq. 56, 83 Atl. 181 S. W. 916 (gift upheld); Hays v. (gift by son twenty-four years of Foather, 244 111. 172, 18 Ann. Cas. age to domineering father set 538, and note, 91 N. E. 97; Carter aside) ; Miskey'a Appeal, 107 Pa. St. v. Tice. 120 111. 277, 11 N. E. 529 611; In re Coleman's Estate, 193 (citing the text) ; Knox v. Sing- Pa. St- 605, 42 Atl. 1085 (deed sus- §962 EQUITY JTJEISPEUDENCE. 2080 of this kind plainly turn upon the exercise of actual undue influence, and not upon any presumption of invalidity; a gift from parent to child is certainly not presumed to be invalid. 4 « § 962, 4 Dalton v. Dalton, 14 Nev. 419; Mulock v. Muloek, 31 N. J. Eq. 594; Martin v. Martin, 1 Heisk. 644; Highberger v. Stiffler, 21 Md. 338, 83 Am. Dec. 593; Todd \. Grove, 33 Md. 188; Comstock v. Comstock, 57 tauied); Davis v. Strange's Execu- •tor, 86 Va. 808, 8 L. K. A. 261, 11 S. E. 406 (gift). As to the neces- sity of radependent advice to the chUd, and the character of such ad- vice that is required to sustain tte gift, see Powell v. Powell, [1900] 1 Ch. 243; ante, §958, note (m). In Pusey v. Gardner, 21 W. Va. 469, the rule in Jenkins v. Pye was approved; but the plaintiff's remedy would probably have been lost by laches under • any rule. That the parent will not be suffered to retain an unconscientious advantage ob- tained by reason of confidence re- posed by the child, see Wood v. Eabe, 96 N. T. 414, 48 Am. Rep. 640; post, § 1056, end of note. § 962, (c) Gift, etc., by Parent to Child. — The text is quoted in Haw- thorne V. Jenkins, 182 Ala. 255, Ann. Cas. 1915D, 707, 62 South. 505; Keeble v. Underwood, 193 Ala. 583, 69 South. 473; Hemenway v. Ab- bott, 8 Cal. App. 450, 97 Pac. 190; Broaddus v. James (Broaddus v. Monroe), 13 Cal. App. 464, 110 Pac. 158; Westphal v. Heckman (Ind.), 113 N. E. 299; Henry v. Leech, 123 Md. 436, 91 Atl. 694; Kleckner v. Kleckner, 212 Pa. St. 515, 61 Atl. 1019; Burton's Adm'r v. Burton (Pember v. Burton), 82 Vt. 12, 17 Ann. Cas. 984, 71 Atl. 812 (giving facts of many cases) ; Burwell v. Burwell (Va.), 49 S. E. 68; cited in Orr V. Pennington, 93 Vt. 268, 24 S. E. 928; Westphal v. Williams (Ind. App.), 107 N. E. 91. See, also, Coomker v. Coomker, [1911] 1 Ch. 174, afarmed, [1911] 1 Ch. 723 (gift from mother to son upheld) ; Mackall v. Mackall, 135 U. S. 167, 172, 173, 10 Sup. Ct. 705; Towson V. Moore, 173 U. S. 17, 19 Sup. Ct. 332; Sawyer v. White (C. C. A.), 122 Fed. 223; Alcorn v. Alcorn, 194 Fed. 275; Hawthorne v. Jenkins, 182 Ala. 255, Ann. Cas. 1915D, 707, 62 South. 505 (gift sustained); Neal V. Neal, 155 Ala. 604, 47 South. 66 (presumption that parent was dominant party overcome) ; Stanfill V. Johnson, 159 Ala. 546, 49 South. 223; Sanders v. Gurley, 153 Ala. 459, 44 South. 1022; McLeod v. McLeod, 145 Ala. 269, 117 Am. St. Eep. 41, 40 South. 414; Pierey v. Piercy, 18 Cal. App. 751, 124 Pac. 561 (burden on grantee); Becker v. Sehwerdtle, 6 Cal. App. 462, 92 Pac. 398; Noble V. Hutton, 7 Cal. App. 14, 93 Pac. 289 (son who was agent for his mother obtained practically whole of her estate; held, burden on him to show no fraud or undue influence; and in case of gift, independent ad- vice necessary) ; Mooney v. Mooney, 80 Conn. 446, 68 Atl. 985 (no pre- sumption of undue influence, though son was confidential adviser of mother) ; Turner v. Gumbert, 19 Idaho, 339, 114 Pac. 33 (mother and daughter; actual undue influence must be shown) ; Oliphant v. Idver- sidge, 142 HI. 160, 30 N. B. 334; Morgan v. Owens, 228 HI. 598, 81 2081 CONSTKXJCTIVE FKAUD.