Case Name: FRANK H. SMITH, Respondent, v. J. R. NEWBERRY COMPANY (a Corporation), et al., Appellants
Court: District Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1913-03-11
Citations: 21 Cal. App. 432
Docket Number: Civ. No. 1271
Parties: FRANK H. SMITH, Respondent, v. J. R. NEWBERRY COMPANY (a Corporation), et al., Appellants.
Judges: 
Reporter: California Appellate Reports
Volume: 21
Pages: 432–436

Head Matter:
[Civ. No. 1271.
Second Appellate District.
March 11, 1913.]
FRANK H. SMITH, Respondent, v. J. R. NEWBERRY COMPANY (a Corporation), et al., Appellants.
Vendor and Vendee—Putting on Inquiry—Deed Intended as Mortgage.—Where a grantor in a deed absolute intended as a mortgage notifies a third person through intermediaries that he still owns the property, such person is put on inquiry as to the condition of the title, and if'he fails to investigate, he cannot become a 6 ona, fide purchaser.
Id.—Bona Pide Purchaser—Burden op Proop.—The burden of proof is upon one who buys, where the title is in such condition, to show that he paid the purchase money in good faith without notice, actual or constructive, of the grantor’s claim.
Id.—Quieting Title—Tender op Mortgage Debt.—-Where the grantee in a deed intended as a mortgage conveys the property to a person who, though put upon inquiry, contends that he purchased without notice of the condition of title, the grantor, in a suit to quiet title, need not make personal tender of the debt, but a judgment directing the payment thereof is sufficient.
APPEAL from a judgment of the Superior Court of Kern County and from an order refusing a new trial. J. W. Mahon, Judge.
The facts are stated in the opinion of the court.
Adams & Mahan, M. E. C. Munday, and Rowen Irwin, for Appellants.
Drew Pruitt, and Fred N. Arnoldy, for Respondent.

Opinion:
ALLEN, P. J.
The action was one to quiet title. Findings and judgment went in favor of plaintiff, and defendants appeal from such judgment and an order denying a new trial.
The court finds that in February, 1906, plaintiff was indebted to J. R. Newberry Company, a corporation, in the sum of one hundred and thirty-five dollars; that on said date plaintiff, being the owner and in possession of certain described premises, in order to secure the payment of said sum, executed to said J. R. Newberry Company an instrument, in form a grant deed, conveying the premises in controversy ; that notwithstanding the form of the deed, it was intended to be by way of mortgage to secure the debt; that such instrument was duly recorded, and on the third day of December, 1906, J. R. Newberry Company, in consideration of the sum of three 'hundred dollars, granted the premises to J. K. McGinnis; that McGinnis purchased said premises with knowledge of the fact that said instrument from plaintiff to Newberry Company was a mortgage and intended as such; that in June 1910, plaintiff tendered to defendant Newberry Company two hundred dollars in cash, being the amount of the principal and interest of the mortgage debt, and demanded a reconveyance, which was refused; that plaintiff thereupon paid into court the sum of two hundred dollars for the benefit of defendant Newberry Company, the same being the principal of said debt and interest, and the sum of $9.85, the amount of the taxes assessed against said lands advanced and paid by McGinnis.
Appellants specify as error the insufficiency of the evidence to support the findings with reference to the character of the deed, and as to the fact of McGinnis's acquirement of the premises with notice. An examination of the record satisfies us that there is to be found therein ample evidence to support the findings of the court, not only from the circumstances of the case, but from admissions. It is very clear that the deed to the Newberry Company was by way of mortgage. There is evidence tending to show that in October, 1906, plaintiff notified McGinnis, before he purchased the premises through an intermediary, that he still held an equity in the land and still owned it. This was sufficient to put McGinnis upon inquiry as to the condition of title. The rule is that the burden is upon the one claiming to he a bona fide purchaser under the circumstances of this case to show that he had paid the purchase money in good faith without notice, actual or constructive, of plaintiff's claim. (Kenniff v. Caulfield, 140 Cal. 45, [73 Pac. 803], and authorities there cited.) There is nothing to show any effort on McGinnis's part to ascertain the true facts in relation to the title after having received this notice, and he cannot be said, under the established rule, to be a bona fide purchaser without notice. The findings of the court must be accepted as being based upon evidence clear and satisfactory. It is for the trial court to determine the weight and effect of the evidence.
