Page 147 U. S. 140
v. Braiden's Administratrix, 2 Black 458; Story's
Eq.Jur. § 1219.
Although there is some contrariety of expression, the doctrine
of a vendor's lien arising by implication seems to have been
generally recognized in the State of Iowa.
In
Porter v. City of Dubuque, 20 Ia. 440, the supreme
court said:
"The right to a lien in favor of a vendor upon the real estate
sold to a vendee is not based upon contract, nor is it properly an
equitable mortgage; neither can it be regarded as a trust resulting
to the vendor by reason of the vendee holding the estate with the
purchase money unpaid. It is a simple equity raised and
administered by courts of chancery. It is not measured by any fixed
rules, nor does it depend upon any particular fact or facts. Each
case rests upon its own peculiar circumstances, and the vendor's
lien is given or denied according to its rightfulness and equity,
in the judgment of the court, upon the facts developed in the
particular case."
It was stated, however, that whether the doctrine should obtain
in Iowa might be regarded as still an open question, although it
had been declared in
Pierson v. David, 1 Ia. 23, that the
lien was firmly established. This case is cited with approbation in
Johnson v. McGrew, 42 Ia. 560, but it is added that
whatever might be the view of the question under the general
doctrines of equity, there could be no doubt respecting it under
the provisions of the statute, and reference is then made to
sections 3671 and 3672 of the Iowa Revision of 1860, which were
sections 2094 and 2095 of the Code of 1851. These sections provided
that the vendor of real estate, when all or part of the purchase
money remained unpaid after the day fixed for the payment, might
file his petition asking the court to require the purchaser to
perform his contract or to foreclose and sell his interest in the
property, and that the vendee should in such case, for the purpose
of foreclosure, be treated as a mortgagor of the property
purchased, and his rights be foreclosed in a similar manner. And it
was held that the sections applied as well where a deed had been
made as where it had not.
In
McDole v. Purdy, 23 Ia. 277, a vendor's lien was
Page 147 U. S. 141
allowed and enforced for a deficiency in value of lands taken in
exchange on account of the false representations of the other
party, and to the same purport
see Brown v. Byam, 65 Ia.
374.
In
Huff v. Olmstead, 67 Ia. 598, the plaintiff conveyed
to the defendant in consideration of a partial cash payment and a
promise by defendant to execute a mortgage back to secure the
payment of the balance of the purchase money, unless he should
sooner convey to plaintiff a good title to certain other lands in
payment of the balance. Defendant did not convey the other lands,
but he executed a mortgage, and had it placed on record, differing
in its terms, however, from the one agreed on. The plaintiff did
not accept the mortgage, and it was held that he had a vendor's
lien on the land conveyed to the defendant.
In
Devin v. Eagleson, 79 Ia. 269, where land had been
purchased and partly paid for, and had passed into the possession
of the purchaser under an agreement that he would as soon as
possible execute a mortgage thereon to the vendor to secure the
residue of the purchase money, and the mortgage was prepared, but
not executed, it was decided that the vendor had a lien, according
to the terms of the prepared mortgage, for the residue of the
purchase price, and that the agreement to execute the mortgage was
excepted from the statute of frauds by section 3665 of the Code. In
that case, the language above given from
Porter v. City of
Dubuque as to the character of a vendor's lien was quoted,
though it was stated that plaintiff's lien was not such a lien, but
one based upon a contract which a court of equity would
enforce.
Sections 2094 and 2095 of the Code of 1851 were carried forward
into the Code of 1873, but changed to cases where the vendor had
"given a bond or other writing to convey," and section 1940 was
enacted, which provided:
"No vendor's lien for unpaid purchase money shall be recognized
or enforced in any court of law or equity after a conveyance by the
vendee, unless such lien is reserved by conveyance, mortgage, or
other instrument duly acknowledged and recorded, or unless such
conveyance by the vendee is made after suit brought by
Page 147 U. S. 142
the vendor, his executor or assigns, to enforce such lien."
McClain's Ann.Code 1888, p. 776, § 3111.
Under this section, it has been decided that after the execution
of a conveyance by the vendee, the lien ceases to exist even though
the grantee knew that the purchase money had not been paid. This is
because the grantee has the right to assume that a vendor's lien as
against him is waived,
Cutler v. Ammon, 65 Ia. 283;
Prouty v. Clark, 73 Ia. 55;
Rotch v. Hussey, 52
Ia. 694, a presumption which cannot be indulged in where suit to
enforce such lien is pending.
It is argued that the second branch of the section should be
construed to mean that no vendor's lien shall be recognized or
enforced after a conveyance, not only unless the lien is reserved,
but also unless the conveyance is made after suit brought. It
appears to us that this would disregard both language and obvious
intention, and that where the conveyance is after suit brought, the
grantee takes subject to the maintenance of the lien.
