Court Opinion

ID: 9688143
Source: CourtListenerOpinion
Date Created: 2023-08-24 17:35:02.803237+00
Date Added: 2024-06-11T12:05:09.971175
License: Public Domain

C. F. KELSCH, District Judge
(on petition for rehearing).
The defendants, Lyle and Sharon Bratcher, have served and filed a petition for rehearing wherein they claim that this court committed prejudicial error in its decision when it held, in effect:
(1) That in the absence of fraud, mutual mistake or accident, oral or intrinsic evidence is incompetent and inadmissible under the parol evidence rule to prove that a quitclaim deed, absolute in its terms, was executed and delivered for the sole and only purpose of security, and that this court had not only the legal right but the explicit duty to disregard and to exclude such evidence from its consideration in the rendition of its decision upon the merits;
(2) That the defendants, Lyle and Sharon Bratcher, failed to prove that the quitclaim deed, in issue, was executed and delivered for security only by evidence that is clear, satisfactory and convincing, and that the findings of the trial court to the contrary were unsound and clearly erroneous ; and
(3) That the defendants, Lyle and Sharon Bratcher, acquired their warranty deed, in issue, in violation of the express penal provisions of Section 12-17-14, N.D.C.C., and that, by reason thereof, it was cham-pertous and void.
We deem it necessary and advisable to answer these three assignments of prejudicial error separately, in the order set forth herein.
ASSIGNMENT OF ERROR NO. 1
The contention of counsel for said defendants in support of this assignment of prejudicial error is twofold:
(1) That the decision of this court overrules, without a passing reference to the rule established and maintained by this court from 1894 to the present time; that in equitable actions parol testimony is admissible to show that a deed, absolute in its terms, was in fact intended only as security for the performance of some act. He relies upon the following decisions to sustain this contention: Burr v. Kelley, 74 N.W.2d 428 (N.D.1956); Ginter v. Ginter, *64063 N.W.2d 394 (N.D.1954); Mechtle v. Topp, 78 N.D. 789, 52 N.W.2d 842 (1952); Altenbrun v. First National Bank, 47 N.D. 266, 181 N.W. 590 (1921); Miller v. Smith, 20 N.D. 96, 126 N.W. 499 (1910); McGuin v. Lee, 10 N.D. 160, 86 N.W. 714 (1901); Jasper v. Hazen, 4 N.D. 1, 58 N.W. 454 (1894);
(2) That the rale established in Jasper v. Hazen, supra, and Miller v. Smith, supra, is not only the prevailing rule in this state but the universal rule in courts of equity in this country, and cites decisions from other states in support thereof.
We have carefully examined the decisions in Jasper and Miller and find and conclude:
(1) That the record shows that Jasper was before this court three times; that in the first appeal reported in 1 N.D. 75, 44 N.W. 1018 (1890), the court set forth the facts alleged in the plaintiff’s complaint, wherein the plaintiff claimed, in substance, that the defendant promised that if plaintiff would give him a warranty deed to his land and possession of his personal property, that he would farm it, pay up the mortgage, deduct a reasonable sum from the income for his services, and would return the land and personal property to him, upon demand; that he believed and relied thereon, gave the defendant a warranty deed to his land and delivered his personal property to him; that the defendant breached his promises in violation of his trust, “with intent to cheat and defraud plaintiff, and to enable defendant to convert the same to his own use.” Obviously, fraud was specifically alleged and relied upon in Jasper, and therefore the parol evidence rule did not apply. Consequently, oral testimony was admissible to show that a deed, absolute in its terms, was in fact intended as security for the performance of an act, as the court correctly held:
(2) That in Miller v. Smith, supra, the court held that parol evidence was admissible to prove the intention of the parties at the time of the transaction, under Section 6153, R.C.1905, which is shown as Section 35-02-04 in the Century Code and which has since been repealed by Chapter 296, Section 32, S.L.1965 (Vol. 7, p. 95);
(3) That in McGuin, Altenbrun, Mechtle, Ginter and Burr, relied upon by counsel, the record shows that this court considered oral testimony to prove that a deed, complete, unambiguous and absolute in its terms, was in fact a mortgage, but the decisions of this court in each of these cases was based upon the sufficiency or insufficiency of the testimony to prove that the deed involved therein was, or was not, a mortgage, by evidence that was clear, satisfactory and convincing. In none of the decisions in these cases does the record show: (a) whether the complaint or answer specifically alleged fraud, mistake or accident, (b) whether there was any objection to the competency and admissibility of oral testimony under the parol evidence rule, or (c) that this court expressly held, as counsel claims and infers, that oral testimony was admissible to show that a deed, complete, unambiguous and absolute in its terms, was in fact a mortgage given as security for the payment of a debt, even though there was no specific allegation or reliance in either the complaint or answer upon fraud, mistake or accident.
It is true, as counsel for defendants claims, that as a general rule parol evidence is admissible in equitable actions to have a deed declared a mortgage or a trust, or to establish the right to repurchase, or for the. redemption of real property, where there are no statutory restrictions to the contrary.
We are firmly convinced, after a critical analysis of our statutory provisions as we have interpreted them, that they contain several specific restrictions which forbid and preclude the admission of oral testimony in equitable actions to prove that a deed, complete, unambiguous and absolute in its terms, in the absence of a specific allegation of fraud, mistake or accident, *641was executed and delivered as security only, subject to the right to repurchase or the right of redemption by the grantors.