- §963 § 963. Other Relations. — The equitable doctrine applies with strictness to executors and administrators who, in Barb. 453; Whelan v. Whelan, 3 Cow. 537; Deem v. Phillips, 5 W. Va. 188; Liddel's Ex'r v. Starr, 20 N. J. Eq. 274. The general doctrine of the text is applied to transactions between other near relations, as gifts N. E. 1135 (if relation confidential, grantee must make full disclosure); Sears v. Vaughan, 230 111. 572, 82 N. E. 881; Hensan v. Cooksey, 237 111. 620, 127 Am. St. Rep. 345, 86 N. E. 1107 (support deed from mother to son canceled; actual fiduciary relation casts burden on son); Smith v. Kopitzki; 254 111. 498, 98 N". E. 953; Bishop v. Bil- liard, 227 HI. 382, 81 N. E. 403; Fitzgerald v. Allen, 240 111. 80, 88 N. E. 240; McLaughlin v. McLaugh- lin, 241 111. 366, 89 N. E. 645; Gish V. St. Joseph Loan & Trust Co. (Ind. App.), 113 N. E. 394 (illiter- ate father who intrusted all his business to son; burden on son); -Beese v. Shutte, 133 Iowa, 681, 108 N. W. 525 (burden on son in whom aged and infirm parent reposed con- fidence) ; McCord V. McCord, 136 Iowa, 53, 113 N. W. 552 (no relation of dependence) ; Re Acken, 144 Iowa, 519, Ann. Cas. 1912A, 1166, 123 N. W. 187 (mother and daughter; on facta, presumption of invalidity) ; Curtis v. Armagast, 158' Iowa, 507, 138 N. W. 873 (depend- ent mother and son; burden on lat- ter); Smith V. Smith, 84 Kan. 242, 35 L. B. A. (N. S.-) 944, and note, 114 Pac. 245 (gift from parent to child constructively fraudulent when parent is dependent) ; Shields V. Burge, 171 Ky. 149, 188 S. W. 321 (mother, aged seventy-five, adult child aged fifty-seven; burden to prove fairness on latter); Eeed v. Eeed, 101 Md. 138, 60 Atl. 621 (gift from mother to spn; confidential re- n— 131 U lation being established, burden is on son); Kennedy v. McCann, 101 Md, 643, 61 Atl. 625; Horner v. Bell, 102 Md. 435, -62 Atl. 736 (gift to daughter standing in actual fidu- ciary relation); Thiede v. Startz- man, 113 Md. 278, 77 Atl. 666 (fiduciary relation existed, and bur- den on grantee) ; Beck's Ex'r v. Beck, 110 Md. 497, 73 Atl. 144 (burden placed on grantee) ; Henry V. Leech, 123 Md. 436, 91 Atl. 694; Prescott V. Johnson (Minn.), 97 N. W. 891; Xaeseth v. Hommedal, 109 Minn. 153, 123 N. W. 287; Fischer V. Sperl (In re Sperl's Estate), 94 Minn. 421, 103 N. W. 502 (review of cases by Jaggard, J.) ; Eader v. Bader, 108 Minn. 139, 121 N. W. 393; Webb v. Webb, 99 Miss. 234, 54 South. 840 (deed from illiterate parents to son set aside) ; Kineer v. Kincer, 246 Mo. 419, 151 S. W. 424 (facts raise presumption of undue influence) ; Bonsai v. Bandall, 192 Mo. 525, 111 Am. St. Eep. 528, 91 S. W. 475; Jones v. Thomas, 218 Mo. 508, 117 S. W. 1177; Huffman v. Huffman, 217 Mo. 182, 117 S. W. 1; Nelson v. Wickham, 86 Neb. 46, 124 N. W. 908 (conveyance of land without consideration three weeks before grantor's death, to one son in • exclusion of other, closely scrutin- ized); Post V. Hagan, 71 N. J. Eq. 234, 124 Am. St. Eep. 997, 65 Atl. 1026 (dependent parent gives all estate to child. Held, burden on donee to show independent advice and such advice defined; review of New Jersey cases) ; James v. Aller, §963 EQtriTY JUKISPRUDENCE. 