Title: CHARLES G. VAN PATTEN, JR., AND MARTHA LOUISE VAN PATTEN v. CHARLES VAN PATTEN AND WESTAMERICA MORTGAGE COMPANY, A Colorado Corporation

State: wyoming

Issuer: Wyoming Supreme Court

Document:

CHARLES G. VAN PATTEN, JR., AND MARTHA LOUISE VAN PATTEN v. CHARLES VAN PATTEN AND WESTAMERICA MORTGAGE COMPANY, A Colorado Corporation1989 WY 219784 P.2d 218Case Number: 89-93Decided: 12/15/1989Supreme Court of Wyoming
CHARLES G. VAN PATTEN, 
JR., AND MARTHA LOUISE VAN PATTEN, APPELLANTS (PLAINTIFFS),

v.

CHARLES VAN PATTEN AND 
WESTAMERICA MORTGAGE COMPANY, A COLORADO CORPORATION, APPELLEES 
(DEFENDANTS).

Appeal from the District 
Court, PlatteCounty, William A. Taylor, J. 

Fred W. Phifer, 
Wheatland, for 
appellants.

Richard L. 
Williams of Williams, Porter, Day & Neville, P.C., Casper, for appellee Westamerica Mortg. 
Corp.

Before CARDINE, C.J., THOMAS and MACY, JJ., and 
RAPER and BROWN, Retired JJ.

BROWN, Justice, 
Retired.

[¶1.]     The trial court 
determined that appellee Westamerica Mortgage Company (Westamerica) had a 
purchase money mortgage superior to appellants' equitable 
title.

[¶2.]     Appellants assert two 
issues:

1. There is no evidence 
to support the Court's finding that Defendant's mortgage was a purchase money 
mortgage.

2. Is Defendant's 
Mortgage superior to Plaintiffs' equitable title?

[¶3.]     Westamerica states that 
the issues are:

1. Was the trial court 
correct in finding that the mortgage from Charles Van Patten to Westamerica 
Mortgage Company was a purchase money mortgage?

2. Did the mortgage to 
Westamerica Mortgage Company have priority over any claims arising through its 
mortgagor, Charles Van Patten?

3. Was the mortgage to 
Westamerica Mortgage Company superior to the      equitable title 
claimed by the appellants?

[¶4.]     We will reverse and 
remand.

[¶5.]     This case was commenced 
by appellants filing a quiet title action against appellees on January 7, 1988. 
The matter was tried to the court sitting without a jury on stipulated facts. 
The agreed facts are:

[¶6.]     Appellee Charles Van 
Patten is the son of Charles G. Van Patten, Jr. and Martha Louise Van Patten 
(appellants).

[¶7.]     On June 10, 1977, 
Charles Van Patten and Julia Van Patten entered into a contract for deed wherein 
Marvin L. Roberts, et al., were sellers and Charles Van Patten and Julia Van 
Patten were buyers. The contract for deed covered Lot Number 11 in Western 
Acres, a subdivision in the N 1/2 NW 1/4 of Section 35, Township 24 North, Range 
68 West, 6th P.M., Platte County, Wyoming, and encompassed approximately five 
acres. This contract for warranty deed was recorded on May 9, 1978, in Book 11, 
, office of the CountyClerk, Platte County, Wyoming.

[¶8.]     In 1977 or 1978, 
appellants purchased one acre from appellee Charles Van Patten out of the 
property which is the subject matter of this action, for the sum of $2,000. In 
1979, appellants purchased an additional one and one-half acres out of Tract 11 
for an additional $3,000. No deed to either of these parcels was ever executed 
or delivered to appellants by appellee Charles Van Patten. Appellants have been 
living in their home on said property continuously since 1977. On May 17, 1983, 
Julia Van Patten quitclaimed all of her interest in Tract 11 to appellee Charles 
Van Patten.

[¶9.]     In the summer of 1983, 
appellee Charles Van Patten applied for and obtained a loan from Westamerica, 
which loan was secured by a mortgage on Tract 11. The mortgage was dated July 
22, 1983, and recorded July 29, 1983, in Book 245, , records in the office of 
the County Clerk, Platte County, Wyoming. In connection with this loan 
application, a survey was completed on Tract 11, a copy of which was supplied to 
Westamerica showing two structures on the property. An appraisal was also done 
on the property in question, part of which included pictures of two structures 
on the property. Appellee Charles Van Patten executed an owner's affidavit 
stating "[t]hat there is no person in actual possession or having a right to 
possession of said property or any part thereof, other than said 
owner(s)."

