Adam v. McClintock, 131 N.W. 394

131 N.W. 394 | N.D. | 1911

Goss, J.

This action comes to this court upon an appeal by defendants from a judgment entered against them in favor of the plaintiffs by the district court of Pierce county; the judgment as entered, quieted title in plaintiffs to the land involved. Prom this judgment,, defendants appeal.

On trial the facts were stipulated, and are summarized into the following statement: Pulbina Adam, before her marriage, made homestead entry upon 160 acres of land in Pierce county, in 1901, establishing her residence.thereon soon afterwards. On November 7, 1902, to secure her father’s pre-existing debts to the defendants, evidenced by promissory notes aggregating $280, and accrued interest due in 1903, plaintiff executed and delivered to defendants her mortgage in writing, duly acknowledged by her, covering her unproved government homestead, and running to defendants as mortgagees. The mortgage contained the usual' covenants of title, ownership, right of possession, quiet enjoyment, right to convey, and against encumbrances. It also covenanted to pay the debts purported to bo so secured. This mortgage was recorded in the office of the register of deeds on the day it was given. Plaintiff, Fulbina Adam, did not sign the notes secured by the mortgage, and the debts evidenced by said notes were not her debts. The mortgage was executed in her maiden name, Ftilbina Baumstark. Her father, since deceased, had previously executed the notes secured, and he joined in the mortgage, which covered other lands in which he had some interest. Thereafter, in August, 1903, these plaintiffs intermarried, and ever since have been and now are husband and wife. Immediately on their marriage, they moved upon the unproven homestead held under homestead entry of the wife, and have even since resided thereon. The husband plaintiff, since the marriage, has placed improvements upon the wife’s homestead to the value of $500, and has had the complete control, charge, and use of said premises. Since their marriage three children have been born to plaintiffs, and the tract has always been claimed as exempt under the state homestead law, from levy under execution, and is of a value of less than $5,000. That, at the time Fulbina Baumstark executed and delivered the mortgage aforesaid, Nikolaus Adam was not present. He had no notice of the existence of said mortgage until after final proof had been made on said land, and he is in no way liable for the indebtedness mentioned in the mortgage.

On June 29, 1908, Fulbina Adam filed her duly verified schedules in bankruptcy in the 'United States district court, and was then duly adjudged a bankrupt upon proper motion and order; that her schedules in bankruptcy listed and set forth the indebtedness and mortgage signed by her, heretofore mentioned, and in addition thereto she duly scheduled and listed all estoppels against her, contained in the warranties and covenants of said mortgage; that in said schedules she claimed as exempt to her the homestead premises, both under the homestead laws of the state of North Dakota and under the government homestead law, and that ísaid land was by the court set apart to her as homestead property and .as exempt, as claimed in her schedules. It is further stipulated that -•said proceedings were in all things regularly conducted before said •bankruptcy court, and as a result Fulbina Adam was duly adjudged a bankrupt under the laws of Congress relating to bankruptcy; that she •conformed to all the requirements of the bankruptcy laws in that behalf, and was, on September 24, 1908, after due notice had been given, as by such laws required, to all parties entitled thereto, including the •defendants herein, discharged from all debts and claims which are made provable by the United States bankruptcy acts against her estate, and which existed on June 29, 1908, the day the petition for adjudication in bankruptcy was filed by her; the decree in bankruptcy, however, excepted such debts from its operation as are excepted by law from discharge in bankruptcy.

It is further stipulated that on October 15, 1908, Fulbina Adam made final proof for said land under her homestead entry of seven years •before, based on residence on such land, — not commutation proof,— .•and that her final proof was duly accepted by the Department of the Interior, and that title has passed on said final proof by patent from the United States to her, Fulbina Adam, prior to the commencement of this •action. That said proof was paid for by her husband and coplaintiff, Nikolaus Adam, and that, at the date of said proof and long previous thereto, and at the time that title passed from the United States government for said land to Fulbina Adam and previous thereto, this plaintiff, Nikolaus Adam, claimed homestead rights in and to said land under the state laws, and was living thereon with his wife, Fulbina Adam, •and had all such homestead rights as are so allowed by law.

