Case Name: MOSLEY et al. v. MAGNOLIA PETROLEUM CO. et al.
Court: Supreme Court of New Mexico
Jurisdiction: New Mexico
Decision Date: 1941-06-10
Citations: 45 N.M. 230
Docket Number: No. 4312
Parties: MOSLEY et al. v. MAGNOLIA PETROLEUM CO. et al.
Judges: MABRY, J., concurs.
Reporter: New Mexico Reports
Volume: 45
Pages: 230–287

Head Matter:
114 P.2d 740
MOSLEY et al. v. MAGNOLIA PETROLEUM CO. et al.
No. 4312.
Supreme Court of New Mexico.
June 10, 1941.
G. L. Reese, Sr., of Roswell, G. L. Reese, Jr., of Carlsbad, and Fred O. Jaye, qf De Leon, Tex., for appellants.
Atwood & Malone, of Roswell, Palmer Bradley, of Houston, Tex., and Hervey, Dow, Hill & Hinkle, of Roswell, for appellees.

Opinion:
PER CURIAM.
Upon consideration of the second motion for rehearing, previous opinions are withdrawn and the following substituted:
BRICE, Chief Justice.
This action was instituted by appellants ,(who will be styled plaintiffs) to quiet title to an undivided one-half interest in the oil, gas and other minerals in and under 160 acres of land situated in Lea County, New Mexico; and to cancel certain deeds purporting to transfer mineral interests therein to appellees (who will be styled defendants) and their predecessors in title.
The plaintiffs, who held by patent from the United States, pleaded in detail a chain of title from them to the defendants, and alleged that a certain deed purporting to have been executed by them to one Burke, through which each pf the defendants claims a one-fourth interest in said minerals, was a false, forged and altered instrument, and passed no title; by reason of which all subsequent conveyances in each of the defendants' chain of title are void; that title had never passed from them.
The defendants pleaded the general issue, and specially, in substance as follows:
The plaintiffs knew, a year prior to the date defendants' predecessor obtained a deed from Burke, and more than seven years prior to the filing of this suit in the district court, that the Burke deed had been altered in the manner hereinafter stated, and that the altered deed was of record in the deed records of Lea County. They knew that some interested person might at any time purchase this property, relying upon the apparent validity of the Burke deed, and the fact of its alteration would not be disclosed by the record or become known to him unless plaintiffs should seasonably institute legal proceedings such as this suit, or otherwise make a public record of their claim, which they failed to do.
That'defendants and their predecessors in title had no knowledge of any defect in said deed or of any fact that would put them on inquiry regarding it; that they purchased said interests in reliance upon the title as disclosed by the public records and the opinion of reputable attorneys that' the title as thus disclosed was good; that they were without knowledge, actual or constructive, that plaintiffs claimed any interest therein; that the plaintiffs, from.the date of the sale to Asbury, 'knew that the property was steadily increasing in value; that at the date this suit was instituted (which was after oil had been discovered in the vicinity of the land) the property was worth many thousands of dollars.
That it was the duty of the plaintiffs, under the circumstances stated, to protect unknown purchasers against the hidden defect in the Burke deed by making a public record of their claim, either by court action or otherwise; so that any person interested in its purchase would be advised thereof and not necessarily rely upon the record of the void deed, and thereby be induced to purchase said property in the belief that the deed was genuine; which duty they failed to perform.
That by reason of the facts stated the plaintiffs are estopped, and are barred by their laches from maintaining this action, or to establish title to the property in suit as against defendants.
The plaintiffs replied to the defenses of estoppel and laches, in substance, that when they discovered the record of "the false, forged and materially altered deed" in June, 1928, in order to protect their title and show by the public record their claim to the property the - plaintiff, Ennis C. Mosley, on the 7th of June, 1928, executed, acknowledged and delivered a mineral deed conveying an undivided one-half interest in the minerals in said lands to plaintiff Mrs. Nellie E. Mosley, which was placed of record on that date; and thereafter on July 2, 1928, in order to give further notice of plaintiffs' claim, the plaintiff Nellie E. Mosley executed and delivered to plaintiff Ennis C. Mosley a like conveyance, transferring the same property back to him, which deed was duly acknowledged and placed of record on the 3rd day of July, 1928. That at the time of the purchase of said property by defendants and their predecessors these deeds were of record. That in June, 1928, they employed attorneys to protect their interests by filing suit to cancel the Burke deed, and were advised by said attorneys, after a delay of two or three months, that plaintiffs did not have a cause of action. That they did not again employ attorneys, or make arrangements to sue, until a short time before this action was instituted. That defendants had notice of - plaintiffs' claim when they purchased said property, and had no legal right to rely alone upon the record of said altered deed.
The facts, as found by the trial court, are, in substance, as follows:
That prior to 1927 plaintiffs were the owners in fee simple of the 160 acres of land in question, evidenced by a patent from the United States, dated August 10, 1921, and recorded in 1926. They sold the surface rights, and leased the reserved mineral interests. Thereafter, on November 29, 1927, they agreed to sell and convey to one Asbury an-undivided three-fourths interest in the underlying minerals for $800, subject to the oil and gas lease mentioned. In the execution of this agreement, and at Asbury's suggestion, two deeds were signed and acknowledged by plaintiffs, one conveying to Asbury an undivided one-half of the mineral interests mentioned, and the other an undivided one-fourth thereof.
By agreement of the parties the deeds were sent to a bank at Cisco, Texas, to be held by it as escrow agent for thirty days, during which time Asbury had the privilege of paying the purchase price and taking the deeds; failing which, the deeds were to be returned to plaintiffs by the bank. Upon receipt of the deeds by the Cisco bank, Asbury tortiously secured possession of the one conveying the larger interest, after which (according to ¡defendants' brief and the findings of the court)—
" Asbury and Bates took the one-half deed to Bates' office at Cisco and by the use of a chemical eradicator removed the name of Asbury, as grantee, and inserted the name of E. T. Burke. They also removed the figure ¡1/z in four places where it had been written in -the deed to indicate the interest conveyed and wrote in lieu thereof the word 'one-half'. In like manner they erased the land description 'SEJ4' and wrote instead 'Southeast Quarter.' The consideration shown in the deed was Five Hundred Dollars written in words and figures, and this was changed to Ten Dollars. The wife of Mosley had signed the deed 'Nellie E. Mosley;' the initial 'E' was removed from the signature and from the certificate of acknowledgement. The word 'who' in the certificate of acknowledgement was changed to 'her' in the last line.
"After these alterations were made in the deed, Asbury and Bates took the deed and abstract to Abilene, some fifty miles away, and at Burke's direction, submitted them to Burke's attorney for a title examination. The abstract contained only a few entries and the examination was completed and the title opinion written and delivered to Burke on the same day. The title was approved and the purchase price of $800 for the one-half interest, was paid by Burke on the same day. Asbury and Bates returned to Cisco the same day and took up the Mosley draft with the proceeds from the sale to Burke, and thereupon received the one-fourth deed, which had remained in the bank
"The altered deed which was delivered to Burke was forwarded for record by him and was filed for record in Lea County, on December 14, 1927."
Before J. H: Reynolds purchased said property from Burke for Cranfill & Reynolds (now defendant General Crude Oil Co.), he had made a complete abstract of the title thereof and caused the same to be examined by an employee in their behalf.
Before the defendant Magnolia Petroleum Corporation purchased an interest from Cranfill & Reynolds, it had a complete abstract of title thereof examined by its attorney, who had none of the original papers before him and none of the alterations in the Burke deed were shown by said abstract, and it purchased without knowledge of any of the changes in the Burke deed, or claims of plaintiffs.
The alterations in the Burke deed were made without the knowledge of the Cisco bank, and plaintiffs first learned of them by an inspection of the deed records of Lea County, about June 22, 1928; but they never knew that these alterations were made in the deed while it was tortiously in Asbury's possession, and that the deed had never been delivered, until so stated by defendants' counsel at the opening of the trial of this suit.
At the time Asbury contracted to buy the property it was of the value of $800, and thereafter steadily increased in value, and at the time this suit was filed it was worth many thousands of dollars.
