U.S. Supreme Court
Cordova v. Hood, 84 U.S. 17 Wall. 1 1 (1872)
Cordova v. Hood
84 U.S. (17 Wall.) 1
1. Where a deed of land shows on its face that the consideration is yet "to be paid," a second purchaser (that is to say, a purchaser from the vendee) who has notice of the deed takes the land is those states (of which Texas is one) where the English chancery doctrine of a vendor's lien prevails, subject to the vendor's lien, unless such lien has been in some way waived.
2. In the case of such a deed, it is the duty of the new purchaser to inquire, and where inquiry is a duty, the party bound to make inquiry is affected with all the knowledge which he would have got had he inquired.
3. Though it is true that taking a note with a surety from the vendee is generally evidence of an intention to rely exclusively upon the personal security taken, and therefore, presumptively, is an abandonment or waiver of a lien, yet this raises only a presumption, and as a presumption only, it may be rebutted by evidence that such was not the intention of the parties.
4. The testimony of the vendor received to rebut, and being positive, held sufficient to do so.
5. Where a vendor already has a lien evidenced by a note for the payment of all and every part of the purchase money so long as it remains unpaid, the lien for any purchase money afterwards still unpaid is not lost by the fact of his receiving part payment of the note before its maturity, taking a new note payable at the same time and in the same way and place as the original note, and a destruction of such original one.
6. By the laws of Texas (which in a matter connected with real estate was respected by this Court in a suit coming from Texas) an assignment of a note given for the purchase money of real estate carries the vendor's lien.
On the 4th of March, 1859, B. G. Shields, by instrument of chanroblesvirtualawlibrary
writing, "bargained and sold to G. M. Hood" (both parties being of Texas) a tract of land in that state, described, "for the sum of $27,000, to be paid by the said Hood as follows." Certain drafts and notes to be given by Hood were then specified, among the notes, one for $9,000, payable at the Union Bank, New Orleans, April 9, 1862. The deed ended with a covenant that "on the completion of the payments before mentioned," Shields would warrant and defend the premises to Hood, his heirs and assigns, against all persons lawfully claiming or to claim them. In point of fact, when the papers came to be executed, the notes were signed not only by Hood, the purchaser, but also by his son, G. M. Hood, Jr. On the 1st of April, 1862, before the note that became due on the 9th matured, Hood, Sr., called on Shields and stated to him that he had some surplus cash with which he desired to pay a part of it off. Shields accordingly took his money and a new note was executed for the balance, the old note being given up. The new note, like the old one had been, was made payable April 9, 1862, and at the Union Bank, New Orleans. This new note Shields afterwards (in the autumn of 1862) assigned to one Bartlett.
In May, 1863, Hood sold the land to two persons named Scroggin and Hanna, and, Bartlett having become bankrupt, his assignee in bankruptcy, one Cordova, now filed a bill in the court below against both the Hoods, Scroggin, and Hanna, to enforce the lien. The bill did not allege that the complainant had exhausted his remedy at law against Hood, the vendee of the land, who, or whose estate in point of fact, appeared to be solvent.
The Hoods let a decree pass pro confesso. Scroggin and Hanna set up in answer or in argument that all vendor's lien had been waived by taking Hood, Jr., as a party, who, not being interested, was a surety on the notes; that even if any lien had existed under or by virtue of the note of $9,000, such lien was waived when that note was paid, as in law it was completely when it was surrendered, the transaction having been not a credit on an old debt, of so much cash paid, but an acceptance of cash and of a new chanroblesvirtualawlibrary
debt, accompanied by an annihilation and extinction of the old one; that, at any rate, however all this might be as between Shields and Hood, they, Scroggin and Hanna, were purchasers, bona fide and without notice of any lien; that further, if Shields, the vendor, might himself have enforced a lien against the land had he continued to hold the note and debt, the right of enforcement was a right personal to him, and that it did not pass to Bartlett, his assignee, and as little certainly to Cordova, assignee in a second remove.
Shields, who was examined, thus testified:
"The recital in the instrument executed to G. M. Hood, Sr., on the 4th of March, 1850, corresponds with the facts, except that the name of G. M. Hood, Jr., was also signed to the notes. The land was sold to Mr. Hood, Sr., and his responsibility, coupled with a vendor's lien, secured by the regular form and terms of the instrument, was deemed by me a sufficient security. Mr. Hood, Jr., accompanied his father to my house, and was represented by his father to be his agent. I do not remember why it was that Mr. Hood, Jr.'s name was signed to the notes. The deed or instrument was prepared, to the best of my recollection, before the notes and in the absence of Mr. Hood, the notes after the arrival of Mr. Hood and son. Their joint signatures was probably a suggestion of the moment, and did not alter or take from the facts recited in the instrument. Mr. Hood, Sr., did execute the notes to secure the payment of the amounts, and at the time and for the considerations mentioned in the deed. The additional signature of Hood, Jr., was simply that much more -- a gratuity not called for by nor altering the contract. Mr. Hood, Sr., was represented, by those who knew him in Eastern Texas, to be a wealthy man. His son was considered responsible and trustworthy as far as I know. The reason for not taking a mortgage is shown by the terms of the instrument, by which the vendor's lien is plainly retained and held. I have no recollection of who was present when the terms of the instrument securing the vendor's lien were discussed, if discussed at all. There never was any question between us on that point, it being considered, of course, that my obligation of warranty in the instrument would only be made perfect or complete upon the payment of the whole amount of the purchase money. "
"The payment of a portion of the note of $9,000 in advance and taking another note was simply a matter of convenience, and not intended in any manner or to any extent whatever to impair or affect the lien retained by the terms of the instrument to secure the payment of the whole amount of the purchase money. It was positively and unequivocally so stipulated and agreed between us at the time of the execution of the said note of $5,015, so stated and understood, without question, between us."
"The note was traded to Bartlett with the statement from me that it was secured by a vendor's lien on the land sold to Hood, Sr. I will further state that I believed at the time that Mr. Bartlett had special reference to that fact in the transaction, and that he felt that the note of G. M. Hood, Sr., to secure the remainder of the last payment for the land, with the right of the vendor's lien upon said land, was safer for him (Bartlett) than cotton, which he gave me for it, then liable at any moment to impressment."
"Both Hanna and Scroggin spoke to me sometime since -- perhaps 1868 or 1869 -- in reference to the terms of sale by me to Hood. I gave them such information as my recollection of the facts warranted. One of them and perhaps both statce to the terms of sale by me to Hood. I gave them such information as my recollection of the facts warranted. One of them and perhaps both statce to the terms of sale by me to Hood. I gave them such information as my recollection of the facts warranted. One of them and perhaps both stated that they had been informed by Mr. Hood that he had paid the whole amount of the purchase money, in reply to which I gave them true information as nearly as I could. At the time, there was more than $9,000 due."
Bartlett was also examined. He said:
"When Shields sold the note to me, he told me distinctly and positively that it was secured by a lien on the land. This was perfectly understood between us. I relied on this lien when I purchased it."
Scroggin and Hanna were also both examined. They testified that Hood, Sr., was one of the wealthy men in Texas; that they supposed that the land had been sold to him on his personal responsibility; that with his own lips he declared to them that every dollar was paid on the land; that they had never heard of any lien. It appeared, however, on cross-examination that they had seen the record of the deed of March 4, 1859, from Shields to Hood, before purchasing chanroblesvirtualawlibrary
from Hood, and had had it examined by their professional adviser for their own "protection."
The court below confirmed the decree so far as the bill was confessed, but dismissed it as against Scroggin and Hanna. From that decree Cordova took this appeal.