2082 common with all trustees, are prohibited from purchas- ing the property of the estate when -sold in course of from a sister to brother :« Thornton v. Ogden, 32 N. J. "Eq. 723; Hewitt V. Crane, 6 N. J. Eq. 159, 631; Sears v. Shafter, 6 N. Y. 268; Boney v. Hollingsworth, 23 Ala. 690. It has been held, however, that there is no fiduciary relation ipso facto between a son-in-law and mother-in-law: Fish V. Cleland, 33 111. 238; Cleland v. Fish, 43 111. 282. 68 N. J. Eq. 666, 111 Am. St. Eep. 654, 6 Ann. Cas. 430, 6 L. E. A. (N. S.) 285, 62 Atl. 427, reversing 66 N. J. Eq. 52, 57 Atl. 476 (mere improvidenee of gift not ground for rescission); Slack v. Eees, 66 N. J. Eq. 447, 69 L. E. A. 393, 59 Atl. 466 (gift from dependent father to daughter; burden on latter); Walsh y. Haslcey (N. J. Eq.), 69 Atl. 726 (deed of all property from mother to daughter, without independent advice, voidable) ; Beeves v. White, 84 N. J. Eq. 661, 95 Atl. 184 (gift by aged man to wife of adopted son, in ignorance of its legal effect, pre- sumptively invalid, without inde- pendent advice) ; Soper v. Cisco, 85 N. J. Eq. 165, 95 Atl. 1016; Allen v. La Vaud, 213 N. T. 322, 107 N. E. 570 (gift of all property to child by dependent parent; burden on child to show good faith) ; Wessell v. Eathjohn, 89 N. C. 377, 45 Am. Eep. 696; Bellamy v. Andrews, 151 N. C. 256, 65 S. E. 963 (grandfather to grandson having dominant posi- tion); Fjone V. Fjone, 16 N. D. 100, 112 N. W. 70 (transaction held fair) ; McAdams v. McAdams, 80 OMo St. 232, 88 N. E. 542 (son a lawyer and prepared deed; presump- tion against invalidity held to be overcome, on the facts) ; Turner v. Turner, 31 OM. 272, 121 Pac. 616; Meek v. Meek, 79 Or. 579, 156 Pac. 250 (confidential relation) ; Yeakel V. McAtoe, 156 Pa. St. 600, 27 Atl. 277; Clark v. Clark, 174 Pa. St. 309, 34 Atl. 610, 619; Vaughn v. Vaughn, 217 Pa. 496, 66 Atl. 745; Saufley v. Jackson, 16 Tex. 579; Jenkins v. Rhodes, 106 Va. 564, 56 S. E. 332; Boyle V. Eobinson, 128 Wis. 567, 109 N. W. 623; Quinn v. Quinn, 130 Wis. 548, 110 N. W. 488 (father to son; on facts, burden of proof on son); Haynes v. Harrimau, 117 Wis. 132, 92 N. W. 1100; Vance v. Davis, 118 Wis. 548, 95 N. W. 939. §962, (d) Transactions Between Other Near Eelations. — See, also. Beeves v. Howard, US' Iowa, 121, 91 N. W. 896 (no presumption against gift from brother to sister, when no relation of dependence) ; Gillespie v. Holland, 40 Ark. 28, 48 Am. Eep. 1 (gift from sister to brother who stood in looo parentis set aside); Million V. Taylor, 38 Ark. 428; Odell V. Moss, 130 Cal. 352, 62 Pac. 555 (gift to sister from dependent brother set aside) ; Crawford v. Crawford, 134 Ga. 114, 19 Ann. Cas. 932, 28 L. E. A. (N. S.) 353, 67 S. E. 673 (relation between brothers not confidential); Noble v. Noble, 255 HI. 629, 99 N. E. 631 (deed from sister to brother, who was confiden- tial adviser) ; Bonham v. Doyle, 39 Ind. App. 438, 77 N. E. 859, 79 N. E. 458 (stepdaughters; no confi- dential relation) ; Nixon v. Klise, 160 Iowa, 238, 141 N. W. 322 (no presumption against validity of transaction between ' brothers) ; Shevlin v. Shevlin, 96 Minn. 398, 105 N. W. 257 (transaction between 2083 CONSTRUCTIVE FKAITD. § 963 administration, and from making any personal profits by their dealings with it.i The same general principle extends, with more or less force, to dealings between a physician and patient,2i3 a spiritual adviser and penitent,^ c vendor and vendee of land,^ ^ husbands and §963, 1 Scott V. Umbarger, 41 Cal. 410; Green v. Sargeant, 23 Vt. 466, 56 Am. Dec. 88; Ives v. Ashley, 97 Mass. 198; Hawley v. Mancius, 7 Johns. Ch. 174; Wortman v. Skinner, 12 N. J. Eq. 358; Obert v. Obert, 10 N. J. Eq. 98; Kruse v. StefEens, 47 111. 