1. A person residing in California employed an agent to contract
for and superintend the building of a ship at New York. The agent
was furnished with funds for the purpose and specially directed by
the principal to give himself out as the true owner and to conceal
the interest of the principal. Accordingly the agent made all
contracts in his own name and had the vessel registered as his own
property. After she was finished, he sold her and put the price in
his pocket.
Held that the principal's right in the vessel
was gone unless he could prove that the vendee had notice of his
right before payment of the purchase money.
2. As between the principal and agent themselves, the legal
title of the latter could not avail him except as a lien for his
services and money advanced, but the rule is different as respects
a third person who has bought in good faith and for a valuable
consideration.
3. When a question arises between two innocent parties which of
them shall suffer by the misconduct of another, the loss must fall
upon him who has enabled the wrong to be committed, and not on him
who had no means of knowing that it was a wrong.
4. If the equitable owner of a thing has permitted another to
hold the legal title accompanied with the usual documentary
evidence of it, with full possession and with declarations of
ownership corresponding to the legal title, he cannot set up his
equity against a
bona fide purchaser, who had no notice of
it.
5. Secret instructions from the equitable to the legal owner
which produced no change in the apparent relation of the latter to
the thing will not affect the right of the purchaser.
6. The burden of proof rests upon the equitable owner to show
that the purchaser had notice of his rights in due time.
7. Where the purchase has been made for a full price and on fair
conditions without special advantage to the vendee, the proofs to
impeach it should be more full and direct, more unequivocal and
certain than would be required in the case of a hard or unequal
bargain.
Page 67 U. S. 373
MR. JUSTICE NELSON.
The bill was filed in the Court below by Scudder, the
administrator of John Van Pelt, deceased, against the Steamboat
Company, claiming title to thirteen-twentieths of the steamer
Adelaide, as belonging to the estate of his intestate, and
a consequence of this interest to the complainant, an account of
her earnings &c.
The respondent set up, by way of defense, title to the whole of
the steamer as
bona fide purchasers and for full value
from one William W. Vanderbilt, in the City of New York.
The case discloses that John Van Pelt, a resident of California,
in the spring of 1853, employed Vanderbilt, an engineer and
constructor of steamers, to visit the City of New York and there
enter into contracts, and superintend the construction of the
steamer in question, he, Van Pelt, furnishing the necessary means
for the purpose. The contracts were to be made in the name of
Vanderbilt, the builders' certificate to be taken and the
enrollment, at the custom house, made in his name as owner. This
instruction was given by Van Pelt to Vanderbilt for the avowed
purpose of concealing his own name in the construction of the
vessel, as, for reasons not material to state, he did not wish it
to be known in the City of New York, or in California, that he was
interested in her. He was very specific and urgent on this point;
for, in one of his late letters to Vanderbilt, written at his
request, 13th September, 1853 (he died on the 29th), he says,
"You are not to know that he (Van Pelt) has any interest in the
boat, and that you must be more particular in talking and writing
about her and her destination."
The boat was built in New York in pursuance of this authority
and these instructions. The contracts were entered
Page 67 U. S. 374
into for the hull and engines in July, 1853, for joiner work,
painting &c., at a later date. All made in the name of
Vanderbilt. She was finished in September, 1854. In the latter part
of August of the same year, two agents of the respondents visited
the City of New York for the purpose of buying a steamboat to be
put on their line of steamers in the place of one disabled, and saw
or had seen the steamer in question advertised in the daily city
papers for sale. And, on application to Vanderbilt, and after
examination of the vessel and the usual negotiations as to price,
on the third of August, the purchase was made for the sum of
$88,000 -- $5,000 paid down, $15,000 23 August, and the balance 9
September. Vanderbilt, after having procured the usual builder's
certificate, to which he was entitled as contractor for the
building of the vessel, had her enrolled in his own name as owner,
and then, on the 9th September, executed a bill of sale to the
purchasers, under whom the respondents claim title.
Upon this simple statement of the case, it is not to be doubted
but that the legal title to this vessel passed to the purchasers,
for although as between Vanderbilt and Van Pelt, his principal, or
the estate of Van Pelt, the legal title could not avail beyond a
lien for his services or for any advances, yet, as it respects
third persons who have bought in good faith and for a valuable
consideration, the rule is different. The question then arises
between two innocent parties, and the equity of the case turns
against the party who has enabled his agent or any other person to
hold himself forth to the world as having not only possession, but
the usual documentary evidence of property in the article. 3 B.
& Cr. 38; 4 D. & A.,
S.C. 8 Cow. 238.
The case furnishes a very strong illustration of this
principle.
All the indicia of property in this vessel in Vanderbilt existed
from no fault of his, for he was clothed with it by the express
authority of the principal. Van Pelt therefore took upon himself
knowingly the responsibility of vesting the property of the vessel
in Vanderbilt, as he must have known that it was in his power to
deal with it as owner. Besides, he was extensively engaged in the
business of steamboats in the waters of California,
Page 67 U. S. 375
and doubtless understood, in point of fact, the responsibility
he was assuming. Van Pelt died in September, 1853, while this
vessel was under contract for construction. The event, however, did
not interfere with it, as his legal representatives continued the
arrangement the same after as before -- furnishing the necessary
funds and carrying on the work till the vessel was finished. They
took the place of Van Pelt.