In June, 1928, plaintiffs contracted to convey to one Payne an undivided one-half interest in the minerals in said land, but were informed that according to the record title they had theretofore conveyed three-fourths to others. It was at this time they discovered the alteration of the Burke deed by an inspection of the deed records of Lea County, and immediately employed attorneys to institute suit to cancel it, who later advised them that they did not have a cause of action against Burke.
Plaintiff Ennis C. Mosley conveyed to his wife, by deed recorded June 7, 1928, an undivided one-half interest in the minerals under the lands; and plaintiff Mrs. Mosley reconveyed the same property to plaintiff Mosley, by deed filed for record July 3, 1928.
Some time thereafter (the date was not given) the plaintiffs retained G. L. Reese, Sr., an attorney of Roswell, New Mexico, to institute this suit in the district court, but nothing was done until the present suit was filed on the 16th day of April, 1935, after the discovery of oil near the property in suit.
That since the institution of this action the defendants have procured a quit claim deed from Asbury, conveying the property in suit to Burke.
Finding of Fact No. 9 is as follows: "That the price received for said mineral interests was the fair market value thereof at the time of the sale, but that in the year 1936, three oil wells were brought in on said land by the lessee thereof, the Humble Oil & Refining Company; and that the defendants herein and their successors in interest have collected the annual rentals thereof continuously since said date;
Plaintiffs urge that the following part thereof has no support in the evidence: "That the defendants herein and their successors in interest have collected the annual rentals thereof continuously since said date." We understand from reading the trial court's opinion that he intended to find that the defendants and their predecessors in title had collected the annual rentals of $10 continuously since the alleged sale to Asbury. The only evidence regarding this matter was a record of the lessee, introduced by stipulation of the parties, which established that plaintiffs collected the rentals for the years of 1928, 1929 and 1930, and the defendants collected them thereafter. Obviously, as made, the finding is not supported by any evidence and it must be cancelled. But the facts stipulated by the parties (as stated above) will be accepted as true and so considered in our disposition of the case.
Finding No. 11 is cancelled because it is not a finding of fact, but a statement regarding the testimony of witnesses.
Certain alleged errors are based upon statements in the trial court's opinion. The opinion is not a "decision" as contemplated by Sec. 105-813, N.M.Sts.1929 (now Supreme Court Rule 105-813); and error cannot be predicated thereon.
The decision (findings of fact and conclusions of law) is the basis upon which the judgment of the court rests (Victor Gold & Silver Mining Company v. Nat'l Bank, etc., 18 Utah 87, 55 P. 72, 72 Am.St.Rep. 767); the opinion consists of the reasons given for the judgment and findings. It may be referred to as an aid in construing ambiguous findings (Lepper et al. v. Wisconsin Sugar Co., 146 Wis. 494, 128 N.W. 54, 131 N.W. 985) and for the argument and reasons given in support of findings, conclusions, rulings and holdings (Morehouse v. Brooklyn Heights R. Co., 185 N.Y. 520, 78 N.E. 179, 7 Ann.Cas. 377, 379); but the rights of the parties are controlled by the findings as stated in the decision of the court, if a decision is filed; and we are not permitted to add to or take from them by resort to the opinion. Brothers v. United States, 250 U.S. 88, 39 S.Ct. 426, 63 L.Ed. 859; Reibel v. Mueller, 177 Minn. 602, 225 N.W. 924, 66 A.L.R. 1; United States v. Sioux City Stock Yards Co., 8 Cir., 167 F. 126; Fleischmann C. Company v. United States, 270 U.S. 349, 46 S.Ct. 284, 70 L.Ed. 624; Miller v. Marks, 46 Utah 257, 148 P. 421; Boehm v. Wermuth, 194 Wis. 82, 215 N.W. 818; Schmoldt v. Loper, 174 Wis. 152, 182 N.W. 728; Keeley et al. v. Ophir, etc., Co., 8 Cir., 169 F. 598; Scholle v. Finnell, 173 Cal. 372, 159 P. 1179; Goldfield v. Roger, 8 Cir., 249 F. 39; Stock Growers' Finance Co. v. Hildreth, 30 Ariz. 505, 249 P. 71. If, at times, we have, in our discretion, ruled upon statements in the bill of exceptions or opinion, presented and accepted by the parties as a finding of fact, it was not because the practice was proper or approved of by us, but because it was acquiesced in by the parties. Wormley v. Grand Rapids Trust Co., 232 Mich. 680, 206 N.W. 307. The trial court concluded in his opinion, though not by his decision, that defendants were "bona fide purchasers for value without notice," and the parties have treated it as a part of the decision, and it is so presented here. We will so treat the question.
The court's conclusions of law upon the facts stated are as follows:
"That as between the plaintiffs and the defendants Magnolia -Petroleum Company and General Crude Oil Company, that the delivery of the deed to the one-half interest was made, as a matter of law, when the bank delivered it into the possession of Asbury, and it should be considered that the material alterations therein, to-wit, that of the substitution of the name of Burke as grantee, was made after delivery;
' "That the plaintiffs have parted with their title to said mineral interest, and further, that by reason of their laches, they cannot maintain this action."
The trial court erred in concluding that the rule of "relation back to the first delivery" applies to the facts of this case.
A well known authority (4 Thompson on Real Property, Sec. 3953) has stated that "Whether an innocent purchaser from a grantee who wrongfully obtained a deed deposited in escrow without performing the condition, thereby acquired title to the property, is a question upon which there is much conflict of authority;" and (Id. Sec. 3953) "the better opinion', however, upon principle, and that supported by the weight of authority, is that a subsequent purchaser in good faith acquires a good title though his grantor had received his deed from a depositary without performing the condition upon which such deed was to be delivered." An amazing statement, for not a single authority cited by the text writer in support of the last proposition sustains his conclusion. The only one that even by dictum supports it is Hubbard v. Greeley, 84 Me. 340, 24 A. 799, 800, 17 L.R.A. 511, from which the author quotes, and the second syllabus of which supports the text; but the court stated: "We rest our decision upon the ground that the deed was, in fact, delivered to the grantees' attorney as such, and that such' a delivery is equivalent to a delivery to the grantee himself."
It was upon these authorities, and the case of Somes v. Brewer, 2 Pick., Mass., 184, 13 Am.Dec. 406 (cited in support of the text mentioned, but which it does not support), that the trial court concluded that the defendants were innocent purchasers, and therefore delivery related back to the deposit of the escrow, or "first delivery."
The doctrine of relation back to the first delivery of an escrow has application to those cases where by reason of incidents happening between the first and second delivery, such fiction is necessary to give the deed effect to prevent injuries that would result from legal impediments or the like, and thereby effectuate the intention of the parties (Devlin on Real Estate Sec. 328) ; as in cases where either the grantor (Stanton v. Miller, 58 N.Y. 192) or the grantee (Prewitt v. Ashford, 90 Ala. 294, 7 So. 831) died after the first delivery; or where, between the two deliveries, one of the parties becomes insane and is incapable of carrying out an agreement (Simpson v. McGlathery, 52 Miss. 723); or where a woman marries between the date of the deposit of the first delivery and the second and thereby incapacitates herself to make a deed (Wellborn v. Weaver, 17 Ga. 267, 63 Am.Dec. 235) ; or where the grantor has sold to a third person, who had notice of the escrow, after the first delivery, and the grantee carried out the conditions of' the escrow (Conneau v. Geis, 73 Cal. 176, 14 P. 580, 2 Am.St.Rep. 785). The rule has no application to a case where a grantee wrongfully obtains possession of the instrument from the escrow holder, even though thereafter ratified. In such cases title passes as of the date of the ratification. Carlisle v. National Oil & Development Co., 108 Okl. 18, 234 P. 629; Waldock v. Frisco Lumber Co., 71 Okl. 200, 176 P. 218; and see generally annotation in 117 A.L.R. beginning at page 69. It is the general rule that where a. deed is executed and placed in escrow to be delivered upon a condition subsequent, it will be given effect as of the date of the final or effective delivery. May v. Emerson, 52 Or. 262, 96 P. 454, 96 P. 1065, 16 Ann.Cas. 1129; Prutsman v. Baker, 30 Wis. 644, 11 AmRep. 592; anno. 117 A.L.R. page 69 et seq.
