*1 Respondent, KNAUSS, Plaintiff Reo L. INC., HOMES, Defendant
MILES Appellant. No. 8533.
Civ.
Supreme Dakota. of North Court
Dec. 1969.
Rehearing Denied Jan. *2 parties a con-
which the had executed was payments all for deed tract applied on rent made Burke were to be purchase price. due balance Thereafter, possession while *3 land, farming pur- engaged in and Homes, Inc., the de- Miles chased from present for in the materials fendant planned to construct on which he house building pay for such property. To materials, he and delivered executed pur- and for the Miles a note promptly price. chase The was recording Some time after the recorded. judgments mortgage, of a number such Knauss, the seller against docketed were land, liens judgments became property. interest in on the of Knauss such began the Burke construction Bismarck, home, had Chapman, using for which he & the materials Rausch respondent. house purchased from Miles. plaintiff and Before however, completed, Burke defaulted was Mills, Bismarck, for defend- R. William payments Knauss under con- appellant. ant and delay, for deed. After considerable tract brought cancel- an action for the Knauss STRUTZ, Judge. lation of the contract for deed. mortgage on which held the recorded by L. brought Reo This an action is property, interest was not Inc., Homes, quiet Miles made a to cancel County Burleigh property title to real Judgment cancelling the con- contract. ( n ½) of Sec- as the South Half described deed entered tract for thereafter was North, Range Township 140 tion No on such action November West. appeal by Burke. was taken facts, they pertinent are The so far as by Miles given The Burke to case, disclose that of this issues title, and remained cloud on Knauss’s Knauss, Harry and one L. plaintiff, Reo com- the action here before the court was agreement into an Burke entered 15, 1965, July purpose menced J. which Burke writing under terms discharging quieting title in Knauss and property. possession Some went into of record. The trial court agreement, the execution time after quieted in- ordered title in Knauss as parties toas dispute arose between might prop- terest which Miles have in relationship. Knauss their nature of erty by mortgage from Burke. reason of its agreement a lease asserted that order, judgment From entered on such con- buy, while Burke option an appeals demanding trial to this agreement was tended that the de novo. all for deed under the terms of which Any him
payments rent made interest which were purchase price. capable being is transferred credited on were to be 35-02-05, litigated mortgaged. Sec. N.D.C.C. finally dispute The Burke, purchaser as under held that the instrument interest district court Burke, is an interest contract for deed held citing the contract transfer, thus Section Century he could Dakota property which North mortgage. provides: he could Code. That interest section an pur- mortgage given “The mortgage duly record of a made deed for chaser under operates as all subsequent pur- notice to Knauss, land from purchase chasers encumbrancers.” all of the interest which covered This court has held had in the land. plaintiff contends that he since of a contract for of a holder the interest subsequent purchaser not a or encum- mortgageable interest. Simonson deed is brancer, but the holder of the Wenzel, N.D. 147 N.W. prior title whose long L.R.A.1918C, In the action (1914). Miles mortgage, regarded he cannot be defendant, Miles, the quiet title *4 subsequent purchaser or encumbrancer counterclaim, sought to foreclose its and the recording of mortgage the Miles action, the mortgage. In the trial of therefore was not constructive notice to attorney stated the trial court: plaintiff’s to him of property. Miles’s interest the quarrel the fact “We have no early He cites the case of Mc- Sarles v. in- they mortgage upon obtained the Gee, 365, 1 N.D. (1891), N.W. that the had.” terest Burkes support Sarles, of this In contention.
