Arndt v. Griggs, 134 U. S. 316,
affirmed to the point that the duty of determining unsettled
questions respecting title to real estate is local in its nature,
to be discharged in such mode as may be provided by the state in
which the land is situated when such mode does not conflict with
some special prohibition of the Constitution or is not against
natural justice.
Applying that doctrine to this case, it is held that the decree
in the equity cause of
Pippert v. English was not void for
want of personal service on English and his wife, as the laws
relating to the District of Columbia permit service by publication
upon absent defendants.
And further, as the evidence shows that Pippert had no knowledge
of the attempt by Mrs. English to encumber the land in question by
a deed of trust, the recording of the instrument did not give him
constructive notice of it, as the formalities required by law to
authorize the recording were not complied with.
That deed of trust was inoperative as a legal instrument.
There being no actual notice, and the recording of the defective
deed not operating as constructive notice, the alleged equitable
lien is wholly inoperative against those holding under the decree
below.
The complainant below was Christeina Murphy, who sued
Page 161 U. S. 248
in her own right and as executrix and trustee under the will of
Peter Pippert, her deceased father. By her bill, complainant sought
the cancellation of a deed of trust upon certain land in the City
of Washington devised by her father to complainant and to two of
the defendants named in the bill or, in the alternative, the
reinstatement of a deed of trust for the benefit of said Pippert,
which had been cancelled by a judicial decree as hereinafter
stated. The deed of trust attacked by the bill purported to have
been executed in August, 1874, by Elizabeth English to one Bean, to
secure payment of four notes for $1,000 each, payable to the order
of James Lynch. It was averred in substance that at the time of the
execution of the deed of trust the legal title to the land was in
Elizabeth English and Andrew Schwartz, Sr., by virtue of a
conveyance from Pippert made July 27, 1874, and the land which it
embraced was encumbered by a deed of trust to Pippert given to
secure the unpaid purchase money, $10,390.42. It was also alleged
that the deed from Pippert to English and Schwartz was annulled by
a decree of the Supreme Court of the District of Columbia in a suit
instituted by Pippert to cancel his conveyance on the ground of
alleged fraud practiced upon him in the transaction. At the time of
the institution of said suit, the Bean deed of trust had been
placed by Mrs. English on her three-fourths interest in the
property bought by herself and Schwartz from Pippert, and it was on
the land records of the District of Columbia. Neither Lynch nor his
trustee, Bean, were made parties to the suit.
Relief was sought as to the Bean deed of trust upon the ground
that it was executed on behalf of Mrs. English by her husband, who
had no proper or competent authority in law to execute the same,
and it was urged at the trial, among other objections, that the
power of attorney under which English assumed to execute the deed
of trust was defective, and was not entitled to record, because of
the absence therefrom of a certificate of the official character of
the officer before whom, in Michigan, Mrs. English acknowledged the
instrument. It was further urged in the bill as ground of relief
that the notes to Lynch were made without consideration
Page 161 U. S. 249
and that the transaction was part and parcel of a scheme by
which English attempted to defraud Pippert, as alleged in the suit
of Pippert hereinbefore referred to, and that the defendant Jane
Lynch, claiming to be the owner of the notes secured by said deed
of trust and the heirs at law of Bean, the deceased trustee, were
threatening to enforce the deed of trust by advertising the
premises for sale thereunder.
The controversy in this Court being confined to the question of
the validity of the apparent deed of trust to Bean, numerous
allegations contained in the bill are unnecessary to be referred
to.
Of the pleadings filed on behalf of the various defendants, only
that of Jane Lynch requires notice. In her answer, she set up her
ownership of the notes referred to in the Bean deed of trust,
claiming that she received them from her husband on the day the
notes bore date. She denied any knowledge of the suit to cancel
Pippert's conveyance to Mrs. English and Schwartz, and averred that
she had no knowledge of the decree in Pippert's suit until very
recently, and further averred that her deceased husband parted with
full consideration for the notes, and that the transaction was not
fraudulent.
