The question to be decided is, was Hodgdon's title acquired in good faith, and for a valuable consideration?
It is not denied in this case that Captain Hodgdon acted in this case in perfect good faith, without any knowledge of plaintiff's title, and without any notion to defraud any one. The only questions raised are these: First--Does a mortgage taken to secure an antecedent debt rest on a valuable consideration? Second--If the mortgage itself does not rest on a valuable consideration, does the holder of a deed made by the Sheriff, in pursuance of an order of sale foreclosing that mortgage, the sale and payment of the money being made in advance of the recordation of a prior deed, hold the land as if the mortgage itself was founded on a valuable consideration? The question of bona fides being out of this case, the remaining question to be determined is, what is a valuable consideration? Forbearance in collecting a debt is a valuable consideration. (Bouvier's Law Dic. 330.) That Hodgdon's bid at the mortgage sale did extinguish his debt pro tanto, we refer to Branham v. Mayor, etc., of San Jose, 24 Cal. 607. That the bidder at such sale is a purchaser for a valuable consideration, see Hunter v. Watson, 21 Cal. 363; Perley v. Huggins, 15 Cal. 137; 5 Indiana, 396, and 21 Indiana, 137.
The cases cited by appellant's counsel are generally of this class: A. is the owner of chattels. B., under some fraudulent pretense or misrepresentation, obtains possession of these chattels, and sells them to C., an innocent third party. The question then arises between A., the original owner, and C., the innocent purchaser, who shall sustain the loss or damage caused by the fraudulent conduct of B. It has beenuniformly held in such cases that if C. buys the goods in the regular course of trade, and with due care, that he may retain the goods; but if he has taken them as security, or in payment of an antecedent debt, he must yield them up to A., the original owner. But what is the reason of this latter rule? Is it because there was no consideration passed from C. to B. in payment for these chattels? It appears to us that such a proposition is ridiculous. If so, you could never discharge a preexisting debt by the delivery of goods, because such transaction would be without consideration, and void.
But there is no such proposition in the case. There is no doubt but that the antecedent debt, as between B. and C., is a valuable consideration, and the contract is good and valid as between the parties to it. A., then, would recover the goods, not because of any invalidity in the contract between B. and C. for non-payment of a valuable consideration in such contract, but because he has a superior right to both B. and C.
But why, it may be asked, does A. recover in the one class of cases and not in the other? Simply on this principle: that when one of two innocent parties must suffer loss by the acts of a cheat or a swindler, he who, by his negligence or undue confidence, has put it in the power of the swindler to commit the fraud, must suffer the loss, rather than the party who has not been guilty of any negligence, and has placed no undue confidence in the cheat.
Then, if B. obtains the goods from A. under false pretenses, A. is supposed to have been at least slightly negligent in allowing the goods to go out of his hands. If C. buys the goods, and pays the money without any fault or carelessness whatever, he is the innocent party, and must be protected from loss even at the expense of A., who was morally innocent, but lawfully responsible for his negligence.
If, on the other hand, C. takes these goods as security for or in payment of an antecedent debt, usually he loses nothing by such transaction. When the goods are taken from him by A., he is in the same position as before--the old debt is renewed by the loss of the goods; B. is still liable for it; C. has lost nothing, except the disappointment arising from a false hope; he therefore cannot say to A.: " You must not take these goods or you will subject me to a loss." He has, in fact, lost nothing. Even if he had executed a release to B. of the old debt, it would be set aside on A.'s recovery of the goods, and he would still have his debt against B.
Again, if C. was guilty of any imprudence in the purchase; if he bought under circumstances which should have excited suspicion in a reasonable mind that B. did not come honestly by the goods, A. would recover, although C. paid actual cash for the purchase, because there would be equal fault in A. and C., and the legal title would prevail.
But under the Registry Law there is no question about who is the innocent party--who has to sustain the loss. If a bona fide purchaser pays a valuable consideration to the party who has the apparent title upon the record, whilst the real owner neglects to put his title on record, the last purchaser is protected.
The only question is, did Hodgdon pay a valuable consideration? Whether paid in money, horses, cattle, or old debts, or new debts, makes no difference.
JUDGES: Belcher, J.
OPINION
BELCHER, Judge
Upon application for a rehearing, the following opinion was rendered:
By the Court:
A rehearing is asked upon the ground that the demanded premises were not included in, and therefore did not pass by the deed of May 7th, 1850, from Sutter, Sr., to Sutter, Jr. If this be so, it is said that the point upon which the case was decided in our former opinion becomes immaterial. The words used in the deed by way of description were: " All my right, title, and interest in Sacramento City, Upper California, consisting of town lots and buildings thereupon." It is not denied, and we think it could not be, that this description was sufficient to have conveyed the lots in controversy, if they had not been embraced in the previous unrecorded deed from Sutter, Sr., to Pratt, but it is insisted that, being a quitclaim, though it were taken in good faith, and for a valuable consideration, and first recorded, it could not prevail to convey the title as against the previous deed. In our former opinion we held that Hodgdon was to be regarded as a purchaser in good faith, and for a valuable consideration, and we still adhere to that opinion. This being so, Hodgdon is in a position to claim these lots, if Sutter, Jr., could have done so, provided he had received his deed in good faith, and for a valuable consideration. In Graff v. Middleton, 43 Cal. 341, we held that our Registry Act had made no distinction in this respect, between quitclaim deeds and other deeds, and " that a quitclaim deed received in good faith, and for a valuable consideration, which is first recorded, will prevail over a deed of older execution, which is subsequently recorded."