Smith v. Pettus

¶1The complainant in this suit, and who is plaintiff in error, filed his bill in the Circuit Court of Lawrence county, in which he alleges that on the --day of ——V—, 1819, he purchased of the defendant, Pettus, lots Nos. 87 & 88, in the town of Court-land, for which he agreed to give two thousand three hundred and sixty-six dollars and sixty-six cents, which sum he was to pay to the Commissioners, the said Pettus being indebted to them for said lots.' The Commissioners not being present, the arrangement could not then be made, and the complainant executed his notes payable to Pettus in three instalments. The first for seven hundred dollars, payable the 25th of December, 1819 ; the second for eight hundred and fifty-three dollars and thirty-three cents, payable the first of November, 1820; and the third for eight hundred and thirty-three dollars and thirty-three cents, payable the first of November, 1821 — which notes Pettus was to hold until the Commissioners could be got together, and the complainant substituted in the place of Pettus as their debtor for the lots, and receive a title immediately from them. Said Pettus executed his bond to complainant to make title to said lots, which was to be cancelled when the'arrangement should take place with the Commissioners, and their bond substituted for Pettus’s, which bond of Pettus is lost or mislaid. The complainant received possession . of said lots in December, 1819, at which time he gave Pettus notice that he was ready to take up his [Pettus’s] notes executed to the Commissioners for the purchase mo*125ney of said lots, amounting to two thousand three hundred and sixty-six dollars and sixty-six cents, and to receive a bond from the Commissioners to malee him a title, and to give up to him, Pettus, his bond for title. Pettus refused, and complainant refused to pay the notes, and on the 13th day of October, 1821, he applied to the Commissioners and lifted two of Pettus’s bonds for one thousand and thirty dollars each, dated the 29th of October, 1818, and payable in one year, and the other, two years after date, and procured for Pettus a credit for three hun- and sixty-six dollars and sixty-six cents on another note held by the Commissioners against him, making the full amount agreed to'be given by complainant for said lots, and also the.full amount due by Pettus to the commissioners for said lots; that he, complainant, has made valuable improvements upon said lots: that Pettus hasassigned to C. Anderson, one of the defendants, the note for seven hundred dollars, and that a judgment at law has been obtained thereon. The complainant prays an injunction of the judgment at law, and that the notes be cancelled and makes the proper parties defendants. Complainant also exhibits the notes executed by said Pettus and John P. Brod-nax toWilliam H. Whitaker and others, Commissioners of the town of Courtland, to secure the purchase money of said lots, also the receipt of the Commissioners for three hundred and six dollars and sixty-six cents, paid as before stated. The defendant, Charles Anderson, answers, that he took the note from Pettus for money which he had previously loaned to him, and without notice that there would be any objection to the payment of it; that he knew nothing of the parol agreement, and does not admit *126that any such was made; but admits that the written agreement stated in the bill. of complainant was correctly made, and that the same, is correctly stated in the bill. The defendant does not admit that complainant in December 1819, proposed to Pettus to substitute himself to the Commissioners as the payor for said lots, and receive their bond for title and to give up Pettus his bond for title, and that Pettus refused. The answer admits- that complainant has taken up Pettus’s notes to the Commissioners, and obtained a credit for him, as stated in complainant’s bill. The answer also denies the insolvency of Pet-tus at the time the note assigned him fell due, and up to the time Pettus and his security left the country, which was in January 1822 : the answer admits that Pettus was involved, but that he paid all executions up to the time of his removal, The answer then avers that Pettus, at the time of the sale of said lots to complainant, and afterwards, and until he left this country, was the- owner of stock in the Courtland Company to a considerable amount. The record of the proceedings in the Court of law shows, that the note was executed on the 17th day of July, 1819, for seven hundred dollars, payable to Pettus on the first day of November thereafter, as the first payment for lots, numbers eighty-seven and eighty-eight, in the town of Courtland, and that the said Pettus on the *29th day of January 1820, assigned the same to Anderson. The other defendants, William H. Whitaker, James Perrine, John Allen, Thomas E. Tart, and Bernard McKernan, the Commissioners of the town of Courtland, in their joint answer, slate, they know nothing of the contract between complainant and Pettus; hut they admit that Pettus was the puroha-*127ser of said lots Nos. 87 and 88, as stated in complainant’s bill. They also admit that said Pettus has ab-sconed from this State, and left the United States, leaving many large debts unpaid, among others said debts to the respondents for said lots. They also admit that said Pettus, and his security Brodnax for the payment of the'purchase money of said lots, are insolvent. They also admit, that complainant has taken up said notes of Pettus and Brodnax, and executed his notes in lieu thereof, as chargedin complainant’s bill. They farther state- that since Pettus absconded, Daniel Wright, Esq. his agent, settled with the respondents for the purchase of all the property purchased by said Pettus of the respondents in said town except said lots Nos. 87 and 88, and gave up the bond of the respondents to make to Pettus the title to the lots purchased as aforesaid, including lots Nos. 87 and 88, and exhibits the bond as a part of their answer, by which it appears that they bound ■ themselves to make to Pettus a title in fee simple as soon as the purchase money should be paid, the last instalment of which fell due 29th October, 1821.