While averring that English did have proper and competent
authority in law to execute the said deed of trust as the agent of
his wife, Mrs. Lynch coupled such averment with the claim that the
property purchased from Pippert was in fact paid for by the money
of Alexander English, who kept his property in his wife's name so
as to be out of the reach of his creditors, and that said English
was the real principal, and in giving the deed of trust for the
benefit of Lynch he was pledging his own property, though in the
name of his wife, for a debt due by him, and for which he received
the consideration. We quote the following statements in the
answer:
"Defendant further says that she is advised and believes, and
therefore charges, that while the said deed of trust is not
technically sufficient in law to constitute a valid deed of trust,
yet that it was, on the part of said English, a pledge of property
of which he was the real and equitable owner, for a just debt which
he owed the said James Lynch, and that the
Page 161 U. S. 250
said deed of trust constitutes an equitable mortgage upon the
said premises which this defendant has the right to have enforced,
and that the said Peter Pippert had notice thereof in his lifetime,
and before the filing of the suit by him hereinbefore referred to;
that the complainant herein is not a purchaser thereof, but a mere
volunteer, having taken the property as a gift, and without paying
any value therefor, and with full notice of this defendant's claim,
and this defendant says that complainant took the land subject to
all the equities of this defendant and all other persons
whomsoever. Defendant says that the said notes have never been
paid, and that it is true that she threatened to enforce the said
trust by a sale of said real estate because of the nonpayment
thereof."
After the cause was at issue, a decree was entered by consent of
all parties appointing a trustee to make sale and ordering a sale
of the property affected by the bill. The following provision is
contained therein:
"And whereas the said Jane Lynch, in consideration of the
provision hereinafter made, is willing to consent to the decree of
sale, now it is further ordered, adjudged, and decreed that said
John C. Heald, immediately upon the completion of such sale, shall
pay into the registry of this court the sum of eight thousand
dollars of the proceeds of said sale, and that the same shall be
invested and reinvested under the direction of the court, and held
until the final determination of this cause in the court of last
resort, and that said sum of eight thousand dollars, and the notes,
securities, or property in which the same shall from time to time
be invested, and the increase thereof, as to all parties interested
in said real estate, shall stand in the place and stead of said
real estate, and that if in this proceeding it shall ultimately be
decided that the defendant Jane Lynch had a valid lien upon said
real estate at the time the bill in this case was filed, for the
sum of four thousand dollars, with interest as aforesaid, or only
part thereof, then said sum of eight thousand dollars, and the
increase thereof, or so much thereof as shall be necessary, shall
be applied for the satisfaction of such lien. "
Page 161 U. S. 251
A sale of the property was had, and the fund representing the
Lynch claim was paid into the registry of the court.
After the taking of testimony the cause came on for hearing, and
on May 13, 1891, the court at special term entered a decree
adjudging the deed of trust to Bean to be null and void, that the
fund in the registry of the court belonged to the estate of Peter
Pippert, and, under his will, passed to the complainant and the
defendants Edwin Marsh and Florence Marsh. On the appeal of Jane
Lynch, the general term, on May 31, 1892, affirmed the judgment of
the special term.
Thereupon Mrs. Lynch took an appeal to this Court.
MR. JUSTICE WHITE, after stating the case, delivered the opinion
of the Court.
The question for our determination is whether or not appellant
had a valid lien, legal or equitable, upon the real estate in
question at the time the bill of complaint was filed.
We will premise that the decree in the equity cause of
Pippert v. English et al. was not void because English and
his wife were not personally served with process. Constructive
service by publication was authorized by § 787 of the Revised
Statutes, relating to the District of Columbia.
Hart v.
Sansom, 110 U. S. 151,
relied upon as supporting the proposition that the rights of Mr.
and Mrs. English in the land could not be affected by such
constructive notice, and that the decree rendered thereon was not
entitled to recognition in a federal court, does not support the
contention. The
Hart case was explained in
Arndt v.