The foregoing facts are the stipulated facts before the court. The pleadings are in the usual form, the husband and wife, plaintiffs, asking “that title be quieted in them, to the effect that the mortgage be declared no lien upon the land, and be adjudged void and canceled of record. Defendants, answering, recite their mortgage, default in payment thereof, the usual statutory recitals, and ask judgment for sale of the land under foreclosure, to collect the debt so secured. The trial court made findings of fact establishing the facts stipulated, and ordering judgment thereon as prayed for by plaintiffs, declaring defendant’s adverse claims under the mortgage to be void, discharged, and a mere cloud on the title to said land. This case presents many interesting questions for decision, among: them (1) the validity of the mortgage given on the unproven government, homestead of the wife plaintiff prior to her marriage; (2) the effect, if" any, of the adjudication and discharge in bankruptcy upon the mortgage; and (3) whether the husband’s homestead exemption or rights-thereunder in and to the land under our state laws affect any rights the mortgagees may have under the mortgage given by the wife before-marriage. On the decision of these questions turns the case.

Under the statement of facts, the entry woman, plaintiff, executed, the mortgage in question the year following her homestead entry upon» the land, October 22, 1901. When she filed her schedules in bankruptcy,, and was adjudged a bankrupt on June 29, 1908, she had resided upon, said land for over five years, in fact over six and one-half years, and thereafter, on October 15, 1908 she made final proof, and the same-was accepted and a United States patent based on such residence and improvements was issued and delivered to her prior to the commencement of this action. She was an unmarried woman when she made-homestead entry, and also at the time she mortgaged her homestead,, the date of her marriage being August 15, 1903.

Was her mortgage valid when executed, considering the fact that, legal title to the land was then in the United States government ? The later authorities are unanimous that an entryman on government lands, holding the same under the homestead laws, may give a valid mortgage thereon, and that, regardless of the fact that legal title has not been-conveyed by the government to the homesteader. Nor does the statute, U. S. Rev. Stat. § 2296, U. S. Comp. Stat. 1901, p. 1398, to the-effect that no land so held shall in any event become liable to the satisfaction of any debt contracted before final proof, invalidate a mortgage-voluntarily given on land so held.

An entryman acquires by homestead entry the right of possession,, use, and occupancy of the land homesteaded, subject to the fulfilment, by him of the Federal law requiring his residence upon, and cultivation and improvement of, the land so held. And upon his compliance with, the law in such particulars for the period of five years from and after his homestead entry, the inchoate right to legal title becomes in fact a-full equitable title to the land so homesteaded. Such equitable title,, however, on final proof of his .compliance with the homestead law, when, made through the proper channels provided for by the Federal govern-merit, is merged in the government patent to the land, which patent is-issued upon the approval of the final proof, and as the last act necessary to be performed to transfer the legal title to the entryman. This act. of executing and delivering the patent is held to be but a ministerial act. The foregoing describes the legal status of the homesteader’s-rights from the inception of his rights by homestead entry, until legal title is vested in him by the government patent to the land homesteaded..

At no stage of these proceedings, up until the homesteader has fully complied with the homestead act by residence upon, cultivation and improvement of, his homestead for the full period of five years, has he the-full equitable title to the land homesteaded; but upon the expiration of' such time, and upon such compliance with the law, he has the full equitable title to his homestead land, subject only to the defeasance by his-death before final proof, or failure to make final proof, as provided by law. The act of final proof is not a part of the requirement of the-Federal homestead statute, but is merely proof of the fact of his compliance with that statute. The government is informed of such compliance by such proof, and thereupon, as a purely ministerial act, issues-its grant by patent to the homesteader. The full equitable title is in the homesteader as completely immediately after the five years’ compliance with the law, and up to the time of final proof, as it is after the-final act of making the proof and prior to the issuance of patent. From the date of homestead entry until the completion of the five years’ requirement of residence, cultivation, and improvement, the inchoate right-of the entryman is gradually being developed, until the same becomes in ■ fact a vested equitable title at the end of such five-year period.

