Bernardy v. Colonial & United States Mortgage Co.

17 S.D. 637 | S.D. | 1904

Lead Opinion

Corson, P. J.

This action was instituted by the plaintiff to quiet his title to a quarter section of land in Kingsbury county. The judgment was in favor of the plaintiff, and the defendant has appealed. All the facts in the case were stipulated, and are contained in the agreed statement of facts, which constitutes, in effect, the findings of the court. . There are many facts contained in the agreed statement that we regard as entirely immaterial in the determination of this case. All the facts that we deem material are that in February, 1898, William A. Wilkes made a timber-culture entry for the premises in controversy; that in May, 1890, said Wilkes and wife and one Wells and wife executed, acknowledged and delivered to the defendant a deed to the premises in controversy purporting to grant to the defendant a fee-simple title to the same, and that said deed was duly recorded in March, 1891; that in April, 1895, the said Wilkes received a United States patent for the said premises; that in 1893 Wilkes and wife executed a mortgage upon the said property to one Edgar Smith, which mortgage was foreclosed, and all the title that Smith acquired thereunder, if any, passed by mesne conveyance to the plaintiff. It will thus be seen that the deed to the defendant and the mortgage to Smith were both executed by the same party (Wilkes) prior to the issuance of the patent, and that the Wilkes deed to the defendant was recorded about two years prior to the execution of the mortgage. Wells does not appear, to have had any interest in the timber-culture claim, and he will not be further referred to. Two questions are therefore presented, and are thus stated in the appellant’s brief: “(1) Was the deed from Wilkes and Wells to the defendant such a conveyance that any title to the land therein described, after-wards acquired by the grantors, or either of them, would, by operation of law, pass to the defendant? (2) Did the record of the deed from Wilkes and Wells to the defendant operate as constructive notice of defendant’s right, to the plaintiff, Bernardy, at the time he purchased the land?

It is provided by subdivision 4, § 947, of the Civil Code, that “where a person purports by proper instrument to grant real property in fee simple, and subsequently acquires any title or claim of title thereto, the same passes by operation of law to the grantee or his successors.” This subdivision was copied from the California Civil Code, and makes an important change in the common law upon the subject of after-acquired titles. In the case of Clark v. Baker, 14 Cal. 612, 76 Am. Dec. 449, the Supreme Court of that state, in an exhaustive opinion, arrives at the conclusion that “the thirty third section of the act concerning conveyances changes the rule of the common law as to the effect of deeds under the statute of uses upon subsequently acquired interests of the grantor, and gives them an operation equivalent to the most expressive covenant of warranty.” The court in the opinion further says: “The effect, then, of its provisions upon a conveyance of premises in fee * * Ms the same as if it were written upon its face that the grantor conveyed all the estate which he then possessed, or which he might at any time thereafter acquire. ” And the court holds that mortgages are included in the provisions of the section. The thirty-third sec^ ion referred to was subsequently amended to read the same as the section of our Civil Code above quoted, but the section as amended has been treated by the courts of California ■ as substantially the same in effect as the former section. Mr. Deering, in his Annotated California Codes, p. 211, vol. 2, in a note to section 1106, the same as the section of our Code, speaks of the section as a substantial re-enactment of section 83. See, also, San Francisco v. Lawton, 18 Cal. 465, 79 Am. Dec. 187; Lent v. Morrill, 25 Cal. 500; Morrison v. Wilson, 30 Cal. 347; Kirkaldie v. Larrabee, 31 Cal. 457, 89 Am. Dec. 205; Green v. Clark, Id. 593; Cadiz v. Majors, 33 Cal. 289.