In order to weaken this view of the case, it is said that Van
Pelt, before his death, changed the agency of Vanderbilt by the
appointment of one D. P. Vail. If this were conceded, unless it had
the effect to change the apparent ownership of the vessel in
Vanderbilt, the circumstances would be immaterial. No secret
arrangements between the parties could affect third persons. But
there was no change in the instructions to Vanderbilt of any
importance in the case. The authority of Vail was confined to the
furnishing of the vessel after she was finished, and to the taking
charge of her as Captain in carrying her to California. The funds
furnished by the owners passed through his hands to Vanderbilt. In
one of the last letters written by Van Pelt, 1st September, 1853,
to Vanderbilt before his death, he says -- speaking of the vessel
--
"I wish the bill of sale to be made for D. P. Vail,
ten-twentieths; R. Chenery, four-twentieths; R. M. Jessup,
three-twentieths; W. W. Vanderbilt, two-twentieths; and Frank
Johnson one-twentieth."
These instructions to Vanderbilt related to his disposition of
the vessel after her completion, the names and shares representing
the owners, and their interest. The ten-twentieths in Vail's name
represented the interest of Van Pelt, and was placed there to
conceal his interest agreeably to his original purpose.
These instructions, whatever may have been their effect upon the
parties concerned, had none as it respected the apparent relation
of Vanderbilt to the vessel. He remained in possession of her and
of all the documentary evidence of property, and was thus held out
to the world as the legal owner. Indeed, no change was contemplated
in this letter till the boat was finished. Vanderbilt then was to
give a bill of sale to the persons named, Van Pelt's interest still
to be concealed. We lay out of the case,
Page 67 U. S. 376
therefore, all the evidence in respect to the connection of Vail
with the construction of the vessel as in no way affecting the
ostensible ownership of her by Vanderbilt.
It is insisted, however, that assuming the respondents obtained
the legal title of the vessel by the purchase and bill of sale of
Vanderbilt, still the title was defective inasmuch as they are
chargeable with notice of the equitable interest of the estate of
Van Pelt. This, in our view of the case, is the only serious
question in it.
It is admitted that the respondents paid the full value of the
vessel at the time of the purchase -- $88,000. They had no motive,
therefore, to make the purchase of a vessel of doubtful or
defective title. So far as regards the contract of purchase itself,
its terms and conditions, there is nothing inconsistent with the
most entire good faith. If the vessel had been purchased under her
value, or the mode of payment had been prejudicial to the vendor,
or any special gain had been achieved by the purchasers, the Court
would necessarily approach this question of notice with very
different impressions from those proper in this case. Down to this
point, the evidence of good faith is undeniable, and must be
overcome by the proofs of the adverse party. We go one step
further; with such evidence of good faith from the terms and
conditions of the contract itself, the proofs to overcome it should
be more full and direct, more unequivocal and certain than in the
case of a like impeachment of a hard and unequal bargain.
Before we enter upon the proofs on this point, it may be well to
ascertain with some degree of exactness the precise practical
question involved in this charge of notice.
The estate of Van Pelt claims thirteen-twentieths of the vessel
on the ground that the funds of Van Pelt in his lifetime and of his
estate since his death were furnished to the extent of this
interest to build the vessel. The claim is for a latent equitable
interest resting in the heirs or personal representatives of the
intestate. The remaining interests in the vessel are not in
question. It is admitted the other owners authorized the sale, and
have received their share of the purchase money. The
Page 67 U. S. 377
case, therefore, is brought down to the single question, are the
respondents chargeable with notice of this outstanding equitable
interest in the vessel at the time of the purchase?
Our first remark is that all the parties concerned in or
connected with the purchase deny notice, and testify to the good
faith of the transaction. Vanderbilt and Vail, who were concerned
in the sale, and Deming and Todd in the purchase -- four persons,
each of unimpeachable characters.
This position is sought to be impaired by a critical examination
of the testimony of Vanderbilt and Vail, who were examined on
interrogatories, and isolated answers are seized on for the purpose
of weakening the general denial, and establishing the fact of
notice. We shall not go into the detail, but content ourselves by
stating that we have very diligently examined all the answers of
these witnesses relied on in connection with the whole of their
testimony on the subject, and they come to this -- that the
purchasers were advised there were parties in California who had
advanced money towards building the vessel; that she was originally
intended for employment in the waters of that state; that this
purpose had been changed; and that they wished the boat sold, and
that they, Vanderbilt and Vail, were authorized to sell her. Now
this taken together furnishes neither notice of the equity of the
estate of Van Pelt in the vessel to the purchasers, nor is it
sufficient even to put them on inquiry. It must be recollected that
the burden of proof rests upon the complainant. Taking the whole
statement as true and entitled to belief, there is nothing in it to
excite the apprehensions of even a prudent businessman; for at the
same time the purchasers were advised of advances or interests of
persons in California, they were advised they had authorized the
sale. One part of this statement was as much entitled to belief as
the other. The case falls within the principle stated by Lord
Lyndhurst in
Jones v. Smith, 1 Phillip Ch. 244.