Section 2628 of the Code provides:
"When a petition has been filed affecting real estate, the
action is pending, so as to charge third persons with notice of its
pendency, and while pending no interest can be acquired by third
persons in the subject matter thereof, as against the plaintiff's
title, if the real estate affected be situated in the county where
the petition is filed."
2 McClain's Ann.Code, p. 1037, § 3834.
The circuit court held that as the petition in this case was
filed February 26, 1883, in the county wherein the land was
situated, and as the conveyance to George Lyle was made March 1,
1883, that conveyance did not affect the rights and equities of
complainants; that it was the filing of the petition, and not
service of notice, that created notice to third parties of the
pendency of the action, and that even though there was a verbal
contract in regard to the alleged purchase by George Lyle, made in
December, 1882, yet that did not defeat a vendor's lien under
section 1940 of the Code. These conclusions we understand to be in
accord with the decisions of the Supreme Court of Iowa.
Noyes
v. Kramer, 54 Ia. 22;
Haverly v. Alcott, 57 Ia.
171.
Page 147 U. S. 143
It is said that this cannot be so, because the effect of
lis
pendens is merely to give constructive notice to any purchaser
after the filing of the petition, and that if actual notice would
not protect the vendor's lien, then
a fortiori a
constructive notice would not. But the notice given by filing the
petition is notice of the assertion of the lien, and not merely of
the fact that the purchase money has not been paid. The reservation
of the lien by recorded instrument or its assertion by suit for its
enforcement alike avoid the objection that it is a secret lien and
prevent the acquisition of superior equities by third parties.
Appellants further insist that no suit can be held to be
"brought," under section 1940, although the petition be previously
filed, until the delivery of the process notice to the sheriff,
with intent that it be served immediately, and that his (or this
and service) alone constitutes the commencement of the action,
(Code, §§ 2599, 2532), that the first publication of notice of suit
in this case was not until March 22, 1883, and the publication was
not completed until April 12, 1883 (§§ 2619, 2620), and that hence
the conveyance to George Lyle had priority. Section 2532 relates
simply to the bar of the statute of limitations, and section 2599
to the general rule in respect of the manner of commencing actions;
but, as already said, it is the filing of the petition, and not the
delivery or service of process, that creates notice to third
parties of the pendency of the action and prevents them from
acquiring an interest in the subject matter thereof as against the
lien so asserted.
Undoubtedly a lien of the character we are considering may be
defeated if the grantor or vendor do any act manifesting an
intention not to rely on the land for security, but this must be an
act substantially inconsistent with the continued existence of the
lien, and cannot be inferred from the mere fact that the parties
may not have contemplated the assertion of the lien in the first
instance. We find no sufficient evidence of a waiver here, and we
do not regard the lapse of time between the surrender of possession
in January, 1881, upon the purchase's being made, and the filing of
the bill in February,
Page 147 U. S. 144
1883, as justifying a conclusion to that effect. The position is
also taken that the remedy at law must first be exhausted or shown
not to exist before a bill in equity can be filed to enforce such a
lien. But our attention has been called to no decision by the
courts of Iowa laying down that rule, and although we are aware
that it obtains in some jurisdictions and under some circumstances,
it is inapplicable here and need not be discussed as an independent
proposition.
We are of opinion, in view of all the facts and circumstances
disclosed by the record and of the concession that the deeds were
mortgages, and that John Lyle agreed on January 1, 1881, to pay the
Shropshires $21,600 for the land, subject, of course, to the
reduction of that amount by the indebtedness of the Shropshires to
him, complainants were entitled to maintain a lien upon the
property for the balance due them, which the conveyance to George
Lyle could not in itself destroy.
In this connection, it should be observed further that George
Lyle had not paid the entire alleged consideration for the land
before the bill was filed. The evidence of George Lyle and his
grandfather is in many particulars directly in conflict. George
testified that he made a verbal contract for the purchase of the
farm about December 1, 1882, for $22,000, which he paid in cash;
that he traded for it six hundred and forty acres of land in Union
County, Iowa at $30 per acre, and $3,800 in cash. This would be
$23,000. He also said that he gave a note of $1,600 for the stock
on the place. John testified that George turned over to him, on the
purchase price, sale notes to the amount of about $4,000, and gave
his note for $6,000, and that a half section in Union County was
part of the consideration, and was to be deeded as he might direct;
that the agreed price for the 320 acres was $8,000. The deed for
this land conveyed 320 acres for the expressed consideration of
$8,000, and bore date September 20, 1883. Payments made after this
bill was filed were made by George Lyle in his own wrong, so far as
complainants' rights were concerned, and, treating the doctrine
that all the purchase money must be
Page 147 U. S. 145
paid before notice of a prior lien, in order that a subsequent
purchaser may be protected, as so far qualified that protection may
be accorded for the amount actually paid before notice,
Kitteridge v. Chapman, 36 Ia. 348, it is quite apparent
that George Lyle was not deprived against his will of that
protection by the relief awarded.
The motion to dismiss the suit for defect of parties was
properly overruled. By Equity Rule 47, it is provided that in all
cases where it shall appear to the court that persons who might
otherwise be deemed necessary or proper parties to the suit cannot
be made parties by reason of their being out of the jurisdiction of
the court or incapable otherwise of being made parties, or because
their joinder would oust the jurisdiction as to the parties before
it, the court may, in its discretion, proceed in the cause without
making such persons parties, and in such case the decree shall be
without prejudice to the rights of the absent parties. When this
bill was filed, the conveyance to George Lyle had not been made.
What rights may have accrued to him prior to that date are not
affected by the decree. The suit was removed into the circuit court
of the United States by the defendant John Lyle, and, having done
that, he then contended that the court had no jurisdiction, because
George Lyle was an indispensable party defendant and he was a
citizen of the same state as complainants. We do not think this
will do. If George Lyle, who was fully aware of the pendency of the
suit and gave his testimony therein, desired to set up equities
which he claimed arose from the payment of part of the purchase
price of the property before the suit was brought, he might, as
pointed out by the circuit court, have intervened in the cause for
the protection of his rights without ousting the jurisdiction. This
he did not do, and we are not prepared to hold the circuit court
should be deprived of jurisdiction at the suggestion of the party
who voluntarily invoked it.
Undoubtedly George Lyle would have been a proper party to the
proceeding, but we do not regard the case as one in which his
interest in the subject matter and in the relief sought was so
bound up with John Lyle that his legal presence as a
Page 147 U. S. 146
party was an absolute necessity, without which the court could
not proceed.
Traders' Bank v.
Campbell, 14 Wall. 87,
81 U. S. 95.
This brings us to the examination of the matters complained of
in regard to the master's report. The rule in relation to the
findings and conclusions of a master, concurred in by the circuit
court, is that they are to be taken as presumptively correct, and
unless some obvious error has intervened in the application of the
law or some serious or important mistake has been made in the
consideration of the evidence, the decree should be permitted to
stand.
Crawford v. Neal, 144 U. S. 585,
144 U. S. 596;
Furrer v. Ferris, 145 U. S. 132.
We have carefully examined the evidence, and are satisfied that
the findings of the master (including that rejecting the alleged
settlement in January, 1880) ought not to be disturbed, under a
proper application of the rule just stated, except in one
particular, in respect of which we hold a serious and important
error has been committed. The report of the master states certain
items, amounting to $5,778.80, as the "individual indebtedness" of
A. C. Shropshire to John Lyle on January 1, 1881, including
interest. In the summary of the account stated between the parties,
the report puts the balance due in the alternative. If the
$5,778.80 were rejected as a credit in Lyle's favor, the balance
found was $7,807.31, and, if it were allowed, the balance was
$2,028.51. The circuit court entered a decree for a larger amount,
with interest thereon. We cannot concur in this conclusion. Lyle's
advances were made for the benefit of both the Shropshires. The
husband had charge of the farm, and the stock that was procured
from time to time and placed upon it through the business
transacted with Lyle was for the benefit of both. Lyle gave credit
to the farm and its operations, and not to A. C. Shropshire, as
contradistinguished from his wife. Some of the credits allowed to
the Shropshires in the $4,894.44 appear to have been realized out
of items thrown into the alleged individual indebtedness of A. C.
Shropshire. The course of dealing between the parties, their
correspondence, the whole evidence taken together, seem to us
wholly inconsistent with the idea that Lyle was trusting A. C.
Shropshire to the extent indicated, and looked to
Page 147 U. S. 147
him for repayment, or that Shropshire and his wife so
understood. The indebtedness was joint, and not several. There is,
however, included in this amount of $5,778.80 a note of $1,000 of
Augustus and Alexander C. Shropshire, with interest from December
1, 1877, to January 1, 1881, amounting to $327.83, which should be
excluded as individual indebtedness of A. C. Shropshire, and not
properly chargeable in this account. All equitable considerations
are open in such a suit, and we think that the equities require
that John Lyle should receive an additional credit of $4,450.97.
The balance due upon the account stated, corrected in this
particular, would be $3,356.34.
The decree is reversed, and the cause remanded with a
direction to enter a decree for the amount of $3,356.34, with
interest from January 1, 1881.