[¶10.]  Appellee Charles Van Patten defaulted on 
repayment of the loan to Westamerica, and Westamerica foreclosed on its 
mortgage. A sheriff's sale was held on January 12, 1988, and Westamerica was the 
high bidder at the sale for the property.

[¶11.]  Appellants were not aware that there was 
a mortgage on the property until 1987. In addition to the $5,000 which the 
appellants paid to their son, appellee Charles Van Patten, for the land, 
improvements were also made.

[¶12.]  After Westamerica answered, both 
appellants and Westamerica made motions for summary judgment. These motions were 
denied and the case proceeded to trial on the stipulated 
facts.

[¶13.]  After trial, the trial court ruled in 
favor of appellees and dismissed appellants' complaint with prejudice. The basis 
of the court's judgment in favor of appellees was set out in the court's 
decision letter1 which stated that Westamerica's 
purchase money mortgage was superior to appellants' equitable 
title.

[¶14.]  If the mortgage here was in fact a 
purchase money mortgage, it would be entitled to a preference over certain 
claims or liens arising through the mortgagor, although they were prior in 
time.

A mortgage on land 
executed to secure the purchase money by a purchaser of the land 
contemporaneously with the acquisition of the legal title thereto, or afterward, 
but as a part of the same transaction, is a purchase-money mortgage. The deed 
and mortgage need not be executed at the same moment, or even on the same day, 
to make them contemporaneous, within the meaning of this rule, provided they are 
parts of one continuous transaction, and so intended to be. A mortgage given to 
secure money to be applied on the purchase price of land, although given after 
the execution of a deed of the property mortgaged, the mortgagee paying the 
money to a third person with whom the deed had been deposited in escrow until 
the payment of the purchase price, and securing the deed and delivering it to 
the mortgagor, is nevertheless a purchase-money mortgage. Moreover, the fact 
that a mortgage is made to a person other than the vendor does not prevent its 
being a purchase-money mortgage.

55 Am.Jur.2d 
Mortgages § 13 at 202-03 (1971) (citations omitted).

A mortgage on land 
executed to secure the purchase money by a purchaser of the land 
contemporaneously with the acquisition of the legal title thereto, or afterward, 
but as a part of the same transaction, is a purchase-money mortgage, and is 
entitled to a preference as such over all other claims or liens arising through 
the mortgagor although they are prior in point of time. It has also been held 
that a mortgage given to secure money to be applied on the purchase price of 
land, although given after the execution of a deed of the property mortgaged, 
the mortgagee paying the money to a third person with whom the deed had been 
deposited in escrow until the payment of the purchase price, and securing the 
deed and delivering it to the mortgagor, is a purchase-money mortgage, and takes 
precedence over other liens and claims.

Id., § 348 at 408 (citations 
omitted). See also Powers v. Pense, 20 Wyo. 
327, 123 P. 925 (1912); Emery v. Ward, 68 Colo. 373, 191 P. 99 
(1920).

A purchase-money mortgage 
generally takes precedence over all existing and subsequent claims and liens 
against the mortgagor as to the property sold. Omaha Loan & Bldg. Assn. v. 
Turk, [146 Neb. 859, 21 N.W.2d 865 
(1946)].

A purchase-money mortgage 
is given for the unpaid purchase money on a sale of land as part of the same 
transaction as the deed, and its funds are actually used to buy the 
land.

Commerce Savings 
Lincoln, Inc. v. Robinson, 213 Neb. 596, 331 N.W.2d 495, 497-98 
(1983).

"To constitute a 
purchase-money mortgage, the money must have been loaned with the express 
purpose and intention that it should be used in paying the purchase price of the 
land." Lorenz Co. v. Gray, 136 Or. 605, 298 P. 222, 225 (1931). A portion of 
Lorenz Co. was overruled in Anderson v. Chambliss, 199 Or. 400, 262 P.2d 298 (1953); however, the rule we quoted above was not 
disturbed.

"[T]he true test as to 
when a mortgage is a purchase-money mortgage, is not whether it is executed to 
the vendor, but whether the proceeds are to be used to apply on the purchase 
price." Wermes v. McCowan, 286 Ill. App. 381, 3 N.E.2d 720, 722 (1936). See 
also Ely Sav. Bank v. Graham, 201 Iowa 840, 208 N.W. 312, 314 (1926); American National Bank of Hutchinson v. Gorham, 153 Kan. 145, 109 P.2d 65, 66 (1941); Syracuse Savings & 
Loan Association v. Hass, 134 Misc. 82, 234 N.Y.S. 514, 517 
(1929).

