Akey v. Great Western Building & Loan Ass'n , 110 Mont. 528 ( 1940 )

The appellant contends that before the execution and delivery of the mortgage by Carroll, J.L. Akey became the full equitable owner of the land described in the pleadings, as nothing further remained to be done except delivery of the conveyance by the grantor to the grantee. This state is committed to the universally established rule that actual possession of real property is constructive notice of whatever claim the occupant has in the land. (Baum v. Northern P. Ry. Co., 55 Mont. 219,223, 175 P. 872.) See, also, the case of Reed v.Richardson, 94 Mont. 34, 20 P.2d 1054, as to the constructive notice doctrine. (See, also, 41 C.J. 539, and note 24; 66 C.J. 1168-1171; Edwards v. Montgomery, 26 Okla. 862,110 P. 779, 780; Gray v. Zellmer, 66 Kan. 514, 72 P. 228;Roy Titcomb, Inc., v. Villa, 37 Ariz. 574, 296 P. 260,261; Nichols v. DeBritz, 178 Wash. 375, 35 P.2d 29, 31; Pomeroy's Eq. Jur., sec. 615; Follette v. Pacific L. PowerCo., 189 Cal. 193, 208 P. 295, 23 A.L.R. 965; 20 R.C.L. 352;Spencer v. Steward, 37 Idaho, 610, 218 P. 369; 27 R.C.L. 722; Phillips v. Pitts, 78 Ill. 72, cited in 13 L.R.A. (n.s.) 93.)

Possession alone does not constitute an estate or title in the property possessed, but serves only as notice to subsequent purchasers or encumbrancers of whatever estate or interest in the land is held by the occupant. In the case of Roy Titcomb v.Villa, supra, the court states that whether the respondent knew of the appellant's possession or not is immaterial. It is his duty to know who is in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant. (Pomeroy's Eq. Jur., sec. 622.)

Laches will not be presumed from mere delay, alone, short of the statute of limitations. The delay must have worked injury, disadvantage or prejudice to another. (51 C.J. 201; Hall v.Hall, 70 Mont. 460, 474, 226 P. 469; Pomeroy's Eq. Jur., sec. 1443.) The idea is that the adverse party must have been "misled." Thus delay coupled with unusual circumstances (made to appear affirmatively) may result in the defense of laches, even short of the statute of limitations. (Hogan v. Thrasher, 72 Mont. 318, 324, 233 P. 607.) Each case is to be decided according to its own peculiar circumstances.

Whether the Akeys knew of the giving of the mortgage and the foreclosure action is immaterial, as the Akeys were in possession and could rest in the security of their title, and the actions of the mortgagee founded upon notice of the Akeys' rights, and their failure to join them in the action, lends bad faith to the transaction and surely places the respondents is a highly negligent position. (Hynes v. Silver Prince Min. Co.,86 Mont. 10, 281 P. 548.)

The respondents are charged constructively with the notice of plaintiff's rights in the property, an equitable title, a notice which has literally run for years, from the inception of the transaction; and charged with such notice, they will not now be protected against the enforcement of the rights of the plaintiff. (Dennis v. Northern P. Ry., 20 Wash. 320, 55 P. 210;Finnell v. Finnell, 156 Cal. 589, 105 P. 740, 134 Am. St. Rep. 143.) Plaintiff brought this action to quiet title to certain real property in Flathead county. The district court found for the defendants Great Western Building and Loan Association and Brown, receiver. Plaintiff has appealed from the judgment.

The plaintiff's evidence is to the effect that her husband, J.L. Akey, purchased the land in question from Father Joseph J. Carroll in the fall of 1921 for approximately $280, which was paid by him by the assumption of a debt owing by Father Carroll to the McCarthy Motor Company, in which Akey was interested as manager. There was no written evidence of the transaction other than a receipt given by Father Carroll to plaintiff's husband. The receipt was not introduced in evidence, but there was testimony to the effect that it had been lost. No deed was ever given by Father Carroll to Akey, but there is testimony that he frequently promised to do so, and gave as his reason for not doing so that the plat had not been recorded.