this court said: of a gives If the law to the holder “A senior incumbrancer is not bound right mortgage any for deed the to contract respect equitable rights junior to the aof contract, has in the it interest which he property incumbrancer in the unless he necessity give party the to must of notice, constructive, has either actual or mortgage given the interest whom such rights. of such The recording of rights mortgagor and has junior mortgage not constructive no- under the contract. The tice prior mortgagee to the the exist- property in the holder of contract has mortga- mortgage, ence of such or of described in a for deed cannot be * * thereunder, gee’sequitable right terminated seller notice without such holder. laid Whether the rule down immediately mortgage case, applicable to Miles was Sarles would be in this put permit plaintiff, on record. But the evidence does not it whether would gave any disclose that admittedly Miles notice of its who position would be in a property interest in the comparable to Knauss other to that of a encum- senior place than to record. mortgage brancer, on to cancel for Burke’s contract And, Burke, purchaser while as under a deed without regard junior encum- deed, Miles, contract for brancer, had an interest which plaintiff, where the Miles, fact, be mortgaged could enforce- has actual or constructive notice depend upon ment of the mortgage would mortgage Miles than other keeping the which, contract for deed full force recording of the mortgage, under McKinstry, law, effect. Sheehan v. 105 the notice, above would not constitute Or. 210 P. A.L.R. In 1315. need not be decided in this how Sheehan, mortgagee purchaser Here, ever. the defendant has demanded party was made novo, in the action defendant trial try de and this court must cancel the contract. This was not done the case anew and determine the facts by Knauss in the action cancel Burke Davis, for itself. 140 N.W.2d Johnson however, contract. plaintiff, (N.D. stren- 1966); Zahn, Bertsch uously required asserts that he was not Verry N.W.2d 792 (N.D.1966); v. Mur join phy, Miles in the action to cancel the (N.D.1968). N.W.2d 721 jury,
Therefore, very carefully tried to the court without we we have actual plaintiff find that did have whether on issue of studied the record knowledge mortgage at the of the Miles knowledge of plaintiff had actual time of the contract Weighing the action cancel in this case. Miles And, since determining given this issue deed to Burke. the evidence knowledge of this plaintiff had actual anew, other can no conclusion we come to immaterial whether re- mortgage, prior plaintiff, than that the or was not cording of the to cancel the Burke given constructive notice of the con- only the knowledge had actual of not provisions of Section prop- Miles under the on the the Miles home struction of Century Code. Dakota mortgage to North erty giving but of the plaintiff having had actual knowl- cancelling the action Judgment in Miles. Miles, edge he should was entered contract for deed joined as a defendant hearing in Miles At the November in order cut interest bar, off had on Decem- the case at which was might assignee of the inter- have as that he knew ber testified true that est of Burke. being prop- on the While that a built house Burke, have no mortgagee of could erty early The record or 1964. as 1963 greater property interest than that shows that the first materials mortgagor, house were delivered on *5 could not be terminated without notice to that he had 1960. But Knauss asserts plaintiff had actual knowl- Miles where given had knowledge actual cross-examination, edge of its existence. a mortgage. Miles On had notice that when asked when he first Thus, cancelling in for deed he property, Miles had on Burke, given plain- which he had to “Well, years ago.” or three answered: two joined tiff as should Miles notice He thus admitted that he had actual so, Had done would defendant. he Miles early of the Miles as 1962 mortgage as compelled pay have been off the Burke to redirect, at- or 1963. On his counsel protect plain- to interest. tempted correct the effect of this testi- to money, tiff had would have Miles’s mony by knowledge this asking whether interest would have been cut off. gained by the action to him after contention, plaintiff’s however, is that al- deed, reply the contract cancel Miles, join he though failed to the interest that, yes.” after was: “I think in which Miles had should him, belong plaintiff. now to in this A of the entire evidence review very plaintiff was case shows that inquiries in his direct evasive answers to equitable is an action. No This gained knowledge he as when plaintiff equity reward court should mortgage. having admitted Miles After give proper notice to those for failure to early
that it was as as 1962 1963—which property; who have an interest in the long would be before the cancellation case, Miles give failure to notice to by the contract for deed held Burke—he being cancelled. contract was said, merely law- when asked his own dissent, strenuously by the It asserted yer after whether it was before or however, mortgagee contract, “I think concellation of Burke, legal considered a as- cannot be that, yes.” was after signee purchaser. this as With agree. assuming,
sertion we do not But Miles arguendo, mortgage given that the determine the court must Since that, legal assignment, we believe is not de novo anew on demand for trial facts Miles at least an mortgagee, as such appeal judgment an ciples since an equitable assignee Burke’s interest quiet title is es- sentially equitable equitable An as- an the contract deed. action. Thus the which, one signment has been defined as the action brought an though assign- quiet title, even at law as invalid should have ment, given recognized will period is one which be Miles such good make equity. enforced in Black’s Law Diction- default under the contract as the facts ary, 4th the case required. Ed. For reasons opinion, stated of Burke’s assignee equitable anAs judgment of trial court quieting title interest, Section come under Miles would plaintiff, Knauss, is reversed and Code, Century