The trial court's 
judgment was based on its finding that Westamerica had a purchase money mortgage 
on the property involved in this action. The evidence was insufficient to show a 
purchase money mortgage. Evidence of a purchase money mortgage was deficient in 
that it did not show that the money supplied by Westamerica was used to pay for 
the land involved in this action. Furthermore, there was no evidence to show 
that the land had ever been paid for.

[¶15.]  In its brief, Westamerica 
says:

Given the date of the 
deed, and recordation of the deed at the same time as the mortgage was recorded, 
it was certainly reasonable for the trial court to make the inference that the 
loan proceeds were used to pay off the contract for deed. In the proceeding 
before this Court, Westamerica's evidence must be given every favorable 
inference which may be reasonably and fairly drawn from it. Sinclair Refining 
Co. v. Redding, 439 P.2d 20, 22 (Wyo. 
1968).

Westamerica is 
asking this court to substitute an inference for the most critical element of 
proof of a purchase money mortgage. We cannot properly do 
this.

[¶16.]  In their briefs, the parties cite 
Wyoming 
statutes. They also allude to theories and defenses other than the basis of the 
trial court's determination. We need not discuss these statutes, theories and 
defenses. We confine this opinion to the specific determination of the trial 
court, that is, that Westamerica had a purchase money 
mortgage.

[¶17.]  Reversed and remanded to the trial court 
for consideration of appellants' quiet title action and other matters raised by 
the pleadings.

THOMAS, J., filed a specially 
concurring opinion.

RAPER, Retired J., filed a 
specially concurring opinion.

FOOTNOTES

1 The trial court's 
decision letter states in pertinent part:

Gentlemen:

The Court must agree with 
Mr. Williams that the [appellants] never obtained title to the property which is 
a prerequisite to the applicability of Section 1-32-207 of the Wyoming 
Statutes.

The [appellants'] son did 
not have title himself until he negotiated the purchase money mortgage in 1983, 
several years after the sale to his parents. Until 1983, the son could not 
deliver legal title to his parents.

Therefore, the Court 
finds [Westamerica's] mortgage to be superior to [appellants'] equitable 
title.

Ingratitude, thou 
marble-hearted fiend

More hideous when thou 
show'st thee in a child,

Than the sea 
monster;

How sharper than a 
serpent's tooth it is

To have a thankless 
child!!

Shakespeare

 King Lear

THOMAS, Justice, specially 
concurring.

[¶18.]  I am compelled to concur in the reversal 
and remand of this case according to the majority opinion. I must confess that I 
do so somewhat reluctantly. The entire record tends to support what the district 
court did and would justify affirmance if it could be considered. Unfortunately, 
some of that information was presented in support of the bank's motion for 
summary judgment, and it was not duplicated in the stipulation of facts upon 
which the district court decided the case. The court well might have been 
entitled to judicially notice those matters that came from public records, but 
there is no indication from the record that it did so. It is difficult for me to 
countenance the necessity for further proceedings in the district court, but 
there is no question that the disposition by this court is technically 
correct.

[¶19.]  I would have no difficulty sustaining the 
judgment of the district court on the entire record. Once the district court 
denied the cross motions for summary judgment, however, the information which 
was presented in support of those motions no longer could be considered at the 
trial on the merits absent some consent by the parties. The only information 
upon which the court could decide the case on the merits was that set forth in 
the "Stipulated Facts." That stipulation contains no information from which the 
inference could be drawn that the mortgage taken by the bank was a purchase 
money mortgage. It might have been possible for the court to judicially notice 
those matters of public record from which that inference could be made, but Rule 
201(e), W.R.E., requires that a party is entitled to be heard if the court takes 
judicial notice of any fact, and that opportunity was not afforded the Van 
Pattens in this instance.

[¶20.]  It is indeed unfortunate that this case 
must be returned to the district court so that a record can be made that will 
lead to the result already reached. It is my impression that the bank will have 
no difficulty in establishing that the mortgage was a purchase money mortgage. 
Once those facts are present, the majority opinion demonstrates that the rights 
of the bank to the premises in question are superior to the equitable interest 
of the Van Pattens. We have succeeded only in making the case more expensive to 
the parties and more time consuming for the trial court. In the light of this 
record, I see no way to avoid that result.

RAPER, Justice, Retired, 
specially concurring.

