Case Name: Bernardy v. Colonial & United States Mortgage Co., Limited
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1904-02-03
Citations: 17 S.D. 637
Docket Number: 
Parties: Bernardy v. Colonial & United States Mortgage Co., Limited.
Judges: 
Reporter: South Dakota Reports
Volume: 17
Pages: 637–655

Head Matter:
Bernardy v. Colonial & United States Mortgage Co., Limited.
1. Civ. Code, § 947, subd. 4, declares that where a person, purports, by a proper instrument, to grant real property in fee simple, and subsequently acquires any title or claim of title thereto, thesame passes by operation of law to the grantee or his successors. Held, that where an entryman on public land conveyed it to defendant, by deed purporting to grant a fee simple title, before a patent was issued, on the subsequent issuance of the patent to the grantor the fee passed to defendant under the deed.
2. Under Civ. Code, §§915, 916, providing that a transfer is an act of the parties'or of the law by which title to property is conveyed by one living person to another, and that a voluntary transfer is an executed contract, subject to all the rules of law concerning contracts in general, except that a consideration is not neccessary to its validity, a conveyance of real estate without consideration is valid as between the parties.
3. Civ. Code, § 943, provides that every grant of i eal property is conclusive against the grantor and every one claiming under him, except a bona fide purchaser or incumbrancer who acquires a title or lien by aninstrument first duly recorded; and section 989 declares that the recording and deposit of any instrument for record shall be constructive notice of the execution of such instrument to all subsequent purchasers and incumbrancers. ' Held, that where an entryman conveyed the property before receiving a patent by deed, which was immediately recorded, and after patent issued he mortgaged the property to another, the mortgagee was bound to take notice of the deed recorded before the patent, and acquired no interest in the property as against the grantee therein. Fuller. J ,.dissenting.
(Opinion filed Feb. 3, 1904.)
Appeal from circuit court, Kingsbury county; Hon. Julian Bennett, Judge.
Action by William Bernardy against the Colonial & XJnite.d States Mortgage Company, Limited. From a judgment in favor of plaintiff, defendant appeals.
Reversed.
French £ Orvis, for appellant.
A fee simple title is presumed to be intended to pass by a grant of real property, unless it appears from the grant that a lesser estate was intended. Subd. 2, section 3254, Compüed Laws.
Where a person purports by proper instrument to grant real property in fee simple, and subsequently acquires any title or claim of title thereto, the same passes by operation of law to the grantee, or his successors. Subd. 4, section 3254, Compiled Laws. Citizens Bank v. Shaw, 14 S. D. 197.
A record is only constructive notice to subsequent purchasers deriving title from the same grantor. Pomeroy Equity Jur. section 658.
The payment of a valuable consideration and good faith are affirmative matters to be pleaded and proved by defendant. Farmers and Traders Bank v. Kimball Milling Co., 1 S. D. 388; Parish v. Mahaney, 12 S. D. 278.
A subsequent purchaser must plead and prove, by evidence other than the deed itself, a bona fide purchase without notice, previous to and down to the time of paying the money and delivery of the deed, and must explain circumstances from which notice can be inferred. Boone v. Chiles, 10 Pet. 177; Simmons Creek Coal Co. v. Doran, 142 U. S.437, 35 L. Ed. 1072; Smith v. Orton, (U. S.) 18 L. Ed. 62; Jewett v. Palmer, 7 Johnson’s Ch. 65, 11 Am. Dec. 401; Nantz v. McPherson, 18 Am. Dec. 216; Johnson v. Toumlin, 52 Am. Dec. 219; Cummings v. Coleman, 62 Am. Déc. 406; Sillyman v. King, 36 la.' 207; Nolan v. Grant, 5 N. W. 513; Lewis v. Lindley, 48 Pac. 765, (773); Richards v. Snyder, 6 Pac. 186; Weber v. Rothchild, 15 Pac. 650.
E. 8. Johnson and E. F. Green, for respondent.
In order that a person may claim that he occupies the position of a bona fide purchaser, it is essential as one of the facts giving him this character that he has acquired his right for a valuable consideration. Delvin on Deeds, Vol. 2, Sec. 834. Parties who purchase from pre-emptors before patent can not maintain the position of bona fide purchaser as they purchase only an equity. Copp’s Public Land Laws, page 919. Purchaser of land is chargeable with notice by implication of every fact effecting the title which would be discovered by an examination of the deed or other muniments of title of his vendor, and of every fact as to which the purchaser with reasonable prudence or diligence ought to become acquainted. Warvelle on Abstracts, p. 67, 69 Am. Dec. 397, 36 Am. Dec. 136, 47 Iud. 356, 11 N. J. Eq. 246, 73 Mo. 289, 32 Am. Dec. 772.
A person having no reason to question the rights of a patentee may rely upon his title as valid. Warren v. Sibley, Wis , 19 N. W. 40.
