DeLany v. Knapp

Henshaw, J.

Appeals from the judgment and from the order denying a new trial. The action was to quiet title to one hundred and sixty acres of land. The facts of the case are as follow:

One Neil, from whom both plaintiff and defendants deraign title, entered the land in controversy under the United States homestead laws, and thereafter, pursuant to the statute, commuted and paid for the land, receiving a patent therefor, which, by way of preamble and recital, declared that, “ Whereas, George Neil, of San Diego county, California, has deposited in the general land-office of the United States a certificate of the register of the land-office at Los Angeles, California, whereby it appears that full payment has been made by the said George Neil, according to the provisions of the act of Congress of the 24th of April, 1820, entitled ‘An act making further provision for the sale of the public lands/ and the acts supplemental thereto, for” the land (describing it) “which said tract has been purchased by the said George Neil,” etc.

Upon March 18, 1893, Neil, by deed of grant duly recorded, conveyed the land to Mrs. A. L. Treanor. Upon the fifth day of May following, Mrs. Treanor, by like deed of grant, also duly recorded, reconveyed the same property to Neil. Upon May 10th, five days after, a deficiency judgment was docketed against Neil, and in favor of this plaintiff. The land in controversy was then subjected to levy, and, on the fifteenth day of June, 1893, was sold at public auction, and purchased by this plaintiff. Thereafter, upon the twenty-third day of November, 1893, Neil executed his deed of grant to the same land to one Pauly, to whose title these defendants afterward succeeded.

For the reasons hereafter given we consider it unnecessary to pass upon the question whether, by his commutation, the character of the title Neil received from the government was that inuring under a homestead, or that attaching to a pre-emption patent. For the purposes of this consideration, it will be assumed (though not decided) that Neil took the land as a government homestead.

So taking, the land was not liable for any debt of Neil contracted prior to the issuance of the patent. (Rev. Stats. 1878, sec. 2296.) The deficiency judgment of plaintiff against Neil was for such a pre-existing debt.

Neil’s deed to Mrs. Treanor was, upon the face of the recorded instrument, a conveyance of all his interest in the property, and, when he subsequently acquired title from her by deed of grant, he took the land divested of its homestead exemptions. The patentee sells his land. It is protected in the hands of the purchaser from any debt of the grantor which could not have been enforced against it while the title remained in him; and this is all that the case of Russell v. Lowth, 21 Minn. 167, 118 Am. Rep. 390, decided upon the matter. But, as with a state homestead, so with a federal; its character and exemptions do not revive on a subsequent repurchase by the original holder by whom it has been sold. (Hebert v. Mayer, 42 La. Ann. 839.)

But to overcome the effect of the deeds from Neil to Treanor, and from Treanor to Neil, defendants were permitted, over objections and exceptions, to call Mrs. Treanor, who testified that Neil, who was sick, sent for her, and said to her: “ My creditors are pushing me pretty hard. Would you object to having my property put in your name, so that it will be beyond the reach of my creditors?” Mrs. Treanor consented, the deed was made under these circumstances without consideration, and the property thereafter in like manner re-conveyed by her to him.

Plaintiff’s claim was for a debt due prior to the issuance of the patent. The land was, therefore, not liable for it, and plaintiff was not one of Neil’s creditors who could have been injuriously affected by the transfer.

Upon the other hand, these transactions originated and were executed in fraud. Plaintiff had no knowledge of the secret trust. She bought at the execution sale in good faith and for value, upon the security of the title which stood in Neil, and which, by the record, was freed from homestead exemptions. Under these circumstances, is she protected against the effect of this private agreement?

I think she should be and is. It is true she was not one of those creditors who could complain of the original fraud and cause the conveyance to Mrs. Treanor to be set aside. Nevertheless she was a bona fide purchaser for value and without, notice at the execution sale, and her rights are the same as those which would have attached to an innocent third person buying under like circumstances. She is protected against latent equities of which she had no notice. (Riley v. Martinelli, 97 Cal. 575; 33 Am. St. Rep. 209.)

The defendants, deriving their title from Neil after the rights of plaintiff as purchaser had accrued, occupy no better position than would he. Where he would be estopped, so are they; and what binds him concludes them.

The fact that plaintiff was not one of those whose injury was intended by the original fraud would not be a reason for permitting Neil to prove it against her, if in fact she had innocently suffered by reason of it, and if Neil could not prove it neither could those claiming, under him.

If the transfers had been made with the understanding that they were designed merely to effect an apparent destruction of the homestead character of the land, no one would assert that Neil could prove this fact against one who had changed his situation under a belief in the bona fides of the matter. Yet this is the precise result which, if not intended, necessarily followed the fraud of Neal and Mrs. Treanor. Neil held out to the world that he had purchased the land under circumstances which by operation of law freed it from its homestead exemptions. An innocent third person dealing with this property relied upon these circumstances and bought the property after a levy and sale which were legal except for this secret and fraudulent transaction. Neil cannot,, nor can those claiming under him, defeat the title thus obtained by proof of any such “ latent equity.”

The admission of the evidence of Mrs. Treanor was thus error for which the order denying a new trial must be reversed and the cause remanded. So ordered.

McFarland, J., and Temple, J., concurred.