10 N.W.2d 599 | N.D. | 1943
This is an action to quiet title to a lot in the city of New Rockford in Eddy county. Prior to April 15, 1937, the plaintiff had acquired title to the lot through foreclosure proceedings that resulted in a sheriff's certificate of sale being issued and recorded December 26, 1935. The sheriff's deed was issued to the plaintiff on December 31, 1936, and recorded December 18, 1940.
On April 15, 1937, the plaintiff as vendor entered into a contract for deed with Irvine V. Hanson and Joseph J. Greenheck as vendees for the sale and purchase of the lot for $1,500 payable in monthly instalments of $25 each. This contract contained this provision: Said parties of the second part further covenant and agree as follows: to pay before penalty attaches thereto, all taxes due and payable in the year 1936, and in subsequent years, and all special assessments heretofore or hereafter levied, and in addition thereto all delinquent taxes. It was recorded in the office of the Register of Deeds of Eddy county, October 29, 1937.
On May 24, 1939, Hanson and Greenheck entered into an agreement for the dissolution of their partnership whereby it was provided that the contract be transferred to Hanson who remained in possession of the premises. This agreement was recorded January 12, 1940. At Hanson's request a new contract for deed was made with the plaintiff *632 wherein the vendee agreed to pay $1,000 for the premises. This contract contained the identical covenant regarding taxes that appeared in the first contract and which we have quoted above. It was not recorded.
Hanson failed to pay the taxes assessed against the premises which were sold at a tax sale and bid in by Eddy county. No redemption was made. A tax deed was issued to the county on October 2, 1940, for a consideration of $1,591.77. On November 19, 1940, the county issued a tax deed to Rochus Sander for $1,400. On December 11, 1940, Rochus Sander and his wife executed a quitclaim deed to Hanson for a named consideration of $1. The actual consideration was $1,700.
On December 11, 1940, Hanson and his wife executed a mortgage to the defendant Theo. Hamm Brewing Company for $1,600, which was recorded December 17, 1940. The proceeds of this mortgage was applied by Hanson on the purchase price paid to Rochus Sander.
The trial court ordered judgment quieting title in the plaintiff except as to the rights acquired by Irvine v. Hanson under his contract for deed with the plaintiff, and limited the rights of the defendant Theo. Hamm Brewing Company to the interest of the defendant Hanson in the property in question. Both defendants appeal from this judgment and demand a trial de novo.
The vendor contends that Hanson is estopped from acquiring a tax title adverse to the vendor because of the covenant in the contract obligating the vendee to pay the taxes on the premises. It is argued that the title acquired from Sander inures to the benefit of the vendor and amounts merely to a redemption from the tax sale.
The defendants on the other hand contend that the issuance of the tax deed to Eddy county and the subsequent sale by the county to Rochus Sander created a new, distinct, and separate title in the purchaser and deprived any former owner of all title, lien or interest in the property whatsoever.
The basis for this contention is to be found in decisions of this court to the effect that a valid tax deed clothes the grantee with a new and complete title under an independent grant from the sovereign authority of the state. Baird v. Stubbins,
In this case the vendee failed to perform his covenant to pay taxes. As a result of his breach of covenant the property was sold at tax sale. A tax deed was eventually issued that created a new and paramount title adverse to that of the vendor. The vendee then purchased this title which had its inception in the vendee's default and breach of covenant. In an early and leading case, the supreme court of California set forth the law applicable to this situation in the following language: "If the defendant was under any legal or moral obligation to pay the taxes, he could not, by neglecting to pay the same and allowing the land to be sold in consequence of such neglect, add to or strengthen his title by purchasing at the sale himself, or by subsequently buying from a stranger who purchased at the sale. Otherwise, he would be allowed to gain an advantage from his own fraud or negligence in failing to pay the taxes. This the law does not permit, either directly or indirectly." Moss v. Shear,
Finch v. Noble,
The situation under consideration is analogous to that involving an after-acquired title obtained by a mortgagor. In Roby v. Bismarck Nat. Bank,
In Adam v. McClintock,
In the case at bar the vendee failed to pay the taxes which he had agreed to pay. The direct result of this omission was the sale of the premises for taxes and the ultimate issuance of a tax deed to Eddy county. The county in turn issued a tax deed to Rochus Sander under the provisions of chapter 235, Session Laws ND 1939, which vested a paramount title in him. The vendee then acquired this title. To permit the vendee to thus take advantage of his own dereliction to the detriment of the vendor would contravene sound principles of equity. The title that had its inception in the vendee's breach of covenant inures to the benefit of the vendor.
The remaining question to be determined deals with the status of the mortgage given by Hanson to the Theo. Hamm Brewing Company. The answer of this defendant pleads that it is an innocent mortgagee and that at the time it took its mortgage, the records in the office of the Register of Deeds of Eddy county disclosed full and good title in fee simple in Irvine v. Hanson.
The status of the mortgage in question depends upon notice. It can scarcely be argued that if the Theo. Hamm Brewing Company had actual knowledge of all the facts which we have held to estop Hanson from asserting title against the plaintiff, the Brewing Company would be in any better position than Hanson the mortgagor. Burrow v. Carley,
The Brewing Company was dealing with Hanson with respect to real property, and was chargeable with notice of properly recorded instruments affecting the title thereto. Sections 5546 and 5597 ND Comp Laws 1913. The records in the office of the Register of Deeds showed that the plaintiff had foreclosed a mortgage on the premises, that a certificate of sale had been issued to the plaintiff, and that the year of redemption had long since expired. The record further showed that the plaintiff had sold the premises to Irvine V. Hanson and Joseph *636 J. Greenheck on a contract for deed, and that the vendees had dissolved partnership and the contract was transferred to Hanson. There was nothing of record to indicate that the contract had ever been canceled or satisfied. It is true that subsequently a new contract was made which was unrecorded and concerning which the Brewing Company had no actual notice. The record however is such as to charge the Brewing Company at least with the duty of making inquiry regarding the rights of the plaintiff.
Section 7290, Comp Laws ND 1913, provides that: "Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, and who omits to make such inquiry with reasonable diligence is deemed to have constructive notice of the fact itself." Newell v. McMurray,
The evidence shows that on December 11, 1940, a representative of the Brewing Company was present in New Rockford, and made arrangements for financing the purchase by Hanson from Sander. Within two or three days thereafter, a representative of the Brewing Company appeared at the office of the plaintiff in Fargo with an abstract of title to the premises in question and sought to obtain from the plaintiff a quitclaim deed to the property, which the plaintiff declined to give. In view of the instruments on record in the office of the Register of Deeds and the other circumstances surrounding the transaction in which Hanson purchased Sander's title, it appears that the Theo. Hamm Brewing Company is not an innocent mortgagee but is chargeable with notice of the facts that estopped Hanson from asserting the title acquired from Sander. The Brewing Company is likewise estopped from asserting that its mortgage is superior to the rights of the vendor. Comstock v. Robertson,
Affirmed.
CHRISTIANSON, BURR, NUESSLE, and BURKE, JJ., concur. *637