It must be remembered that this was not a purchase under a power
of attorney, and hence a necessity to look to the power and see to
the authority.
The purchase was from the apparent owner, possessed of all
Page 67 U. S. 378
the indicia of property, and the question is whether this
evidence of ownership is overcome by notice of an outstanding
equitable interest in the vessel. The affirmative rests with the
party charging notice, and the facts brought home to the knowledge
of the purchaser to charge him with notice must be taken together,
as the question is, what effect the evidence as a whole should have
produced on his mind. Nor should it be forgotten that the persons
who had advanced money to Vanderbilt had advanced it for the
building of a vessel in his name and as his property.
The same observations are applicable to the testimony of Butler,
a witness, who says, there appeared to be a question between the
parties regarding the validity of the title to the boat; that
Vanderbilt and Vail assured the purchasers that, independent of
being builders of the boat, they were duly authorized by all the
parties that might have any interest in her in California to sell
her on the best terms. This witness does not profess to give the
words of the parties, but only the substance of the conversation as
he then recollected it.
The testimony of Spencer, who went to New York to become steward
on the
Adelaide, to the 12th interrogatory, says, "I
understood from both Capt. Vanderbilt and Mr. Demming that John Van
Pelt was part owner of the
Adelaide," and to the 15th, he
answered,
"they (Vanderbilt and Demming) both told me that the
Adelaide was built to go to California; Captain Vanderbilt
said they had entered into a combination out there, and the
Adelaide was not needed; that they had boats enough out
there to do all the business, and that this was the reason why they
sold the
Adelaide."
Now the fact that the boat was built for parties in California
and that they had come to the conclusion she was not needed there
and wished her sold did not necessarily detract from the right or
authority of Vanderbilt to sell, who was invested with the legal
title. If she was intended for sale, the presumption would not be
an unnatural one that he was thus invested for the very purpose of
a sale. As to the testimony of Spencer that he "understood from
both Vanderbilt and Demming that John Van
Page 67 U. S. 379
Pelt was part owner of the
Adelaide." This is hardly
evidence in a court of justice. It is the inference of the witness
from conversation, instead of the conversation itself. It is not
the evidence of a fact -- a charge of perjury could not be
predicated upon it if false.
Wood, another witness relied on to prove notice, beside the
indefiniteness of his testimony, the conversation occurred nearly
four years after the transaction; after also litigation had sprung
up concerning the claim of the estate of Van Pelt. The suit in
question was then pending against the respondents, and was
naturally the subject of conversation and very easy of
misapprehension. This witness also seems to have been in frequent
communication with one of the parties in the Van Pelt interest. As
a specimen of his testimony --
"I asked Demming, I think, how the boat came to be sold here,
and I think, Demming or Mayhew told me that a person by the name of
Van Pelt owned her, who died in California. I don't know that he
said Van Pelt owned her, but that, owing to Van Pelt's death, she
was sold here."
This witness also says:
"I understood from conversation I had with Demming and Mayhew
that they had knowledge of the interest of Van Pelt or of that
estate before the boat was purchased."
We need not repeat this is not evidence. This is all the
testimony on the question of notice that deserves any comment. We
have seen that Van Pelt in his lifetime, and his legal
representatives since his death, have studiously concealed their
interest in this vessel in the City of New York, and for this
purpose caused her to be constructed and finished in the name of
Vanderbilt; and, after the appointment of another agent, Vail, to
take charge of her after completion, the interest was still to be
concealed in his name, thereby holding out a third person as the
ostensible owner from the beginning of her construction till the
sale took place in August, 1854. And although we do not say these
parties who have thus enabled their agents to impose upon the
purchaser should be estopped from setting up their interest as
against him if he purchases with knowledge, yet we think, under
such circumstances, it is
Page 67 U. S. 380
the duty of the Court to scrutinize the evidence with more than
ordinary attention -- the proof of knowledge should be direct and
unequivocal. The parties here seeking to prove the knowledge assume
a position in contradiction to their past conduct, and are not
entitled to the most favorable consideration of the Court. They are
endeavoring to charge knowledge of a fact upon third persons or the
public when their interests become concerned, which they had down
to the sale industriously concealed.
Some observations have been made upon the circumstances under
which the vessel left the port of New York for the East as tending
to impeach the good faith of the purchasers. The proofs on this
subject leave no such impression on the mind of the Court. The
vessel had been purchased to fill a vacancy on a line of
steamboats, and a delay of some ten days had occurred beyond the
time fixed for her completion, which reasonably explains any
impatience on the part of the purchasers in leaving for the City of
Boston. Certainly the fear of arrest can hardly be inferred from
their anxiety, as the vessel was equally exposed to one in the
latter city as in the former.
Without pursuing the case further, we are satisfied that upon a
full examination of the proofs on the question of notice, they fail
to impeach the
bona fides of the purchasers, and as the
legal title passed, the complainant has failed to establish any
right to relief, and, we may add, we are not sorry that we have
come to a conclusion in favor of the innocent party who has acted
upon the evidence of the legal title of the party from whom the
purchase was made against the other innocent party, who had not
only been instrumental in furnishing this evidence but has
industriously concealed his own, and thus turned the equity of the
case against him.
The decree below reversed.
MR. JUSTICE CLIFFORD, dissenting:
I cannot concur in the opinion just pronounced, and inasmuch as
the case is one of importance to the parties, I think it proper to
state the reasons of my dissent. Appellee claims title to
thirteen-twentieths of the
Page 67 U. S. 381
steamboat described in the bill of complaint, as administrator
of John Van Pelt, late of San Francisco, in the State of
California, deceased. He was the complainant in the court below,
and his claim is based, in the bill of complaint, upon the ground
that the money to build thirteen-twentieths of the steamer was
furnished by his intestate in his lifetime, or was paid out of his
estate since his decease, to redeem certain personal property
belonging to the estate which had been pledged by the decedent
while in full life to furnish credits to construct and complete the
steamer. Title to the whole steamer is claimed by the respondents
in their answer by virtue of a purchase made by their agent on the
9th day of September, 1854, of one William W. Vanderbilt. John Van
Pelt, on the 1st day of May, 1853, employed William W. Vanderbilt
to make a draft for a steamer which he proposed to build in the
City of New York, to be employed in navigating the waters of
California. Vanderbilt made the draft as requested, and Van Pelt
about the same time proposed to him that he should proceed to the
City of New York as his agent, and there contract for and
superintend the building of the steamer. Prior to that time, he had
been in the employment of Van Pelt as an engineer in navigating
steamers on the waters of the former state. Connected as Van Pelt
was with such navigation, he did not desire that it should be
publicly known that he was about to build a steamer of the
description mentioned to come to California; consequently it was
arranged between him and his agent that the latter should
immediately proceed to the City of New York and make the contracts
for the contemplated steamer in his own name, and Vanderbilt
testifies that he was to enter the steamer, when completed, at the
custom house in New York as his vessel, unless he was otherwise
ordered by his employer. According to the arrangement as then made,
the steamer, when completed, was to be sent to California and there
wholly transferred to the principal, unless the agent should decide
to become interested in her to the extent of two-twentieth parts,
as it was then contemplated he might do. Full proof is exhibited
that Van Pelt advanced $20,000 to his agent towards the enterprise
before any of the contracts were actually made
Page 67 U. S. 382
for the building of the steamer; $12,000 of that sum was
advanced in the month of May, 1853, before the agent sailed for New
York, and the balance was duly forwarded to the agent and received
by him before any of the payments fell due under the construction
contracts. On the 7th day of July, 1853, the agent made the
contract with Lupton and McDiarmid to build the hull of the steamer
for the sum of $20,000; $5,000 were to be paid when the keel was
laid, $5,000 when the vessel was in frame, $5,000 when she was
planked and her deck laid, $2,500 when she was launched, and the
balance of $2,500 when the carpenter work was finished. Separate
and wholly independent contracts with other parties were made by
the agent for the engine, joiner work, and painting. Payments under
all the contracts were to be made by installments "as the work
progressed," and in all except the one first mentioned it was
expressly stipulated that the work should be done to the
satisfaction of Vanderbilt. Van Pelt wrote to him on the 1st day of
September, 1853, directing that the steamer, when completed, should
be registered as follows, to-wit: ten-twentieths in the name of D.
P. Vail, four-twentieths in the name of Richard Chenery,
three-twentieths in the name of R. M. Jessup, two-twentieths in the
name of William W. Vanderbilt, and one-twentieth in the name of
Frank Johnson. Other correspondence took place between these
parties which shows to a demonstration that Vanderbilt was merely
the agent of Van Pelt in contracting for the building of the
steamer, and that the original instructions in respect to the
registry of the steamer were wholly superseded. When the enterprise
was projected, Van Pelt had expected to visit New York before the
steamer was completed, but his health failing in September, 1853,
he was obliged to abandon that intention, and for that and other
reasons determined to make some new arrangement in respect to the
steamer. Having come to that determination, he sent for Richard
Chenery, who, accordingly visited the decedent at Sonoma where he
was then sick, and they made an arrangement in respect to the
subject matter of this controversy. Under that arrangement,
Chenery, for himself and R. M. Jessup, took seven-twentieths of
the
Page 67 U. S. 383
steamer, and it was agreed that he should have the entire
control of the business. Pursuant to that arrangement, Chenery paid
to Van Pelt seven-twentieths of the $20,000 which the latter had
already advanced to build the steamer, and by pledging property
they procured a letter of credit on Page, Bacon & Company for
an additional sum of $50,000, to be expended in her completion.
They also appointed D. P. Vail as their agent and sent him to New
York to adjust and pay the accounts and close up the concerns
growing out of the building of the steamer. He took with him the
letter of credit and proceeded to New York, but on the 29th day of
the same September, John Van Pelt died.
Administration was granted on his estate in California in
October, 1853, and when closed, it appeared that there was $70,000
for distribution among his heirs, exclusive of his interest in the
steamer now in controversy. Thirteen-twentieth parts of the steamer
were built from moneys advanced by John Van Pelt or procured from
credits furnished by him in his lifetime, as fully appears by the
accounts adjusted and paid by his administrators and duly presented
and allowed in the probate court. $48,194.57 were paid by his
administrators to redeem the property pledged to procure the
before-mentioned letter of credit, and the whole amount so paid by
them was expended in the construction of the steamer. $13,000 had
been advanced by Van Pelt in his lifetime, as before explained, and
the two sums exceed thirteen-twentieths of the cost of the steamer
by more than a thousand dollars. Vail proceeded to New York,
pursuant to his appointment as agent of Van Pelt and Chenery, but
as all the contracts had been made in the name of Vanderbilt, he
continued to superintend the completion of the steamer.
Contractors for the hull agreed to complete the same in four
months from the seventh day of July, 1853, and the evidence shows
that the hull was launched and delivered to Vanderbilt in December
following. She was built in Green Port, and after being delivered,
she was taken to New York, and in a few days after her arrival
there, the proper contractors commenced to put in her engines. More
than $56,000 were expended in her construction
Page 67 U. S. 384
and equipment, in addition to the sum of $20,000 paid to the
builders of the hull. Builders of the hull were paid in full
according to the contract, and they delivered the same to
Vanderbilt in December, 1853, without reservation or condition.
1. Having received their pay in full, and delivered the vessel
without reservation or condition, of course they retained no
interest which they could afterwards convey to anyone. They built
the hull only, and never had any interest, title or claim, in the
entire vessel or in the $56,000 expended for her completion after
such delivery. Where an entire vessel is agreed to be built by a
contractor, no property vests in the party for whom she is built
until she is ready for delivery, and has been accepted or approved
by such party.
Mucklow v. Mangles, 1 Taun. 318;
Stringer v. Murray, 2 Barn. & Ald. 248;
Merrit v.
Johnson, 7 Johns. 473; Abbott on Ship, p. 5.
But that rule does not prevail where the vessel is constructed
under the superintendence of the party for whom she is built or his
agent, and payments for her, based upon the progress of the work,
are to be made by installments as the work is done. In such cases,
the person for whom the vessel is built is regarded as the real
owner by all the well considered decisions upon the subject.
Woods v. Russel, 5 Barn. & Ald. 442;
Atkinson v.
Bell, 8 Barn. & Cress. 277;
Clarke v. Spence, 4
Ad. & Ell. 448;
Laidler v. Burlinson, 2 Mee. &
Wels. 602; Chitt. on Con. (10th ed.,) p. 401;
Andrews v.
Durant, 1 Ker. 40. Vanderbilt acquired no title by the
delivery of the steamer, for the reason that he furnished no money
to pay the contractors, and in accepting the same he acted as the
agent of those whose money was invested in the enterprise. He took
no written conveyance at that time, and the whole evidence shows
that he did not then contemplate any fraud upon the rights of those
he represented in accepting the delivery. Builders never had any
title, because the work had been performed under the
superintendence of the agent, and by the terms of the contract the
consideration was to be paid, and was in fact paid by installments,
as the work was done.
2. Suppose it had been otherwise, however, it must still be
Page 67 U. S. 385
conceded, I think, that no title remained in the builders of the
hull after the reception of the consideration and the unconditional
delivery of the steamer under the contract. Title, therefore, must
have vested in those who furnished the means to build the vessel,
unless it be held that it was in abeyance, which no one will
assert. Assuming the facts to be so, then it is clear that the case
falls within the rule that when an agent acquires property in his
own name by the use of the funds of his principal, it thereby
becomes the property of the principal by operation of law.
Scott v. Surman, Willes 400;
Taylor v. Plummer, 3
Maul & Selw. 574, 578;
Thompson v. Perkins, 3 Mason
235; Story on Ag., sec. 231.
None will deny that title to a ship or vessel may be acquired by
building or by purchase, and it is equally clear that it may be
established, especially when acquired in the former mode, without
the exhibition of any bill of sale or other written evidence.
Authorities in this country are abundant to show that the title of
a vessel may pass by delivery under a parol contract.
Bixby v.
Franklin Ins. Co., 6 Pick. 86;
United
States v. Willings, 4 Cranch 55;
Badger v. Bank
of Cumberland, 26 Me. 428;
Windover v. Bageboom, 7
Johns. 308;
Vinal v. Barret, 16 Pick. 401;
Leonard v.
Huntington, 15 Johns. 298;
Thorn v. Hicks, 7 Cow.
699; Pars.Mer.L. 329;
Stacy v. Graham, 3 Duer S.C. 452;
Lord v. Furgerson, 1 Mason 317. Thirteen-twentieths of the
steamer vested in the estate of John Van Pelt, in December, 1853,
when the builders of the hull delivered the same to Vanderbilt.