Griggs, 134 U. S. 316,
in
Page 161 U. S. 252
which last case it was held that the duty of determining
unsettled questions respecting the title to real estate was local
in its nature, to be discharged in such mode as might be provided
by the state in which the land was situated, where such mode did
not conflict with some special inhibition of the Constitution, and
was not against natural justice, and we held (pp.
134 U. S.
327-328) that nothing inconsistent with this doctrine
was decided in
Hart v. Sansom.
From the evidence contained in the record, we are satisfied that
when Pippert instituted the action to annul his conveyance to Mrs.
English and Andrew Schwartz, Sr., he did not have actual knowledge
that Mrs. English, or anyone claiming to represent her, had
encumbered or attempted to encumber the land. The question then
presents itself: was the record of the alleged deed of trust to
Bean constructive notice to Pippert? We are relieved from extended
discussion in answering this question by the admissions made in the
answer of defendant Lynch and in the brief of her counsel.
In the bill of complaint it is charged that Alexander English
was without any proper or competent authority in law to execute
said deed of trust. This refers to the authority of English to
execute the deed of trust as the attorney of his wife. This
allegation is admitted by the answer, for while it is averred
therein, "upon information and belief, that said Alexander English
did have proper and competent authority in law to execute the trust
to said William W. Bean," it proceeds to aver, in connection with
this allegation, that "the true facts in relation thereto" were in
substance that the payment made by English when the property was
purchased from Pippert was made with money belonging to English
personally, that he had personally received the benefit of the
consideration from Lynch, and that the said deed of trust,
"while not technically sufficient in law to constitute a valid
deed of trust, . . . was, on the part of said English, a pledge of
property of which he was the real and equitable owner, for a just
debt which he owed to said James Lynch, and that the said deed of
trust constitutes an equitable mortgage upon the said premises,
which this defendant has the right to have enforced. "
Page 161 U. S. 253
In the brief of counsel for appellant, the matter is thus
stated:
"The only remaining objection to the Lynch trust is the
defective character of the instrument. It is admitted in the answer
that the instrument is inartificially drawn, and, as a mortgage, is
technically defective."
And the argument then proceeds to maintain that the evidence
clearly established a good equitable mortgage in favor of
appellant.
In the face of these concessions, it becomes unnecessary to
determine what were the particular defects rendering the writing in
question legally invalid.
Having concluded that the deed of trust was inoperative as a
legal instrument, we recur to the question whether or not its
spreading upon the land records of the District constituted
constructive notice. As said by Pomeroy in § 652 of his work
on Equity Jurisprudence:
"The record does not operate as a constructive notice unless the
instrument is duly executed and properly acknowledged or proved, so
as to entitle it to be recorded. The statutes generally require 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 of these preliminaries entirely omitted or
defectively performed, such a record would be a mere voluntary act,
and would have no effect upon the rights of subsequent purchasers
or encumbrancers."
Story (Eq. Jur., 13th ed., § 404) states the doctrine
thus:
"The doctrine as to the registration of deeds being constructive
notice as to all subsequent purchasers is not to be understood of
all deeds and conveyances which may be
de facto
registered, but of such only as are authorized and required by law
to be registered, and are duly registered in compliance with law.
If they are not authorized or required to be registered, or the
registry itself is not in compliance with the law, the act of
registration is treated as a mere nullity, and then the subsequent
purchaser is affected only by such actual notice as would amount to
a fraud."
It follows that the recording of the instrument under
consideration
Page 161 U. S. 254
was a mere nullity in a jurisdiction such as the District of
Columbia (Rev.Stat. Dist.Col. § 440), where particular
formalities are required to authorize the recording. To the cases
referred to by the authors first cited may be added
Dohm v.
Haskin, 88 Mich. 144, and
Musgrove v. Bouser, 5 Or.
313, 315, 316, the defect in the recorded instrument in both cases
being the absence of a certificate as to the official character of
the officer before whom a deed was acknowledged.