The following authorities, practically covering that portion of the-United States where the public domain has been disposed of by virtue-of the homestead law, expressly hold in accordance with the foregoing,, that mortgages are valid given by the entryman on unproven homestead' entry land, and that the equitable ownership of the land embraced in-, the homestead entry is in the entryman, and ripens into legal title as-above set forth. The earlier United States decisions were to the effect, that a mortgage was a conveyance within the provisions of §§ 2262 and 2296 of the U. S. Rev. Stat., and therefore void. These early Federal decisions were followed by the early decisions in Kansas, California, and Minnesota. Such holding, however, has been overruled in all of.’ .those jurisdictions, as will be noticed from the following later authorities :

Bogan v. Edinburgh American Land Mortg. Co. 11 C. C. A. 128, 27 U. S. App. 346, 63 Fed. 192; Norris v. Heald, 12 Mont. 282, 33 Am. St. Rep. 581, 29 Pac. 1121; Gilbert v. McDonald, 94 Minn. 289, 110 Am. St. Rep. 368, 102 N. W. 712; Lang v. Morey, 40 Minn. 396, 12 Am. St. Rep. 748, 42 N. W. 88; Weber v. Laidler, 26 Wash. 144, 90 Am. St. Rep. 726, 66 Pac. 400; Forker v. Henry, 21 Wash. 235, 57 Pac. 811; Brazee v. Schofield, 2 Wash. Terr. 209, 3 Pac. 265; Rogers v. Minneapolis Mach. Co. 48 Wash. 19, 92 Pac. 774, 95 Pac. 1014; Dale v. Griffith, 93 Miss. 573, 136 Am. St. Rep. 546, 46 So. 543; Stewart v. Powers, 98 Cal. 514, 33 Pac. 486; Kirkaldie v. Larrabee, 31 Cal. 456, 89 Am. Dec. 205; Christy v. Dana, 34 Cal. 548, and Christy v. Dana, 42 Cal. 174; Kneen v. Halin, 6 Idaho, 621, 59 Pac. 14; Camp v. Grider, 62 Cal. 20; Whitney v. Buchman, 13 Cal. 536; Orr v. Stewart, 67 Cal. 275, 7 Pac. 693; Pioneer Land Co. v. Maddux, 109 Cal. 633, 50 Am. St. Rep. 67, 42 Pac. 295; Fuller v. Hunt, 48 Iowa, 163; Spiess v. Newberg, 71 Wis. 279, 5 Am. St. Rep. 211, 37 N. W. 417; • Jones v. Yoakam, 5 Neb. 265; Bellinger v. White, 5 Neb. 399; Stark v. Duvall, 7 Okla. 213, 54 Pac. 453; Wilcox v. John, 21 Colo. 367, 52 .Am. St. Rep. 246, 40 Pac. 880; Hubbard v. Mulligan, 13 Colo. App. 116, 57 Pac. 738; Dickerson v. Bridges, 147 Mo. 235, 48 S. W. 825; Atchison, T. & S. F.'B. Co. v. Pracht, 30 Kan. 66,1 Pac. 319; Newkirk v. Marshall, 35 Kan. 77, 10 Pac. 571; Schneider v. Hutchinson, 76 Am. St. Rep. 480, and note, 35 Or. 253, 57 Pac. 324; Barnady v. Colonial & U. S. Mortg. Co. 17 S. D. 637, 106 Am. St. Rep. 791, 98 N. W. 166; Larson v. Weisbecker, 1 Land Dec. 409; Re Ray, 6 Land Dec. 340; Haling v. Eddy, 9 Land Dec. 337.

That the land is earned after five years’ compliance with law with•out further act, and the vested equitable title is then in the entryman, see Newkirk v. Marshall, 35 Kan. 77, 10 Pac. 571; Bogen v. Edinburgh American Land Mortg. Co. 11 C. C. A. 128, 27 U. S. App. 346, 63 Fed. 192; United States v. Breyberg, 32 Fed. 195; Pioneer Land Co. v. Maddux, 109 Cal. 633, 50 Am. St. Rep. 67, 42 Pac. 295; see note in 79 Am. St. Rep. 916 ; Stark v. Starr, 6 Wall. 402, 18 L. ed. 925; Barney v. Dolph, 97 U. S. 652, 24 L. ed. 1063; Kneen v. Halin, 6 Idaho, 621, 59 Pac. 14; Egbert v. Bond, 148 Mo. 19, 49 S. W. 873; Dale v. Griffith, 93 Miss. 573, 136 Am. St. Rep. 546, 46 So. 543; Bellinger v. White, 5 Neb. 399.

That the final proof is no part of the consideration, bnt merely evidence to satisfy the government that the right of the grantee is perfect, that he has complied with the homestead laws, and is entitled to patent, the issuing of which is but a ministerial act, see Brazee v. Schofield, 2 Wash. Terr. 209, 3 Pac. 265; Stoddard v. Chambers, 2 How. 284, 11 L. ed. 269; Barney v. Dolph, 97 U. S. 652, 24 L. ed. 1063.

