PURCHASE OF EQUITABLE RIGHTS.

51

LETTER VII.

I HAVE still a few directions to give you in regard to Cautions upon a Purchase.

Where you purchase any equitable right, of which immediate possession cannot be had-for instance, money in the funds, standing in the names of trustees, in trust for a father for life, and after his decease for his son; and you buy the son's interest during the father's lifetime, you should, previously to completing the contract, inquire of the trustee, in whom the property is vested, whether he has had notice of any encumbrance. If the trustee make a false representation, equity would compel him to make good the loss which you may sustain in consequence of the fraudulent statement. When the contract is completed you should give notice of the sale to the trustee. The notice would certainly affect his conscience, so as to make him liable in equity should he transfer the property to any subsequent purchaser; and would also give you a preferable title to any former purchaser or encumbrancer who had neglected the same precaution. The safest course, however, is to prevail upon the trustee, if you can, to join in the assignment to you; or, if he decline to join, to allow you to endorse on his settlement a memorandum of the assignment to you.

If you should purchase, with notice of the claim of another, although he has not a conveyance, and you actually procure the estate to be conveyed to you, yet you will be bound in equity by the notice; for it is a general rule in equity that a purchaser with notice is

12

52

NOTICE TO PURCHASER.

bound to the same extent, and in the same manner, as the person was of whom he purchased. I will give you an instance of this: You know that I have lent Tompson £1000, and that he has agreed to secure it by a mortgage upon his estate. Now this gives me merely an equity, that is, a right to call upon him in a court of equity, to execute a mortgage to me. Till that is done the entire ownership at law remains in him. If you should purchase the estate from him before the mortgage is executed, without notice of my loan, you would hold the estate discharged from it; for by the conveyance you would get the legal estate, and by the contract the equitable estate; so that having both law and equity on your side, you would prevail over me who have equity only. For it is a rule, never departed from, that a bona fide purchaser for a valuable consideration, and without notice, shall not be affected in equity. This has been carried so far, that a purchaser in early times was allowed to take advantage of a deed relating to the estate, which he stole out of a window by means of a ladder. I could hardly, however, advise you to be so bold at the present day. But in my case, as you have notice of the loan, you would be bound by it, although you procure the legal estate, and equity would accordingly compel you to execute a mortgage to me pursuant to Tompson's agreement. In all these cases, therefore, you should stop your hand.

Notice, I must observe, before payment of all the purchase-money, although it be secured, and the conveyance actually executed, or before the execution of the conveyance, notwithstanding that the money be paid, is equivalent to notice before the contract.

It is not necessary that you should have express notice; for instance, in my case it is not essential that you should actually see and read Tompson's agreement

DANGER OF NOTICE TO PURCHASER'S ATTORNEY. 53

with me; for equity holds many acts to amount to constructive notice to a purchaser; and constructive notice is equally binding with actual notice. Against some of these you cannot guard by any precaution; but there is one of which I must warn you. Notice to your counsel, attorney, or agent, would be notice to you. And the same rule prevails, although the counsel, attorney, or agent be the vendor, or be concerned for both vendor and purchaser. The notice, however, must be in the same transaction. Three times the House of Lords passed a Bill, introduced by me, in which was a clause making actual notice only binding on a bond fide purchaser for value; twice the Bill was postponed in the House of Commons, and at length, when they passed the Bill, the provision was struck out, although the sense of the House was not taken upon a division.

It can seldom happen that your attorney, or agent, has notice of any encumbrance on an estate which you intend to purchase, unless he is employed by the seller as well as by you. Attorneys are frequently employed on both sides, in order to save expense. This practice has been discountenanced by the Courts, and is often productive of the most serious consequences; for it not rarely happens, that there are encumbrances on an estate which can only be sustained in equity, and which will not bind a purchaser who obtains a conveyance without notice of them. Now, as I have just mentioned, notice to your agent, although concerned for the vendor as well as for you, is treated in equity as notice to you; and, therefore, if the attorney is aware of any encumbrance you will be bound by it, although you yourself were ignorant of its existence.

And by employing the vendor's attorney you may even deprive yourself of the benefit to be derived from the estate lying in a register county; the register may

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REGISTRY.-NOTICE TO THE ATTORNEY.

be searched and no encumbrance appear; yet if the attorney have notice of any unregistered encumbrance, equity will assist the encumbrancer in establishing his demand against you. I must explain to you that the register counties are Middlesex and York; and all instruments affecting lands in those counties are in effect required by Act of Parliament to be registered in offices kept for that purpose, for they are declared to be binding, according to their priority of registry. But although your conveyance should be duly registered, yet if you had notice of a prior unregistered conveyance equity would hold you liable to it; for the Acts of Parliament were only intended to give you notice of prior deeds; and if you have notice independently of the Acts, the intent of the Legislature is answered.

Another powerful reason why you should not employ the vendor's attorney is, that if the vendor be guilty of a fraud in the sale of the estate, to which the attorney is privy, you, although it be proved that you were innocent, would be responsible for the misconduct of your agent. In one case a purchaser lost an estate, for which he gave nearly £8000, merely by employing the vendor's attorney, who was privy to a fraudulent disposition of the purchase-money.

Your solicitor will, of course, search the proper registers for such encumbrances as require registry. They are brought together in one office, and the fee for a search of all is only 1s. In order to bind a purchaser, every crown debt and other indirect charges must be re-registered every five years, so that the search can now be readily made and at a trifling expense. The binding power of judgments was greatly curtailed by several Acts, for which I was responsible, and which were not passed without much opposition in the House of Commons, but ultimately, after the Report of a Commission, that House,

JUDGMENTS. LIS PENDENS.

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of its own motion, passed a more extended measure, which was adopted by the Lords, and is now law. The Act does not apply to Ireland, and is prospective only as to its principal provisions, and therefore all judgments entered up before the 29th July 1864, the day the Bill passed, will range under the old law. The Act declares that no judgment, statute, or recognisance to be entered up after the passing of the Act shall affect any land, of whatever tenure, until such land shall have been actually delivered in execution by virtue of a writ of elegit or other lawful authority in pursuance of such judgment, &c. This provision extends to all orders having the operation of judgments, and the Act contains many directions with which it is not necessary to embarrass you.*

power to register a pending suit as a lis pendens, so as to bind purchasers, was greatly abused; but that was corrected by a short Act, for which I am responsible.+

* 27 & 28 Vict., c. 112.

+30 & 31 Vict., c. 47.