112; Audenreid's Appeal, 89 Pa. St. 114, 33 Am. Rep. 731.»' § 963, 2 Billage v. Southee, 9 Hare, 594; Dent v. Bennett, 4 Mylne & C. 269; Aherne v. Hogan, 1 Dru. 310; CrispeE v. Dubois, 4 Barb. 393; In- gersoU V. Roe, 65 Barb. 346; Cadwallader..v: West, 48 Mo. 483. Cases presenting the same question arising on the probate of wills are not uncommon. § 963, 3 The religious belief or connection is immaterial : Lyon v. Home, L. R. 6 Eq. 655; Nottidge v. Prince, 2 GifE. 246; Leighton v. Orr, 44 Iowa, 679; Greenfield's Estate, 24 Pa. St. 332; Naehtrieb v. Harmony Settle- ment, 3 Wall. Jr. 66. §963, 4 Baker v. Monk, 4 De Gex, J. & S. 388; Clark v. Malpas, 4 De Gex, F. & J. 401. brothers; actual fiduciary relation and cited in State v. Culhane, 78 shown); Creamer v. Bivert, 214 Mo. Conn. 622, 63 Atl. 636. 473, 113 S. "W. 1118 (brother and §963, (b) Physician and Patient. sister) ; Miller v. Worth, 89 Neb. 75, The text is quoted in Peterson v. 130 N. W. 846 (conveyance from Budge, 35 Utah, 596, 102 Pac. 211, ' one sister to another set aside, dissenting opinion. See, also. But- actual fiduciary relation) ; Balthrop ler v. Gleasou, 214 Mass. 248, 101 V. Todd, 145 N. C. 112, 58 S. E. 996 N. E. 371; Matthaei v. Pownall, 235 (conveyance from elderly woman to Pa. 460, 84 Atl. 444; Unruh v. her sister; held that grantee must Lukens, 166 Pa. St. 324, 31 Atl. 110; show good faith, as the relation was Norfleet v. Beall (Miss.), 34 South, actually fiduciary) ; Jenkins v. Jen-- 328. kins, 66 Or. 12, 132 Pac. 542 (gift §963, (c) Spiritual Adviser.— The from man sixty years old to his text is cited in Gilmore v. Lee, 237 brother in actual confidential rela- 111. 402, 127 Am. St. Eep. 330, 86 tion set aside) ; Devlin v. Devlin, 89 N. E. 568. See, also, McPherson v. S. C. 268, 71 S. E. 966 (brother and Byrne, 155 Mich. 338, 118 N. W. dependent sister). 985. A leading case is AUcard v. §963, (a) The majority of the Skinner, 36 Ch. D. 145. This was American cases ' cited ante, under § 958, are of this character. The § 963, (d) The text is cited in text is quoted in Elting v. First Nat. Liskey v. Snyder (W. Va.), 49 S. E. Bank, 173 111. 368, 50 N. E. 1095; 515. 963 EQUITY JURISPEUDENCB. 2084 wives, and persons occupying their position,^ « part- § 963, 5 Corley v. Lord Stafford, 1 De Gex & J. 238; Nelson v. Stoeker, 4 De Gex & J. 458; Turner v. Turner, 44 Mo. 535; Coulson v. Allison, 2 De Gex, F. & J. 521 (husband and wife's sister) ; Bivins v. Jamigan, 3 Baxt. 282 (conveyance by a man to his mistress). an action to set aside large gifts by A., a member of a Protestant "sis- terhood," to S., the "lady superior" of the sisterhood, made for its charitable purposes. The rules of the sisterhood required members to give up all their property (though not necessarily to the sisterhood) ; to "regard the voice of her superior as the voice of God"; and especially not to seek advice of any extern without the superior's ieave. There was no proof of actual unfair