This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
Where the purchaser has neither taken a conveyance of the legal estate, nor taken such a conveyance of the equitable estate as would seem to give him an absolute and indefeasible right to call for the legal estate, the rule of Equity, "Qui prior est tempore potior est jure" will be allowed to operate in favour of an adverse claimant having, in other respects, an equal equity (i). In a case, in which the prior authorities were fully reviewed, the rule was thus stated: " as between equitable incumbrancers, relief will be given to the incumbrancer prior in point of date, unless he has lost his priority by his own act or neglect; and relief will not be refused to him, as against a subsequent incumbrancer, on the sole ground of the latter being a purchaser for value without notice, unless he has the legal estate, or the best right to call for it "(k). Thus, where a mortgagee lent money upon a conveyance of what he knew to be a mere equity of redemption, it was held by Lord Thurlow that he must be postponed to mesne incumbrancers of whom he had no notice (/) ; and the decision was several times recognized by Lord Eldon (m) : so, where bankers took an equitable mortgage by deposit of title deeds of an estate which was subject to a secret trust of which they had no notice, it was held that such trust must prevail against their security (n) : so, a purchaser of a legacy takes subject to the liability to refund for payment of debts (o) : and, as a general rule, the purchaser of an equitable chose in action takes it subject to all prior equities (p); and the rule applies even in cases where the purchase is made in market overt, and in the ordinary course of business (q) ; but a prior incumbrancer, seeking the aid of Equity against a purchaser in good faith without notice, should be prompt in his proceeding (r).
Purchaser with mere equitable title, is postponed to prior equitable claimants. As between mere equitable claimants prior title prevails.
(g) Joyce v. DeMoleyns, (1845) 2 J. & L. 374.
(h) Manners v. Mew, (1885) 29 Ch. D. 725; 54 L. J. Ch. 909 ; and, generally, as to the effect of the Acts on this doctrine, see Ind v. Emmerson, (1887) 12 A. C. 300; 56 L. J. Ch. 898 ; Be Ingham, 1893, l Ch. 352, 361 ; 62 L. J. Ch. 100, and the notes to Bassett v. Nosworthy, 2 Wh. & T. L. C. 7th cd. at pp. 157 - 164.
(t) Rice v. R., (1853) 2 Dr. 73, 85;
23 L. J. Ch. 289 ; Lane v. Jackson, (1855) 20 Beav. 535 (case of mortgagee and judgment creditor) ; and see Thorpe v. Holdsworth, inf., and cases there cited ; Isaac v. Worstcn-croft, (1892) 67 L. T. 351, 352.
(k) Per V.-C. Giffard in Thorpe v. Holdsworth, (1868) 7 Eq. 139 ; 38 L. J. Ch. 194 ; and see Hooper v. Harrison, (1855) 2 K. & J. 86 ; Stackhouse v. lady Jersey, (1861) 1 J. & H. 721 ; 30 L. J. Ch. 421; Farrand v. Yorkshire Bkg. Co., (1888) 40 Ch. D. 182; 58 L. J. Ch. 238.
In one case (s), where A., an owner of railway bonds, entered into a contract with B., who falsely represented himself to be the vendor's agent, for the purchase of an estate to be paid for by means of the bonds, and one of them was transferred in part payment to B., who assigned it over for value to C, who had no notice of the fraud, it was held that A. could not sustain a suit against C. for the delivery of the bond. The deposit of the bond was treated as merely giving a right of action against the depositee in case the purchase fell through, and not as constituting him a trustee for the purchaser, so as to attach any equity to the bond.
Mortgagees by deposit, bound by secret trust.
(/) Beckett v. Cordley, (1784) 1 Br. C. C. 353.
(m) See Ex p. Gawthorne, (1822) 1 Gl. & J. 240, 243; Evans v. Bicknell, (1801) 6 Ves. 173, 192 ; Martinez v. Cooper, (1826) 2 Rus. 198, 214 ; see Jones v. J., (1838) 8 Si. 633, 642 ; 7 L. J. N. S. Ch. 164 ; TourvilU v. Naish, (1734) 3 P. W. 306, 308.
(n) Manningford v. Toleman, (1845) 1 Coll. 670; 14 L. J. Ch. 160 ; see A.-G. v. Flint, (1844) 4 Ha. 147, 156 ; Stackhouse v. Lady Jersey, (1861) 1 J. & H. 721 ; Cave v. C, (1880) 15 Ch. D. 639 ; 49 L. J. Ch. 505.
