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Rule in Equity.—The rule that ownership will not be treated as having passed unless there is something more to show intent than mere manufacture or acquisition, is not altogether adhered to by courts of equity. It is frequently held that whatever powers or privileges the parties intended should eventually pass to the buyer will be given effect by courts of equity, even as against third persons who have secured intervening rights, as soon as they are capable of passing. In Kribbs v. Alford 136 plaintiff was the mortgagee of certain property already owned by the mortgagor and of other described property to be acquired. This latter property was subsequently acquired by the mortgagor, but before any further demonstration of intent to pass an interest in it to the mortgagee was made, the mortgagor sold it to the defendants, who took possession. These purchasers did not actually know of the mortgage, but were held to have had constructive notice of it because it had been recorded. The court held the plaintiff's interest to be paramount to that of the defendants. It admitted that the plaintiff's claim would be invalid at law, but said, “Invalidity at law imports nothing more than that a mortgage of property thereafter to be acquired is ineffectual as a grant to pass the legal title. A court of equity, in giving effect to such a provision, does not put itself in conflict with that principle. It does not hold that a conveyance of that which does not exist operates as a present transfer in equity, any more than it does in law. But it construes the instrument as operating by way of present contract to give a lien, which as between the parties takes effect and attaches to the subject of it as soon as it comes into the ownership of the party. Such we deem the rule to be in equity in this state." The principle behind such holdings is expressed as being that, “Equity treats a mortgage of property to be afterward acquired as a contract, binding in conscience, to execute a mortgage upon it at the very instant it comes into being, and will enforce specific performance. It does more: It considers it as already done if no specific performance be requested; and then, by virtue of the equitable doctrine of notice, binds everybody to respect the equitable lien who knows of it, or, without knowing of it, has got the property without valuable considera
scription in the contract of sale seems clearly to indicate that he intends, at least, that the contract shall apply to that particular property. The holding of the court, that despite this fact he did not intend title to pass, is quite out of harmony with the general principle already pointed out that when the property subject to the
contract has been pointed out, price ascertained, etc., title will be presumed to have passed regardless of delivery. In Re McDonald, 138 Fed. 666, title to uncompleted ships was held to have passed because the parties had expressed an intent that it should.
136_120 N. Y, 519.
Many courts have held, however, that even in equity a buyer gets no rights in the property itself by a mere sale of property to be acquired in the future.188
But even of these cases a number hold that if possession is actually taken it will be treated as a transfer as of the date of the mortgage, so far as concerns preferences under bankruptcy and insolvency acts.189
Potential Interests.—Sales of "potential interests" do not fall within the foregoing discussion. They are treated by both equity and law courts either as though the “potential interest” were a thing capable of sale and in actual existence at the date of the contract, or as though acquisition of ownership alone passed the title. There is no inherent or practical reason for this distinction. The “potentiality” may have a separate existence metaphysically, but it can not be so distinguished really. The practical reasons that might apply in the preceding cases would apply also to cases of sales of a potentiality. Nevertheless, the legal distinction does exist.
137–From Little Rock, etc. R. R. Co. v. Page, 35 Ark. 304. Accd. Phillips v. Winslow, 18 B. Monroe (Ky.) 431, 68 Am. Dec. 729; Pierce v. Milwaukee, etc. R. R., 24 Wis. 551, 1 Am. Rep. 203; Morrill v. Noyes, 56 Me. 458, 96 Am. Dec. 486; Apperson v. Moore, 30 Ark. 56, 21 Am. Rep. 170; Hurst & McWhorter V. Bell & Co., 72 Ala. 336; Grant v. Steiner, 65 Ala. 499; Holroyd v. Marshall, 10 H. of L. Cas. 191, the leading English case. But, contra, Burns V. Campbell, 71 Ala. 271, 288; Elec.
Lighting Co. v. Rust, 117 Ala. 680; Pennock v. Coe, 23 How. 117; Butt v. Ellett, 19 Wall. 544.
The subject is discussed at length in 19 Harvard L. R. 557.
138–Gittings v. Nelson, 86 ni. 591; Redd v. Burrus, 58 Ga. 574; Mchts. Bk. V. Lovejoy, 84 Wis. 601; Chase y. Denny, 130 Mass. 566; Orcutt v. Moore, 134 Mass. 48; Cooke v. Blanchard, 144 Mass. 207.
139—Chase v. Denny, 130 Mass. 566; Mower v. McCarty, 79 Vt. 142, 7 L. R. A. (n. 8.) 418, annotated.