We are of the opinion, therefore, that, as the deed from Wilkes to the defendant did purport to grant the property in fee simple, the after-acquired title of Wilkes passed “by operation of law” to the defendant. Notwithstanding the provisions of the Code are clear, definite, and certain, and the deed to the defendant is precisely such a deed as the Code provides shall pass the after-acquired title “by operation of law,” the counsel for the respondent insists that the defendant is not entitled to the benefit of the¡ statute,'for the reason (1) that the defendant did not pay any"'consideration for the property; and (2) that the plaintiff had mo constructive notice of the "defendant’s title when he purchased the same. And this apparently was the view of the court in stating his conclusions of law and. en-t-ering judgment in favor of the plaintiff. In the view we take of-the law. neither of these positions can be sustained. In our opinion, there is nothing in the agreed statement of facts that warranted the trial court in holding that there was no consideration for the deed from Wilkes to the defendant. But as we view the case, this is entirely immaterial, as a voluntary conveyance is valid against a subsequent purchaser “with notice, either actual or constructive, of a prior deed. ” By the Civil Code it is provided: “A transfer is an act of the parties or of the law by which title to property is conveyed from one living person to another. A voluntary transfer is an executed contract subject to all the rules of law concerning contracts in general, except that a consideration is not necessary to its validity.” Sections 915, 916, Civ. Code. These sections are copies of sections 458 and 459 of the proposed Civil Code of New York. In their notes to these sections, the commissioners say, in speaking of the clause, “except that a consideration is not necessary to its validity”: “This clause was proposed for enactment in regard to grants of real property by the revisers of 1828, but was not enacted. It is, however, undoubted law both as to real and personal property.” And this seems to be the gem eral rule m this country as to voluntary conveyances. 6 Ency, of Law, pp. 683, 684.. On page 684 the author, under the heading of “Consideration,” says, “In the United States, however, it is held, that a voluntary deed is valid against any subsequent purchaser who buys with notice, whether the notice be actual, or such as the law implies from the recording of the prior deed.” In 14 Ency. of Law, p. 466, the author, under the subject of “Fraudulent Sales,” says, “In the United States the authorities are almost unanimous in holding that a voluntary conveyance, if made bona fide, is valid as against, a subsequent purchaser with notice of the conveyance.” In support of this statement of the law, the author cites a large number of authorities. In Walker v. Walker, 35 N. C. 335, the Supreme Court of that state says: “No consideration is necessary in order to give validity to the deed. * * * The general rule is, a deed is valid without a consideration. ” In Jackson v. Cleveland, 15 Mich. 94, 90 Am. Dec. 266, the Supreme Court of Michigan held, as appears from a headnote, that “a voluntary deed purporting to be for the beneficial use of the grantee, and made deliberately and without mistake or contrivance, is binding upon the grantor and his heirs, and can • be avoided only by creditors and others having superior equities to the grantee.” Section 943 of the Civil Code provides that “every grant of an estate in real property is conclusive- against the grantor and every one subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded. ”

It will thus be seen that the deed from Wilkes to the defendant, being duly acknowledged and recorded,, conveyed Wilkes’ title to the defendant, not only as against himself, but as against “every one subsequently claiming under him,” except a purchaser in good faith and for valuable consideration, who acquired a title or lien by an instrument that was first duly recorded. It affirmatively appears from the agreed statement in this case that the deed from Wilkes to the defendant was executed and recorded some two years prior to the mortgage executed by Wilkes to Smith, under whom the plaintiff claims. There is nothing in the agreed statement of facts that in any manner can be regarded as impugning the good faith of Wilkes in executing the deed to the defendant, and there is no presumption that the conveyance was not made in good faith. It is clear, therefore, that the fact — if such be the fact — that the conveyance from Wilkes to the defendant was voluntary and without consideration gives plaintiff nó legal or equitable title to the premises in controversy.

This brings us to the second or more important question, namely, did the plaintiff, at the time he purchased the property, have constructive notice of the conveyance from Wilkes to the defendant? It is contended by the respondent that as the deed from Wilkes to the defendant was executed and recorded prior to the time the United States patent was issued to Wilkes, and before he acquired a legal title to the property, the plaintiff did not have constructive notice of the same, for the reason (1) that the deed from Wilkes to the defendant was without consideration; (2) for the reason that the plaintiff was not required to examine the record for any conveyance from Wilkes prior to the acquisition of his patent from the United States. This contention is untenable, for, as we have seen, the conveyance from Wilkes to the defendant was good as against him and all persons claiming under him, except creditors, and the title acquired by him by virtue of the patent passed by operation of law to the defendant; and the rule contended for by the respondent, that he was not required to look back of Wilkes’ patent, prevailing in some states where the common law is still in force, in which after-acquired titles do not pass to the grantee, has no application under the registry law of this state and the law providing that after-acquired titles shall pass to the grantee. We shall not stop, therefore, to discuss the cases cited, further than to say that they are not uniform in support of the position of the plaintiff, even in states where the common law prevails, and where no provisions have been made for the passing of after-acquired titles by operation of law. Tefft v. Munson, 57 N. Y. 97; Warburton v. Mattox, Morris, 367.

