APPEAL from the Circuit Court of Massachusetts.
This cause was by consent heard upon the bill, answer, and exhibits in the case. The material facts were these:
In the month of January 1796, sundry persons, and among them William Wetmore, purchased of the agents of certain persons in Georgia, called the Georgia Mississippi Company, then in Boston, a tract of land, then in the state of Georgia, and now in the Mississippi territory, estimated to contain 11,380,000 acres, at ten cents per acre; which tract the Georgia Mississippi Company had purchased of the state of Georgia, and had received a grant thereof in due form of law. The conditions of the purchase were, that the purchase-money should be paid as follows, viz., two cents thereof on or before the first day of May 1796; one cent more, on or before the first day of October 1796; two and a half cents more, on or before the first day of May 1797; two and a half cents more, on or before the first day of May 1798; and the remaining two cents, on or before the first day of May 1799. The whole of the purchase-money was to be secured by negotiable notes of the several purchasers, with approved indorsers, to-be made payable to Thomas Cumming, president of the Georgia Mississippi Company, or order, payable at the bank of the United States, at Philadelphia, or at the branch bank at Boston, and to be delivered to the agents, upon the execution of the deed of conveyance by them. It was further agreed, that the deed, when executed, should be placed in the hands of George R. Minot, Esq., as an escrow, to be delivered over by him to the grantees, upon the first payment of two cents, payable in May 1796, for which first payment, and for that only, the purchasers agreed to hold themselves jointly responsible.
Accordingly, a deed of conveyance was executed by the agents, dated the 13th day of February 1796, to certain grantees named by the purchasers, to wit, William Wetmore, Leonard Jarvis and Henry Newman, in trust for the purchasers; and the same was duly placed in the hands of Mr. Minot, as an escrow, and negotiable notes, with approved indorsers, were duly delivered to the agents, by all the purchasers, for their respective shares of the purchase-money. And afterwards, the first payment of two cents having been satisfactorily made to the agents, the said deed was, with their consent, delivered over to the grantees, as an absolute deed; and a deed of confirmation thereof was, afterwards, in February 1797, duly executed and delivered to the grantees by the Georgia Mississippi Company.
After the purchase, and before the delivery of the deed, the purchasers formed themselves into an association by the name of the New England Mississippi Land Company, and executed sundry articles of agreement, and among other things, therein agreed, that the deed of the purchase should be made to Jarvis, Newman and Wetmore, as grantees as above stated; (art. 2d) that they should execute deeds to the several original purchasers for their proportions in the lands, but should retain these deeds, until the purchasers should sign and execute the articles of association; and should also execute a deed of trust, to certain trustees, as provided for in the articles, of such their respective shares in the purchase; (art. 3d) that the several purchasers should execute a deed of trust to Jarvis, Newman and William Hull, of their respective shares in the purchase to hold to them and the survivor of them in trust, to be disposed of according to the articles; (art. 4th) that the business of the association should be managed by a board of directors, who were to have full power and authority to sell and dispose of the whole, or any part of the property of the company, and to pay over to their respective proprietors their proportions of the money received from any and every sale, &c.; (art. 8, 16, 20) that upon receiving a deed from any purchaser, according to the tenor of the articles, the trustees were to give to each proprietor a certificate, in a prescribed form, stating his interest in the trust, and that he should hold it according to the articles of the association; which certificate was recorded in the company's books, and was to be 'complete evidence to such person of his right in said purchase,' and was to be transferrible by indorsement; and upon a record of the transfer in the company's books, the transferree was to be entitled to vote as a member of the company. The share of Mr. Wetmore in the purchase was 900,000 acres. He paid the two cents per acre in cash; and of the notes given by him for the purchase-money, $40,000 were paid by Mrs. Sarah Waldo, his indorser, and the residue, $45,000, still remained unpaid. Mr. Wetmore received his certificates from the trustees for his whole purchase; and having sold or conveyed 500,000 acres, he afterwards conveyed the remaining 400,000 acres to Robert Williams, to whom certificates for that amount were duly issued by the trustees, three of which certificates, each for 20,000 acres, duly indorsed by said Williams, came into the plaintiff's, Mrs. Gilman's, hands, for a valuable consideration; and the assignment thereof having been duly recorded in the company's books, she was admitted, and had always acted as a member of the company.