¶2The complainant subsequently obtained leave and filed his supplemental bill, making William and Samuel Cruse, defendants, charging that Pettus had assigned to them one of the notes for eight hundred and thirty-three dollars and- thirty-three cents, and that they had obtained a judgment at law thereon, and prayed an injunction, which was granted. The defendants, Cruses, answer and deny that they have any knowledge of the transaction. They also deny having any interest in the judgment; that they never purchased the note, and that the first intimation that they ever had of any such proceedings being in exis-*128fence was, when the complainant’s bill and supplement were served upon them, and that their names had been used without their consent, privity or connivance. The depositions taken in the cause prove substantially the allegations charged in the complainant’s bill. On the hearing in the Court below, the bill was dismissed for the want of equity and Anderson decreed to have the benefit of his judgment at law. .It' is now assigned for error that the bill was improperly dismissed, which brings to the-consideration of this Court the right of the complainant to the relief sought; or how far a Court of Chancery will relieve the purchaser of real estate from the payment of the purchase money, when from subsequent events the vendor becomes unable to make titles, and also the equity between the assignee of the vendor who has become unable to make titles, and the purchaser, in being relieved from the payment of a note 'given for the purchase money : and thirdly — how far the purchaser of real estate has a right to discharge liens upon the property, in order to obtain titles.

¶3In considering the first proposition, the equity of the bill is involved; for if a Court of Chancery is incompetent to relieve a purchaser from the payment of money agreed to be given for land, when the vendor is unable to make titles, there is no equity in the bill, and it was properly dismissed. That Courts of Chancery will exercise jurisdiction in perfecting titles to real estate, or in case that can not be done, to relieve the purchaser from the payment of the purchase money, is abundantly established by authority.

¶4The Supreme Court of Kentucky, in the case of Fishback vs. Williams,a decided, that if a vendor is 'unable to convey, it is unconscious in him to enforce *129the payment of the purchase money until he is able to convey ; and that such an inability is good ground for the vendee to apply to a Court of Chancery to enjoin the vendor from enforcing payment. The same principle is recognhod in McKinney vs. Watts, et al;band in page 470 of the same Book, Hamble’s heirs v. Hawkson's heirs, it is decided, that the purchaser of lands who receives a bond from the vendor to make title, he having no title, may resort, after a great lapse of time, either to Law for compensation, or to Equity for a dissolution of the. contract; the jurisdiction is concurrent.

¶5In Marshall, 240, (Abney vs. Brownlee’s adm’r,) the-Court held, that the insolvency of the purchaser was sufficient to protect the seller from his covenant to-convey, and lay down the rule that a total inability to-comply by the one, operated as a release of the other; and there is such a uniformity of decision in all the Books, that I deem it unnecessary to pursue them further.

