Trusty v. Ray

PORTER, Justice.

Appellants filed this action to quiet title to 115.47 acres of land located in Bannock County. All the defendants defaulted except respondent, D. C. Ray. Doctor Ray filed answer to the complaint and, as a defense thereto, alleged that he is the owner and holder of a valid mortgage upon the real estate in question; that said mortgage secures a note in the amount of $700; that said mortgage was duly filed of record in the office of the County Recorder of Bannock County, Idaho; and that plaintiffs knew and were advised of said loan at the time of taking possession of the premises in question. As a further defense, said respondent alleged that he is the owner of the premises in question and that plaintiffs had notice of his ownership when they took possession thereof. He prayed that it be decreed that he is the owner of a valid unpaid mortgage upon the premises and that he is owner of said premises.

The cause was tried to the court sitting without a jury. The court found the issues in favor of respondent Ray, refused to quiet title in appellants and quieted title in respondent to an undivided one-half interest in the premises. From such judgment, appellants have appealed to this court.

The record discloses without dispute that respondent Ray is the owner and holder of a real estate mortgage on the premises in question given by Ambrose M. Barrett and Mandy Barrett, his wife, under date of April 28, 1926, to secure the payment of a promissory note in the sum of $700 due one. year after date; that said mortgage was duly filed for record on April 30, 1926; and that such note has never been paid.

Appellants are the son-in-law and daughter of Ambrose M. Barrett and Mandy Barrett. They have been married about ten years. Appellant, George W. Trusty, is a building contractor in Pocatello. In the year 1948 he guaranteed and paid certain bills for materials procured for the use of his father-in-law in building a home. Appellants received a deed to the property from the Barretts on June 20, 1949. Mr. Trusty testified that the total consideration for the deed was “somewhat over $4,000”; and that, “those bills that were a part of the exhibit here are materials which I procured for Mr. Barrett, and he had no way of paying mej and it was agreed finally that I should take the property, paying him more consideration, in addition to those bills, and call the bills square.” The reasonable value of the property is not affirmatively disclosed by the evidence.

Doctor Ray testified at the trial that in the year 192/ the Barretts had their attorney prepare a deed to the premises in favor of Doctor Ray in which the consideration was stated to be the release of the note and mortgage and the additional payment of $200 to the Barretts. That the Barretts presented this unsigned deed to Doctor Ray but that he did not accept the deed and the same was never executed. That he loaned $200 to the Barretts. He testified as to- the conversation that took place at that time as follows:

“Q. Just state to the Court what that conversation was with reference to the deed and why it was not accepted. A. Mr. Barrett and his wife came into the office. They needed some money, and they had seen Mr. Jeffery and had him make out a deed to release the mortgage, so it wouldn’t cost anything to release it, and I said, ‘Now, Ambrose, you took up that land and I helped you with it,’ I says, T would like for you to get out what you put in it as well as myself. If you will keep up the taxes I will get a deed before the mortgage closes, — before the time for the mortgage to close, and if we sell the property we will divide it fifty-fifty.’

“Q. And what did Mr. Barrett say then? A. He said that was perfectly all right with him.”

The record also discloses that the taxes on the premises for the year 1926 in the sum of $13.15 were unpaid and that on February 16, 1931, the County Treasurer of Bannock County deeded the premises to Bannock County for the consideration of the delinquent taxes. On April 23, 1931, Bannock County issued a purported redemption deed to said property to Doctor D. C. Ray which was filed for record on May 20, 1931.

We will not discuss separately the numerous assignments of error made by appellants, but will consider the questions raised by such assignments. Appellants contend that they are the purchasers of the premises for value and without notice. That at the time of their purchase, the note and mortgage to D. C. Ray were outlawed and barred by the statute of limitations. And that they are entitled to quiet title against such mortgage. Respondent Ray contends that appellants being in privity with the mortgagors, are barred from quieting title against the unpaid mortgage. The trial court found as a fact that appellants had full knowledge of such note and mortgage and that the same were unpaid at the time of the purchase of the premises. A careful examination of the record shows there is sufficient evidence to sustain such finding by the court.

The general rule is that a mortgagor or his successor in interest cannot quiet title against a mortgagee, while the secured debt remains unpaid, although the statute of limitations has run against the right to foreclose the mortgage. Note 164 A.L.R. 1393. In Gerken v. Davidson Grocery Co., 50 Idaho 315, at page 321, 296 P. 192, at page 193, we said:

); “There is no more firmly established rule than that the liability to pay a mortgage debt rests upon the mortgaged land as well as upon the mortgagor. A mortgagor cannot without paying his debt quiet title as against the mortgagee; and the same rule applies to the grantee of a mortgagor, who takes the land while it is still burdened with a lien for the security of a debt.”

See also, Mendini v. Milner, 47 Idaho 439, 276 P. 313; Miller v. Monroe, 50 Idaho 726, 300 P. 362.

Appellants contend, however, that one who purchases real estate upon which there is a mortgage barred by the statute of limitations at the time of the purchase is not bound to satisfy the. mortgage debt in order to secure decree quieting his title to the property. Note 164 A.L.R. 1396-1397. Such seems to be the holding in Faxon v. All Persons, etc., 166 Cal. 707, 137 P. 919, L.R.A.1916B, 1209. However, an examination of such case discloses that the predecessor in interest of the plaintiff purchased the property for a consideration at an executor’s sale. There was no privity between the mortgagor and the plaintiff. Fontana Land Co. v. Laughlin, 199 Cal. 625, 250 P. 669, 48 A.L.R. 1308. Moreover, there was no showing in such California case that the plaintiff had any knowledge of the mortgage other than the notice given by the recording thereof.

