## Facts

- Mary Osin agreed to sell improved real estate to Robert H. Johnson.
- Osin executed and delivered a deed to Johnson and took back a $30,000 purchase-money note; there was no down payment.
- Johnson promised to prepare and record a deed of trust securing Osin’s purchase-money note but instead recorded only the deed, leaving Osin’s security interest unrecorded.
- After taking record title, Johnson borrowed $11,000 from Perpetual Building Association and later $3,300 from Glorius, giving each lender deeds of trust; the lenders took without notice of Osin’s unrecorded claim.
- Johnson’s other creditors obtained judgments that became liens on the property under District of Columbia law.
- When foreclosure proceedings began under the deeds of trust, Osin filed an equity action to protect her interest; judgment creditors intervened as lienholders.
- The trial court found Osin knowingly conveyed title to Johnson relying on his assurances and ruled the deed-of-trust holders and judgment creditors held interests superior to Osin’s unrecorded claim.

## Issues

1. Whether Osin’s unrecorded equitable claim arising from Johnson’s fraud had priority over deeds of trust held by lenders who took for value without notice.
2. Whether Osin’s unrecorded equitable claim had priority over judgment liens obtained by Johnson’s creditors.

## Decision

- The court held the action was properly tried in equity without a jury.
- The court affirmed the judgment giving priority to the deed-of-trust holders over Osin’s unrecorded equitable claim.
- The court reversed as to the judgment creditors, holding Osin’s equitable claim was superior to their judgment liens, and remanded for further proceedings consistent with that priority determination.

## Legal Principles

- A constructive trust may arise by operation of law when property is acquired or retained through fraud or other unconscionable conduct.
- An unrecorded equitable interest, including one based on constructive trust principles, does not defeat the rights of bona fide encumbrancers for value who take without notice and rely on record title.
- Judgment creditors’ liens attach only to the debtor’s actual interest in the property; they generally do not obtain the protected status afforded to bona fide purchasers or mortgagees who part with value without notice.
- Where the owner’s equitable interest predates judgment liens, equity may recognize that interest as prior to the liens even though it is subordinate to later bona fide encumbrances.

## Conclusion

The court allocated the loss from the buyer’s fraud by protecting lenders who extended value without notice and relied on the public record, while subordinating later-arising judgment liens to the seller’s earlier equitable claim grounded in constructive trust principles.


Osin v. Johnson, 243 F.2d 653 (D.C. Cir. 1957)