¶6That Pettus was insolvent,, and unable to make titles to Smith when the bill was filed, and has ever since continued so, is a fact incontestibly established. It i§ also true, that by the terms of the agreement between Smith and Pettus, Pettus was not bound to-convey until the purchase money was paid; if therefore he had been possessed of the title, his withholding a conveyance would have been no excuse for a. suspension of the payment by Smith. But Pettus-being insolvent — having no title — he was unable to-perform the agreement on. his part; he could, therefore, have no right in equity and good conscience, to insist upon the performance upon the part of Smith: Jus inability to convey was, therefore, a sufficient *130ground for the interposition of a Court of Equity, to prevent him from enforcing the payment of the purchase money until his inability shall be removed.— So far then, as Smith’s and Pettus’ rights were concerned, neither the rules of law or of equity impose any obstacle in a Court of Chancery adjusting them.

¶7I will, in the nest place, consider if the transfer of the note to Anderson, given by Smith to Pettus, for the first instalment for said lots, placed Anderson in a better condition than Pettus, as regarded the equity of Smith. The ability with which this point has been argued by the counsel, for and against the defendants, has induced me to examine the question with some minuteness; and I will in the first place remark, that the defendants counsel rested his de-fence, with much force, upon the defendant, Anderson, being the holder of the note, which was negotiable, and that for a valuable consideration, and before the equity of Smith arose. If the proposition, out of which the argument arose, be true, that the note from Smith to Pettus, was a negotiable instrument, then Smith’s equity, which arose after the paper was negotiated, would be postponed to that of Anderson, who had acquired the interest in. it.

¶8I presume it will be admitted, that the note out of which this controversy arose, so far as Anderson is concerned, is not by the Law Merchant, a negotiable paper. Have we any statute then, or legislative provision which makes it negotiable. It will be found in the Digest, page 67, that the Mississippi Territory, in 1807, passed an act, in the first section of which it will be found that promissory notes were made negotiable as inland bills of exchange, were, by the custom of merchants in England. By this statute, promissory notes remained negotiable until *1311812, when the Legislature again legislated upon the subject. By the first section of that aet,a it will he found, promissory notes with other instruments for the payment of money or any other thing, should thereafter be assigned by endorsement, and~ gives the assignee a right of action in his own name, and the payor the uenofit of all payments, discounts and oft; had or possessed against the same, previous to tice of the assignment. In the second section of this act, it will be found that the Legislature repealed the law making promissory notes negotiable, placing them w~aiu in the same situation as they were at Common Law, with the exception that they might l~e eiidorsed~ and the assignee sue in his own name, and giving tiie payor the defences, mentioned in the statute. Promissory notes, therefore, have no tiable character given to them by statute. Anderson then can not be the iimocent holder of a negotiable instru~nent, and therefore stands in the same `tion as Fettus with respect to the ncte, and all table defences that Smith might have set up against him. This was declared to be the rule of decision, by one of the ablest American jurists of his day, (Judge Haywood,) in the case of Welch vs. Watkins & Picket.b) In the case referred to Watkins sold land to Welch, gave bond to make a title, and Welch executed a note to deliver a good waggon and team by sucha day. Watkins endorsed the note to Picket, and after the endorsement it was discovered that Watkins had no title to the land. Judgment was obtained upon the note, and an injunction awarded to stay the judgment at law.

¶9In the caso referred to, (as also the one under consideration,') the note was given for land to which *132the vendor could not make title. The learned Judge says, “ he cannot, therefore, in equity, demand payment of the money, and is not entitléd to a recovery of it.” The same principle is laid down in the case of Norton vs. Ross,a in which the negotiability of the instrument, the payment of which was sought to be enforced, was the point upon which the case turned, and involved the construction of the statute of Virginia which makes bonds &c.-assignable, which is in its provisions similar to our own of 1812. The Court decided that it was not intended by the statute to abridge the rights of the obligor, or to enlarge those of the assignee, beyond that of suing in his own name. Whether or not the construction given to the statute by the Courts of Virginia be the correct one, is by the 2d section of our statute, rendered unnnecessary to enquire into, inasmuch as it has declared, that promissory notes are not negotiable; the character of the instrument being fixed, ascertained the rights of the parties. It not being negotiable, the assignee took it subject to all the equity of the obligor against the obligee, although he may be the endorser for a valuable consideration and without notice.