In the case at bar both plaintiff and defendant, as before stated, claim title from the same grantor, Wilkes; anú as we have seen, it was perfectly competent for Wilkes to make a voluntary conveyance of the property to the defendant, and that plaintiff, as a subsequent purchaser, with notice, '“actual or constructive, ” of the deed from Wilkes to the defendant, acquired no title to the property. Section 986 of the Civil Code provides: “Every conveyance of real property, other than a lease for a term not exceeding one year, is void as against any subsequent purchaser or incumbrancer, including an assignee of a mortgage, lease, or other- conditional estate, of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded.” Section 989 provides: “The recording and deposit of an instrument, proved and certified according to the provisions of sections 963, 976, 977, 978, 979, are constructive notice of the execution of such instrument to all purchasers and incumbrances [incumbrancers] subsequent to the recording.” It will thus be seen that the recording and deposit of an instrument properly proven is constructive notice of the execution of such instrument “to all purchasers and incumbrancers subsequent to the recording.v It is true, this section does not, in terms, speak of the instrument duly acknowledged; but it is clear that the Legislature had, in effect, provided in the previous sections that such instruments, duly acknowledged and recorded, would impart constructive notice. It will be further noticed that the only party who can acquire a title superior to that evidenced by the record is one whose title ‘ ‘in good faith and for a valuable consideration” has first been duly recorded. It will be further observed that no exception is made in the Cod© of conveyances made prior to the acquiring of the legal title when such conveyances are duly recorded. It is therefore quite clear that the plaintiff, at the time he purchased the property, did have constructive notice of the con-, veyance from Wilkes to the defendant, and is presumed to have had knowledge of the law providing that the subsequent .legal title acquired by Wilkes under his patent passed to the defendant by operation of law. It is clear that the theory that the plaintiff was not bound by constructive notice of the deed from Wilkes to the defendant is entirely inconsistent with our registration act, and our law as to passing subsequently acquired titles. It, in effect, strikes from our Code the provisions above quoted in relation to after-acquired titles, for if a party is not required to look beyond the legal-title, or is not charged with constructive notice of any conveyance prior to the acquisition of the legal title by the party under whom he claims, the provisions of the Code as to after-acquired titles can have but very little, if any, effect.

Let us, for a moment, consider the effect of the theory advanced by the respondent, and apparently adopted by the trial court., A. enters upon government land, .and conveys the same to B. by deed purporting to grant the title in fee simple. Subsequently a patent is issued to A. for the land, and, under the theory of the counsel for respondent, A., after the issuance of such patent to him, may convey the land to 0., who has no actual notice of the prior conveyance to -B., and he will acquire a good title to the property as against B., notwithstanding the statute declares that the legal title acquired by A. shall pass by operation of law to his grantee, B. As a further illustration, take the case at bar. Wilkes, so far as the record discloses, has never conveyed or mortgaged the property to any one since the government patent was issued to him. Suppose that some party who has no actual notice of the mortgage executed to Smith by Wilkes, under whom the plaintiff ■ claims, and assuming that the mortgage was the only conveyance made by Wilkes, purchases the property from Wilkes, and places his deed upon record, and brings an action against the plaintiff to recover possession of the property. Under the plaintiff’s theory, such subsequent purchaser would clearly be entitled to recover possession, as he would not be charged With constructive notice of any conveyance or mortgage prior to the issuance of the patent, and the plaintiff would therefore have neither a legal nor equitable title to interpose against the plaintiff’s claim. These illustrations sufficiently demonstrate the fallacy of the respondent’s theory as applied to our law for the passing of after-acquired titles, and to our registration act. In this state, therefore, a purchaser of property is nec-' essarily charged with notice of all conveyances or mortgages made by the party under whom he claims. It will be observed, therefore, that under the plaintiff’s theory the statute providing that after-acquired titles shall pass to the grantee by operation of law would practically be repealed, and a purchaser from one who has acquired the legal title must examine the record, and ascertain whether or not he has previously conveyed the property by a conveyance purporting to convey the fee-simple title, as a purchaser is presumed to know the law, and to know that the party in whom the legal title stands may have previously conveyed the property, and that such prior grantee may have acquired such legal title by operation of law under the statute.

Counsel for the respondent have discussed at some length the question as to what extent a party has constructive notice of conveyances not in the line of his chain of title, but, in the view we take, this question has no application to the case at bar, for, as before stated, both plaintiff and defendant claim title under the same party, Wilkes. No question, therefore, is presented as to the notice of any record of conveyances lying outside of the plaintiff’s chain of title.

The view that we have taken of the registration laws is strengthened by sections 868 and 869 of the Political Code, which require a numerical index to be kept of both city and farm property. Under such a system, abstracts will necessarily show all the conveyances made of the property.