The deed in question was void for three reasons: First, it was never delivered; second, it was fraudulently obtained from the escrow holder without complying with the escrow agreement (Roberts v. Humphreys, 27 N.M. 277, 199 P. 1006; Otero v. Albuquerque, 22 N.M. 128, 158 P. 798 and anno. 48 A.L.R. 405 et seq.); and; third, the unauthorized substitution of Burke's name as grantee for that of As-bury was a material alteration of an undelivered deed, and destroyed its force as a conveyance; and defendants who purport to have paid value, without knowledge of the invalidity of the Burke deed, are not protected, Roberts v. Humphreys, supra; Sipes v. Perdomo et al., 118 Okl. 181, 247 P. 689; King v. De Tar, 112 Neb. 535, 199 N.W. 847; 16 Am.Jur. "Deeds" Sec. 29; 2 Am.Jur. "Alteration of Deeds" Sec. 31; Restatement of Law of Contracts, Sec. 434.
We stated in Otero v. Albuquerque, supra [22 N.M. 128, 158 P. 799] : "In the present case, however, the delivery of the deed was procured by fraud practiced upon the escrow holder. The deed, therefore, was void, and transferred no title. 'A deed, which has been surreptitiously and fraudulently obtained from the grantor without his knowledge or consent, does not, even as against a subsequent purchaser without notice, transfer title. A deed purloined or stolen from the grantor, or possession of which was fraudulently or wrongfully obtained from him without his knowledge, consent, or acquiescence, is no more effectual to pass title to the- supposed grantee than if it were a total forgery, and an instrument of the latter kind had been spread upon the record.' "
To the same effect are: Spotts et al. v. Whitaker et al., Tex.Civ.App., 157 S.W. 422; Wiggenhorn v. Daniels, 149 Mo. 160, 50 S.W. 807; McGinn v. Tobey, 62 Mich. 252, 28 N.W. 818, 4 Am.St.Rep. 848; Jackson v. Lynn et al., 94 Iowa 151, 62 N.W. 704, 58 Am.St.Rep. 386; Balfour v. Hopkins, 9 Cir., 93 F. 564; Houston Land & Trust Co. v. Hubbard, 37 Tex.Civ.App. 546, 85 S.W. 474; Steffian et al. v. Milmo Nat'l Bank, 69 Tex. 513, 6 S.W. 823; Clevenger v. Moore et al., 126 Okl. 246, 259 P. 219, 54 A.L.R. 1237; Houston v. Forman et al., 92 Fla. 1, 109 So. 297, 48 A.L.R. 401 and anno, at page 430. Both the deed and its record were nullities. Scheer v. Stolz, infra; Meley v. Collins, infra; Epps v. McCallum Realty Co., 139 S.C. 481, 138 S.E. 297; Stone v. French et al., infra; 16 Am.Jur. "Deeds" Sec. 21.
See also the following cases, in each of which it was held that a forged instrument and its record are utterly void, and its record is not constructive notice, 2 Devlin on Deeds, 3d Ed., Sec. 726; Scheer v. Stolz, 41 N.M. 585, 72 P.2d 606; and one who purchases relying upon the record alone, though without knowledge of the invalidity of the instrument, is not protected as an innocent purchaser, Catto v. Hollister, 39 N.D. 1, 166 N.W. 506, though the deed had been of record for years with the owner's knowledge, Meley v. Collins, 41 Cal. 663, 10 Am.Rep. 279; Pom.Eq.Jur., 3d Ed., Sec. 918; Chandler v. White, 84 Ill. 435; Stone v. French, 37 Kan. 145, 14 P. 530, 1 Am.St.Rep. 237; Com'rs Court v. Burke, Tex.Civ.App., 262 S.W. 94; West v. Houston Oil Co., 56 Tex.Civ.App. 341, 120 S.W. 228; Chamberlain v. Showalter, 5 Tex.Civ.App. 226, 23 S.W. 1017; Kypadel, etc., Co. v. Millard, 165 Ky 432, 177 S.W. 270; Gulf Coal & Coke Co. v. Alabama Coal & Coke Co., 145 Ala. 228, 40 So. 397.
But we need not multiply authorities, the defendants agree to these general rules. They state: "It is a general rule, of course, that a change in the name of the grantee in a deed befo,re delivery without consent of the grantor voids the transfer. There is no controversy about the rule. It is also a general rule, as stated by this court in the case of Roberts v. Humphreys, 27 N.M. 277, 199 P. 1006, and Otero v. City of Albuquerque, 22 N.M. 128, 158 P. 798, above referred to, that an instrument in escrow wrongfully obtained without compliance with the escrow passes no title, even in the hands of an innocent purchaser. "
Whether the erasures and substitutions in the Burke deed amounted to a forgery we need not decide; for whether a forgery or not, when Asbury erased his name as grantee and inserted that of Burke in its place in the undelivered deed, he destroyed it as a conveyance as effectively as though the entire instrument had been forged, and it passed no title to Burke, or through him to the defendants. Otero v. City of Albuquerque, supra. It was not admissible in evidence as a muniment of title in its altered or original form, and the trial court erred in so admitting it. It was a nullity and established nothing except the fact that it had been materially altered, and was admissible for no other purpose. Ruby v. Talbott, 5 N.M. 251, 21 P. 72, 3 L.R.A. 724; Wood v. Steele, 6 Wall. 80, 18 L.Ed. 725; Brady v. Berwind-White, Etc., Co., 106 F. 824; Schmidt v. Quinzel, 55 N.J.Eq. 792, 38 A. 665; Hecht v. Shenners, 126 Wis. 27, 105 N.W. 309; Jones v. Crowley, 57 N.J.L. 222, 30 A. 871; 2 C.J., Alteration of Instruments, § 28; 3 C.J.S., Alteration of Instruments, § 18; 2 A.J. "Alteration of Instruments" Sec. 31.
The deed and the record thereof must go out, except as evidence of the alterations.
We all agree that no title passed to Burke, or through him to either defendant ; that on June 22, 1928, the date that plaintiffs discovered the record of the altered deed, they owned the property in fee simple ; that if they had filed suit on that date they would have prevailed.
If plaintiffs had a complete title on the date named (as we all agree they had), then all past transactions (including that with Asbury) had spent their force without affecting it. Plaintiffs' title was no different, and just as secure against the claim under and through the Burke deed, as would be that of any other land owner against a claim under a void instrument. They could have sold it on that day and have conveyed a complete title to the purchaser. It necessarily follows that on the date named the defendants' predecessor Burke had no semblance of title, and could convey none to defendants. This being true, plaintiffs could lose title involuntarily only by some sufficient subsequent occurrence that under the law would deprive them of the right to assert it, and not by reason of any previous dealings with As-bury regarding the property.
As a preliminary to the defense of estoppel, and apparently for the purpose of proving themselves good faith purchasers, the defendants assert that they had complete abstracts of title of the property in suit examined by' their respective attorneys; that the defect in the Burke deed was not apparent in the record, and they purchased without knowledge of the alterations or of plaintiffs' claim of' title.
Except as otherwise provided by Statute, the rule caveat emptor applies to a purchaser of real property. Simmons Creek Coal Co. v. Doran, 142 U.S. 417, 12 S.Ct. 239, 35 L.Ed. 1063. The responsibility for securing the title of the owner rests upon the purchaser. He must, at his peril, secure title from one who has title to convey. Catto v. Hollister, supra; Meley v. Collins, supra. The owner whose title is of record is not required to stand guard over it, or protect the unwary against buying a spurious title, unless duty so demands. Saylor v. Kentucky, etc., Corp., 205 Ky. 724, 266 S.W. 388, 50 A.L.R. 666.
.The examiner of an abstract of title to land ordinarily assumes that it correctly reflects the record of the instruments in the chain of title, and that such instruments are genuine and valid, unless it otherwise appears, or can be inferred from information contained in the abstract. An authority on the subject states: "In addition to the general survey of title from all the instruments and proceedings', each particular step must be examined technically and critically, and its own sufficiency or insufficiency passed upon. Under the English system this would consist of a comparison of the original instruments with the abstract, but this task under the American system, is supposed to have been satisfactorily performed by the abstract maker, and all that counsel is expected to do is. to see that the instruments as they are presented are sufficient in form and substantially correct." Warville on Abstracts of Title, 3d Ed., Sec. 593.