(o) Jennings v. Bond, (1845) 2 J. & L. 720 ; but see contra as to legacy duty, Farwell v. Seale, (1849) 3 De G. & S. 359 ; 18 L. J. Ch. 189. As to costs of administration suit, Re Jones, 1897, 2 Ch. 190 ; 66 L. J. Ch. 439.
(p) Friddy v. Rose, (1817) 3 Mer. 86; Morris v. Livie, (1842) 1 Y. & C. C. C. 380; 11 L. J. N. S. Ch. 172; Molloy v. French, (1849) 13
Ir. Eq. R. 261 ; Burnett v. Sheffield, (1852) 1 D. M. & G. 371 ; 21 L. J. Ch. 692 ; Cockell v. Taylor, (1852) 15 Beav. 103 ; 21 L. J. Ch. 545 ; Smith v. Parkes, (1852) 16 Beav. 115; Ford v. White, (1852) ib. 120, 123; Cole v. Muddle, (1852) 10 Ha, 186 ; Mangles v. Dixon, (1852) 3 H. L. C. 702, 735; Clack v. Holland, (1854) 19 Beav. 262 ; 24 L. J. Ch. 13; Irby v. I., (1858) 4 Jur. N. S. 989; Brandon v. B., (1856) 7 D. M. & G. 365; 25 L. J. Ch. 896 ; Athenceum Ass. Soc. v. Pooley, (1858) 3 D. & J. 294 ; 28 L. J. Ch. 127; Rolt v. White, (1862) 31 Beav. 520 ; Re Natal Investment Co., (1868) 3 Ch. 355 ; 37 L. J. Ch. 362 ; and see Lewin, 11th ed. 407, 872.
(q) Athenceum Ass. Soc.v.Pooley, sup.
(r) See Sibson v. Fletcher, (1632) 1 Ch. R. 32 ; Wallace v. Marquis of Donegal, (1837) 1 D. & Wal. 461, 488 ; affirmed ib. 490 ; 5 CI. & F. 629.
(s) Ashwin v. Burton, (1863) 9 Jur. N. S. 319; 32 L. J. Ch. 196.
But as respects equitable estates in land, the priority of a purchaser or incumbrancer is not affected by his giving, or neglecting to give, notice of his purchase or security, to the trustees, mortgagees, or other persons in whom the legal estate may happen to be vested (t) ; and the ordinary rule, as to notice of assignments of choses in action, does not apply. But the rule holds good in respect to the proceeds of sale of real estate vested in trustees upon trusts for sale, though no sale may have been effected (u).
On purchase of equitable interest in land, no priority acquired by notice to owner of legal estate.
Where the proj)erty is subject to a concealed incumbrance, it seems that a purchaser of part, having merely the equitable estate, may throw the entire charge upon a subsequent innocent purchaser of the equitable estate in the residue (x).
Concealed incumbrance thrown wholly on puisne equitable purchaser.
(t) Peacock v. Burt, (1834) 4 L. J. N. S. Ch. 33 ; Jones v. J., (1838) 8 Si. 633 ; 7 L. J. N. S. Ch. 164; Wiltshire v. Rabbits, (1844) 14 Si. 76 ; 13L.J.Ch.284; Wilmot v.Pike,(\8ib) 5 Ha. 14 ; 14 L. J. Ch. 469 ; Bugden v. Bignold, (1843) 2 T. & C. C. C. 377, 392 ; Hooper v. Harrison, (1S55) 2 K. & J. 86, 105 ; Union Bank of London v. Kent, (18S8) 39 Ch. D. 238 ; 57 L. J. Ch. 1022; Be Richards, (1890) 45 Ch. D. 589 ; 59 L. J. Ch. 728 ; Ward v. Buncombe, 1893, A. C. 369 ; 62 L. J. Ch. 881, judgments of Lords Herschell and Macnaghtcn; Hopkins v. Hemsworth, 1898, 2 Ch. 347 ; 67 L. J. Ch. 526 (case of submortgagees) ; Taylor v. London and County Bkg. Co., 1901, 2 Ch. 231 ;
70 L. J. Ch. 477 ; and generally see Coote on Mortgages, 7th ed. pp. 1254- 1258.
(«) Lee v. Howlett, (1856) 2 K. & J. 531 ; Re Hughes' Trusts, (1S64) 2 H. & M. 89; Consolidated Investment, §c. Co. v. Biley, (1859) 1 Gif. 371 ; 29 L. J. Ch. 123 ; Arden v. A., (1885) 29 Ch. D. 702 ; 54 L. J. Ch. 655 ; Lloyd's Bank v. Pearson, 1901, 1 Ch. 865; 70 L. J. Ch. 422; Be Lake, 1903, 1 K. B. 151 ; 72 L. J. K. B. 117 ; and see Christie v. Taunton, 1893, 2 Ch. 175 ; 62 L. J. Ch. 385 (as to money secured by debentures).
