Maxim 4: Where the equities are equal, the first in time shall prevail.

This Maxim “where the equities are equal the first in time shall prevail” elaborates that whenever there is a conflict between two or more persons who have only equitable claims (and none of them has a legal claim), the person whose equity has attached to the property first in point of time shall be entitled to priority over the other or others.

Whereas the immediately preceding maxim decides upon the questions of priority in cases of conflict between a legal and an equitable interest, this maxim governs the conflict between two or more equitable estates or interests with reference to the same property.

Limitation:

If equities are not equal then, naturally, he who has a greater equity is given the relief sought; e.g., when one of the equitable owners has been guilty of unconscientious conduct, such as fraud, he loses all claims, even though he be prior in time.

In the second place, if any one of the contestants has a legal right, in addition to an equitable interest he takes priority over others because, where equities are equal the law shall prevail. The present maxim will be applied in the total absence of legal claims between the contestants.

The maxim does not apply to chattels or when the subject matter of conflicting equitable claims is a choice in action or a trust fund of personally. Such cases are governed by the rule in Dearle v. Hall, according to which priority in such cases goes to him who first gives notice of his claim to the debtor or the trustee as the case may be.

Cave vs. Cave:

In Cave v. Cave, the sole trustee of a marriage settlement used trust funds to purchase land in breach of trust and took the conveyance in the name of his brother. The brother, then, created a legal mortgage in favor of A, and an equitable mortgage in favor of B, neither A nor B having notice of the trust. It was held that A’s legal mortgage had priority over the equitable interest of the beneficiaries. However, the interest of beneficiaries was prioritized over the equitable mortgage. (interest of beneficiaries is first in time).

Bona fide Purchasers for value without notice:

The basic rule of law, as well as equity, is that estates and interests rank in order of their creation. This basic rule is, however, qualified by the doctrine of bona fide purchasers without notice. This brings out the basic difference between a legal and equitable estate.

1. “A legal right is enforceable against any person who takes the property, whether he has notice of it or not, except where the right is void against him for want of registration”. If A sells to B a plot of land over which X has a right of way, B takes the land subject to X’s right, though he had no knowledge of that right. (Bought property with or without the knowledge of the right of easement.)
2. An equitable right is enforceable against those persons only whose conscience is affected by a transaction. E.g. A sells to B a plot of land which was already subject to an equitable mortgage. B buys it for value and without notice of the prior equitable mortgage. B will be entitled to priority against the prior equitable mortgagee.
3. Because B acquired the plot for value. (not without valuable consideration e.g. gift)
4. B does not have notice of the prior equitable claim of the mortgage.

B becomes entitled both to the legal as well as equitable estate, and he takes priority over the mortgagee because he has only an equitable interest.

(Bought property without the notice of equitable right/mortgaged property).

The Doctrine of Notice:

When a purchaser has knowledge or notice of a prior equitable right of another over the estate, which he purchased for value, he no longer remains a bona-fide purchaser. Notice of a prior equitable right at once makes a mala fide purchaser. In such cases, there, the prior equitable claim remains persistently attached to the estate and the mala fide purchaser takes subject to that prior right and is unable to defeat the prior claim.

Read also: Maxim 3: Where there is equal equity the law shall prevail.