It is claimed by appellants that the findings do not support the judgment as against them. We see no merit in this contention. The judgment with reference to the cancellation of the deed may be ignored, but there still remains in the judgment an adjudication that plaintiff's title and possession of the premises be quieted against all claims or demands of the defendants, and that they each be enjoined and restrained from asserting any claim thereto adverse to plaintiff. We regard the complaint as sufficient.
The principal contention of appellants is that McGinnis, under any view of the case, was entitled to the money due upon the mortgage, that the tender to him was a condition precedent to a decree quieting title. We do not understand the rule to be that a personal tender is requisite to the bringing of the action, but simply that payment to the party entitled thereto must be provided for or made before a decree be entered. We think, however, that under the record in this case no tender or payment to McGinnis was necessary. Nor is there any error, under the pleadings and evidence, in' directing the payment of the two hundred dollars deposited in court to the Newberry Company as the holder of the debt. We are not unmindful of the fact that our supreme court, in Hooper v. Young, 140 Cal. 274, [98 Am. St. Rep. 50, 74 Pac. 140], following Halsey v. Martin, 22 Cal. 645, has determined that a conveyance by one holding the legal title by way of security carries with it an equitable assignment of the debt secured thereby. The decisions affecting the question as to the effect which a court of equity should give such a conveyance are not harmonious. As early as Peters v. Jamestown Bridge Co., 5 Cal., 335, [63 Am. Dec. 134], and afterward in Dutton v. Warschauer, 21 Cal. 623, [82 Am. Dec. 765], it was determined that an attempt to assign a mortgage without a transfer of the debt was without effect, and that a conveyance of the mortgaged premises did not operate as an assignment of the mortgage, nor of the mortgage debt. Subsequently, in Halsey v. Martin, 22 Cal. 645, the contrary was held. Thereafter, upon the adoption of the Civil Code, section 3540 was added thereto, which section provides: "The incident follows the principal, and not the principal the incident"; which was the doctrine of Peters v. Jamestown Bridge Co. However, we are confronted with Hooper v. Young, 140 Cal. 274, [98 Am. St. Rep. 50, 74 Pac. 140], wherein it is said that "whatever the true character of the conveyance was, the grantee succeeded to all of the grantor's rights and interest. If such conveyance was in fact a mortgage, she succeeded to all rights as mortgagee." This opinion was by a divided court and rests undoubtedly upon the theory that where a conveyance of premises held by way of mortgage is made to one with knowledge of the character of the title, nothing to the contrary appearing, it will be presumed that it was the intention of the parties to transfer all interests, the principal as well as the incident. Accepting such decision as based upon that theory, it is scarcely applicable to this case. Under the record presented here, there can be no presumption that there was any intention on the part of Newberry Company to transfer the debt. In the first place, Newberry Company denies and strenuously insists that the conveyance to it was not by way of mortgage; and, in the second place McGinnis insists that he took a good title by virtue of the purchase, and that he bought without knowledge of the debt, believing that Newberry Company was the owner of the premises free from any claim of third parties. Nowhere is there any suggestion or any fact from which it could be reasonably inferred that it was the intention of the Newberry Company to assign the debt, or of McGinnis to receive an assignment thereof. The case under consideration strongly suggests an attempt to deprive plaintiff of his property rights, and not an effort upon the part of New-berry Company to transfer its interest in the debt and the mortgage securing the same to McGinnis. Under these circumstances, we are of opinion that the conveyance by the Newberry Company to McGinnis, under the facts, was a nullity and conveyed nothing. It was a plain attempt to transfer the incident and the grantor to retain the principal. Aside from all this, however, the unquestioned amount due from plaintiff was paid into the treasury of the court and there remains for the benefit of whomsoever may be entitled thereto. Upon such payment, and under the facts found by the court, plaintiff was entitled to his decree quieting title. We do not see how it could be well claimed that McGinnis was entitled to the two hundred dollars, for he nowhere claims to be entitled thereto. If such claim had been made by him, and were there 'anything in the record indicating an intention to assign the debt when the conveyance was made, w.e think a modification of the judgment, directing payment of the two hundred dollars to McGinnis, would be proper, but under the pleadings and the facts and circumstances of the case, we do not see how we would be warranted in • directing such modification. There being no evidence tending to show a bar to the action through the statute of limitations, no finding was necessary. Plaintiff's right to redeem existed until five years' adverse possession be shown, which is not done here.
We see no prejudicial error in the record either in relation to the admission or rejection of evidence, or otherwise; nothing at least which would entitle defendants to a reversal on account thereof.
The judgment and order are affirmed.
James, J., and Shaw, J., concurred.