A record of a deed not connected with the record chain of title will not charge a subsequent purchaser with notice of the rights of such grantor. Huber v Bossart, 70 la. 718, 29 N. W. 609, 16 A. and E. Enc. of Law, 1 Ed. 800; Pomeroy Eq. Jur. Sec. 591-676, 23 L. R. A. 565.

Opinion:
Corson, P. J.
This action was instituted by the plaintiff to quiet his title to a quarter section of land in Kingsbury county. The judgment was in favor of the plaintiff, and the defendant has appealed. All the facts in the case were stipulated, and are contained in the agreed statement of facts, which constitutes, in effect, the findings of the court. . There are many facts contained in the agreed statement that we regard as entirely immaterial in the determination of this case. All the facts that we deem material are that in February, 1898, William A. Wilkes made a timber-culture entry for the premises in controversy; that in May, 1890, said Wilkes and wife and one Wells and wife executed, acknowledged and delivered to the defendant a deed to the premises in controversy purporting to grant to the defendant a fee-simple title to the same, and that said deed was duly recorded in March, 1891; that in April, 1895, the said Wilkes received a United States patent for the said premises; that in 1893 Wilkes and wife executed a mortgage upon the said property to one Edgar Smith, which mortgage was foreclosed, and all the title that Smith acquired thereunder, if any, passed by mesne conveyance to the plaint iff. It will thus be seen that the deed to the defendant and the mortgage to Smith were both executed by the same party (Wilkes) prior to the issuance of the patent, and that the Wilkes deed to the defendant was recorded about two years prior to the execution of the mortgage. Wells does not appear, to have had any interest in the timber-culture claim, and he will not be further referred to. Two questions are therefore presented, and are thus stated in the appellant's brief: "(1) Was the deed from Wilkes and Wells to the defendant such a conveyance that any title to the land therein described, after-wards acquired by the grantors, or either of them, would, by operation of law, pass to the defendant? (2) Did the record of the deed from Wilkes and Wells to the defendant operate as constructive notice of defendant's right, to the plaintiff, Bernardy, at the time he purchased the land?
It is provided by subdivision 4, § 947, of the Civil Code, that "where a person purports by proper instrument to grant real property in fee simple, and subsequently acquires any title or claim of title thereto, the same passes by operation of law to the grantee or his successors." This subdivision was copied from the California Civil Code, and makes an important change in the common law upon the subject of after-acquired titles. In the case of Clark v. Baker, 14 Cal. 612, 76 Am. Dec. 449, the Supreme Court of that state, in an exhaustive opinion, arrives at the conclusion that "the thirty third section of the act concerning conveyances changes the rule of the common law as to the effect of deeds under the statute of uses upon subsequently acquired interests of the grantor, and gives them an operation equivalent to the most expressive covenant of warranty." The court in the opinion further says: "The effect, then, of its provisions upon a conveyance of premises in fee Ms the same as if it were written upon its face that the grantor conveyed all the estate which he then possessed, or which he might at any time thereafter acquire. " And the court holds that mortgages are included in the provisions of the section. The thirty-third sec^ ion referred to was subsequently amended to read the same as the section of our Civil Code above quoted, but the section as amended has been treated by the courts of California as substantially the same in effect as the former section. Mr. Deering, in his Annotated California Codes, p. 211, vol. 2, in a note to section 1106, the same as the section of our Code, speaks of the section as a substantial re-enactment of section 83. See, also, San Francisco v. Lawton, 18 Cal. 465, 79 Am. Dec. 187; Lent v. Morrill, 25 Cal. 500; Morrison v. Wilson, 30 Cal. 347; Kirkaldie v. Larrabee, 31 Cal. 457, 89 Am. Dec. 205; Green v. Clark, Id. 593; Cadiz v. Majors, 33 Cal. 289.