From causes well known to the public, the New England Mississippi Land Company never obtained possession of the tract of land so conveyed to them.*fn1 2
On the 31st of March 1814, congress passed an act, entitled, 'an act providing for the indemnification of certain claimants of public lands in the Mississippi territory.' By this act, and other subsequent acts amending the same,*fn2 3
it was provided, that the claimants of the lands might file in the office of the secretary of state, a release of all their claims to the United States, and an assignment and transfer to the United States of their claim to any money deposited or paid into the treasury of Georgia, such release and assignment to take effect, on the indemnification of the claimants, according to the provisions of the act. Commissioners were to be, and were, accordingly, appointed under the act, who were authorized to adjudge and determine upon the sufficiency of such releases and assignments, and also to 'adjudge and determine upon all controversies arising from such claims so released as aforesaid, which may be found to conflict with, and to be adverse to each other.' And the sum of $1,550,000, to be issued in public stock, was appropriated by the act, to indemnify the claimants, claiming in the name of, or under, the Georgia Mississippi Company. The New England Mississippi Land Company duly executed the release and assignment, required by the act of congress; and presented the claims of the whole company before the commissioners. The commissioners awarded the company the sum of $1,083,812 in stock, certificates for which were duly issued, under the act of congress, and received by the treasurer of the company. A further claim was made for the whole amount of the original share of Mr. Wetmore, but the board of commissioners decided, that the Georgia Mississippi Company had a lien in equity on the land sold and conveyed to said Wetmore, for the purchase-money due and unpaid by said Wetmore, and that the indemnity under the act of congress should follow that lien, and be awarded to said Georgia Mississippi Company to the amount thereof. And inasmuch as the said Sarah Waldo was the holder of certain certificates issued by said trustees, on account of said Wetmore's original purchase, the commissioners further awarded, that the sum of $40,000 of the purchase-money (which had been paid or satisfied by her for said Wetmore, on her indorsement) should be applied first to make good the scrip or certificates so issued to her; and that if there was any surplus, after making her scrip or certificates good, such surplus could not be applied to the scrip or certificates held under Robert Williams, who did not become the assignee of the said Wetmore, until after the said sum was paid. And the commissioners further decided, that the certificates, issued by the trustees on account of any of the original purchasers, who failed to make payment of the purchase-money to the Georgia Mississippi Company, were bad, and that the parties claiming under them must lose their indemnity under the act of congress. By this award of the commissioners, the claim of the New England Mississippi Land Company, for the amount of the share of the plaintiff, was completely excluded. But the plaintiff claimed her share of the stock actually received, as a proprietor in the New England Mississippi Land Company, notwithstanding the award of the commissioners, and to establish this claim, the present suit was brought; and in her bill she averred, that she was a bon a fide purchaser, for a valuable consideration, without notice of the non-payment of the purchasemoney by Mr. Wetmore, which averment was not denied by the answer. The court below decreed, that the complainant was entitled to the relief she claimed, and the cause was brought by appeal to this court.