¶10The case of Stockton vs. Cook,bis further illustrative of the principles above decided. The Court, in the case here referred to, places the assignee of the bond in the same situation as the assignor, as regards the equity of the payee, and that the payor is not precluded from relief in equity against his bond for the purchase money, by the circumstance that before he made the purchase he was fully apprised of incumbrances, and took the bond of the vendor to free the estate of them. This authority *133furnishes an answer to i~io argument used by defendant's counsel, 1~iat Smith should resort to his covenant against Pettus for redress. How futile would such a suit have been againi~t au insolvent man, even were lie within the jurisdiction of our Courts. That insolvency is a substantial ground for relief hu equity, I refer to the case of Hamlin's exr's. vs. Berry.a The case referred to, was one of mutual and independent covenants, and Judge White, (for whose opinion I have the highest respect,) decided that that could have no bearing on the case. The case of Greenby vs. Cheevers,b relied on by the defend ant's counsel, contains no principle adverse to the relief sought by the complainant in this suit, or contrary to the authority above referred to. The case in Johnson was an action to recover back money paid for land, because of an existing incumbrance. The Court decided that before the plaintiff could recover, he must fix a default upon the defendant. Iconsider this case, then, as aïi authority on the side of the plaintiff. Pettus is surely iii default, and will ever remain so, as far as I am enabled to judge from the testimony. He should not, therefore, derive any benefit from a contract, which he has placed out of his power to fulfil. That he has clone this is abundantly proved for his agent cancelled the agreement between him and the commissioners, and gave up their bond by which they were hound to make him titles to the lots when the purchase money was paid. If he could now force Smith to pay for the lots because their agreement was independent, I should conclude that there was nothing substantial in the name of justice.

¶11The case relied on by the defendants in 20 Johns. *134R. 15, I have not had an opportunity of examining; but so far as I recollect the principle of decision in that case, it is this, that he who has the prior equity shall be preferred, recognising the principle in its fullest extent: if it be true, that the assignee stands in no better situation than the assignor, Smith’s equity is prior to Anderson’s, because Anderson’s equity depends upon Pet-tus’, and he has none by reason of his inability to perform his contract. So far then as the rights of Smith and Pettus, or Pet-tus’ assignees, are concerned, I might here close the investigation of this cause; but the complainant seeks in his bill to have a conveyance of the lots from the commissioners of the town of Courtland, to him, upon his paying the price agreed to be given for them by Pettus, it being the same amount agreed by him to be paid to Pettus for said lots. Smith’s right to remove an incumbrance in the way of a complete title, which Pettus had covenanted to make, is well sustained upon principle, and to have the amount thus paid, deducted from the price agreed to be given, is sustained by the case of Prescott vs. Truman,a also the case of Sprague vs. Baker:bhis right to do this is in accordance with strict justice; for otherwise he might never be able to obtain a good title. But how far the recission of the contract between Pettus and the commissioners, by which they received back -the lots, and became again invested with a complete title, to them, affects Smith’s right to have a conveyance from them on payment of the purchase money, has not been made a question, and I presume will be unnecessary to a decision of this cause, in as much as the commissioners have received Smith’s notes for the purchase money and setup no resistance to the con*135veyance provided the money is paid; it would be unnecessary therefore to use argument or authority to compel persons to do that which they are already willing to perform. I am therefore of opinion that the decree of the Court below be reversed — and in this opinion the Court is unanimous. And this Court proceeding to render such decree as* the Court below should have done. It is therefore ordered, adjudged and decreed, that the decree of the Circuit Court be reversed. It is also further ordered, that the injunction of Anderson’s judgment be made perpetual; as also the judgment in favor of Cruses.— The note of Smith to Pettus, outstanding, is hereby cancelled, and declared to bo void. ' That the com-misskmors of the town of Courtland make to Smith a good and sufficient title to said lots upon Smith’s paying to them the purchase money. That Smith and Anderson pay jointly the costs of this suit.