con- duct, coercion, etc., on the part of the defendant. The Court of Ap- peal admitted that the case was one "of great importance and diflSeulty" (Lindley, L. J., p. 180; Bowen, L. J., p. 189), and that it did not come within the group of cases where "the position of the donor to the donee has been such that it has been the duty of the donee to ad- vise the donor, or even to manage his property for him." It was held by the Court of Appeal that the ab- sence of independent advice ren- dered the gifts voidable as being made to a person in a position to exercise undue influence; but in the opinion of a majority of ,the court the plaintiff's remedy was lost by acquiescence. See, also, Morley v. Loughnan, [1893] ICh. 736, where, however, the undue influence was actual rather than constructive. In Pironi v. Corrigan, 47 N. J. Eq. 135, 20 Atl. 21S, the importance of in- dependent advice in a business dealing between penitent and spirit- ual adviser, whereby the latter ob- tained an advantage, was dwelt upon in the opinion of Pitney, V. C, The lack of independent advice to the donor was also decisive in Cas- pari V. First German Church, 12 Mo. App. 293 (Thompson, J.), where a gift, disproportioned to her means, made by an aged widow, to a church, at the solicitation of the pastor thereof, who was also the donor's spiritual and business ad- viser, upon the parol condition, sub- sequently repudiated by the church, that she was to receive interest on the money during her life, was set aside. See, also, Dowie v. Driscoll, 203 111. 480,. 68 N. E. 56. Compare the somewhat similar case of Longe- necker v. Zion Evangelical Lutheran Church, 200 Pa. St. 567, 50 Atl. 244, where the. gift was sustained. In Connor v. Stanley, 72 Gal. 556, 1 Am. St. Bep. 84, 14 Pac. SOS, it was held that the relation between a person who is a firm believer in spiritualism, and the medium upon whose spiritual manifestations he habitually relies, is one of personal confidence, casting the burden of proof upon the medium as to the fairness of contracts by which the latter gains an advantage. § 963, (e) Husband and Wife, etc. The text is cited in Hadden v. Larned, 87 Ga. 634, 13 S. E. 806 (deed of gift from wife to husband not prima facie void) ; Eogers v. Rogers, 97 Md. 573, 55 Atl. 450. See, also. Holt v. Agnew, 67 Ala. 360 (transfer of insurance policy to pay husband's debt, sustained) ; Harraway v. Harraway, 136 Ala. 499, 34 South. 836 (in suit by wife 2085 CONSTEXJCTIVE FKAUD. 963 ners,^* and indeed all persons who occupy a position §963, 6Bayne v. Terguson, 5 Dow, 151; Rawlins v. Wickham, 3 De Gex & J. 304; McLure v. Ripley, 2 Macn. & G. 274; Clegg v. Edmondson, to set aside exchange of land, bur- den on defendant to show it to be just, fair, and equitable); Mathy v. Mathy-, 88 Ark. 56, 113 S. W. 1012 (conveyance from wife to husband closely scrutinized); Yordi v. Yordi, 6 Cal. App. 20, 91 Pac. 348 (husband must show independent advice to support gift from wife) ; White v. Warren, 120 Cal. 322, 49 Pac. 129, 52 Pae. 723; McCord v. Bright, 44 Ind. App. 275, 87 N. E. 654 (burden of showing fairness, etc., on hus- band taking deed from wife); Stiles V. Beed, 151 Iowa, 86,- 130 N. W. 376 (mere relationship of husband and wife is not enough to raise presump- tion of undue influence) ; Rankin v. Schiereck, 166 Iowa, 10, 147 N. W. 180 (antenuptial agreement, utmost