Jones, for the appellants, argued, that the decision of the commissioners was correct in principle. The property acquired by the New England Company, under their purchase from the Georgia Company, was not a legal, but a mere equitable interest, unassignable at law. Even if the Georgia Company had a legal estate, their deed to the New England Company does not pass such estate, according to the local law of Georgia; it never having been acknowledged, proved and recorded. It amounted only to a covenant to stand seised to uses, an agreement to sell, which a court of equity would enforce. The rescinding act of Georgia has a double effect; one to annul the contract; the other to render all deeds conveying the property incapable of being recorded. It is only as to the first effect that the court has pronounced, or could pronounce, the act to be unconstitutional and void. The states have an unquestionable right to regulate the mode of conveying real property and the rule of evidence as to land titles. Even supposing the trustees to have acquired a legal estate, the cestuis que trust have acquired an equitable interest only. The claim of the vendor for unpaid purchase-money is the prior equity, which must be preferred. If the subsequent purchaser acquires a mere equitable interest, he is entitled to no notice of the vendor's lien. The assignee of a chose in action, which is not assignable at law, has a mere equitable interest, and takes subject to the same equity as the assignor. Finch 9, 34; Davies v. Austin, 1 Ves. Jr. 247; Coles v. Jones, 2 Vern. 692; Ibid. 765; 1 Ves. sen. 123; 1 Bro. C. C. 302; Mackreth v. Symmons, 15 Ves. 329. But even if notice be necessary, the lien of the vendor is sustainable, because there was notice either actual or constructive, and notice to the trustees of the New England Company, was notice to the individuals whom they represented. Sugd. on Vend. 492, 498; Mertins v. Jolliffe, Ambl. 311. But all discussion on this point is cut short by the well-established principle, that the purchaser who sets up the want of notice must positively deny the notice in her plea, and swear to it. Sugd. on Vend. 510-13. Here, the pleadings, so far from denying notice, impliedly admit it; and the rule of presumption against the party omitting to deny notice, is to be applied a fortiori in a case like the present, where the person insisting on the want of notice is the party plaintiff. Nor has there been in this case any waiver of the equitable lien for the purchase-money. All the facts of the case repel the presumption of a waiver of the lien. The notes, with approved indorsers, taken from the individual purchasers, cannot furnish such a presumption. The case of Fawell v. Heelis, Ambl. 734; 3 Bro. C. C. 422, n., which will be relied on to support this position, has been repeatedly overruled. Sugd. on Vend. 252, et infra. The taking of personal security is not considered as a waiver of the lien. Hughes v. Kearney, 1 Sch. & Lef. 132; Mackreth v. Symmons, 15 Ves. 329; Grant v. Mills, 2 Ves. & B. 306; Elliot v. Edwards, 3 Bos. & Pul. 181. It is not necessary to prove affirmatively the intent to retain a lien. It is a natural equity; and he who would repel it must show that the vendor agreed to rely on the personal security, and to abandon the lien. Frost v. Beekman, 1 Johns. Ch. 288; Garson v. Green, Ibid. 308; Mackreth v. Symmons, and the cases there cited, 15 Ves. 329. As to the lex loci of Massachusetts, which does not recognise the equitable lien on land for unpaid purchase-money, it has nothing to do with the question; for the record does not show that the deed was executed in that state; and even if it did, the lex loci rei sitoe of Georgia must govern the case, according to a well-known rule. But even supposing the award of the commissioners to be erroneous, it is still conclusive upon the parties. The commissioners had jurisdiction of the subject-matter, under the act of congress by which the board was established, to determine upon all controversies arising from adverse claims to these lands. There is no analogy between this claim, and the lien of a judgment. It is a real interest in the land; an equitable mortgage; a charge upon it, which descends, and is assigned with it. Cator v. Bolingbrook, 1 Bro. C. C. 302; Ibid. 424; Pollexfen v. Moore, 3 Atk. 272. The decision of the commissioners, then, has the force of res judicata.