The rights of the homesteader under the patent, on issuance of the same, relate back to the original entry, and all rights thereunder inure to the settler from the date of his entry. United States v. Fryberg, 32 Fed. 195; Bernardy v. Colonial & U. S. Mortg. Co. 17 S. D. 637, 106 Am. St. Rep. 791, 98 N. W. 166. Immediately on entry the entryman thereby acquired an inchoate right in and to the land homesteaded. Bergstrom v. Svenson, 20 N. D. 55, 126 N. W. 497; Hastings & D. R. Co. v. Whitney, 132 U. S. 357, 33 L. ed. 363, 10 Sup. Ct. Rep. 112. This right is pledged him by the homestead laws that the premises homesteaded shall be his in fact so long as he complies with legal requirements under which the same is so held; and that the government, ¡as a trustee for him, will convey to him the legal title on his full performance of its requirement of five years’ bona fide residence upon, cultivation and improvement of, the tract homesteaded.

The interest, then, of the plaintiff, while but slight in the beginning, became perfected into a full equitable title, to which the mortgage could .and did attach long prior to the bankruptcy proceedings; so that at the time of the bankruptcy, this mortgage was not hovering above this land, hut instead was upon it, an existing lien under which the entire equitable title of the plaintiff was pledged as security to the defendant for performance of the contract to pay, and covenants contained in and a part of the mortgage instrument. And it remained unpaid and unsatisfied, while the plaintiff mortgagor converted her equitable title into •.the legal title by offering her final proof, and procuring patent to the land upon which rested this mortgage.

At such time, immediately upon the issuance of patent, our state ¡statute, § 6155, became operative, not as of the date of proof, but as of the date of the execution and delivery of the mortgage, under the doctrine of relation back, provided for in the statute (§ 6155, Rev. Code of 1905), reading: “Title acquired by the mortgagor subsequent to the execution of the mortgage inures to the mortgagee as security for the-debt in like manner as if acquired before the execution.” The statute then, as between mortgagor and mortgagee, gives the effect to the mortgage the law would have given the mortgage, had the mortgagor possessed the legal title at the time of the mortgaging of the property, title to-which was subsequently acquired. Besides this, the law invokes an estoppel against the mortgagor, and refuses to permit the mortgagor to-deny the validity of the mortgage. The plaintiff having covenanted with the mortgagee that she owned the land in fee simple; that the same-was free from encumbrance; that she had good right to convey the same,, and that the mortgagee should, in case of title acquired thereunder,- enjoy quiet and peaceable possession of said premises, all this as security for her promise contained in the mortgage, to pay the mortgagee the-amount secured thereby, — in equity she cannot be heard to deny such recitals and covenants, and assert the contrary, to defeat the very object, for which she gave the mortgage. Such covenants, in the absence of the; statute, would have caused the after-acquired title to have inured by estoppel to the benefit of the mortgagee. In the first instance, then, the statute in legal effect casts the encumbrance back to the date of its execution, to be inforced in all particulars as valid from that date; and,, in the second instance, plaintiff is barred by estoppel from asserting the-invalidity of the mortgage through her lack of title, contrary to the covenants of her mortgage contract. Whether she acquired the title for the; benefit of the mortgagee under his mortgage, or, instead, acqxiired the-title with the purpose of defeating the mortgage, as she has evidently done in this case, is immaterial, as equity conclusively ’presumes sheeompleted the title for the benefit of the mortgagee. Smith v. Hogue, 19 N. D. 337, 123 N. W. 827.

Yerkes v. Hadley, 5 S. D. 324, 2 L.R.A. 363, 40 N. W. 340; Clark v. Baker, 14 Cal. 612, 76 Am. Dec. 449; Gardner v. Wright, 49 Or. 609, 91 Pac. 286; Tucker v. Tucker, 122 App. Div. 308, 106 N. Y. Supp. 713; and many of the authorities cited as supporting the validity off the mortgage.

It is immaterial, then, as to what was done in the bankruptcy proceedings, the bankruptcy statute by express terms excepting liens and mortgages from its operation. It is true the debt secured by the mortgage-was long past due, and was for an amount certain and ascertainable,, but the covenant to pay the debt ran with the land, and was unaffected* by the bankruptcy proceedings. Bankruptcy does not discharge a debt in the full sense or as results from a payment of the debt. Bankruptcy •simply affects the remedy for the collection of the debt, and bars such remedy. The debt actually still exists, and may be a valid consideration for a new promise to pay or perform. The bankruptcy statute has relation to the remedy for the collection of the debt by court process, but leaves intact the remedy for collection of the still existing debt by lien foreclosure. The obligation to pay the debt, so far as suit thereon is concerned, is discharged, but the right to enforce payment thereunder because of the lien is unaffected, the debt remaining so secured. Such being the case, the mortgage still remains a lien by voluntary act by contract, upon the premises in question, unaffected by the bankruptcy.