If it is the duty of the abstract maker to compare the original instruments with the record, as stated in the text quoted, we are satisfied that it is a duty seldom, if ever, performed in this country. Ordinarily the abstract maker assumes that the record is a correct copy of the instruments recorded and enters into no quest regarding the genuineness or validity of an original instrument.
Only valid instruments - are authorized to be filed or recorded, of which purchasers are charged with notice. If a false or void document, purporting upon its face to be a conveyance, is recorded, the record, like the instrument, is void and no more protects a purchaser than if it did not exist. Scheer v. Stolz, supra; Steele's Lessee v. Spencer, 1 Pet. 552, 7 L.Ed. 259. Thompson on Real Prop. Sec. 4025.
The opinions of the defendants* examiners, therefore, did not purport to cover the question of void documents or records, regarding which the defendants assumed the risk. And, assuming — as has been suggested — that millions of dollars are invested upon the faith of the genuineness of the instruments duly recorded and upon abstracts reflecting such records; nevertheless, there is an element of negligence and considerable risk incurred in such reliance; and there is no principle of law that permits a would be purchaser of land to shift this responsibility to the land owner, unless voluntarily assumed by him by acts or silence amounting in law to fraud, notwithstanding the latter's superior knowledge of the title.
In the books are many cases holding that purchasers had no title to property bought in reliance upon the record of void instruments, such as forgeries, undelivered deeds, deeds by minors or others under disability, deeds purporting to convey community property executed by the husband alone, and the like, or where an owner is in actual possession under an unrecorded deed; none of which defects were disclosed by the records.
It is common knowledge that the title to oil properties will be contested by someone connected with the title, if there is a remote chance of success. Likewise, defendants must have known that recorders are not called upon to question the validity of instruments offered for record; that a void conveyance might be in the apparent chain of title reflected by an abstract, and the infirmity not disclosed by the public record.
Coming to the defense of estoppel, we find that the defendants have pleaded it, with the particularity and precision that the law requires (Warren v. New York Life Ins. Co., 40 N.M. 253, 58 P.2d 1175; and anno. 120 A.L.R. 105); the substance of which we have stated.
Neither the pleadings nor the findings state a single affirmative act on the part of plaintiffs that misled the defendants or induced them to purchase the property in suit. They did not alter the deed or place it of record or intimate to any person by words, acts, or silence, that Burke was the owner of the property or that they were not the owners. If they are estopped to claim title it must be upon defendants' theory that a duty rested upon them to apprise the public by court action, or other effective means, that another had caused to be placed of record a deed affecting the title to their property that was to all intents and purposes a forgery.
According to defendants' plea of estoppel, their sole reliance for evidence of title in their grantors was upon the records of instruments affecting it in the county clerk's office, and the opinion of their respective examiners of abstracts of title. The finding of the court was to the effect that each defendant relied upon the opinion of its examiner regarding the title as reflected by the abstracts of title furnished by it.
The question then is: Did the plaintiffs owe a duty to every person (that is the public) to protect them individually and collectively (known or unknown) against the hidden. defects in the record of the Burke deed, which required them to take some affirmative action, such as the filing of this or a like suit, or by otherwise giving record notice of their claim under penalty of losing their property? In no other way could the public (including the defendants) have been effectively warned of the lurking danger in the record, if, as here, the investigation of the title should go no further than the examination of an abstract of title.
It is the general rule that no such duty is owed to the public by an owner of real property.
The case of Wiser v. Lawler, 189 U.S. 260, 23 S.Ct. 624, 628, 47 L.Ed. 802, is quite instructive on the question of the duty of the owner of land to give public notice in such cases. Contract purchasers of mines, pursuant to an escrow agreement which required the proceeds of operations to be applied to the purchase price, and containing a forfeiture clause, .issued prospectuses in which false statements regarding the title were made that misled purchasers of stock in that corporation. The mine owners' title was of record, hut they knew of the sending out of such prospectuses and must have known they would mislead the public. The Supreme Court said:
"So, too, to constitute an estoppel, either 'by express representation or by silence, there must not only be a duty to speak, but the purchase must have been made in •reliance upon the conduct of the party .sought to be estopped.
"No duty to speak arises from the mere fact that a man is aware that another may take an action prejudicial to himself if the •.real facts are not disclosed. As stated by Bigelow on Estoppel, 5th Ed. •page 596: 'So long as he is not brought into contact with the person about to act, and does not. know who that person may be, he is under no obligation to seek him out, or to stop a transaction which is not due to his own conduct as the natural and obvious result of it.' It cannot be that A would be estopped by silence with respect to his title to property which B is about to purchase, when he has no knowledge that B contemplates buying and B has no knowledge that A is connected with the property. We know of no case holding that a man is estopped by silence as against the public, or any partindar person with whom he has no fiduciary relations. It was said by the court of appeals of New York in Viele v. Judson, 82 N.Y. 32, 40, of the cases, holding a party to be estopped by his silence: 'In all of them the silence operated as a fraud and actually itself misled. In all there was both the specific opportunity and apparent duty to speak. And, in all, the party maintaining silence knew that some one else was relying upon that silence, and either acting or about to act as he would not have done, had the truth been told. These elements are essential to create a duty to speak.' " (Emphasis ours.).
In the case of Saylor v. Kentucky, etc., Corp., 205 Ky. 724, 266 S.W. 388, 389, 50 A.L.R. 666, to which is appended an extensive note on the question of estoppel for failure to disclose title, it is stated: "There is no principle of law making it the duty of a landownep to seek out and ascertain whether others are wrongfully entering into negotiations for his land. It would render land titles very insecure if one could be estopped from claiming his property be cause he had failed to learn of such transactions or because he could have reasonably known of such sale. The law of estoppel is exactly the opposite. Knowledge must be carried to the party sought to be estopped, and with such knowledge he must have acted or spoken, or have remained silent under circumstances that called for a statement on his part, and such statements or conduct must have been acted upon to the prejudice of the party seeking the estoppel."
Regarding equitable estoppel, see Dye v. Crary, 13 N.M. 439, 85 P. 1038, 9 L.R.A.,N.S., 1136; Id., 12 N.M. 460, 78 P. 533; Crary v. Dye, 208 U.S. 516, 28 S.Ct. 360, 52 L.Ed. 595; 10 R.C.L., Estoppel, Sec. 21; 2 Pom.Eq.Jur., 4th Ed., Secs. 805, 807, 811, 818; 19 A. J., Estoppel, Sec. 34; 21 C.J., Estoppel, Sec. 116.
On the specific question the decisions of the courts are almost unanimous in holding in cases where the facts are similar, that the owner of land is not estopped to claim title to his property. The question has been so decided innumerable times. The Supreme Court of California, in the early case of Meley v. Collins, 41 Cal. 663, 10 Am.Rep. 279, decided it. According to the facts of that case, a forged deed was recorded in 1859. The grantee therein sold to an innocent purchaser in 1865, who deeded the property to Collins in 1866. The owner of the land had known of the forgery and that it was of record prior to 1861. .The action was commenced in 1867. The opinion applies so perfectly to the facts in this case that we quote therefrom, as follows :
"The case does not show that the plaintiff knew of the respective sales of the property by Gilbert and his vendee, or that either of them intended to effect a sale, until after the respective conveyances had been executed. If the plaintiff is estopped to set up her title because the defendant purchased the property five years after the plaintiff knew that the deed was of record— she not having taken any steps during that time to attack the deed — then the delay of one year or one month would afford the defendant the same advantage. The proposition advanced in the instructions, when stripped of accidental and immaterial circumstances is, that if the defendant purchased the property and paid the consideration without any notice that the deed in question was a forgery, and after the plaintiff knew that the deed was of record, and before she had taken any steps to have it annulled, she is estopped to allege that it is not her deed.
"The cases which lay down the familiar. doctrine- — that one who stands by, and purposely or negligently suffers his property to be disposed of by another, is estopped to assert his title to the property — have no application here, for the plaintiff did not 'stand by' while Gilbert or his vendee was selling her property.