In our opinion, the propositions advanced by respondent’s counsel, and which apparently were sanctioned by the trial court, are calculated to unsettle titles; and are in opposition to rules long established and understood, and which constitute rules of property. Had the respondent made such an examination of the records as men of ordinary prudence would have done, he would have discovered that Wilkes had, prior to the execution of the mortgage to Smith under which the ■ plaintiff claims'title, conveyed the property to the defendant, and that the legal title of Wilkes under his patent passed by operation of law, under the statute, to the defendant, and that Wilkes, at the time he mortgaged the property to Smith, had no interest in the property to mortgage, and that Smith acquired no title to the property by reason of his mortgage and the foreclosure of the same, and that he, in purchasing, would acquire no title to the property.

The judgment of the circuit court is reversed, and a new trial ordered.

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Dissenting Opinion

Fuller, J.

(dissenting). The facts omitted from the majority opinion as immaterial, and which I deem conclusive of the questions of law presented, are these: On the 9th day of December, 1882, Oliver L. Taylor, a pre-emptioner, obtained a receiver’s final receipt, which was duly recorded six days later, when he mortgaged the premises described therein for $894, and appellant became the assignee of such mortgage more than one year after the entry of the pre-emptioner and mortgagor had been canceled by proper authority at the General Land Office of the United States. Three and one-half years before the cancellation of his entry, Taylor conveyed the mortgaged premises by warranty deed to. William A. Wilkes and Rollin J. Wells, and eighteen months after the cancellation of such entry, and four months after the assignment of the Taylor mortgage to appellant, it obtained from Wilkes and Wells the- warranty deed relied upon. Respondent’s source and chain of title emanat.es from the United States, and is traceable thus: William A. Wilkes placed a timber-culture filing on the land in controversy about 75 days after Taylor’s entry was canceled,, made final proof on the 2d day of August, 1893, and received a patent from the government April 27, 1895, since which date all taxes have been paid by respondent and his grantors. Alter making final proof, Wilkes and his wife mortgaged the land for $400, under date of August 11, 1893, to Edgar L. Smith, who obtained a sheriff’s deed on the 3d day of November, 1897, by virtue of a valid statutory foreclosure of such mortgage. On the 23d day of August, 1898, Smith and wife conveyed the property, for a valuable consideration, to Alpha D. Cadwell, by a warranty deed containing the covenant that ‘ ‘the premises are free from incumbrances since the issuance . of the patent from the United States, ’ ’ and, for a valuable consideration, Cadwell and wife conveyed on the 7th day of September, 1898, by the usual warranty deed, to C. C. Hortman, who, together with his wife, executed and delivered to respondent a warranty deed dated March 13, 1899, in which the grantors covenant that the premises are free from all incumbrances since the issuance of the patent, except the taxes of 1898 and a mortgage for $500, all of which was assumed by respondent, and subsequently paid in full and satisfied of record. Before obtaining the Taylor mortgage or the deed from its grantees, Wilkes and Wells, appellant knew that the title,' both legal and equitable, was in the United States; and the doctrine of after-acquired title, being in the nature of an equitable estoppel, should never be applied as against a purchaser in good faith for value, in favor of a gratuitous grantee not influenced by the recitals in his deed. Without determining whether the extinction of the Taylor interest relates back to the date of the pre-emption filing, or merely takes effect as of the date his entry was canceled, there is no escape from the conclusion that the cancellation of the entry imparted constructive notice to both grantors and the grantee that neither party had an interest in or lien upon the property when the deed was executed. It being shown by the undisputed evidence that the only consideration for such conveyance was the satisfaction of a mortgage rendered void by the cancellation of the Taylor entry, the inference is irresistible that nothing was paid for the deed, and the trial court is justified in its conclusion that appellant is not a bona fide purchaser of the land. Valuable consideration, absence of notice, and presence of good faith are the essential attributes of a bona fide purchaser. Bank v. Shaw, 14 S. D. 197, 84 N. W. 779.

As neither Taylor, the mortgagor, nor his grantees, Wilkes and Wells, possessed the slightest interest in the property, a sheriff’s deed upon foreclosure would convey no estate, and nothing is gained or lost by the satisfaction of a mortgage absolutely void. Mitigation of damages arising from a breach ©f warranty, and sustained by a bona fide purchaser, being the only reason for passing after-acquired title by operation of law, one who obtains his deed without any consideration whatever suffers no injury, and is hot entitled to invoke the doctrine as against the grantees of Smith, in favor of whom the after-acquired title of Wilkes inured. As previously stated, Taylor, against and under whom appellant claimed a mortgage lien and estate by virtue of the deed from such entryman’s grantees, never obtained a patent; and, at the time appellant became the assignee of the mortgage and grantee of the premises, the-entry, which was the only foundation for its claim of title, had been duly canceled.