[¶21.]  I concur in most of the views of the 
majority, but believe we can and should go further and settle the case 
completely rather than remanding for further consideration by the trial judge. I 
do not agree to a remand for further hearing.

[¶22.]  I am convinced that a person in 
possession at the time a mortgage is given by another has a right superior to 
that of the mortgagee under the circumstances of this case when no inquiry was 
made by the mortgagee of the interests of appellants, parents of the mortgagor, 
who had paid the mortgagor for the land but their son never got around to giving 
his parents any sort of conveyance other than delivering possession. The 
appellants have enjoyed that possession since 1977 and have expended several 
thousand dollars in making improvements. They reside on the property and claim 
against all others; the appellees in particular.

[¶23.]  Early on the Wyoming Supreme Court stated 
the rule to be that:

"Possession of real 
property by a person other than the vendor is notice to the purchaser of 
whatever rights or interests, legal or equitable, in the fee which the occupant 
has or claims and which would be disclosed on a proper and reasonable inquiry of 
him. Indeed, such possession is notice of all facts in reference to the title 
which due and diligent inquiry of the occupant would disclose. Therefore 
possession is notice of the rights of those under whom the possessor 
claims."

Healy v. 
Wostenberg, 47 Wyo. 375, 399, 38 P.2d 325, 333-34 (1934) 
(quoting 66 C.J. 1167).

[¶24.]  No reasonable inquiry whatsoever was made 
to determine the occupants', appellants', claims of right. As I see it, the 
mortgagor's statement that he owns the property and possesses the same is 
insufficient and the survey showing two buildings is not an inquiry of who 
occupies those buildings. It is my view that inspection and inquiry would have 
revealed the equitable claims of appellants, the persons occupying the 
buildings.

[¶25.]  Later, in Stryker v. Rasch, 57 Wyo. 34, 42, 112 P.2d 570, 573 (1941), it was said "a mortgagee should take notice of the rights of 
the person who is in possession of the premises at the time when he takes his 
mortgage."

[¶26.]  It seems to me that the proposition was 
solidly settled in Soppe v. Breed, 504 P.2d 1077, 1080 (Wyo. 1973) where it was 
held that in order to avail themselves of the recording statute, subsequent 
purchasers to cut off the rights of prior claimants, have the burden of proving 
they were purchasers in good faith and without notice. Possession by others puts 
the subsequent claimant on notice and requires reasonable investigation of the 
rights of such possessors.

[¶27.]  To repeat what has already been said, the 
mere presence of buildings shown by survey proves nothing. A statement by the 
mortgagor that no one else was entitled to possession is self-serving and may be 
fraudulent, not only as to the mortgagee but his parents as well, who had paid 
out cash to the extent of $5,000 and possessed the property. Not only that, it 
adds nothing to the covenants already included in the 
mortgage.

[¶28.]  All the foregoing is bolstered by many 
other Wyoming 
cases on the subject. See also Arndt v. Sheridan Congregation of Jehovah's 
Witnesses, Inc., 429 P.2d 326, 329 (Wyo. 1967); 
State ex rel. State Highway Commission v. Meeker, 75 Wyo. 210, 294 P.2d 603, 
605 (1956).

[¶29.]  Nor does the statute of frauds apply 
where both parties have performed an oral contract for the sale of lands. 
Nussbacher v. Manderfeld, 64 Wyo. 55, 186 P.2d 548, 553 (1947); Rohrbaugh v. Mokler, 26 Wyo. 514, 188 P. 448, 451 (1920). The statute 
of frauds applies only to executory contracts and not to agreements which have 
been completely executed on both sides. Nussbacher, 186 P.2d 548.

[¶30.]  Here the purchase money was paid to 
appellee son and possession of the land was delivered to appellants and they 
acted on the delivery by expending several thousand dollars in improvements and 
occupying the residence they developed thereon. No reasonable investigation was 
made by appellee Westamerica to develop these important and ruling 
facts.

[¶31.]  I would reverse on both grounds; that 
proposed by the majority and as I have set out. I see no need to refer the case 
back to the trial judge for any further consideration. He heard and decided the 
case on stipulated facts, as we have. The conclusion is just, as contemplated by 
Koontz v. Town of South Superior, 716 P.2d 358 
(Wyo. 1986) 
with respect to cases decided on stipulated facts.

[¶32.]  The title will be settled in that part of 
the property occupied by appellants and the appellee Westamerica can proceed to 
foreclose on the balance of land covered by the mortgage and settle title to the 
balance of the land. This accomplishes the purpose of appellants' quiet title 
action.