32-18-01, North Dakota the case is remanded to the district court aof that on cancellation provides with instructions to fix a pe- reasonable given be notice shall contract for riod of time defendant, within which the plain assigns. or his purchaser assignee purchaser, will al- only pur gave tiff notice good lowed to make the default on the Miles, the join chaser. His failure purchase contract, depending upon the facts assignee, interest was equitable whose in this case as found by the court and him, interest of known to resulted upon equities based being assignee terminated shall determine. Burke’s contract. cancellation of statute, States, by have even ex- Some ERICKSTAD, PAULSON and KNUD- beyond right redeem as- tended the SON, JJ., concur. lien, signees having senior creditor mortgaged equitable, upon the TEIGEN, Chief (dissenting). Justice premises subsequent mortgage. (as amended Laws Sec. 580.24 Minn.S.A. *6 I dissent. 1967, 248, 3). Sec. Ch. If I import understand the of the ma- jority opinion Miles, correctly, question as The has Burke’s been raised wheth assignee, given is the right er the correct the brought by quiet action to to Knauss and, upon payment default of the proper cutting title off balance was a method of contract, any will be entitled to might receive interest which Miles have under title the land from appears Knauss. It right the mortgage. to terminate may that Miles do this rights foreclosing without vendee’s under a land contract an mortgage and that precluded is quiet Knauss long recog has been title raising any legal Talcott, nized defenses the Fargusson our courts. v. validity of 183, mortgage the or the it (1897); 7 N.D. 73 debt N.W. 207 North purports to majority Savings appear secure. The western Mutual & Loan Ass’n v. to have Hanson, theory abandoned the lien 629, of mort- 10 (1943). 72 N.D. N.W.2d 599 gages they state, specifically at con- the the rights If aof vendee be opinion, clusion of their that Miles “as as- title, terminated an quiet action to there signee of purchaser [Burke], will be absolutely is why rights no reason good allowed to make the default on the ” * * * Miles, vendee’s mortgagee, purchase could not be contract, Miles be- If rights so terminated. The Miles could came the assignee of Burke’s contract for quiet have been determined the action there Miles, is need no But, title brought by against Miles. pay judgment attention as we in Fargusson held v. Talcott and in cancelling the be- Northwestern Savings Mutual & Loan cause that proceeding nullity be would Hanson, Ass’n v. supra, as to the owner of the If contract. guided by equitable should be prin- Miles is the assignee it
902 theory mortgages in North The lien to exer- and entitled owner of the explained Mortgage in Farm Dakota well as Knauss provides cise whatever 491, Pettet, 51 200 Loan Co. v. N.D. N.W. cancelled the contract not has 497, 36 A.L.R. Miles. Knauss, plaintiff, that It is established in North Dakota agree I do well mort- an the effect that does not constitute that has admitted assignment property mortgaged assign gage was to their conclusion the majority mortgagee. base land. statement following admission on Next, that if majority conclude there the trial attorney to by Knauss’s
made assignment is an equit is not a there court: correctly They able have assignment. equitable assignment stated is one that an fact that quarrel “We which, though at law an even invalid inter- mortgage upon the they obtained assignment, recognized be one which will had.” that Burkes est However, equity. they and enforced in an ad- not constitute does This statement that, recognize have failed to in order effect of mission be equitable assignment, work an must Miles. Burke’s interest assign towas ap established there was an absolute misinter- my opinion, have majority, in property propriation by assignor attorney’s statement. preted assigned sought assignee. Co., Metropolitan Blount v. Life Ins. 192 on land elementary that It is 325, 413; Farmers’ Ga. 15 S.E.2d State lien, payment security, mere is a Bank, McNabb, Kidd, Ill.App. v. Ill. 313 convey any it does not a debt 132, 394; Snipes v. Dexter 39 N.E.2d Gin property to the mort- estate title Co., 1019-1020; 45 116 P.2d N.M. gagee. Rubinstein, Whiting 109 v. Wash.2d 312; Gogebic Gogebic is a contract P.2d Auto Co. “A Com’rs, hypothecated County for the of Road Board Mich. specific 898; Estate, the neces- In an act re without N.W. Goodwin’s performance of 733-736; Mil possession.” Section 163 Misc. change N.Y.S. sity of Parrish, ford State Bank v. Utah N.D.C.C. 72-73; Hollet, Nickerson P.2d *7 estate conveys title or no mortgage “A 646, 53; Surety Wash. 272 P. Southern by the covered property in real Bering Mfg. (Tex.Civ.App.), Co. v. Co. by which merely a is but 337-340; Pennsyl 295 S.W. Melnick v. security for hypothecated as property is Trusts, Banking vania Co. 180 Pa. & Aure v. of act.” performance an Super. 441, A.2d 119 825-827. 807. 93 N.W.2d (N.D.), Mackoff equitable “An assignment is such an 789, N.D. Topp, v. 78 Mechtle also: See assignment a title gives assignee Mortg. 842; Cor Federal Farm N.W.2d which, law, 52 although not cognizable at 760, Berzel, 291 N.W. 69 N.D. v. poration equity recognize protect, will and inas Paul v. 550; of First Bank Waseca Nat. assignment property, the case of an of 465; v. 512, State son, 288 N.W. N.D. 69 interest, acquired debt to or to be 708, 184. N.W. N.D. 283 County, 68 Divide Assign- accrue in the future.” 6 C.J.S. [Emphasis ments 1 added.] b. § remains mortgaged property The title of order, equitable assignment “An notwithstanding an even mortgagor in writing, act assignor contrary. 35 — 01— Section agreement to 182; appropriation makes an absolute Federal 08, N.D.C.C.; N.D.L.Rev. Berzel, supra. chose in action fund to use Corporation v. Mortg. Farm
QQ3
transferring
the intent
assignee
ly impressed
with
with a lien in
favor Miles
interest,
present
amounting to
but not
to secure a debt.
assign-
legal assignment.
equitable
An
aforesaid,
For the
agree
reasons
cannot
I
may
ment
an execu-
also
defined as
the majority opinion.
with
trust,
tory agreement or declaration of
assignment
not enforceable as an
equity.
plaintiff,
This action
inis
law,
of equity,
court of
Knauss,
quiet
seeks to
the title
land
discretion,
exercising a sound
will exe-
Miles,
and
counter
not, according
cute or
the circum-
claim,
seeks to foreclose its
and
stances of the case.
alternative,
prays,
equitable
in the
for other
pleadings
relief.
prayer
and the
con
sufficiently
assignment
“The
word
tained
moving papers
sufficiently
are
comprehensive to include
transfers of
require
broad to
juris
the court
to take
property
property rights
all kinds
and
necessary
complete justice
diction
to do
synonymously
and
used
with
is sometimes
parties.
between the
having
‘grant’
operate
conveyance
as a
so as
acquired jurisdiction,
should retain
property,
real
but ordi-
title to
complete
do
justice.
Johnstone,
Schmidt v.
narily
application to
it is limited in its
293;
31 N.D.
Coykendall
153 N.W.
v.
in-
intangible rights,
-the
transfer
Kellogg,
472;
50 N.D.
198 N.W.
cluding
rights, choses
contractual
Arhart
Thompson,
v.
N.D.
N.W.
in or connected
56;
Accounts,
2d
United
Incorporated v.
prop-
distinguished
from the
Larson
(N.D.),
N.W.2d 628.
erty
It
itself.
be observed
appears
posses-
It
that Knauss is
now
transfer,
every assignment
while
is a
sion of the
Burke
land.
removed
every
Am.
assignment.”
transfer is an
land after the cancellation
Jur.2d, Assignments,
Section
final,
Burke has
further
interest in matter. The instant
There
evidence
is no
essential
action was commenced in 1965.
equit-
appropriation
element
work an
assignment
able
in this case.
existent
Burke was decreed to have a contract for
possession
prem-
remained
pos-
February,
deed
1960. He was
at all
after
ises
times
payments
session of the land. Fie made no
executed until Knauss cancelled
con-
on the
contract after the decree
Febru-
mortgagee
pos-
A
is not entitled
tract.
ary,
became
to Miles
1960. He
indebted
property mortgaged,
session
before
purchased
dwelling
materials
foreclosure,
in the absence of a clause
He
which he constructed on the land.
clearly permitting it. Section
gave
promissory
Miles a
his in-
note for
N.D.C.C.;
Ricks,
McClory
N.D.
debtedness and secured with a
1042;
Farm
Co.
Mortgage
N.W.
Loan
mortgage im-
describing the land. The
Pettet,
supra;
First
Hellstrom v.
Guar-
pressed
equitable
with a
*8
Bank,
anty
49 N.D.
N.W. 963.
subsequent
mortgage
lien. The
to
was
a
does not
mortgage
The execution of
lien
contract
Knauss’s vendor’s
under the
mortgagee
possession
entitle
the
the
to
the con-
for deed.
then
Knauss
cancelled
property mortgaged. Hellstrom
First
party
naming
tract
deed
Burke as
Bank, supra.
Guaranty
in that
but did not
or serve Miles
name
standard, general
this case is written on a
cancelling Burke’s
judgment
action. The
form,
context,
grant
not
regular
and does
and has
for deed was entered
possession
it
mortgagee
nor does
possession
Knauss went
final.
into
become
assignment by
mortgagor
constitute an
and,
July,
land
commenced
of his
or in the
interests
quiet the
the instant action
Miles to
equit-
equitable
land.
was mere-
title.
Burke’s
Knauss succeeded
Burke’s
law,
adequate,
complete remedy
cancelled
and
at
land when he
interest in the
able
there is no
equitable interest
occasion for resort to the
the contract.
by
remedy
redemption.”
lien in
Vend-
impressed with
C.J.S.