3. When that delivery was made, Vanderbilt had no muniments of
title whatever, and did not commence to procure them until the 7th
of April, 1854, and in the meantime $56,000, in addition to what
had been paid for the hull, had been expended upon the steamer, and
the estate of the complainants' intestate paid thirteen-twentieths
of that sum to redeem the property, pledged by the intestate in his
lifetime, as before explained. Attention to dates is important on
this branch of the case in order to ascertain when and by what
means, if at all, Vanderbilt acquired what is called an apparent
legal title. Importance
Page 67 U. S. 386
must be attached to the inquiry as to dates because the opinion
of the Court admits in effect that the title in fact, as between
the respondents' grantor and the legal representatives of the
deceased, was in the estate of the decedent, and it is difficult to
see how the admission could have been withheld, as four months
intervened after the builders surrendered all pretense of title
before any writing of any kind was procured furnishing any color to
any such ground of defense. When it is said that Vanderbilt had the
apparent legal title, reference is made, I suppose, to the bill of
sale from the builders of the hull, to their certificate as master
carpenters, and to the enrollment of the steamer at the custom
house. These several papers, it seems, are regarded as constituting
what is called an apparent legal title in Vanderbilt; but if they
do, it will be seen that they became such by a fraud as base and
transparent as was ever perpetrated by a living man upon a dead
man's estate. Bear in mind that Vanderbilt was virtually superseded
when the new agent was sent to New York to settle the accounts and
close the concerns. His subsequent services were rendered as a
sub-agent under David P. Vail; but whether so or not, his agency
under his first appointment terminated on the 29th of September,
1853, when John Van Pelt died. He then had no muniments of title,
apparent or otherwise, and the whole evidence shows that he never
became the agent of the heirs, or legal representatives of Van
Pelt's estate. To make up the supposed apparent legal title, his
first step was to induce the builders of the hull to give him a
bill of sale of the whole steamer. What inducements were held out
to them to give the bill of sale does not appear, but it does
appear that on the 7th day of April, 1854 -- four months after they
had delivered the hull without reservation or condition -- they
gave him a bill of sale of the whole steamer in consideration of
$20,000, as therein expressed with covenants of general warranty
applicable to the whole interest and value of the steamer. They
generously conveyed not only what they built themselves, but all
that was built by others, and warranted the whole to the grantee.
Speaking of the sale of a ship, Chancellor Kent says the general
rule is that no person can convey who has no title, and the mere
fact of
Page 67 U. S. 387
possession by the vendor is not of itself sufficient to give a
title. 3 Kent Com., p. 130;
Williams v. Merle, 11 Wend.
80. Observe that the hull was unconditionally delivered by the
builders four months before the date of this bill of sale, and it
is very evident that after such delivery they retained no interest
in the hull or any part of the vessel which they could convey to
anyone, and they never had any pretense of interest in the engine
or the other materials added to the steamer between the time of the
delivery and the date of their bill of sale. When that bill of sale
was given, no builder's certificate had been filed in the custom
house; but on the 22d day of May following, the builders of the
hull filed in the proper office a certificate in the usual form,
certifying that the steamer had been built by them at Green Port,
in 1854, and that William W. Vanderbilt was the owner. Such a
certificate has the effect to show that the vessel was built in the
United States, and that she is entitled to be registered as such,
and it is required to be filed before the vessel can be registered
or removed from the district where built to the district where the
owner resides. Act Dec. 31, 1792, sec. 4, 1 Stat. at Large 289.
4. Certificates given by master carpenters as a compliance with
the registry acts are required for certain specified purposes, but
they are not instruments of conveyance, and cannot properly have
the effect, or be so construed as to vest any interest in the
person holding the same as the owner of the vessel beyond what he
has by virtue of some other valid, legal title. Unless these two
instruments, taken in connection with the attending circumstances,
constituted a legal title in the grantor of the respondents, then
it is clear that he had none such, because they are all the
muniments of title held by him on the 3d day of August, 1854, when
he contracted to sell the steamer to Wm. Deming and Wm. Todd, the
agents of the respondents who made the purchase. Conveyance of the
steamer, however, was not made by him until the 9th day of
September following, and on that day she was enrolled at the custom
house in his name. Doubts had arisen in regard to her title, and
the purchasers and seller respectively employed counsel to make the
title satisfactory
Page 67 U. S. 388
at the custom house, which resulted in procuring an enrollment
Saturday evening just before the custom house was closed. Written
notice in behalf of the legal representatives of John Van Pelt was
given to the collector of New York on the 22d day of June, 1854,
informing him that Van Pelt at his death was the owner of
thirteen-twentieths of the steamer, and requesting that she might
not be registered or enrolled, or any transfer of her entered at
the custom house without notice to them, but it does not
affirmatively appear that the agents of the respondents had any
knowledge of that paper. Registry acts are to be considered as
forms of local or municipal institutions for purposes of public
policy. They are imperative only upon voluntary transfers of the
parties, and do not in general apply to transfers by act or
operation of the law. 3 Kent. Com., 9th ed., 208. Of itself, the
registry it is said is not evidence of property unless it be
confirmed by some auxiliary circumstances to show that it was made
by the authority of the person named in it, who is sought to be
charged as owner. Without such proof, courts of justice have
expressed strong doubts whether it was even
prima facie
evidence of ownership.
United States v. Brune, 2 Wall Jr.
264;
Tinkler v. Walpole, 14 East 226;
Melver v.
Humble, 16 East. 169;
Fraser v. Hopkins, 2 Taunt. 5;
Sharp v. United Ins. Co., 14 Johns. 381; 1 Greenl. Ev.