"Could it be shown to be the duty of the owner of property, whenever another person asserts title to such property, or is apparently the owner of it, to proceed at once to vindicate his title and destroy the apparent title in such other person, .there would be but little difficulty in holding that his neglect .so to do, could be relied upon as an estoppel by a purchaser from such person, in good faith and for a valuable consideration. If such were the rule, there would be no difficulty in finding cases in point. The owner of property is justified in relying upon his title; and he is under no obligation to proceed against all persons who may assert a hostile title, although another person might be deceived by the apparent genuineness of such hostile title. In the case at bar, it cannot be said that the plaintiff, by any act or neglect, induced the purchase by -the defendant. It was not her duty, if her own interests did not require it, to take the necessary steps to have the deed to Gilbert annulled. It is true.that a purchaser from him, relying on the record, might be injured, but he could readily protect himself by exacting from his vendor the necessary covenants."
The decisions are so uniform on the question that we content ourselves with citing, without further comment, the following authorities to the same effect: 2 Pom.Eq.Jur., 4th Ed., Sec. 918; Kypadel Coal & Lumber Co. et al. v. Millard et al., supra; Balfour v. Hopkins, 9 Cir., 93 F. 564; Westlake et al. v. Dunn et al., 184 Mass. 260, 68 N.E. 212, 100 Am.St.Rep. 557; Catto v. Hollister et al., supra; Gioscio v. Lautenschlager et al., 23 Cal.App.2d 616, 73 P.2d 1230; Gulf C. & C. Co. v. Alabama C. & C. Co., supra; Hakes Inv. Co. v. Lyons, 166 Cal. 557, 137 P. 911; Franklin v. Killilea et al., 126 Wis. 88, 104 N.W. 993; Saylor v. Kentucky, etc., Corp., 205 Ky. 724, 266 S.W. 388, 50 A.L.R. 666, and anno. at pages 668 et seq.; Houston v. Forman, 92 Fla. 1, 109 So. 297, 48 A.L.R. 401 and anno. at page 405; Clevenger v. Moore, 126 Okl. 246, 259 P. 219, 54 A.L.R. 1237 and anno. at page 1246; Houston v. Adams, 85 Fla. 291, 95 So. 859; Sipes et al. v. Perdomo, supra; Johnston Realty Corp. v. Showalter, 80 Cal.App. 176, 250 P. 289; Everts v. Agnes, 4 Wis. 343, 65 Am.Dec. 314; Harkreader v. Clayton, 56 Miss. 383, 31 Am.Rep. 369; Spotts v. Whitaker et al., Tex.Civ.App., 157 S.W. 422; Houston Land & Tr. Co. v. Hubbard et al., 37 Tex.Civ.App. 546, 85 S.W. 474; Tisher v. Beckwith, 30 Wis. 55, 56, 11 Am.Rep. 546; Wallace v. Harmstad, 15 Pa. 462, 53 Am.Dec. 603; Stone v. French, supra.
Slight negligence on the part of a land owner, coupled with knowledge that a void deed was of record, which together misled a purchaser into the belief that his grantor's title was good, has been seized upon by some courts as a ground of estoppel. Such are cases which hold that where an undelivered deed is placed of record with the knowledge of the grantor named therein, and through his negligence or permission, the grantee holds possession of the premises and thereby deceives a purchaser into believing the named grantee is the owner, the grantor is estopped to claim title as against a purchaser from the occupant of the land. Mohlis v. Trauffler, 91 Iowa 751, 60 N.W. 521; Shurtz v. Colvin et al., 55 Ohio St. 274, 45 N.E. 527; Johnson v. Erlandson, 14 N.D. 518, 105 N.W. 722; Quick v. Milligan, 108 Ind. 419, 9 N.E. 392, 58 Am.Rep. 49; McConnell v. Rowland, 48 W.Va. 276, 37 S.E. 586; Haven v. Kramer, 41 Iowa 382; Blight v. Schenck, 10 Pa. 285, 293, 51 Am.Dec. 478; Mays v. Shields, 117 Ga. 814, 45 S.E. 68; Pittman v. Sofley, 64 Ill. 155, 156; Macomber v. Kinney, 114 Minn. 146, 128 N.W. 1001, 130 N.W. 851.
The oil lease executed by plaintiffs in 1926 granted to the lessee the right to explore for oil, gas, etc., for a term of ten years from its date, and thereafter as long as oil and gas, or either of them, are produced by the lessee. The only possession to which the mineral rights in the property were susceptible, was an entry followed by exploration for minerals. Heck v. Morgan, 88 W.Va. 102, 106 S.E. 413. This right to possession has rested in the lessee since 1926, but was not exercised by it until 1936, after this suit was filed. We need not approve or disapprove the doctrine of these cases; it is not applicable here, as neither of the defendants, their grantors or Burke have been in possession of the property at any time.
We have found but two cases (and no others are cited by the defendants), decided solely upon the proposition that the failure to expunge from the record a void deed before an innocent purchaser had bought the property described in the deed, is alone sufficient to estop the owner of the land from claiming title. These cases are: Allen et al. v. Powell et al., 65 Ind.App. 601, 115 N.E. 96, and Costello v. Meade, 55 How.Prac., N.Y., 356; neither of which is the opinion of the highest court of a state, and both are opposed to the great weight of authority.
The vice in the doctrine of these cases-is that the duty to protect unknown would-be purchasers is shifted to the land owner in opposition to the rule caveat emptor. The legislature alone has such authority.
Notwithstanding dicta in some opinions of courts of last resort, none, so far as we are informed, has held under similar facts that a land owner was estopped to claim title to his property.
In support of the defense of laches defendants assert they were bona fide purchasers for value without notice of plaintiffs' title, and the trial court so held. This was error. Defendants were not purchasers, and they have not the semblance of title. The application of the doctrine of "bona fide purchasers for value without notice" is limited to those who purchase the legal title to property without notice of outstanding equities, or knowledge of facts that charge them with such notice. It has no application to one who has no semblance of title. The rule is stated by the United States Supreme Court, through Chief Justice Marshall, as follows: "The rules of law respecting a purchaser without notice, are formed for the protection of him who purchases a legal estate, and pays the purchase-money, witjiout a knowledge of the outstanding equity; they do not protect a person who acquires no semblance of title. They apply fully, only to the purchaser of the legal estate; even the purchaser of an equity is bound to take notice of any prior equity." Vattier v. Hinde, 7 Pet. 252, 253, 8 L.Ed. 675. And through Mr. Justice Brandéis, as follows:
"The claim which the relator makes in this court rests wholly upon the fact that the relator was a bona fide purchaser for value. But the doctrine of bona fide purchaser for value applies only to purchasers of the legal estate. Hawley v. Diller, 178 U.S. 476, 484, 20 S.Ct. 986, 44 L.Ed. 1157 [1158], It 'is in no respect a rule of property, but a rule of inaction.' Pomeroy, Equity Jurisprudence § 743. It is a shield by which the purchaser of a legal title may protect himself against the holder of an equity, not a sword by which the owner of an equity may overcome the holder of both the legal title and an equity. Boone v. Chiles, 10 Pet. 177, 210, 9 L.Ed. 388, 400." Duncan Townsite Co. v. Lane, 245 U.S. 308, 38 S.Ct. 99, 101, 62 L.Ed. 309.
Also see: Hawley v. Diller, 178 U.S. 476, 20 S.Ct. 986, 44 L.Ed. 1157; Boone v. Chiles, 10 Pet. 177, 9 L.Ed. 388; Mitchell v. Sherman E. McEwen Associates, 360 Ill. 278, 196 N.E. 186; Myers v. Van Buskirk, 96 Fla. 704, 119 So. 123; Dodge v. Briggs, C.C., 27 F. 160; Texas Lbr. Mfg. Co. v. Branch, 5 Cir., 60 F. 201; Betts v. Ward, 196 Ala. 248, 72 So. 110; King v. Diffey, Tex.Civ.App., 192 S.W. 262; Allen v. Ayer, 26 Or. 589, 39 P. 1; Gibson v. Gibson, 200 Ala. 591, 76 So. 949; Thomas v. Scougale, 90 Wash. 162, 155 P. 847, Ann.Cas.1918C, 452, and note beginning at page 456.
The defendants are not bona fide purchasers for value; a subj ect we will again discuss in this opinion.