See also
3 Washburn Real Prop. *592; Wade, Notice, §§ 124-126.
The effect of the decree in Pippert's suit annulling his
conveyance to Schwartz and English was that Pippert, as the
consideration of such cancellation, surrendered the benefit of his
vendor's lien and the security of the deed of trust. When this
result was accomplished, the unpaid purchase money amounted to
$10,390.42, and was in fact but $500 less than the entire
consideration for the sale, and practically represented the full
value of the property. By the reconveyance to him under the decree,
Pippert stood in the position of a
bona fide purchaser of
the property for value, and, as we have found he did not have
actual or constructive notice of the real or supposed equity of
Mrs. Lynch, there would seem to be no ground upon which to base the
claim that, at the time of the institution of this suit, Mrs. Lynch
had an equitable mortgage or lien upon the property. Let us assume,
for the sake of the argument, that, as claimed by counsel for the
appellant, Alexander English should be regarded in equity as having
been the real owner of the property at the time of the transaction
with Lynch, though the legal title was in his wife; that Lynch paid
to English full consideration for the cash paid and notes delivered
by English, and that Lynch accepted the notes on the faith of the
security of the property in question. As against English, it is
clear under the authorities that from the nature of the
transaction, upon the hypothesis we have stated, a lien would have
arisen in equity against English's interest in the land. Jones on
Mortgages §§ 162, 163, 166, 168, 169; Story, Eq.Jur.
§§ 1020, 1231;
Peckham v. Haddock, 36 Ill. 38;
McClurg v. Phillips, 49 Mo. 315;
Gale v.
Page 161 U. S. 255
Morris, 29 N.J.Eq. 222, 224. But a
bona fide
purchaser for value of property subject to an equitable mortgage,
without notice of such mortgage, takes the property free of the
equitable mortgage. Jones on Mortgages § 162, citing
Watkins v. Reynolds, 123 N.Y. 211.
Watkins v.
Reynolds was a case where a
cestui que trust for life
executed a mortgage in fee on the trust estate, and after her
death, the remainderman in fee executed, under seal, an unattested
paper covenanting, for sufficient consideration, that the mortgage
should continue to be a lien on the land. Afterwards he sold and
conveyed to another, who paid a sum in cash, and contracted to
assume certain mortgages and pay certain debts of the vendor to
third persons, equal in amount to the remainder of the purchase
price. The cash payment and part of these debts were made before
the purchaser had actual notice of the agreement to continue the
mortgage lien. Upon this state of fact, the court, speaking through
Peckham, J., held that since the purchaser's agreements were made
before notice, and remained in full force after notice, there was
no equitable lien against the property in favor of the mortgagee
for the purchase money unpaid at the time of such notice.
That notice to Pippert, actual or constructive, was an element
essential to the survival of the lien as against Pippert is
admitted in the answer of Mrs. Lynch, expressed by the averment
that Pippert had notice of the existence of the supposed deed of
trust. As that allegation was not established by the evidence, but
the contrary was proven, it follows that the claim of a lien or a
mortgage upon the property in favor of Mrs. Lynch has not been made
out. And this conclusion inevitably results from the following
additional considerations.
Pippert instituted and prosecuted his suit for cancellation of
his conveyance against all persons known to him as claiming an
interest in or encumbrance on the property. He did what the law
required in order to make his judgment binding upon all the world,
and, when the court divested Mrs. English of all her interest in
the property, appellant's alleged rights, acquired through her, not
having been legally recorded before judgment, were divested by the
decree as effectually as if
Page 161 U. S. 256
appellant had been a party. There being no actual notice, and
the recording of the defective deed not operating as constructive
notice, the alleged equitable lien is wholly inoperative against
those holding under the decree.
The decree of the general term of the Supreme Court of the
District of Columbia must be
Affirmed.
MR. JUSTICE BREWER, not having heard the argument, took no part
in the decision of this cause.