494. Upon the same ground and for the same reasons, it is competent
for the real owner who claims as builder to show by parol evidence
that his claim is well founded, and that the builder's certificate
and registry or enrollment were fraudulently made and issued in the
name of another. Such fraudulent acts cannot convey any interest in
the vessel, and if not, then a claimant whose title has no other
foundation cannot convey a good title as against the real owner
even to a purchaser without notice, because he cannot convey a
title to that which he does not own.
Williams v. Merle, 11
Wend. 80;
Everett v. Coffin, 6 Wend. 609;
Prescott v.
Deforest, 16 Johns. 169
5. But suppose it to be otherwise, and that the legal title to
the steamer was in Vanderbilt at the time he and Vail gave the bill
of sale to the agent of the respondent, still the complainant,
Page 67 U. S. 389
as it seems to me, is entitled to recover in this suit on the
ground that Vanderbilt held the title in trust for the legal
representatives of John Van Pelt, and that the agents of the
respondent had notice of the defect of title in their grantor. It
is admitted that as between the legal representative of Van Pelt
and the grantor of the respondents, the title to the steamer was in
the former, so that the only question on this branch of the case is
that of notice, but it is said that direct and unequivocal proof of
notice must be required. Nothing is better settled than the rule
that a purchaser with notice of a trust stands in no better
situation than the seller, and it is equally well settled that
notice to the agent is notice to the principal. Com.Dig.Chan. 4, c.
5;
Maddox v. Maddox, 1 Ves.Jr. 62;
Fulton Bank v. New
York & Sharon Canal Co., 4 Paige Ch. 127;
Bank
of Alex. v. Seton, 1 Pet. 309. Purchasers with
notice are bound in all respects as their vendors were, and have no
greater right.
Taylor v. Stibbett, 2 Ves.Jr. 437.
6. Until a different rule is established by this Court, I must
continue to hold that whatever puts a party upon further inquiry is
sufficient notice in equity. Ordinary prudence is required of the
purchaser in respect to the title of the seller, and if he fails to
investigate when put upon inquiry, he is chargeable with all the
knowledge it is reasonable to suppose he would have acquired if he
had performed his duty.
Hill v. Simpson, 7 Ves.Jr. 170;
Kennedy v. Green, 3 My. & Keen 722; Com.Dig., Chancery
4, c. 2;
Smith v. Lowe, 1 Atk. 489, 3 Sug. on V. & P.,
10th ed., 471;
Jones v. Smith, 1 Hare 43;
Booth v.
Barnum, 9 Conn. 286;
Pitney v. Leonard, 1 Paige Ch.
461;
Carr v. Hilton, 1 Cur.C.C. 390. Constructive notice
is held sufficient, upon the ground that when a party is about to
perform an act by which he has reason to believe that the rights of
a third person may be effected, an inquiry as to the facts is a
moral duty, and diligence an act of justice. Hence, says Judge Duer
in
Pringle v. Phillips, 5 Sand. S.C. 157; he proceeds at
his peril when he omits to inquire, and is then chargeable with a
knowledge of all the facts that by a proper inquiry
Page 67 U. S. 390
he might have ascertained.
Hawley v. Cramer, 4 Cow.
717;
Williamson v. Brown, 20 Law 397.
7. Applying these principles to the present case, I am of the
opinion that the evidence to show notice is full and complete,
establishing the fact beyond all reasonable doubt. Respondent's
agents, Deming and Todd, were examined as witnesses, and they deny
that they heard that any parties in California other than their
grantor had any right or interest in the steamer, but the fact is
proved to have been otherwise by six or seven witnesses, whose
depositions are in the record. Their grantor, Vanderbilt, was
examined as a witness, and he respondents asked him whether in the
negotiations and interviews he represented himself as acting for
any other person than himself, and he stated expressly that he
represented himself as acting for himself, David P. Vail, "and the
other owners." Responding to another interrogatory of a similar
character, he said that he represented himself as acting for
himself and parties in California who had advanced him money to
build the boat, and as if to make it more emphatic and precise, he
also said that he did state that parties in California had advanced
him money to build the steamer
Adelaide; and what is still
more important, he also said that he so stated on board the
Adelaide sometime in August, 1854, and that they, the
California parties, wanted the
Adelaide sold to realize
their money, as he had no other means of paying them.
Communications so direct and specific could not have been
misunderstood, and the occasion last referred to undoubtedly was
the one when the respondent's agents went on board the steamer to
examine her on the day the contract of sale was made. When the last
interview took place, Vail was out of town, but Vanderbilt says he
informed the respondents' agents that Vail represented some parties
in California who had advanced money. Some delay occurred in
consequence of his absence, but he was sent for and joined in the
contract, and Vanderbilt says that he represented to them the
position he occupied; that he represented that he was acting as the
agent of parties in California who had advanced money for the
vessel; and in conclusion, the witness says:
"I always told them there
Page 67 U. S. 391
were parties in California who had advanced money for the
steamer, but I have no recollection of telling them the names of
the parties."