(x) See Hartly v. O'Flaherty, (1833) L. & G. temp. P. 208, 216 ; Averall v. Wade, (1835) L. & G. temp. S.
Incumbrances in favour of a charity seem to be subject to the same rules as those in favour of a private individual; except that notice to the first purchaser is said to bind subsequent purchasers without notice (y) ; but if the incumbrance is merely equitable, it seems that the purchaser without notice is not affected by it (z). Before the Real Property Limitation Act, 1833, mere length of possession was no protection, in Equity, to a purchaser who bought with notice of the charitable trust (a).
Rule as to priority, how far applicable as against charities.
A well-known class of cases may be here referred to, as illustrating the principle that equitable estates take priority according to the date of their creation. It is well settled that a person, who takes an equitable mortgage from a person who is in fact, whether expressly or only constructively, a trustee, without notice of any trust, is postponed to the cestuis que trust. The principle of these cases is that the creation of the trust vests an actual estate and interest in the subject-matter of the trust in the persons in whose favour the trust is created, and that this actually existing estate can only be displaced by such conduct on the part of its owners as gives those dealing with it a higher equity ; and further, that it is not negligence to take a title in the name of a trustee (b). The fact that the cestui que trust has made no inquiry into the disposition of the trust funds does not amount to such conduct (c) ; nor does the fact that the trustee has himself a partial beneficial interest in the property, and that it has been allowed to remain in his name (ft). The conduct of the cestui que trust must, it would seem, amount to a holding out of the trustee as the equitable owner, in order to deprive him of priority (c) ; and the fact that the mortgagee has obtained the title deeds from the trustee, does not make his right any better as against the cestui que trust (f). But where a trustee for sale conveyed the property with a receipt in the body of the deed but never received the purchase-money, a subsequent mortgagee, relying on the statutory receipt, was held to have priority over the cestui que trust (g).
Application of the rule of priority in time to dealings with trust estates.
252; Handcock v. H., (1850) 1 Ir. Ch.R.444, 474; Hughes x. Williams,
(1850) 3 M. & G. 683; Be Jones, 1893, 2 Ch. 461, 470 ; 62 L. J. Ch. 996.
(y) East Grinsted case, (1633) Duke's Char. Uses, 640: sed qu.; and see Comm. of Charitable Donations v. Wybrants, (1815) 2 J. & L. 182, 194 ; Tudor's Char. Trusts, 3rd ed. 291, 292.
(z) Sug. 14th ed. 722.
(a) A.-G. v. Mayor of Coventry, (1700) 2 Vern. at p. 399 ; A.-G. v. Christ's Hosp., (1834) 3 M. & K. 344. As to the effect of the statute, see sup. p. 445; Tudor's Char. Trusts, 3rd ed. 292 et seq.
(b) Cory v. Eyre, (1863) 1 D. J. & S. at p. 167 ; Shropshire Union R. Co. v. Reg., (1875) L. R. 7 H. L. at p. 511 ; 45 L. J. Q. B. 31 ; Bradley v. Riches, (1878) 9 Ch. D. 189; 47 L. J. Ch. 811 ; Hartopp v. Huskisson, (1886) 55 L. T. 773 ; Carritt v. Real and Personal Advance Co., (1889) 42 Ch. D. 263 ; 58 L. J. Ch. 688; Re Richards, (1890) 45 Ch. D. 589, 594; 59 L. J. Ch. 728; Taylor v. London and County Bkg. Co., 1901, 2 Ch. 231, 261; 70 L. J. Ch. 477, and cases there cited.
Negligence will, of course, operate to postpone a prior equitable title (h) ; and the weight of authority seems to favour the view that it does not require a less degree of negligence for the postponement of a prior equitable title to a subsequent one, than is required in order to postpone a legal to an equitable title (i).
Effect of negligence on priorities of equitable estates.