The evidence discloses that in April, 1922, the Akeys went into possession of the property and erected a summer cabin thereon, which they continued to use and occupy from that time on until 1934 — a period of twelve years. They occupied the property only during the summer months of May, June, July and August, when the children were not in school. The property was located on the shore of Whitefish Lake and was used as a summer home by the Akeys during the summer school vacation.

In 1926 Father Carroll for a valuable consideration gave a mortgage to the defendant Great Western Building and Loan Association on this and other property. On April 13, 1930, he died. Action was brought to foreclose the mortgage on May 26, 1930. The Akeys were not made parties to the foreclosure action, but plaintiff testified that she had actual notice of the proceedings. The decree of foreclosure was entered on July 25, 1930, and the foreclosure sale was held on August 22, 1930, the defendant association bidding in the property. Mr. Akey died on July 2, 1936. This action was commenced on May 26, 1938.

The defendant Great Western Building and Loan Association paid taxes on the property each year since 1929. Neither plaintiff nor her husband paid any taxes to the county treasurer on the property, but there is testimony to the effect that Mr. Akey paid the amount of the taxes to Father Carroll for the years 1924 and 1925. The public records do not disclose that the Akeys have, or ever had, any interest in the property.

The trial court found that plaintiff and her husband were guilty of laches, and that the legal and equitable title to the property is in the defendant Great Western Buiding and Loan Association.

It is the plaintiff's contention that the defendant association is not a purchaser or encumbrancer in good faith and without notice, for the reason that possession on the part of the Akeys at the time of the execution of the mortgage placed the association upon notice of whatever rights the Akeys had in the property. They rely upon a statement made in the case of Baum v.Northern P. Ry. Co., 55 Mont. 219, 175 P. 872. In the view we take on the question of laches, it is unnecessary to consider this point.

It is our view that the court was warranted in finding, as it[1, 2] did, that plaintiff and her husband were guilty of laches. Mr. Akey was living at the time Father Carroll's estate was probated, and if he had any interest in the property some steps should have been taken by him during the course of the probate of that estate to assert his interest. Again, the foreclosure proceedings had been instituted some six years before Mr. Akey's death, and if plaintiff's present claim were meritorious, he would or should have asserted it in the foreclosure action. It was not, of course, incumbent upon the plaintiff in the foreclosure action to join the Akeys as defendants (sec. 9467, Rev. Codes), but, knowing of those proceedings, they owed a duty to come forward with their claim, if any they had, long before this action was instituted — and particularly so since the defendant had been paying the taxes for so many years under the supposition that its mortgage was good.

What was said by this court in the case of Kavanaugh v.Flavin, 35 Mont. 133, 88 P. 764, 766, has application here. It was there said: "Speaking upon the subject of laches, the Supreme Court of the United States, in Hammond v. Hopkins,143 U.S. 224, 12 Sup. Ct. 418, 36 L. Ed. 134, said: ``No rule of law is better settled than that a court of equity will not aid a party whose application is destitute of conscience, good faith, and reasonable diligence, but will discourage stale demands, for the peace of society, by refusing to interfere where there have been gross laches in prosecuting rights, or where long acquiescence in the assertion of adverse rights has occurred. The rule is peculiarly applicable where the difficulty of doing entire justice arises through the death of the principal participants in the transactions complained of, or of the witness or witnesses, or by reason of the original transactions having become so obscured by time as to render the ascertainment of the exact facts impossible. Each case must necessarily be governed by its own circumstances, since, though the lapse of a few years may be sufficient to defeat the action in one case, a longer period may be held requisite in another, dependent upon the situation of the parties, the extent of their knowledge or means of information, great changes in values, the want of probable grounds for the imputation of intentional fraud, the destruction of specific testimony, the absence of any reasonable impediment or hindrance to the assertion of the alleged rights, and the like.'" Of the same general tenor is the case of Hynes v. Silver Prince Min.Co., 86 Mont. 10, 281 P. 548.

The court was correct in finding for the defendants. The judgment is affirmed.

MR. CHIEF JUSTICE JOHNSON and ASSOCIATE JUSTICES MORRIS, ERICKSON and ARNOLD concur.