In Yarlott v. Brown, Ind.App., 132 N.E. 599, 602, 133 N.E. 613, the court quoted from and followed Faxon v. All Persons, etc., supra, but specially pointed out the lack of knowledge by the appellee as follows :

“The only knowledge appellee had of the existence of appellant’s mortgage was such knowledge as was disclosed by the mortgage record. This record did not show whether the debt for which the mortgage had been given was paid or unpaid. It did show that appellant’s right to foreclose was barred. She purchased the land with reference to the title as disclosed by the record. No part of the purchase price was withheld from the seller for the purpose of paying appellant.”

It would appear that the evident purpose, intent and meaning of Section 55-817, I.C. (quoted in the dissent of Justice KEETON), was to authorize quieting title of an otherwise outlawed mortgage or other lien, where the only notice the subsequent purchaser or encumbrancer has, is the record notice of the existence and nonpayment of the mortgage.

The Legislature thus evidently considered that Sections 5-201 and 5-216, I.C. (statutes of limitation), were not in themselves sufficient to justify a suit to so quiet title.

Section 55-817, I.C., does not encompass a situation, as herein, where appellants are not only in privity with the original mortgagors, i. e., immediate and direct grantees, but also had actual knowledge of the existence and non-payment of the mortgage. Recognizing this distinction is in line with the California authorities cited.

In the instant case appellants took deed with full knowledge of the existence of the note and mortgage, of the fact that the indebtedness was unpaid and that respondent was claiming some interest in the land. Their rights are not superior to the rights of the Barretts prior to the transfer. Storrs v. Belmont Gold Min. & Mill. Co., 24 Cal.App.2d 551, 76 P.2d 197. The trial court did not err in refusing to quiet title in appellants against the lien of respondent’s mortgage.

The trial court found that in June, 1927, Ambrose M. Barrett, in consideration of the $700 loan and the advancement of another $200, agreed to convey to respondent Ray a one-half interest in and to the said real estate. The court further found “that thereafter and on or about the 23rd day of April, 1931, at the instance of Ambrose M. Barrett, who made the payment necessary to procure the same, the County of Bannock, Idaho, issued and delivered to D. C. Ray a redemption deed conveying to him” the real estate described in.the complaint. Upon such findings of fact, the court concluded that respondent Ray was the owner of an undivided one-half interest in the real estate. Respondent Ray endeavors to justify such conclusion upon the theory that the claimed oral agreement to convey real estate was fully performed and consummated by the taking of the redemption deed.

An examination of the record discloses there is no evidence whatever that the redemption deed was made at the instance of Ambrose M. Barrett or that he made the payment necessary to procure the same or that he knew anything about the issuance of such deed at the time thereof or authorized the issuance of the same in the name of respondent Ray. . There is nothing in the evidence to support the court’s finding that such redemption deed was issued in accordance with and in performance of an oral agreement by Barrett to convey an undivided one-half interest in the real estate to Ray.

The redemption deed purports on its face to be issued in pursuance of Chap-ter 161, 1923 Session Laws, wherein it is provided as follows:

“In all cases where real estate has been or may hereafter be sold for de-

linquent taxes and the county has become the purchaser, and the time for redemption has expired, or a tax deed has issued to the county, and the county has not disposed of such real estate, the person whose estate has been or may hereafter be sold, or his heirs, executors, administrators, or successors in interest, at any time after the purchase thereof by the county and before the county has disposed of the same, has the right to redeem ■ such real estate by paying to the county treasurer of the county wherein the real estate is situated, the amount of the original tax or taxes for which said property was sold, (plus certain other items). * * * Upon payment of the amount required to be paid as herein provided the county treasurer must issue a tax deed to the redemptioner, and, upon the giving of such deed, any tax deed, or tax sale or delinquency entry to the county shall become null and void and all right, title, and interest acquired by the county under or by virtue of such tax deed, or tax sale, or delinquency entry, shall cease and terminate.”

The redemption deed was not a tax deed given by the county upon a sale to a purchaser. It was a purported deed issued to an alleged redemptioner in consideration of the payment of delinquent taxes. It was executed by Bannock County by the Chairman of the Board of County Commissioners instead of being executed by the county treasurer as provided by the statute. If properly executed in favor of a qualified redemptioner, such a redemption deed, under the quoted statute, would merely cancel and terminate all rights of the county in and to the land acquired by virtue of the treasurer’s tax deed.

The mortgage provides for reimbursement to mortgagee for the payment of any taxes. The delinquent taxes paid by respondent became part of the indebtedness secured by the lien of respondent’s mortgage. Eaton v. McCarty, 34 Idaho 747, 202 P. 603; Gillette v. Oberholtzer, 45 Idaho 571, 264 P. 229; Union Cent. Life Ins. Co. v. Nielson, 62 Idaho 483, 114 P.2d 252.

From the foregoing, it follows that the court erred in decreeing that respondent is the owner of an undivided one-half interest in the land in question and that appellants are required to pay the taxes thereon.

The findings of fact recite that the cause of action was dismissed as to all defendants except respondent Ray. This is erroneous as the record shows the default of all such defendants was entered; and appellants were entitled to decree against them.

That part of the decree refusing to quiet title in appellants as against respondent’s mortgage is affirmed. That part of the decree quieting title to an undivided one-half interest in the lands in question in respondent and requiring appellants to pay all the taxes thereon is reversed. The cause is remanded with direction to enter judgment in accordance with this opinion. No costs allowed.

GIVENS, C. J., and TAYLOR, J., concur.