Olson v. Olson , 203 Minn. 199 ( 1938 )

¹ Reported in 280 N.W. 640, 281 N.W. 367. Action to determine the rights of plaintiff under a contract for support which was a lien on the involved 80-acre farm; to declare said lien prior to that of a mortgage; and to sell the land to satisfy plaintiff's lien. The court below found the facts for plaintiff and ordered judgment accordingly. Defendant Frettem appeals from the order denying his motion in the alternative. Defendant George W. Olson having defaulted, we refer to Frettem as though he were the only defendant.

Plaintiff and George W. Olson are father and son. Prior to March 18, 1930, the former owned an undivided one-fourth interest in the farm. He had lived on it continuously as his homestead since 1904. March 18, 1930, George W. Olson received a conveyance of his father's one-fourth and the three-fourths interests in the farm held by others, thereby acquiring the whole fee. Of even date with the conveyance, father and son executed the contract for support, and the son received a bill of sale of all his father's personal property. In the contract the son agreed, in consideration of his father's deed, to pay the latter $1,400; to provide a home for him on the premises for the balance of his lifetime; and to furnish him board and lodging. The contract was made a mortgage on an undivided one-fourth interest. It was not recorded until August, 1934. March 29, 1930, the son executed a mortgage on the whole tract to defendant to secure a loan of $4,500. It was promptly recorded April 2. Defendant had no knowledge of the father-son contract and did not learn of it until 1934. The mortgage has been foreclosed, defendant purchasing at the sale.

Which is the superior lien — plaintiff's contract or defendant's mortgage? First of record is ordinarily first of right. 2 Mason Minn. St. 1927, § 8226. But plaintiff contends, and the court below found, that he had such possession at the time of the execution of defendant's mortgage as to give constructive notice of his rights. Passing that point, we go to another which is decisive.

Conclusive as matter of law is defendant's point that plaintiff is estopped from denying priority to appellant's mortgage. In Esty v. Cummings, 80 Minn. 516, 83 N.W. 420, the owner of encumbered property conveyed to a third person to enable the latter to borrow money wherewith to redeem a foreclosure. Simultaneously, an unrecorded instrument of defeasance was executed providing for a reconveyance to the fee owner, and it was made a lien. The loan was made, and the mortgage securing it was duly recorded. It was foreclosed without redemption. The mortgagee brought ejectment against the former owner's wife in possession. She denied authority for the mortgage to the plaintiff, standing on the unrecorded instrument of defeasance to defeat him. We held that she was estopped from denying the validity of plaintiff's mortgage [80 Minn. 518]. "She clothed Hall with title to the property, empowered him to make a loan thereon for her benefit, and cannot now be heard to dispute that which her conduct induced, and was intended to bring about." The learned trial court sought to distinguish that case from this on the ground, first, that notice of rights through possession was not involved; and, second, the contract for support in the case at bar covers just one-fourth interest and does not affect the land purchased by George Olson with the proceeds of defendant's mortgage. We do not agree. Such an estoppel overrides the rights of the estopped under an unrecorded instrument even though his possession was the harbinger of constructive notice. McEwen v. Keary, 178 Mich. 6,144 N.W. 524, L.R.A. 1916B, 1063. Plaintiff's deed was one of quitclaim. So the estoppel is not one by warranty but rather by his act of conveyance with its intended and speedily effected result in defendant's mortgage. Where, as here, plaintiff conveyed to his son knowing that the son thereafter was to encumber the property in order to pay for it, and the subsequent mortgage (to defendant) covered the whole property, the plaintiff must be taken to have intended that result. He cannot defeat the intended mortgagee's rights by clothing his son with record title and then encumbering the property by a secret, unrecorded agreement.

Query: Is not the result further buttressed by the fact that defendant's was a purchase-money mortgage? "When a third party furnishes a part of the purchase price and takes a mortgage therefor from the vendee, the mortgage may be given effect as a purchase-money mortgage." 4 Dunnell, Minn. Dig. (2 ed.) p. 669, § 6208. "It is unnecessary that the deed and the mortgage should be executed at the same moment, or even on the same day, provided the execution of the two instruments constitutes part of one continuous transaction and was so intended." 4 Dunnell, Minn. Dig. (2 ed.) p. 669, § 6209, and cases cited. If plaintiff's contract for support may also be taken as a purchase-money mortgage, it too would have attached at the same time as defendant's. Having equality of rights thus far, would not plaintiff have had to record to save them? Would or would not defendant's diligence in recording first have saved his and overcome plaintiff's otherwise equal standing?

The order under review must be reversed and the case remanded for decision agreeably hereto and judgment for defendant.

So ordered.

UPON APPLICATION FOR REARGUMENT. On September 30, 1938, the following opinion was filed: