I. Doctrine and Application 1 Granter 1 · PHILLIPS v. PHILLIPS. (Court of Appeal in Chancery, 1862. 4 De Gex, F. & J. 208, 45 Eng. Reprint, 1164.) The LORD CHANCELLOR [WESTBURY]. When I reserved my judgment at the conclusion of the argument in this case, it was rather out of respect to that argument than from a feeling of any difficulty with regard to the question that had been so strenuously contested before me. The case is a very simple one. The plaintiff claims as the grantee of an annuity granted by a deed dated in the month of February, 1820, to issue out of certain lands in the county of Monmouth, secured by powers of distress and entry. The annuity or rent charge was not to arise until the death of one Rebecca Phillips, who died in the month of December, 1839, and the first payment of the annuity became due on the 8th March, 1840. The case was argued on both sides on the admitted basis that the legal estate was outstanding in certain incumbrancers, and is still outstanding. Subject to the annuity the grantor was entitled in fee simple in equity. In February, 1821, the grantor intermarried with one Mary Phillips. On the occasion of that marriage a settlement, dated in February, 1821, was executed, and under this deed the defendants claim, and claim, therefore, as purchasers for a valuable consideration. No payment has ever been made in respect of the annuity. The bill was filed within twenty years, and seeks the ordinary relief applicable to the case. The defendants by their answer insist that the deed was voluntary, and therefore void, under the statute of Elizabeth, as against them in their character of purchasers for valuable consideration, and they also insist upon the statute of limitations. But in the answer the defense of purchase for valuable consideration without notice is not attempted to be raised. At the hearing an affidavit of Mary Phillips and another person was produced, denying the fact of notice of the annuity at the time of the grant and at the time of the creation of the marriage settlement, and the contention at the bar was that the defense of purchase for valuable consideration without notice was available for the defendants under these circumstances, and ought to be allowed as a bar to the claim 1 For discussion of principles, see Eaton on Equity (2d Ed.) §§ 56, 57. by the court. The vice chancellor in his judgment refused to admit the defense of purchase for valuable consideration without notice, and I entirely agree with him in the conclusion that such a defense requires to be pleaded by the answer, more especially where an answer has been put in. But I do not mean to rest my decision upon that particular ground because I have permitted the argument to proceed with reference to the general proposition, which was maintained before me with great energy and learning, viz., that the doctrine of a court of equity was this, that it would give no relief whatever to any claimant against a purchaser for valuable consideration without notice. It was urged upon me that authority to this effect was to be found in some recent decisions of this court, and particularly in the case decided at the rolls of Attorney General v. Wilkins, 17 Beav. 285. I undoubtedly was struck with the novelty and extent of the doctrine that was thus advanced, and in order to deal with the argument it becomes necessary to revert to elementary principles. I take it to be a clear proposition that every conveyance of an equitable interest is an innocent conveyance, that is to say, the grant of a person entitled merely in equity passes only that which he is justly entitled to and no more. If, therefore, a person seised of an equitable estate (the legal estate being outstanding) makes an assurance by way of mortgage or grants an annuity, and afterwards conveys the whole estate to a purchaser, he can grant to the purchaser that which he has, viz., the estate subject to the mortgage or annuity, and no more. The subsequent grantee takes only that which is left in the grantor. Hence grantees and incumbrancers claiming in equity take and are ranked according to the dates of their securities; and the maxim applies, "Qui prior est tempore potior est jure." The first grantee is potior, that is potentior. He has a better and superior, because a prior, equity. The first grantee has a right to be paid first, and it is quite immaterial whether the subsequent incumbrancers, at the time when they took their securities and paid their money, had notice of the first incumbrance or not. These elementary rules are recognized in the case of Brace v. Duchess of Marlborough, 2 P. Wms. 491, and they are further illustrated by the familiar doctrine of the court as to tacking securities. It is well known that if there are three incumbrancers, and the third incumbrancer, at the time of his incumbrance and payment of his money, had no notice of the second incumbrance, then, if the first mortgagee or incumbrancer has the legal estate, and the third pays him off, and takes an assignment of his securities and a conveyance of the legal estate, he is entitled to tack his third mortgage to the first mortgage which he has acquired, and to exclude the intermediate incumbrancer; but this doctrine is limited to the case where the first mortgagee has the legal title, for, if the first mortgagee has not the legal title, the third does not, by the transfer, obtain the legal title, and the third mortgagee, by payment off of the first, acquires no priority over the second. Now the defense of a purchaser for valuable consideration is the creature of a court of equity, and it can never be used in a manner at variance with the elementary rules which have already been stated. It seems at first to have been used as a shield against the claim in equity of persons having a legal title. Bassett v. Nosworthy, Finch, 102, 2 White & T. Lead. Cas. Eq. 1, is, if not the earliest, the best early reported case on the subject. There the plaintiff claimed under a legal title, and this circumstance, together with the maxim which I have referred to, probably gave rise to the notion that this defense was good only against the legal title; but there appear to be three cases in which the use of this defense is most familiar: First, 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 (which was the case in Bassett v. Nosworthy, Finch, 102, 2 White & T. Lead. Cas. Eq. 1), 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 is a bona 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 J. Leach in Collins v. Archer, 1 Russ. & M. 284, that it was no answer to a bill for fines. In those cases the court of equity was not asked to give the