Amory, contr a, insisted, that Mrs. Gilman was not the assignee of Mr. Wetmore, and did not hold his title. She could not be an assignee, without a privity, either in fact or in law, which did not exist in this case. The intention of the associates, from the beginning, was to render the certificates of the trustees the only evidence of the title; for which purpose, the legal title was vested in the trustees, and a new title, in all the property, was derived from them. The certificate possessed by Mrs. Gilman does not contain the name of Wetmore, nor was the certificate originally issued in his name; it could not have expressed a trust upon the portion, or title, acquired by him, and conveyed to the trustees; but such a certificate must have expressed a general interest, or title, pervading the whole land. Inasmuch as the trustees derived their title, not from Wetmore only, but from different sources, it must be presumed and intended, that their certificates were to operate generally on all the right and title which they possessed, without reference to the mode of acquirement. If Mrs. Gilman, or any holder of certificates, was obliged to search into the title, this estate would be attended with all the consequences and incidents of other titles. But that difficulty was expressly intended to be avoided by the 12th art. of association, which declares, that such certificate shall be complete evidence; thereby announcing to any purchaser, that the common rules of real property were dispensed with. Shall the trustees and associates now be permitted, contrary to their express stipulation, to depart from this rule of property, which they themselves created, and thus entrap a bon a fide purchaser, without notice? This association was not incorporated; but the parties intended, so far as they could by law, to give it those facilities, and in some decree, to convert this real estate into personal estate. The title at law was to vest in the trustees, until bon a fide sales of the land were actually made. It is the proceeds of such sales only, or money acquired therefrom, that is assured to the holders of the certificates. The trustees and original purchasers undertook to examine each other's title, and precluded all further inquiries in relation to it. Wetmore gave a quit-claim deed only; the quality of his title, the associates or trustees could judge of, of which they had as much knowledge as he had; and such deed of quitclaim, whether it conveyed a good or a bad title, constituted a good consideration for the compact with the associates and trustees.
If the doctrine of lien for the purchase-money, without mortgage, obtains in Georgia; the contract being made in Massachusetts, where the intention of both parties must be considered as constituting the contract, the laws of Massachusetts ought to construe such a contract, in preference to those of Georgia. We contend, that this doctrine of lien is only a creature of equity, and refers only to such estates or rights of real property as are especially recognised by that tribunal, and which do not derive their support from the ordinary rules of law. The title, in order to be what is commonly denominated equitable, must be such a one as is not recognised by law; such as the assignment of a chose in action, which cannot be assigned by law; or the title must be equitable, from the inefficient mode adopted for its transfer, such as the conveyance of real estate by an instrument without seal, or by an executory contract. The conveyance of land, in this case, did not pass an equitable title merely; the cases of Fletcher v. Peck, 6 Cranch 89, and Green v. Liter, 8 Ibid. 229, show, that, notwithstanding the Indian title be not extinguished, the freehold and seisin may be transferred; and in this case, the most solemn deeds and instruments, duly acknowledged, were adopted for the conveyance of the title; and it is sustained by every legal form.
Even in courts of equity, this lien is only raised by implication; and where other circumstances resist this implication, showing that the parties did not mean to rely on the estate sold for security, the lien is waived. This transaction is filled with circumstances repugnant to such implication. The design of the parties to sell the land, instead of cultivating the same, whereby to pay the notes, expressly excludes the idea of such a lien, as no man would have purchased, who knew that such a note was given for the first purchase, without seeing that his money was appropriated to extinguish the notes; and the strongest circumstance, to repel such a lien for the consideration, consists in this, that the sum of five dollars only is expressed as the pecuniary consideration. Any purchaser, therefore, making inquiry concerning the purchase-money's being paid or not, is at once checked in the pursuit; and no case of lien for the purchase-money, can be shown, where the sum is not expressed in the deed of sale. It is also a doctrine in equity, that the vendee has a lien on the land, in case the title be defective, and proper conveyance not made to him; thus making the right reciprocal. But in this deed, express provision is made, that the consideration-money shall not be refunded by the vendor, for any cause whatsoever; thus essentially distinguishing the present case from those in which such lien is maintained.