Vail was also examined as a witness by the respondents. He says
it was mentioned at the time that he represented owners in
California, and that he consented to the sale by authority of
instructions from Mr. Chenery to that effect. Deming and Todd, as
the witness stated, understood from Vanderbilt and himself that the
vessel was built for parties in California, and that the reason she
was sold was because the business had changed there so that the
boat was not wanted. We told Mr. Deming, says the witness, that we
were acting for parties in California who wished the boat sold, and
we did state that the
Adelaide was built for parties in
California. Both of these witnesses were examined by the
respondents, and it is safe to say there is no ground to suspect
them of any partiality for the complainant. Other witnesses were
also examined upon the subject, on the one side or the other, whose
testimony is equally explicit. Complainant examined Carlos P.
Butler, who wrote the original agreement. He says that there
appeared to be a question between the purchasers and the sellers in
regard to the validity of the title to the boat. Sellers assured
purchasers that, independently of being builders of the boat, they
were duly authorized by any party or parties that might have an
interest in her in California, to dispose of her on the best
possible terms. Want of confidence was evidently felt and
manifested in what is now denominated the apparent legal title.
Assurances were given that the persons proposing to sell had
authority to sell from the real owners, but they exhibited no power
of attorney to represent absent owners or to sell the interest of
the complainant's intestate, and no inquiries were made upon the
subject. Witness says doubts were expressed as to the power of Vail
and Vanderbilt to convey a good title, but Mr. Deming said he was
perfectly satisfied with their statement. Their statement was that
they had authority independently of being builders of the boat, but
no such authority was exhibited and no inquiries made in regard to
it,
Page 67 U. S. 392
although the witness states that it was spoken of by all that
the steamer was built for parties in California.
Answer of respondent denies all such information, but the
evidence proves it and falsifies the answer. Defense must rest
where it is placed in the pleadings, and cannot now be shifted.
Another witness, examined by the complainant, was John W. Marshall,
who testifies that while Deming and Vanderbilt were negotiating on
board the steamer, the latter said he wanted to see Captain Vail
before he could do anything about selling the steamer, as he (Vail)
had power to sell the boat, and the witness adds: Deming knew she
was built for parties in California, as we talked about it before
we came on. Reference should also be made in this connection to the
deposition of John Spencer, who testifies that Vanderbilt and
Deming both told him that the
Adelaide was built to go to
California to run on the Sacramento River, and he expressly states
that he understood from both of them that John Van Pelt was a part
owner in the
Adelaide. Certain conversations between
Deming and James Wood, who was examined as a witness, are also
given in evidence by the complainant, to the effect that the former
stated to the latter, in May, 1858, that the boat was built for
parties in California, and the witness thinks that Deming, or the
party who introduced him, stated that a person by the name of John
Van Pelt, who died in California, owned the steamer. Complainant
also refers to the conduct of Deming after the steamer was enrolled
at the custom house as tending to confirm the testimony, offered to
show that he had knowledge that the title was defective, and unless
the ordinary rules of evidence are to be wholly disregarded, the
circumstances proved are entitled to great consideration. Efforts
to make the title satisfactory were not successful until Saturday
evening, just before the time of closing the custom house. While
the negotiations for perfecting the title were going on, and only
the day before they were closed, an agent of the heirs of John Van
Pelt's estate arrived in the City of New York from California to
look after this vessel. On his arrival, he heard of the sale of the
steamer, but having ascertained that she still remained at the
wharf and that she had not
Page 67 U. S. 393
been enrolled or inspected, he applied to the surrogate for
administration on the estate. All this took place on Saturday, and
that evening, after dark, Mr. Deming sent for Mr. Winchester, who
had come on to take charge of the steamer as master, and directed
him to have the smoke pipe of the steamer painted that night,
signifying at the same time that the steamer would sail on the
following morning.
After his arrival in the City of New York, Winchester had acted
as master of the steamer, but on Sunday morning, William W.
Vanderbilt took charge of her as master, and between seven and
eight o'clock she sailed for Boston in a storm, when it blew so
hard that she had to come to anchor at the mouth of the sound.
Whether Deming knew the person who had arrived from California as
the agent of the heirs does not appear, but it does appear that he
was well known to the sellers of the steamer, and the circumstances
afford strong ground to infer that the departure of the steamer was
hastened as a means of discouraging further attempts to prosecute
the claim. Taken as a whole, I am of the opinion that the evidence
shows that the agents of the respondents had actual notice that the
title of the sellers of the steamer was defective, and that she was
built by monies advanced by parties in California; but at all
events I am of the opinion that they had constructive notice that
their grantors were not authorized to make the sale, and it is
incomprehensible to me how anyone who will read the record can come
to a different conclusion.
Decree of the circuit court, I think, should be affirmed.
MR. JUSTICE MILLER:
I am of opinion that ten-twentieths of the steamboat
Adelaide were owned by John Van Pelt in his lifetime, and
that the legal title passed to his administrators in
California.
That no sale of that interest could be made by those
administrators by the law of California without an order of Court,
and as no such order was made, there was no valid sale of that
interest to defendants.
I have not been able to find anything in the case to take
the
Page 67 U. S. 394
transaction between defendants and Vanderbilt out of rule of
caveat emptor. I am of opinion, therefore, that the decree
of the circuit court should be affirmed, except as to
two-twentieths, which I think were the property of Vanderbilt, and
one-twentieth the property of Frank Johnson which, with the other
seven-twentieths held by Chenery, passed to defendants by
Vanderbilt's sale.