Champion v. Buckingham, 165 Mass. 76, 42 N. E. 498; Citizens’ Loan Asso. v. Boston & M. R. Co. 19 Am. Bankr. Rep. 650, 196 Mass. 528, 14 L.R.A.(N.S.) 1025, 124 Am. St. Rep. 584, 82 N. E. 696, 13 A. & E. Ann. Cas. 365; Christy v. Dana, 34 Cal. 548, and same case again in 42 Cal. 175; Paxton v. Scott, 66 Neb. 385, 92 N. W. 611; Powers Dry Goods Co. v. Nelson, 10 N. D. 580, 58 L.R.A. 770, 88 N. W. 703, 5 Cyc. 354; 3 Remington, Bankr. §§ 2668-2672 and 2673.

This brings us to the consideration of the rights of the mortgagor and her husband in the land, under the homestead statutes granting them by law, as the head of a family, 160 acres of land exempt from judgment lien and from execution or forced sale thereunder, as defined and provided in § 5049, Rev. Code, 1905. The statute (§ 6155), heretofore referred to, provides that the title acquired by the mortgagor inured to the benefit of the mortgagee in like manner as if acquired before execution. As against the mortgagor, the wife, the mortgage is valid, unless the property mortgaged is relieved therefrom because of its being impressed with a homestead character. The mortgage came into existence a year before the marriage. It was recorded immediately, and constructive notice thereof given the husband prior to his residence with the wife on the land. In this connection we might remark that the earlier cases held to the doctrine that, inasmuch as title was derived from the government by patent, the purchaser or intending mortgagee need not look farther in the record than to the patent, and that instruments of record preceding the patent were not constructive notice. This theory, being developed along with the early rule holding the invalidity «£ mortgage executed before patent, under the doctrine that a mortgage was an alienation, has been abrogated by the latter decisions as; has the early doctrine touching the validity of mortgages on homesteads prior to final proof. See Bernardy v. Colonial & U. S. Mortg. Co. 17 S. D. 637, 106 Am. St. Rep. 791, 98 N. W. 166, and cases, cited. The husband, then, has had full notice of the rights of the-defendants, since, prior to the time he could, under the homestead statute, have claimed the land was so exempt.

But any homestead rights of the family came under, and are dependent upon, the title of the wife, the entrywoman. When the law cast, the family’s homestead rights upon this land, the prior right by mortgage of the defendants existed thereon. Surely, if the wife’s title was-sufficient to be a foundation for the operation of the state homestead exemption, it was a mortgagable interest sufficient that the mortgage long prior thereto had attached. The homestead exemption is de-pendent entirely upon the estate and interest of the owner thereof, and is subject to her legal and valid contracts. It is secondary to the wife’s-title, and dependent upon it, and cannot exceed the wife’s rights or modify the wife’s title. See Helgebye v. Dammen, 13 N. D. 167, 100 N. W. 245; Ferris v. Jensen, 16 N. D. 462, 114 N. W. 372; Kneen v. Halin, 6 Idaho, 621, 69 Pac. 14; Rogers v. Minneapolis Mach. Co. 48 Wash. 19, 92 Pac. 774. The husband, coplaintiff, must base the family homestead exemption upon the wife’s title, and he, like the-wife, is, by- the statute, concluded by the recorded mortgage imputing notice to him. The homestead exemption could not be given retroactive force in any event; certainly not beyond the time when it could have existed. The mortgage, being valid when given, remained unaffected by the homestead exemption subsequently coming into existence.

For the foregoing reasons, the mortgage of the defendants upon the tract homesteaded and described in the pleadings is a valid and existing lien thereon, for the full amount thereof, and defendants are entitled to a decree that the premises be sold under foreclosure to enforce payment of said mortgage, together with costs to defendants in district court, to which should be added the costs of this court on appeal; and that the judgment of the lower court heretofore entered be reversed and set aside, and that said court enter judgment in conformity herewith.