It is said, that the commissioners, having a right to decide upon adverse titles, here conclusively decided on our claims; but the adverse titles or claims, on which they were to decide, were adverse claims to the stock from the treasury of the United States, and between such persons as released their claims to the United States. Mrs. Gilman did not release any claim to the United States, or demand any money from the treasury; of course, her rights or claims could not be adjudged by the commissioners; her claim is not on the government, but on her associates and trustees. The commissioners were bound to decide, to whom the money or stock from the treasury should be paid; not the use the receiver should afterwards make of that money, or the obligations he might be under in relation to it. Decrees affect only those who are parties to the suit; and an opinion incidentally given by the commissioners, ought not to control the plaintiff's right.
The Attorney-General, on the same side, contended, that no such lien, as that insisted upon, existed even as to Mr. Wetmore's title; much less was Mrs. Gilman's affected by it. The question whether the legal title passed from the Georgia Company to the New England Company, cannot be raised in the appellate court; because, so far from being raised in the court below, the pleadings admit the fact that the legal title did pass, and the cause was argued upon that ground in the court below. But supposing it were otherwise; as a bon a fide purchaser, without notice, Mrs. Gilman cannot be affected with the equitable lien for purchase-money unpaid by the original vendee, because a distinct personal security was taken, and all the other circumstances of the case combine to show, that the original vendors did not mean to rely on the lien.
It is worthy of observation, that this doctrine of lien for unpaid purchase-money, which has grown to its present extravagant height, seems to have originated in the inaccuracies and mistakes of some of the earlier chancery reporters. The first case is that of Chapman v. Tanner, 1 Vern. 267, which is erroneously reported. According to the reporter, it was the case of a bankrupt, who purchased land, and the purchase-money not being paid, the assignees would have had the vendor come in as a creditor under the commission, for the remainder of his purchase-money: 'Per Cur. In this case, there is a natural equity that the land should stand charged with so much of the purchase-money as was not paid; and that without any special agreement for that purpose.' But Lord APSLEY says, 'Chapman v. Tanner (1 Vern. 267), according to the report, is in point; but it appears, by the register's book, that the vendor retained the title deeds till he was paid; the court said, that a natural equity arose, from his having the title deeds in his custody.' Fawell v. Heelis, Ambl. 724. In the case of Pollexfen v. Moore, 3 Atk. 372 (which is also said, in the last-mentioned case, by Lord APSLEY, to be badly reported), the title deeds were also kept back by agreement; and it was impossible for a court of equity to doubt, in either of these cases, that the lien was retained. But it is from them that the doctrine, as now understood, has originated; and even according to the modern cases, it is nothing more than a lien raised by equity on the presumed intention of the parties. Sugd. on Vend. 358.
This presumption, however, may be repelled by evidence of a contrary intention. Among other circumstances to repel this presumption, is the delivering an absolute deed to the purchaser. Although this circumstance may not be considered strong enough to repel the presumption, as between vendor and vendee, it is so, as to a bon a fide purchaser, under the latter, without notice; otherwise, such a deed would be a fraud on the public. In such a case, this circumstance, connected with that of taking a distinct security, must certainly be deemed sufficient to repel the presumed intention to rely on the lien. The rule is accurately laid down by President PENDLETON. 'The doctrine that the vendor of land not taking a security, nor making a conveyance, retains a lien upon the property, is so well settled, as to be received as a maxim. Even if he hath made a conveyance, yet he may pursue the land, in the possession of the vendee, or of a purchaser with notice. But if he hath taken a security, or the vendee hath sold to a third person, without notice, the lien is lost.' Cole v. Scott, 2 Wash. 141. It has been much contested in England, whether passing the legal title to the vendee, and taking his bond or note alone, will not defeat the lien. But there has been no case, where, after passing an absolute deed, and taking the security of a third person, the lien has been held still to exist. In Hughes v. Kearney, 1 Sch. & Lef. 132, the note was that of the vendee merely; and Lord REDESDALE is understood to admit, that taking a distinct security would discharge the lien. Grant v. Mills, 2 Ves. & B. 306, is also relied on to show that the taking of the security of a third person would not discharge the lien; but the bills of exchange, in that case, were not considered as the security of a third person, but as ...