457, page
interest was not
or and Purchaser
Miles’s
of Miles.
§
favor
by
cancellation action because
cut off
join
The effect of the failure to
knowledge of
had
Miles’s
Knauss
actual
cancellation action made that
it.
name or serve
mortgage but failed to
19(b),
Rule
ineffective as Miles.
N.D.R.
party
cancellation
proper
Miles was
Civ.P.
action.
facts,
appears
of these
it
On
basis
acquired
interests are
“Parties whose
equit-
me that Knauss succeeded to Burke’s
lien,
and
of a
notice
vendor’s
by
able interest
the cancellation of Burke’s
sought,
personal judgment
whom
subject
to the mortgage
contract but took
redemption is not
right of
and whose
junior
lien
Knauss’s vendor’s
foreclosure,
by
judgment
concluded
circum-
under
contract. Under
necessary
parties, are
proper
while
stances,
by
legal title held Knauss
the lien.”
parties to a suit to foreclose
by
lien but the
not affected
a,
Purchaser
and
Vendor
§
C.J.S.
equitable interest
Knauss obtained
page 386.
both
subject
the cancellation
rule, subsequent or
a general
“As
Knauss’s
lien Miles’s
vendor’s
and
are
junior
and
lienholders
encumbrancers
Upon acquiring
equit-
lien.
legal
and
necessary, parties, unless
land,
proper, but not
able titles to the
Knauss became
making
special
owner,
are
circumstances
there
the lien of Miles.
subject
absolute
parties, as
necessary
proper
merge
them
titles did not
allow
two
so
title,
hold
they
hold the
upon
where
Miles’s lien
a first
to become
lien
not made
they are
prior
If
Haney,
lien.
land.
Dakota
North
Lumber Co.
the decree
they
411;
are not
parties,
May
bound
23 N.D.
137 N.W.
v. Cum-
affected
will not be
mings,
and their
21 N.D.
be made opinion of the court in case that the this plain, has a person aWhere foreclosure.
9Q5 court, two reasons: trict demand for for contained the trial basically erroneous novo, scope retry de this proceeded limited our that have the (1) we should entire appeal. not on believe that appeal should case We un- of review on the trial der the law of prior anew and the decisions granted appellant this have the asserts, entirely proper. a trial de because, he action was this court demanded; (2) was properly novo not by petition second the issue raised estopped from appellant the should be rehearing for appellant is that the should it had asserting knowl- claim because its estopped asserting had not cancel the Burke edge Knauss’s of by been served in the action Knauss to nothing at- did deed and cancel Burke’s contract for because tempt to in that which intervene appellant knowledge the had actual of rights. protect its have We could done Knauss’s action Burke and it did order shall these issues discuss attempt not take intervene and such they are raised. steps necessary protect as would be its novo, Surely, says respondent, interests. the the de the re of On issue trial appellant courts should not reward the trial anew was spondent asserts sleeping on its rights, to the detriment of in this case be properly demanded not respondent. file a state did not appellant cause it made demand in which
ment
of
case
trial
N.D.C.C.
de novo. Sec.
clearly warranted by
Unless
file such
failure to
state
Because
its
case,
the facts
estoppel
is not
fa
ment,
argues,
trial de no-
respondent
Albert,
vored. Newman
Cal.App.
v.
170
demanded,
properly
has
vo
not been
2d
339 P.2d
(1959).
588
To warrant
try
not
case anew on
this court
application
estoppel,
of the doctrine of
Blixt,
v.
appeal,
Anderson
72 N.W.
citing
strong appeal
matter must have
and Retterath v. Ret
(N.D.1955);
2d 799
court’s sense
justice. This court
has
terath,
(N.D.
409
76
38 N.W.2d
N.D.
where,
estoppel
by
held that
arises
con
1949).
another,
party
duct or acts
has
been
induced to
position
alter his
or to do some
appellant’s demand for
thing,
his prejudice,
he
otherwise
ap
made in
notice of
trial de
novo
would not
v.
have done. Sailer Mercer
done,
been
all that had
peal.
If that were
County,
75
N.W.2d
N.D.
as
respondent
be correct
would
Lee,
(1947); Woodside v.
contained Section George Rouzie, HERNETT, John
Gail Qualified Sinner, Duly Electors of the Dakota, for Themselves of North State Situated, Petitioners, Similarly Others All Secretary MEIER, of State of the
Ben Dakota, Respondent. State North No.
Civ. 8584.
Supreme Dakota. Court North
Jan.