good faith exacted of man).; Sims V. Sims, 101 Mo. App. 407, 74 S. W. 449; Dimond v. Sanderson, 103 Cal. 97, 37 Pae. 189; Paulus v. Beed (Iowa), 96 N. W. 757 (conveyance by husband to wife who had con- trolling influence) ; Maze's Ex'rs v. Maze (Ky.), 99 S. W. 336 (ante- nuptial contract by which wife de- prived of participation in husband's property scrutinized with care) ; Tilton V. Tilton, 130 Ky. 281, 132 Am. St. Bep. 359, 113 S. W. 134 (antenuptial contract set aside after thirty-two years) ; Pritchard v. Hutton, 187 Mieh. 346, 153 N. W. 705 (no presumption from the rela- -tion against deed from husband to wife) ; Greene v. Greene, 42 Neb. 634, 47 Am. St. Bep. 724, 60 N. W. 937; Hovorka v. Havlik (Neb.), !>3 N. W. 990; Brugman v. Brugman, 93 Neb. 408, 140 N. W. 781 (eon- veyancBj on facts, upheld) ; Hall v. Otterson,-52 N. J. Eq. 522, 28 Atl. 907, and eases cited; Farmer v. Farmer, 39 N. J. Eq. 211; Fretz v. §963, (f) Partners. — See, also. Bowman v. Patrick, 36 Fed. 138 (fraudulent concealment in pur- chase by managing from nonresi- dent partner); Eich v. Teasley, 194 Fed. 534 (accountable for secret profits) ; Goldsmith v. Koopman, 152 Fed. 173, 81 C. C. A. 465 (assign- ment by one partner to another up- held only when made for a fair consideration and upon a full dis- closure of all material facts) ; Cunningham v. Pettigrew, 169 Fed. 335, 94 C. C. A. 457 (fiduciary rela- tionship of .joint purchasers); Ehr- mann V. Stitzel, 121 Ky. 751, 123 Am. St. Eep. 224, 90 S. W. 275; Evans v. Carter (Tex. Civ. App.), 176 S. W. 749 (as to purchase by partner at judicial sale); Colton v. Stanford, 82 Cal. 351, 16 Am. St. Eep. 137, 23 Pae. 16 (relation be- tween several persons associated for the purpose of organizing, con- trolling and operating railroad and other corporations is fiduciary; but compromise agreement with the widow 6f one of the associates sus- tained) ; Miller v. Ferguson, 107 Va. 249, 122 Am. St. Eep. 840, 13 Ann. Cas. 138, 57 S. E. 649 (duty of full disclosure) ; Yost v. Critcher, 112 Va. 870, 72 S. E. 594 (duty of full disclosure) ; Salhinger v. Salhinger, 56 Wash. 134, 105 Pac. 236; Thorne V. Brown, 63 W. Va. 603, 60 S. E. 614 (partner in negotiating with another partner for his share in firm bound to disclose all informa- tion) ; Krebs v. Blankenship, 73 "W- Va. 539, 80 S. E. 948 (duty of full disclosure). ; -_,,..> , ., 963 EQUITY JURISPRUDENCE. 2086 of trust and confidence, of influence and dependence, in fact, althougli not perhaps in law.'^ There remain 8 De Gex, M. & G. 787, 807; Clements v. Hall, 2 De Gex & J. 173; Perens V. Johnson, 3 Smale & G. 419; Blisset v. Daniel, 10 Hare, 493, 538; Cham- bers V. Howell, 11 Beav. 6; Bentley v. Craven, 18 Beav. 75; Maddeford V. Austwick, 2 Mylne & K. 279; 1 Sim. 89; Burton v. Wookey, 6 Madd. 367; Short v. Stevenson, 63 Pa. St. 95; Simons v. Vulcan Oil Co., 61 Pa. St. 202, 100 Am. Dec. 628; Flagg v. Mann, 2 Sum. 487; Wheeler v. Sage, 1 Wall. 518. § 963, 7 A person consulting an elder and distant relative, or a confi- dential friend: Tate v. Williamson, L. R. 2 Ch. 55; 1 Eq. 528; Taylor v. Both, 70 N. J. Eq. 764, 64 Atl. 152 (gift from husband to wife, through. a third person, of all his realty up- held); Monoghau v. Collins (N. J. Eq.), 71 Atl. 617 (presumption of undue influence in gift jfrom hus- band to wife, he being in posi- tion of