plaintiff any equitable, as distinguished from legal, relief. The second class of cases is the ordinary one of several purchasers or incumbrancers, each claiming in equity, and one who is later and last in time succeeds in obtaining an outstanding legal 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 embarrassment to other claimants. He will not be deprived of this advantage by a court of equity. To a bill filed against him for this purpose, by a prior purchaser or incumbrancer, the defendant may maintain the plea of purchase for valuable consideration without notice, for the principle is that a court of equity will not disarm a purchaser, that is, will not take from him the shield of any legal advantage. This is the common doctrine of the tabula in naufragio. Thirdly, where there are circumstances that give rise to an equity as distinguished from an equitable estate, as, for example, an equity to set aside a deed for fraud, or to correct it for mistake,—and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice, the court will not interfere. Now these are the three cases in which the defense in question is most commonly found. None of them involve the case that is now before me. It was indeed said at the bar that the defendants, being in possession, had a legal advantage in respect of the possession, of which they ought not to be deprived; but that is to confound the subject of adjudication with the means of determining it. The possession is the thing which is the subject of controversy, and is to be awarded by the court to one or to the other; but the subject of controversy and the means of determining the right to that subject are perfectly different. The argument, in fact, amounts to this, "I ought not to be deprived of possession, because I have possession." The purchaser will not be deprived of any thing that gives him a legal right to the possession, but the possession itself must not be confounded with the right to it. The case therefore that I have to decide is the ordinary case of a person claiming, under an innocent equitable conveyance, that interest which existed in the grantor at the time when that conveyance was made; but, as I have already said, that interest was diminished by the estate that had been previously granted to the annuitant, and, as there was no ground for pretending that the deed creating the annuity was a te voluntary deed, so there is no ground whatever for contending that the estate of the person taking under the subsequent marriage settlement is not to be treated by this court, being an equitable estate, as subject to the antecedent annuity, just as effectually as if the annuity itself had been noticed and excepted out of the operation of the subsequent instrument. I have no difficulty, therefore, in holding that the plea of purchase for valuable consideration is upon principle not at all applicable to the case before me, even if I could take notice of it as having been rightly and regularly raised. We next come to examine the authorities upon which the defense relies. Now, undoubtedly, I cannot assent to some observations which I find attributed to the master of the rolls in the report of the case of Attorney General v. Wilkins, 17 Beav. 285, but to the decision of that case, as explained by his honor in the subsequent case of Colyer v. Finch, 19 Beav. 500, I see no reasonable objection, and the principles that I have here been referring to are fully explained and acted on by the master of the rolls in the case of Colyer v. Finch, 19 Beav. 500. It is impossible, therefore, to suppose that he intended to lay down anything in the case of Attorney General v. Wilkins, 17 Beav. 285, which is at variance with the ordinary rules of the court as I have already explained them, or which could give countenance to the argument that has been raised before me at the bar. I have consequently no difficulty in holding that the decree of his honor the vice chancellor is right upon the grounds on which he placed it in the court below, and that also it would have been right if he had considered the grounds which have been urged before me in support of this petition of rehearing. I therefore affirm the decree and dismiss the petition of rehearing; but, inasmuch as the plaintiff sues in forma pauperis, of course it must be dismissed without costs. Mr. Pearson, for appellant, asked for a return of the deposit. The LORD CHANCELLOR. I think that the respondent should. have the benefit of the deposit. You purchase the liberty of coming here by the deposit. I do not think that I can give the appellant any further costs against you, but I can give him the benefit of the deposit which, according to the rules of the court, you have made. Therefore the deposit will be given to him, unless it exceeds the costs of the appeal. unecorded warranty Frued mach quitclaim and. against recorded II. What Constitutes a Bona Fide Purchaser (Supreme Court of South Dakota, 1905. 19 S. D. 131, 102 N. W. 598, 117 Am. St. Rep. 938, 8 Ann. Cas. 1093.) Action by W. A. Fowler against H. P. Will and others. From the judgment, plaintiff and defendant H. P. Will appeal. FULLER, J. This action to determine conflicting claims to real property resulted in a judgment quieting title in the defendant H. P. Will, subject to a lien for certain taxes in favor of plaintiff, and both parties have appealed. In the absence of a brief or oral argument on the part of the defendant H. P. Will, the only question is whether the trial court erred in holding an unrecorded warranty deed valid and effectual as against a recorded quitclaim deed executed later by the same grantor, and which purports only to "remise, release, and quitclaim" his interest in the premises. Speaking of such an instrument in Parker v. Randolph, 5 S. D. 549, 59 N. W. 722, 29 L. R. A. 33, we say: "The record was therefore sufficient to put the defendant Lane on inquiry, as a grantee in a quitclaim deed is not a bona fide purchaser. Such deed simply conveys all the interest, if any, which the grantor has, in equity, at the time of its execution." Under our recording act, a subsequent purchaser in good faith, whose conveyance is first duly recorded, has authority to question the validity and destroy the effect of a warranty deed previously executed by a common grantor; but a quitclaim deed in no sense purports to convey title-not even by inference-and is not essentially a grant, in contemplation of the statute. Rev. Civ. Code 1903, § 986. In Winkler v. Miller, 54 Iowa, 476, 6 N. W. 698, the view of the court is thus expressed: "Where a person purchases of 3 For discussion of principles, see Eaton on Equity (2d Ed.) § 58. |