We are of the opinion, therefore, that, as the deed from Wilkes to the defendant did purport to grant the property in fee simple, the after-acquired title of Wilkes passed "by operation of law" to the defendant. Notwithstanding the provisions of the Code are clear, definite, and certain, and the deed to the defendant is precisely such a deed as the Code provides shall pass the after-acquired title "by operation of law," the counsel for the respondent insists that the defendant is not entitled to the benefit of the¡ statute,'for the reason (1) that the defendant did not pay any"'consideration for the property; and (2) that the plaintiff had mo constructive notice of the "defendant's title when he purchased the same. And this apparently was the view of the court in stating his conclusions of law and. en- t-ering judgment in favor of the plaintiff. In the view we take of-the law. neither of these positions can be sustained. In our opinion, there is nothing in the agreed statement of facts that warranted the trial court in holding that there was no consideration for the deed from Wilkes to the defendant. But as we view the case, this is entirely immaterial, as a voluntary conveyance is valid against a subsequent purchaser "with notice, either actual or constructive, of a prior deed. " By the Civil Code it is provided: "A transfer is an act of the parties or of the law by which title to property is conveyed from one living person to another. A voluntary transfer is an executed contract subject to all the rules of law concerning contracts in general, except that a consideration is not necessary to its validity." Sections 915, 916, Civ. Code. These sections are copies of sections 458 and 459 of the proposed Civil Code of New York. In their notes to these sections, the commissioners say, in speaking of the clause, "except that a consideration is not necessary to its validity": "This clause was proposed for enactment in regard to grants of real property by the revisers of 1828, but was not enacted. It is, however, undoubted law both as to real and personal property." And this seems to be the gem eral rule m this country as to voluntary conveyances. 6 Ency, of Law, pp. 683, 684.. On page 684 the author, under the heading of "Consideration," says, "In the United States, however, it is held, that a voluntary deed is valid against any subsequent purchaser who buys with notice, whether the notice be actual, or such as the law implies from the recording of the prior deed." In 14 Ency. of Law, p. 466, the author, under the subject of "Fraudulent Sales," says, "In the United States the authorities are almost unanimous in holding that a voluntary conveyance, if made bona fide, is valid as against, a subsequent purchaser with notice of the conveyance." In support of this statement of the law, the author cites a large number of authorities. In Walker v. Walker, 35 N. C. 335, the Supreme Court of that state says: "No consideration is necessary in order to give validity to the deed. The general rule is, a deed is valid without a consideration. " In Jackson v. Cleveland, 15 Mich. 94, 90 Am. Dec. 266, the Supreme Court of Michigan held, as appears from a headnote, that "a voluntary deed purporting to be for the beneficial use of the grantee, and made deliberately and without mistake or contrivance, is binding upon the grantor and his heirs, and can • be avoided only by creditors and others having superior equities to the grantee." Section 943 of the Civil Code provides that "every grant of an estate in real property is conclusive- against the grantor and every one subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded. "
It will thus be seen that the deed from Wilkes to the defendant, being duly acknowledged and recorded,, conveyed Wilkes' title to the defendant, not only as against himself, but as against "every one subsequently claiming under him," except a purchaser in good faith and for valuable consideration, who acquired a title or lien by an instrument that was first duly recorded. It affirmatively appears from the agreed statement in this case that the deed from Wilkes to the defendant was executed and recorded some two years prior to the mortgage executed by Wilkes to Smith, under whom the plaintiff claims. There is nothing in the agreed statement of facts that in any manner can be regarded as impugning the good faith of Wilkes in executing the deed to the defendant, and there is no presumption that the conveyance was not made in good faith. It is clear, therefore, that the fact — if such be the fact — that the conveyance from Wilkes to the defendant was voluntary and without consideration gives plaintiff nó legal or equitable title to the premises in controversy.
This brings us to the second or more important question, namely, did the plaintiff, at the time he purchased the property, have constructive notice of the conveyance from Wilkes to the defendant? It is contended by the respondent that as the deed from Wilkes to the defendant was executed and recorded prior to the time the United States patent was issued to Wilkes, and before he acquired a legal title to the property, the plaintiff did not have constructive notice of the same, for the reason (1) that the deed from Wilkes to the defendant was without consideration; (2) for the reason that the plaintiff was not required to examine the record for any conveyance from Wilkes prior to the acquisition of his patent from the United States. This contention is untenable, for, as we have seen, the conveyance from Wilkes to the defendant was good as against him and all persons claiming under him, except creditors, and the title acquired by him by virtue of the patent passed by operation of law to the defendant; and the rule contended for by the respondent, that he was not required to look back of Wilkes' patent, prevailing in some states where the common law is still in force, in which after-acquired titles do not pass to the grantee, has no application under the registry law of this state and the law providing that after-acquired titles shall pass to the grantee. We shall not stop, therefore, to discuss the cases cited, further than to say that they are not uniform in support of the position of the plaintiff, even in states where the common law prevails, and where no provisions have been made for the passing of after-acquired titles by operation of law. Tefft v. Munson, 57 N. Y. 97; Warburton v. Mattox, Morris, 367.