dependence) ; Schultze v. Schultze, 73 N. J. Eq. 597, 73 Atl. 824 (burden on wife to show im- proper influence in order to avoid settlement on him) ; Crawford v. Crawford, 24 Nev. 410, 56 Pae. 94 (no presumption against conveyance from husband to wife) ; Massey v. Eae, 18 N. D. 409, 121 N. W. 75; Holt V. Holt, 23 Old. 639, 102 Pac. 187 (must be absolute good faith in transactions between husband and wife); Thomas v. Thomas, 27 Okl. 784, Ann. Cas. 1912C, 713, 35 L. K. A. (N. S.) 124, 109 Pac. 825, 113 Pae. 1058; Darlington's Appeal, 86 Pa. St. 512, 27 Am. Rep. 726; Shea's Appeal, 121 Pa. St. 302, 15 Atl. 629 (release of dower made shortly be- fore marriage) ; Cheuvront v. Cheu- vront (W. Va.), 46 S. E. 233; Swiger v. Swiger, 58 W. Va. 119, 52 S. E. 23 (must show perfect fairness and that wife acted on full in- formation) ; In re Deller v. Deller, 141 Wis. 255, 25 L. K. A. (N. S.) 751, 124 N. "W. 278 (antenuptial contract releasing rights of wife, upheld on facts); Disch v. Timm, 101 Wis. 179, 191, 192, 77 N. W. 196 (presumption against convey- ance from husband to wife who had controlling influence). An import- ant application of the principle is seen in the group of cases where one spouse receives a conveyance from the other on. a parol agree- ment to reeonvey, and is held to be a constructive trustee by virtue of the confidential relation; while in the absence of such relation, and of actual fraud on the grantee's part, the statute of frauds would gen- erally prevent a trust from attach- ing to the property: See Brison v. Brison, 75 Cal. 525, 7 Am. St. Eep. 189, 17 Pac. 689, and other cases post^ § 1056, end of note. As to the fiduciary relation between a man and the woman to whom he is en- gaged to be married, see Hallett v. Fish, 120 Fed. 986; Russell v. Rus- sell, 129 Fed. 434; Gilmore v. Burch, 7 Or. 374, 33 Am. Rep. 710. See, also, McConnell v. Brown, 232 111. 336, S3 N. E. 854 (no presumption against conveyance by the man). Presumption of undue influence on conveyance by a man to a woman with whom he was sustain- ing illicit sexual relations: Shipman v. Furniss, 69 Ala. 555, 44 Am. Rep. 528 (relying on Leighton v. Orr, 44 Iowa, 679; Hanna v. Wilcox, 53 Iowa, 547, 5 N. W. 717; Dean v. 2087 CONSTRUCTIVE FEAUD. 963 to be mentioned two other important relations whicli Obee, 3 Price, 83 ; s attorney of mortgagee and mortgagor : James v. Rum- sey, L. R. 11 Ch. Div. 398 ; and see Giddings v. Giddings, 3 Russ. 241 ; Tanner v. Elworthy, 4 Beav. 487; Waters v. Bailey, 2 Younge & C. Ch. 219; Wakeman v. Dodd, 27 N. J. Eq. 564. Negley, 41 Pa. St. 312, SO Am. Dec. 620; Bivins v. Jarnigan, supra; Kessinger v. Kessinger, 37 Ind. 341; Coulson V. Allison, supra). See, especially, Piatt v. Elias, 186 N. Y. 374, 116 Am. St. Eep. 558, 9 Ann. Cas. 780, 11 L. K. A. (N. S.) 554, 79 N. E. 1 (presumption one of fact, not of law). § 963, (s) De Facto Fiduciary Re- lationships. — Tlie text is quoted in Pritchard v. Button, 187 Micli. 346, 153 N. W. 705. The text is cited in Nelson v. Brown, 164 Ala. 397, 137 Am. St. Kep. 61, 51 South. 360 (stepson and stepmother). See, also, Tribou v. Tribou, 96 Me. 305, 52 Atl. 795, citing the text (uncle and dependent niece); Kyle v. Per- due, 95 Ala. 579, 10, South. 103, citing the text (conveyance tp con- fidential adviser); Cannon v. Gil- mer, 135 Ala. 302, 33 South. 