But if defendants had been innocent purchasers (and they were not) it would have availed them nothing. The bar of laches has no application because it never runs in favor of one claiming real property, by or through a void deed, who is not in possession; or against a duly recorded title, Secret Valley Land Co. v. Perry, 187 Cal. 420, 202 P. 449; Stanley et al. v. Westover, 93 Cal.App. 97, 269 P. 468; Sanborn v. South Florida Naval Stores Co., 75 Fla. 145, 78 So. 428; Baker v. McFarland, 77 Tex. 294, 13 S.W. 1042; Myers v. DeLisle, 259 Mo. 506, 168 S.W. 676, 52 L.R.A.,N.S., 937; Chilton v. Nickey, 261 Mo. 232, 169 S.W. 978; Kypadel Coal & Lbr. Co. v. Millard, supra.
Under the facts the plaintiffs were not barred by .laches. This conclusion is supported both by reason and the great weight of authority.
" Any alteration of a deed by erasure or substitution of the name of the grantee is a material alteration and forgery just as is an unauthorized signing of the grantor's name (16 Am.Jrs. 'Deeds' Sec. 26). A forged deed, in the sense defined above, is absolutely void and wholly ineffectual to pass title, even to a subsequent innocent purchaser from the grantee under such forged deed. (Id. Sec. 27). Mere delay in suing to re cover possession of land purporting to be conveyed by a forged deed or in having the instrument set aside short of the time necessary to establish title in the grantee and those claiming through him by adverse possession does not affect the grantor's right to relief even as against an innocent purchaser from the purported grantee under a forged deed. (Id. Sec. 28.)
"The plaintiff brings this action to quiet her title to all the land described in the complaint. She obtained a judgment. She is the owner of the patent title. Defendants claim under a deed which is clearly and confessedly forged, and appeal to this court. The claim is that plaintiff was negligent in not looking after her title, procuring abstracts, and promptly commencing an action to cancel the forged deeds.
"The claim is futile. A party who has a good title to real property under recorded deeds has no occasion to keep watch of his title. Every purchaser or mortgagee must at his peril see that he gets title from one having title to convey. The appeal presents nothing worthy of any consideration or comment." Catto v. Hollister, et al., 39 N.D. 1, 166 N.W. 506, 507.
Also see: Colby v. Title Ins. Co., 160 Cal. 632, 117 P. 913, 35 L.R.A.,N.S., 813, Ann.Cas.1913A, 515; Gioscio v. Lautenschlager et al., supra; Spotts v. Whitaker et al., supra; Houston Land & Trust Co. v. Hubbard et al., supra; Johnston Realty Co. v. Showalter, supra; Kypadel Coal & Lumber Co. et al. v. Millard, supra; Saylor v. Kentucky, etc., Corp., supra, and anno. particularly at page 712 of 50 A.L.R.; Secret Valley Land Co. v. Perry, 187 Cal. 420, 202 P. 449; Smith v. Burrus, 139 Ga. 10, 76 S.E. 362; Chandler v. White, 84 Ill. 435; French v. French, Court of Chancery of Tenn., 52 S.W. 517; Newport v. Hatton, 195 Cal. 132, 231 P. 987; 51 C.J. "Quieting Title" Sec. 128; 2-Pom.Eq.Jur., 3d Ed., Secs. 805, 810, 821; 19 Am.Jur. "Equity" Secs. 498 et seq; 21 C.J. "Equity" Sec. 211 et seq.
A number of the cases cited in support of our conclusion on the question of estoppel also supports our conclusion on the question of laches.
A land owner is neither estopped to claim title nor is he barred from asserting it by laches, if his only fault is failure to sue to expunge from the public records a forged or void deed to lands in the actual possession of no one, which he neither made nor had recorded; although he knew, or should have known, that one of the públic unknown to him, might purchase the property, assuming the validity of the record of the void instrument.
This disposes of every question raised by the assignment of errors and would ordinarily determine the' case. The special defenses were bottomed upon the assump: tion that plaintiffs owed a duty to the public to expunge the Burke deed from the records, and upon nothing else. Defendants stated in their original answer brief that there were but two controlling questions :
'"1. Did the trial court err in its finding that Mosley agreed to sell to Asbury an undivided three-fourths interest in the minerals in the SE]4 of Sec. 10 for a consideration of $800 and that Asbury paid the purchase price within the stipulated time ?
"2. Are the appellants precluded by laches and estoppel from any recovery?"
These questions have been answered, but defendants submitted certain objections to our opinion and decision in their second motion for rehearing, which will now be disposed of. It is said: "That the opinion of the court is based largely upon precedents in which the facts involved are entirely different from the facts involved in this cause whereby important and substantial equitable rules applicable in this case have been ignored by the court."
The argument is that the rule which we have followed, holding that a materially altered deed is void and that an instrument wrongfully obtained from escrow passes no title, is not applicable to the facts of this case. Defendants state: " There is no doubt about the rules as laid down by these cases, but to apply them to the facts of this case and permit them to control the decision of this court is to surrender principles of equity for technical rules, and to ignore the controlling equities in the case. They are cases in which the owner was defrauded without having any connection with the transaction, and certainly no duty could be cast upon him to expunge the record."
As we understand, defendants' contention seems to. be that while the land owner is not required to expunge from the record a forged instrument made with intent to defraud, he is required to do so where there was no .injury or intentional wrong doing.
Defendants have cited no authorities - in support of their proposition and we have found none.
The trial court made no decision upon the question of whether the alterations and substitutions in the Burke deed were made with a fraudulent intent, but it is utterly immaterial with what intent or what motive these erasures and substitutions were made. We will assume that there was nó fraudulent intent and that the motive was honest. Nevertheless the deed was a nullity and was of no more force and effect than if it had been forged with intent to defraud. Wood v. Steele, 6 Wall. 80, 81, 18 L.Ed. 725. In this case the Supreme Court of the United States said:
"It was a rule of the common law as far back as the reign of Edward III, that a rasure in a deed avoids it. It is now settled, in both English and American jurisprudence, that a material alteration in any commercial paper, without the consent of the party sought' to be charged, extinguishes his liability.
"The grounds of the discharge in such cases are obvious. • The agreement is no longer the one into which the defendant entered. Its identity is changed; another is substituted without his consent; and by a party who had no authority to consent for him. There is no longer the necessary-concurrence of minds.
"The defendant could no more have prevented the alteration than he could have prevented a complete fabrication; and he had as little reason to anticipate one as the other. The law regards the security, after it is altered, as an entire forgery with respect to the parties who have not consented, and so far as they are concerned, deals with it accordingly."
Also see: Gray v. Williams, 91 Vt. 111, 99 A. 735; Otto v. Halff, 89 Tex. 384, 34 S.W. 910, 59 Am.St.Rep. 384; Holloway v. Gano, 125 Kan. 3, 262 P. 573; Idaho State Bank v. Hooper Sugar Co" 74 Utah 24, 276 P. 659, 68 A.L.R. 969; and see 2 A.J. "Alteration of Instruments" Sec. 16; 3 C.J. S., Alteration of Instruments, § 7.
A distinction is made in cases of commercial paper only to the extent that if the intent with which the alteration was made was not fraudulent, an action may be maintained on the original debt, but the paper itself is utterly void and the alteration discharges the collateral security. Otto v. Halff, supra; Holloway v. Gano, supra; 3 C.J.S., Alteration of Instruments, § 9 and 10. But in this case there was no debt upon which to sue. The contract was all contained in the undelivered deed. The effect was no different than if the whole instrument had been forged. Otero v. Albuquerque, supra.
The result is that the transactions with Asbury left plaintiffs with title in fee simple, evidenced by a patent from the United States to the property in question. We know of no special rule of estoppel that would apply to the facts of this case. The defendants have no title, and the plaintiffs have not, by act, word, or silence, es-topped themselves from claiming title.
Defendants' 'next contention is as follows : "That contrary to fundamental principles of equity the court has rendered an inequitable decree in that it has permitted plaintiffs who sold their property, received and retained the agreed purchase price, and acquiesced in such sale for many years while the property increased substantially in value, to come into this court and obtain affirmative relief in the nature of a decree quieting their title to said property."
A the request of Asbury, two deeds were made by plaintiffs to-him as grantee; one conveying % the underlying minerals and the other % thereof, in 160 acres of land, for a consideration of $800. Evidently the property in suit was valued at the time at % of $800, or $533.33. Our conclusion, it is asserted, is inequitable because the plaintiffs have never tendered to anyone the $533.33; and particularly they have not tendered it in this suit. This question is raised for the first time on the second motion for rehearing and is not available to defendants, but in any event is without merit.