It is settled law that “parties who purchase of pre emptors before patent cannot maintain the position of bona fide purchasers, as they purchase only an equity. They take only such title as the vendees of the government had, and purchase subject to the action of the Land Department upon-the entries, either in confirming or canceling them.” Whitaker v. So. Pac. Ry. Co., 2 Copp. 919; Prisbie v. Whitney, 9 Wall. 187, 19 L. Ed. 668; Wilcox v. Jackson, 13 Pet. 498, 10 L. Ed. 264; Arnold v. Grimes, 2 G. Greene 77.

It is stipulated by the parties to the action that respondent purchased the premises for a valuable consideration, and it is quite apparent that his title was acquired without any notice of the deed upon which appellant relies.

In discussing the proposition that the registration of an instrument anterior to, outside of, and not connected with, the purchaser’s chain of title, is insufficient to charge him with constructive notice. Mr. Pomeroy says: “If two titles to the same land are distinct and conflicting, the superiority between them depends, not upon their being recorded, but upon their intrinsic merits. It is settled doctrine, therefore, that a record is only a constructive notice to subsequent purchasers deriving title from the same grantor. Intimately connected with, and, indeed, a branch of, this same doctrine, is the question, how far back is a purchaser bound to search the record title of his own vendor? If the records show a good title vested in the vendor at a certain date, and nothing done by him after that time to impair or incumber the title, it would seem that the policy of the registry act is thereby accomplished. The purchaser is protected. He is not bound to inquire farther back, and to ascertain whether the vendor has done acts which may impair his title prior to the time at which it was vested in him, as indicated by the records. This view is supported by many decisions — it seems by the weight of authority — which hold that a purchaser need not prosecute a- search for deeds or mortgages made by his own vendor further back than the time at which the title is shown by the records to have been vested in such vendor, or, in other words, a purchaser is not bound by the registry of deeds or mortgages from his vendor made prior to that time.” 2 Pom. Eq. Jur. 658. The following cases are to the effect that a valid government patent vests in the patentee an absolute, unconditional right to the land, and that a deed lying outside of a purchaser’s chain of title derived therefrom imparts no notice. Rankin v. Miller, 43 Iowa 11; Tydings v. Pitcher, 82 Mo. 379; Ford v. Unity Church (Mo.), 25 S. W. 394, 23 L. R. A. 561, 41 Am. St. Rep. 711; Harper v. Bibb, 69 Am. Dec. 397; Farmers’ Loan and Trust Co. v. Maltby, 4 N. Y. Ch. 462; Losey v. Simpson, 11 N. J. Eq. 246; Warner v. Sibley (Mich.), 19 N. W. 40.

In the case of Rankin v. Miller, supa, the court says: “To entitle one to recover ownership of lands upon the ground of superior equity in himself, he must have some right other than the acquisition of a void title in ignorance of the rights of another. * * * The patent for lands belonging to the United States, when issued to a party, vests in him the perfect legal title, which relates back to the time of entry of the land. -The-entry of the land and the issuing of the certificate transferred to him at the time all the property held by the government in the land, and conferred upon him all equity therein.”

In-the present case it subverts the purpose of our' registration law, and is utterly absurd, to require respondent, in the interest of a grantee who gave nothing and got nothing, to extend his search beyond the patent from the United States, by virtue of which his grantors acquired perfect title. By the sheriff’s deed, Smith acquired the absolute title of the mortgagor, and the deed from Cadwell to Hortman contains nothing but the usual covenants of warranty. If it were necessary, the familiar doctrine that a grantee with notice, who takes from a grantor without notice, takes also without notice, might be invoked in respondent’s behalf. Under the rule that an innocent purchaser without notice cannot be deprived of any of the inherent qualities of his property, including an absolute right to alienate his entire estate, his grantee with notice is fully protected in the acquisition of the title purged of all equities, not on its own merits, but on account of being the successor of a bona fide purchaser. Van Syckel v. Beam, 110 Mo. 589, 19 S. W. 946; Paul v. Kerswell, 60 N. J. Law 273, 37 Atl. 1102; Arrington v. Arrington, 114 N. C. 151, 19 S. E. 351; Bruen v. Dunn, 87 Iowa 483, 54 N. W. 468; La Fleur v. Chace, 171 Mass. 59, 50 N. E. 456; Buck v. Foster, 147 Ind. 530, 46 N. E. 920, 62 Am. St. Rep. 427.

Appellant is guilty of gross laches, and it seems to me that my associates have overlooked the equitable principles which fully justify the action of the trial court. The judgment appealed from ought to be affirmed.