In those cases where the thing sold is the future natural increase or natural production of something already owned by the seller it is generally held that a present demonstration of intent to transfer ownership will be recognized by the courts as having transferred it when the thing does come into existence, without any further demonstration of intent. As was just pointed out, a buyer of something not in existence at the time of sale; to whom there has been no subsequent transfer, has no legal rights against a third person who acquired an ownership after the thing came into existence. But where the thing sold is to come into existence as the natural increase or product of something already owned by the seller, such a buyer's rights are treated as superior to those of another who purchased after the thing came into existence.
For instance, in one case140 it appeared that Rogers had allowed his stallion to cover Buler's mare, on Buler's agreement that the resulting colt should be the property of Blevinş. Nothing was done thereafter to effectuate or demonstrate a transfer. When the colt was born, Buler, in breach of his agreement, sold it to McCarty. Blevins, however, was allowed to recover it in replevin on the ground that he had title., This holding differs from the customary ones, which support the third parties' rights as against one who had bought before the chattel was in existence, because of the fact that the colt was "potentially” in existence at the time of the agreement. 141
140—McCarty V. Blevins, 5 Yerger (Tenn.) 195, 26 Am. Dec.
It does not appear with certainty from the cases, and does not particularly matter, whether the title to the potentiality is considered as passing, so that the colt, or the crop, or whatever the thing may be, belongs to the buyer as the product of the potentiality of which he had already become owner, or whether the courts simply make such sales an exception to the general rule and hold that title to the colt, etc., transfers to the buyer when it comes into existence because of the previous agreement that it should do so and without any concurrent act. The result is the same on either theory.
Some cases support the former theory and indicate that the "potentiality” is something capable of an ownership separate and apart from the ownership of the thing of which it is physically an indivisible part. Thus, one person may be owner of a mare and another owner of her reproductive power, although the two things can not be physically separated. In Fonville v. Casey148 defendant had contracted that the first female colt to be born from his mare should belong to plaintiff. When a female colt was born defendant refused to let plaintiff have her. The court permitted plaintiff to recover in trover as owner of the colt. The reason given was that “although it be uncertain whether the thing granted will ever exist, and it consequently can not be actually in the grantor, or certain, yet it is in him potentially, as being a thing accessory to something which he actually has in him, for such potential property may be the subject, of a contract executed, as a grant or the like.” This indicates that a present title to the potentiality passed. 143
141-Sawyer v. Gerrish, 70 Me. 254, 25 Am. Rep. 323; Watkins v. Wyati, 9 Baxt. (Tenn.) 250, 40 Am. Rep. 90; Booker v. Jones Admx., 55 Ala. 266; Fonville v. Casey, 1 Murphey (N. C.) 389, 4 Am. Dec. 559; Hull v. Hull, 48 Conn. 250;
Mitchell V. Abernathy, 194 Ala. 698, L. R. A. 1917 C 6; Nestell v. Hewitt, 19 Abb. N. C. (N. Y.) 282, crop from roots already in ground.
142–1 Murphey (N. C.) 389, 4 Am. Dec. 559.
What is a Potential Interest. This rule, that title to the tangible thing sold is in the buyer as soon as it comes into existence, applies only when the thing was "potentially” in existence at the time of the contract. Generally speaking, it may be said that nothing has potential existence which is not the natural increase or product of something in tangible existence. The young of animals, crops produced by the earth, and wool grown upon animals are all natural products and have all been held to have a potential existence. Only such things are natural products, and, with some notable exceptions, nothing else has been held to have a potential existence. A probability, or expectation, that because of one's possession of certain things one can acquire or create other things by his own exertions, and not as the result of the action of nature, is not a potential interest. In Low v. Pew,144 there was a probability that the crew of a fishing schooner would catch fish, but the fish would not be the natural production of the vessel, and it was held that they had no potential existence. So, too, in Orcutt v. Moore,145 the owner of land had leased it to a tenant for half the crop which the tenant should raise. The owner then sold his half of the prospective crop to the plaintiff, but before plaintiff could take possession of it, after its eventual maturity, defendant seized it for an execution creditor. The court
143—Losecco v. Gregory, 108 La. 648, “Hope of a future crop, as an incorporeal thing, separate from the crop itself” is made merchantable by Civ. Code, sec. 2450, 2451.
The early case of Grantham v.
Hawley, Hobart 132, to which
144-108 Mass. 347.