659 (same); Harrison v. Eogers, 162 Ala. 515, 50 South. 364 (white man and dependent negro); McKnatt v. McKnatt (Del. Ch.), 93 Atl. 367 (aged patient and nurse) ; Hawk v. Everett, 71 Ga. 675 (confidential adviser of plaintiff purchases land from her vendee, to her disad- vantage); Allen V. Jackson, 121 111. 567, 13 N. E. 840 (grantor corpora- tion having orally proniised to pro- tect rights of grantee, and having thus assumed a confidential rela- tion, its director is disabled from purchasing the land at judicial sale); Whitesell v. Striekler, 167 Ind. 602, 119 Am. St. Rep. 524, 78 N. E. 845; Smith v. Smith, 222 Mass. 102, 109 N. E. 830 (daughter- in-law not in fiduciary relation) ; Hawkes v. Lackey, 207 Mass. 424, 93 N. E."828; Storrs v. Scougale, 48 Mich. 387, 400, 12 N. W. 502 (bur- den of proof is on confidentia-l adviser); Snyder v. Snyder, 131 Mich. 658, 92 N. W. 353; Nelson v. Wiggins, 172 Mich. 191, 137 N. W. 623 (no confidential relation); King V. Remington, 36 Minn. 15, 29 N. W. 352 (E., being in confidential rela- tion with K., cannot purchase for his own benefit from K.'s assignee in bankruptcy) ; Jackson v. Hooper, 76 N. J. Eq. 185, 74 Atl. 130 (joint adventure; one party not permitted to make secret profit); Bid well v. Piercy, 71 N. J. Eq. 83, 63 Atl. 261 (conveyance by old man to wife of friend) ; Fisher v. Bishop, 108 N. Y. 25, 2 Am. St. Eep. 357, 15 N. E. 331 (conveyance extorted by confiden- tial adviser) ; Colonial Trust Co. v. Hoffstot, 219 Pa. St. 497, 69 Atl. 52 (pledgor and pledgee do not stand in confidential relation) ; Robinson v. Powell, 210 Pa. St. 232, 59 Atl. 1078 (gift to housekeeper, no confidential relation) ; In re Plan- kinton's Estate, 212 Pa. St. 235, 61 Atl. 888 (nephew and aunt); Tap- pan V. Aylesworth, 13 E. I. 582 (deed from Confidential adviser to plaintiff adjudged to be a mort- • gage)-; Briggle v. Cox, 72 Wash. 574, 131 Pac. 209 (relation between joint tenants held to be confidential) ; Bond V. Taylor, 68 W. Va. ,317, 69 S. E. 1000 (joint adventure) ; Berry V. Colborn, 65 W. Va. 493, 17 Ann. Cas. 1018, and note, 64 S. E. 636 (joint adventure). §963 EQUITY JtTRISPBUDENCE. 2088 are partially fiduciary, and to which the principle applies with limitations, — that of surety and creditor and prin- cipal debtor,^ and that subsisting between promoters and directors or trustees of corporations and the corporation itself and the stockholders.^ ^ These subjects are more fully examined in a subsequent chapter. § 963, 8 See ante, § 907. § 963, 9 See ante, § 881. Direetors and managers of corporations are in many respects trustees, and are governed by the rules applicable to trustees generally. They are prohibited from making contracts with them- selves individually, from purchasing property from themselves, or selling to themselves, from making a personal profit out of their dealings with the corporation affairs, and the like: Macon v. Huff, 60 Ga. 221; Barnes v. Brown, 80 N. Y. 527.* § 963, (h) The text is cited in OUver V. OUver (Ga.), 45 S. E. 232 (director purchasing shares from stockholder is under obligation to make full disclosure of facts affect- ing their value); and in Tevis v. Hammersmith (Ind. App.), 81 N. B. 614 (general manager of corpora- tion cannot secure secret profit). § 963, (1) See post, § 1077. As to corporation direetors and managers, see, also, New River Mineral