If ordinarily plaintiffs should have tendered the consideration in the district court (Sloss-Sheffield Steel & Iron Co. v. Board of Trustees, Etc., 130 Ala. 403, 30 So. 433; Twin Lakes Land & Water Co. v. Dohner, 6 Cir., 242 F. 399), the error is not available to defendants now.
If it has merit, the question should have been raised in the district court by demurrer or motion to dismiss the bill for want of equity. The case was tried on its merits below without objection to the pleadings, and we must necessarily follow the course of 'that trial. Twin Lakes Land & Water Co. v. Dohner, supra. The trial court could have imposed conditions in the absence of a tender, if his decision had been in favor of the plaintiffs. Jones v. McGonigle, 327 Mo. 457, 37 S.W.2d 892, 74 A.L.R. 550.
Much is said by defendants regarding plaintiffs' retention of the consideration paid them for the land. We are not advised just what they should have done with the money. To whom should it have been tendered, and who would have accepted it? They were diligent in employing attorneys when they discovered the altered deed, but they were advised at that time they were without remedy. We are well satisfied no party to these transactions (surely not the defendants) would have accepted the money if it had been tendered. Plaintiffs were justified in holding it until the question of title could be settled in court.
It is asserted that the long time which elapsed between the discovery by plaintiffs of the alterations and the filing of this suit, the receipt by defendants of the rental of $10 per annum for a number of years, and the retention of the consideration, constituted a ratification of the alterations in the deed and its delivery.
Ratification was not pleaded, was not raised in the district court or in this court, except in the second motion for rehearing. It cannot be considered by us. Candelaria v. Gutierrez, 30 N.M. 195, 230 P. 436; Smith v. Barnes, 51 Mont. 202, 149 P. 963, Ann.Cas.1917D 330; Erickson v. First Nat'l Bank, 44 Neb. 622, 62 N.W. 1078, 28 L.R.A. 577, 48 Am.St.Rep. 753: Wayne County Nat'l Bank v. Kneeland, 61 Okl. 265, 161 P. 193; Bolt v. State Sav. Bank, Tex.Civ.App., 179 S.W. 1119. The burden of proof to show ratification (if the deed could have been ratified) was on defendants (State v. Findley, 101 Mo. 368, 14 S.W. 111), and there is no finding or substantial evidence of a ratification.
There are authorities which hold that a materially altered deed may be ratified by the grantors named in it without a re-execution or new delivery; while others hold, with the better reason, it would seem that as a sale of real estate to be binding must be evidenced by a memorandum in writing signed by the person to be bound (Statute of Frauds) and duly delivered, an unauthorized alteration could not be ratified except by a new execution and delivery. Moelle v. Sherwood, 148 U.S. 21, 13 S.Ct. 426, 37 L.Ed. 350; Waldron v. Waller, 65 W.Va. 605, 64 S.E. 964, 32 L.R.A.,N.S., 284; Church v. Combs, 332 Mo. 334, 58 S.W.2d 467. On this question generally see notes, Ann.Cas.1917D, 335; 67 A.L.R. 364.
We need not, at this time, choose between the rules, for ratification was not proven under either. The failure to bring suit earlier and the retention of the consideration paid by Asbury did not, as we have held, affect the defendants' title. Now it is asserted (without finding to support it) that defendants claim of title was ratified or acquiesced in by the failure of plaintiffs to object to the payment of the $10 monthly rental by plaintiffs' lessee to the defendants. It is asserted that the receipt of this rental was equivalent to possession; that it was "the only possession to which the property was susceptible."
Under the terms of the lease the Humble Oil & Refining Co. was entitled to possession of the property by entry for- the purpose of operating for oil and gas, and this was the only possession to which the property was susceptible. The lessee did not take possession until 1936 (after this suit was filed), and neither Burke nor the defendants has had possession, of the property at any time.
It has been held that one claiming under a void deed obtains no title, or right that can ripen into a title, by paying taxes acquiesced in for years by the owners, and which they had failed to pay; that only actual possession can accomplish it. Merrifield v. Buckner, 41 N.M. 442, 70 P.2d 896; Sanborn v. South Florida Naval Stores Co., supra; Myers v. DeLisle, supra. The failure of plaintiffs to object to the payment of the rental to defendants was not a ratification of the Burke deed, even though ratification had been pleaded as a defense, and could have been accomplished without a new execution and redelivery of the deed.
The case of Patterson v. Hewitt, 11 N.M. 1, 66 P. 552, 55 L.R.A. 658, affirmed in 195 U.S. 309, 25 S.Ct. 35, 49 L.Ed. 214, cited by defendants, is not in point. Flewitt held the legal title, and he and associates were in possession of the mining property, and had been for eight years, and had performed the labor and advanced the money for five years for its development, which resulted in the discovery of a'large body of gold ore. It was held that eight years delay in bringing his action for a deed barred Patterson's right. This is an entirely different case. The defendants have neither title, semblance of title, possession, or any other claim upon the property.
Defendants' misfortune is to be regretted, but we find no inequitable conduct on the part of plaintiffs that should deprive them of their statutory right to quiet the title to their property as against the defendants who have no semblance of title.
The last question is whether a decree following our opinion will award equitable relief to plaintiffs in court with unclean hands; and if so, whether we should order a dismissal.
This contention was not made below, and is first raised by defendants in their second motion for rehearing. Under the rules and decisions-of this court, the defendants are not authorized to raise it at this stage of the proceeding.
It is asserted, however, that courts regard the "clean hands" maxim as-of such importance that they will raise the question on their own motion in proper cases. This is correct, generally speaking, but the trial court, who alone is the trier of facts in this state, should have acted, or should have been called upon first to act upon the matter.
Plaintiffs' "unclean hands," defendants assert, are proved by the following:
1. That plaintiffs pleaded and testified that they sold only a one-fourth interest in the minerals to the defendants for the $800; that the Burke deed was a copy of the other deed, signed at Asbury's request; that it was altered by Asbury so that it purported to convey a one-half interest in the minerals; that such testimony was willfully false.
2. That the plaintiffs allege in their amended complaint, and testified, that to show of record their interest in the land in question the plaintiff, Ennis C. Mosley, conveyed to his wife the property in question, and she thereafter conveyed the same back to him, and placed the deeds of record, thereby making a double record of their claim. This, it is asserted, was false and known to be false, because the first of the two deeds was made and recorded before plaintiffs knew of the alterations in the Burke deed.
There is a sharp conflict in the testimony as to whether the deed as orginally written, purported to convey one-fourth or one-half the minerals. It is true, the district judge, upon weighing the evidence, decided that it originally conveyed a one-half interest, but he did not hold by this decision that plaintiffs were perjurers. Cases must' be decided, and the district judge finds the facts according to what, in his judgment, the weight of the evidence establishes; but he is not infallible, and his,findings may be incorrect notwithstanding we are bound by them.
Regarding the last charge, neither of the plaintiffs signed or verified the pleadings, nor did their testimony support the allegations mentioned.
The defendants have cited no case from any appellate court that has decided the question as presented here. In our search only two cases have been found where the maxim was raised first and enforced in an appellate court. They are: Armstrong v. Gresham, 73 Colo. 13, 213 P. 114; and Primeau v. Granfield, 2 Cir., 193 F. 911. The defendants, after a contest on the merits in which they were losers, and as a last resort, seek to relegate the plaintiffs to an action at law. If we should dismiss a case upon such grounds and as here raised, there will be no shadow of doubt of the iniquity of the party, and we do not find this to be such a case.
This disposes of all questions raised by the parties. But a new doctrine has been injected into the case, which should not be passed without comment. It is said that our conclusion "results in a grave injustice to innocent purchasers of a valuable property and operates to return said property to the plaintiffs, its former owners, who then will have both the property and the money paid them for it." This statement is not correct. Defendants are not purchasers (innocent or otherwise) of any in terest, legal or equitable, in the property, and plaintiffs are not "former owners," but the owners of the property. It will not be returned to them because they have owned it since it was patented.