In the case at bar both plaintiff and defendant, as before stated, claim title from the same grantor, Wilkes; anú as we have seen, it was perfectly competent for Wilkes to make a voluntary conveyance of the property to the defendant, and that plaintiff, as a subsequent purchaser, with notice, '"actual or constructive, " of the deed from Wilkes to the defendant, acquired no title to the property. Section 986 of the Civil Code provides: "Every conveyance of real property, other than a lease for a term not exceeding one year, is void as against any subsequent purchaser or incumbrancer, including an assignee of a mortgage, lease, or other- conditional estate, of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded." Section 989 provides: "The recording and deposit of an instrument, proved and certified according to the provisions of sections 963, 976, 977, 978, 979, are constructive notice of the execution of such instrument to all purchasers and incumbrances [incumbrancers] subsequent to the recording." It will thus be seen that the recording and deposit of an instrument properly proven is constructive notice of the execution of such instrument "to all purchasers and incumbrancers subsequent to the recording.v It is true, this section does not, in terms, speak of the instrument duly acknowledged; but it is clear that the Legislature had, in effect, pro vided in the previous sections that such instruments, duly acknowledged and recorded, would impart constructive notice. It will be further noticed that the only party who can acquire a title superior to that evidenced by the record is one whose title ' 'in good faith and for a valuable consideration" has first been duly recorded. It will be further observed that no exception is made in the Cod© of conveyances made prior to the acquiring of the legal title when such conveyances are duly recorded. It is therefore quite clear that the plaintiff, at the time he purchased the property, did have constructive notice of the con-, veyance from Wilkes to the defendant, and is presumed to have had knowledge of the law providing that the subsequent .legal title acquired by Wilkes under his patent passed to the defendant by operation of law. It is clear that the theory that the plaintiff was not bound by constructive notice of the deed from Wilkes to the defendant is entirely inconsistent with our registration act, and our law as to passing subsequently acquired titles. It, in effect, strikes from our Code the provisions above quoted in relation to after-acquired titles, for if a party is not required to look beyond the legal-title, or is not charged with constructive notice of any conveyance prior to the acquisition of the legal title by the party under whom he claims, the provisions of the Code as to after-acquired titles can have but very little, if any, effect.
Let us, for a moment, consider the effect of the theory advanced by the respondent, and apparently adopted by the trial court., A. enters upon government land, .and conveys the same to B. by deed purporting to grant the title in fee simple. Subsequently a patent is issued to A. for the land, and, under the theory of the counsel for respondent, A., after the issuance of such patent to him, may convey the land to 0., who has no actual notice of the prior conveyance to -B., and he will acquire a good title to the property as against B., notwithstanding the statute declares that the legal title acquired by A. shall pass by operation of law to his grantee, B. As a further illustration, take the case at bar. Wilkes, so far as the record discloses, has never conveyed or mortgaged the property to any one since the government patent was issued to him. Suppose that some party who has no actual notice of the mortgage executed to Smith by Wilkes, under whom the plaintiff claims, and assuming that the mortgage was the only conveyance made by Wilkes, purchases the property from Wilkes, and places his deed upon record, and brings an action against the plaintiff to recover possession of the property. Under the plaintiff's theory, such subsequent purchaser would clearly be entitled to recover possession, as he would not be charged With constructive notice of any conveyance or mortgage prior to the issuance of the patent, and the plaintiff would therefore have neither a legal nor equitable title to interpose against the plaintiff's claim. These illustrations sufficiently demonstrate the fallacy of the respondent's theory as applied to our law for the passing of after-acquired titles, and to our registration act. In this state, therefore, a purchaser of property is nec-' essarily charged with notice of all conveyances or mortgages made by the party under whom he claims. It will be observed, therefore, that under the plaintiff's theory the statute providing that after-acquired titles shall pass to the grantee by operation of law would practically be repealed, and a purchaser from one who has acquired the legal title must examine the record, and ascertain whether or not he has previously conveyed the property by a conveyance purporting to convey the fee-simple title, as a purchaser is presumed to know the law, and to know that the party in whom the legal title stands may have previously conveyed the property, and that such prior grantee may have acquired such legal title by operation of law under the statute.
Counsel for the respondent have discussed at some length the question as to what extent a party has constructive notice of conveyances not in the line of his chain of title, but, in the view we take, this question has no application to the case at bar, for, as before stated, both plaintiff and defendant claim title under the same party, Wilkes. No question, therefore, is presented as to the notice of any record of conveyances lying outside of the plaintiff's chain of title.
The view that we have taken of the registration laws is strengthened by sections 868 and 869 of the Political Code, which require a numerical index to be kept of both city and farm property. Under such a system, abstracts will necessarily show all the conveyances made of the property.
In our opinion, the propositions advanced by respondent's counsel, and which apparently were sanctioned by the trial court, are calculated to unsettle titles; and are in opposition to rules long established and understood, and which constitute rules of property. Had the respondent made such an examination of the records as men of ordinary prudence would have done, he would have discovered that Wilkes had, prior to the execution of the mortgage to Smith under which the plaintiff claims'title, conveyed the property to the defendant, and that the legal title of Wilkes under his patent passed by operation of law, under the statute, to the defendant, and that Wilkes, at the time he mortgaged the property to Smith, had no interest in the property to mortgage, and that Smith acquired no title to the property by reason of his mortgage and the foreclosure of the same, and that he, in purchasing, would acquire no title to the property.
The judgment of the circuit court is reversed, and a new trial ordered.