Beginning with an unwarranted premise, it is then asserted that as defendants are "innocent purchasers" the doctrine of laches runs in their favor. We have held, and all agree, that defendants are not bona fide purchasers for value; that they purchased no interest, legal or equitable, in the property, and have never been in possession. They are not "innocent purchasers" of anything. Laches never run in favor of one who has never contacted the title or possession of property. That is the situation of the defendants. The bar of laches cannot run in their favor (see authorities heretofore cited on this question). The fact that they paid out their money for a spurious title without knowledge of plaintiffs' title, or any facts which, under the law would require them to take notice of it (if true) avails nothing.
As we have stated, defendants are not purchasers at all, and we know of no rule of law that permits one, who has neither a legal or an equitable interest in property, or the possession of it, to avail himself of the bar of laches against the owner. We need not pass upon the question of whether the defendants are "innocent purchasers" in the sense suggested, but should state that we do not subscribe to the doctrine advanced that a would-be purchaser of property, who has actual notice of the contents of a recorded deed, may ignore it and be held immune from the charge of negligence or gross negligence, if after "weighing the possibilities or probabilities" of ownership, he accepts a spurious title. It is our understanding that when a prospective purchaser of property has knowledge that another claims title thereto under a recorded deed, he is conclusively charged, not only with notice of the contents of the deed, but with notice of "all the estates, rights, titles and interests created or conferred by it or arising from its provisions," and he buys at his peril, 2 Pom.Eq.Jur., 4th Ed., Sec. 655. It is more than notice; it is knowledge of the fact of a claim of title, and he takes subject to the legal effect of such deed, notwithstanding he "weighed the probabilities" of ownership and therefrom came to the'decision that the title was in another than the real owner. Such a doctrine would destroy the intended effect of the recording acts. Kidder v. Pueschner, 211 Wis. 19, 247 N.W. 315; 2 Pom.Eq.Jur. (4th ed.) Secs. 649 and 655; Ochoa v. Hernandez Y Morales, 230 U.S. 139, 33 S.Ct. 1033, 57 L.Ed. 1427; United States v. S. P. & C. del Agua Co., 4 N.M. 405, 17 P. 337; 23 R.C.L. "Records" Sec. 83; Loser v. Plainfield Sav. Bank, 149 Iowa 672, 128 N.W. 1101, 31 L.R.A.,N.S., 1112; Northwestern Nat'l Bank v. Freeman, 171 U.S. 620, 19 S.Ct. 36, 43 L.Ed. 307; Krueger v. United States, 246 U.S. 69, 38 S.Ct. 262, 62 L.Ed. 582; Simmons Creek Coal Co. v. Doran, 142 U.S. 417, 12 S.Ct. 239, 35 L.Ed. 1063; Warville on Abstracts of Title, 4th Ed., Sec. 61; Devlin on Deeds, 3d Ed., Sec. 741; 5 Thompson on Real Property, Secs. 4025-4128.
For the purpose of securing facts upon which to base a conclusion that defendants were "innocent purchasers", the findings of the court have been supplemented by resort to the testimony, in violation of a rule long established in this state. We have consistently held that this court is not a fact finding body; Greenfield v. Bruskas, 41 N.M. 346, 68 P.2d 921; and that the facts found by the trial court, if supported by substantial evidence, are the basis of a decision by this court. Daniel v. Clark, 39 N.M. 494, 50 P.2d 429. We stated in Dailey v. Foster, 17 N.M. 654, 134 P. 206, 208:
" js manifest, therefore, that the court failed to specifically find upon one of the material issues in the case. Judgment, however, was entered for the defendant, and, as the plaintiff had the burden of proof, the presumption is that the court found this issue in favor of the defendant.
" 'We cannot aid the finding by inference or intendment, and must regard silence upon a material point as a finding against the party having the burden.' Coffinberry v. McClellan, 164 Ind. 131, 73 N.E. 97."
We approved this holding in Byerts v. Schmidt, 25 N.M. 219, 180 P. 284. As far as we have gone regarding essential facts not found, is to remand the case for further findings, Farmers' Dev. Co. v. Rayado L. & I. Co., 28 N.M. 357, 213 P. 202; and to assume that where the trial court refused requested findings upon any particular proposition, that in support of the judgment the facts would be considered as made the converse of those requested, (the correctness of which this writer seriously questions), In re Frick Book & Stat. Co., 38 N.M. 120, 28 P.2d 660. Certainly it would not be so in the absence of substantial evidence to support a converse finding.
Some courts hold that no fact other than those specifically included in the findings of the trial court will be presumed or implied, Tackett v. Cunningham, Tex.Civ.App., 91 S.W.2d 965; others that all additional facts necessary to sustain a judgment will be implied if there is evidence not in conflict with the express findings that would support them, Barth Merc. Co. v. Jaramillo, 46 Ariz. 365, 51 P.2d 252; Henke & Pillot v. Amalgamated, etc., Co., Tex.Civ.App., 109 S.W.2d 1083; Hanna, etc., Bank v. Matson, 53 Wyo. 1, 77 P.2d 621; and still others hold that in the absence of a finding of fact on a particular point necessary to support a judgment, it will be presumed that there was not sufficient evidence to warrant it, Calloway v. Twin City Creamery Co., 190 Wash. 173, 67 P.2d 329; MacDiarmid v. McDevitt, 97 Cal.App. 414, 275 P. 500; Hubbard v. San Diego Elec. R. Co., 201 Cal. 53, 54, 255 P. 508. But the rule of this court is that where special findings of fact are silent on a material point, it is deemed to be found against the party hav ing the burden of proof, if not waived; .in this case the defendants. Byerts v. Smith, supra.
We are not permitted to supplement the findings of the trial court by resort to the testimony. If the findings are incomplete in that they are silent on any material point, it should be supplied as an ultimate fact found against defendants, who, in this case, have the burden of proof on all contested issues; unless the case should be remanded to complete the findings. Byerts v. Schmidt, supra.
The defendants requested no findings of fact, and made no objection to any found by the court, in the preparation of which we assume they assisted. The testimony is out of the case except for review to determine whether the findings are supported by substantial evidence, or whether requested findings should have been made, or to construe ambiguous findings. It is superseded by the findings of fact. Wells v. Gulf R. Co., 42 N.M. 378, 79 P.2d 921; Wilson v. Williams, 43 N.M. 173, 87 P.2d 683; Wright v. Atkinson, 39 N.M. 307, 46 P.2d 667; In re Chavez' Will, 39 N.M. 304, 46 P.2d 665; Daniel v. Clark, 39 N.M. 494, 50 P.2d 429; Fair v. Morrow, 40 N.M. 11, 52 P.2d 612.
But, accepting all the alleged facts lifted from the testimony and the opinion of the trial court as supplementing the findings of fact, it is not established that defendants were bona fide purchasers for value, or entitled to the protection of the bar of laches.
It is said, "All authorities hold that a party may not in equity recover property for which he has been paid without tendering back the purchase price." True, of course, if title has passed, and the action is in fact to recover it. The rule stated has application to suits to recover property, the title to which has passed to one who fraudulently obtained it, or the like. This is not an action to recover the title to property. The plaintiffs have never parted with it. The purpose of the action was to remove a cloud from plaintiffs' title, and quiet title presently vested in them. The statute authorizes such action, and to maintain it plaintiffs are not required to tender to anyone the consideration received for an abortive sale from a person who claims no interest in the property; but the trial court, on equitable principles, may require it.
It is unnecessary to choose between the Federal rule, or the general rule of reasonable diligence regarding implied notice, to determine whether defendants are "innocent purchasers" in the sense stated. The bar of laches is not available to them under either. The question of implied notice is not in the case.
This court has applied both the Federal rule and the rule of reasonable diligence'on the question of implied notice, and we do not agree that we are hound to either. We leave it open to be decided when the occasion arises.
The special defenses were bottomed upon the assumption that plaintiffs owed a duty to the public to expunge the Burke deed from the records, and upon nothing else. Much confusion would have been avoided if the issues had been confined to those made by the parties under the assignment of errors. But the importance of the case has impelled us to decide questions which, under the facts found and the issues presented, were not ordinarily subject to review.
The second motion for rehearing is overruled. The judgment is reversed and cause remanded with instructions to set aside the decree and enter a decree for plaintiffs. The condition that plaintiffs pay into the court, for its disposition, $533.33 with six per cent from date of payment, may be added if the trial court is of the opinion that this should be required.
It is so ordered.
MABRY, J., concurs.