They are:
1. "When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible, subject, however, to the other provisions of this chapter.” Section 9-07-04, N.D.C.C. MacMaster v. Onstad, 86 N.W.2d 36, 38 (N.D.1957).
2. “When through fraud, mistake, or accident a written contract fails to express the real intention of the parties, such intention is to be regarded and the erroneous parts of the writing disregarded.” Section 9-07-05, N.D.C.C. Larson v. Wood, 75 N.D. 9, 25 N.W.2d 100 (1946); Verry v. Murphy, 163 N.W.2d 721 (N.D.1969).
3. “The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument.” Section 9-06-07, N.D.C.C. Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606 (1951).1
4. “A contract in writing may be altered by a contract in writing or by an executed oral agreement and not otherwise.” Section 9-09-06, N.D. C.C. Northwestern Equipment v. Tends, 74 N.W.2d 832 (N.D.1956).2
5. “A grant cannot be delivered to the grantee conditionally. Delivery to him or to his agent as such is necessarily absolute and the instrument takes effect thereupon, discharged of any condition on which the delivery was made.” Section 47-09-07, N.D.C.C. Arhart v. Thompson, 75 N.D. 189, 26 N.W.2d 523 (1947); Adams v. Little Missouri Minerals Association, 143 N.W.2d 659 (N.D.1966).
6.“Every grant of an estate in real property is conclusive against the grantor and every one subsequently claiming under him, except a purchaser or encumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that first is duly recorded.” Section 47-10-08, N.D.C.C. Kittelson v. Collette, 61 N.D. 768, 240 N.W. 920 (1932).3
We are satisfied that these rules of substantive law apply not only to actions in courts of law but are equally applicable in courts of equity.
 But counsel for the defendants contends strenuously, however, that this interpretation is unsound and contrary to the universal rule in courts of equity in this country. We disagree, for the following reasons:
(1) That the decisions of courts of other jurisdictions are not controlling or binding upon the courts of this state, but its rules of substantive law, expressive of its public policy, are binding upon them;
(2) That it is elementary in this state that equity not only follows the letter but the spirit of the law. Farm Mortgage Loan Co. v. Pettet, 51 N.D. 491, 200 N.W. 497, 36 A.L.R. 598 (1924);
*642(3) That in Hedges v. Dixon County, 150 U.S. 182, 14 S.Ct. 71, 37 L.Ed. 1044 (1893), the Supreme Court of the United States held:
“The established rule, although not of universal application, is that equity follows the law * * * 'that, wherever the rights or the situation of parties are clearly defined and established by law, equity has no power to change or unsettle those rights or that situation, but in all such instances the maxim * * * [that equity follows the law] is strictly applicable.’ ”;
(4) That this rule has been recognized and approved by this court, (a) in Wade v. Major, 36 N.D. 331, 162 N.W. 399 (1917), where we said:
“A court of equity is not vested with arbitrary powers. It may not assume to decide the facts of a controversy according to its own standard of right, independently of fixed rules. On the contrary, a court of equity is governed in its judicial functions by doctrines and rules as fixed as those governing the actions of a court in a suit at law. If this were not so, every decision would be a virtual arbitration, and all certainty in legal rules, and security of legal rights would be lost.”
and (b): “That . . . equity must not accomplish by indirection what the law has prescribed must not be done directly.” Bartelson v. International School Dist. No. 5, 43 N.D. 253, 174 N.W. 78 (1919).
We are firmly convinced that courts of equity are bound by and must follow and apply the principles of substantive law set out herein; that there must be one uniform standard or rule which applies to all actions whether in law or in equity. This is not an unreasonable, arbitrary or unjustifiable departure from long-established rules with respect to the admissibility of parol evidence in courts of equity, as counsel contends, but, on the contrary, constitutes a sound, consistent and rational development of the law which renders principles of substantive law and the parol evidence rule reasonable and uniform in their applicability, and equitable and nondiscriminatory in their legal effect.
Manifestly, any other interpretation of the principles of substantive law set out herein would empower courts of equity (1) to deprive litigants of the uniform protection of the principles of substantive law in the determination of their legal rights and liabilities under instruments affecting the title to real property, and (2) to establish its own standard of right or wrong, or rules of law or of evidence as the conscience of the court might dictate, in disregard of the mandate of the law, and thereby not only destroy the salutary value of all written contracts but undermine and destroy the stability and security of the title to real property evidenced by written instruments. We cannot sanction or approve a rule of evidence which is absolutely inconsistent with and violative of the principles of substantive law expressive of the public policy of this state.
Considering our interpretation of the principles of substantive law set out herein, we firmly believe that an accurate and correct statement of the law as to when the parol evidence rule does or does not apply is imperative, not only for a determination of the soundness of the defendants’ contention but also to remove and dispel a reasonable doubt, if any exists, as to the validity of the conclusion in our original decision that the parol evidence rule is applicable to and decisive of the legality of the quitclaim deed involved herein.
 The rules clearly established by our applicable decisions, precisely and correctly stated, are as follows:
(1) That where, in an action at law or in equity, fraud, mistake or accident is sufficiently and specifically alleged and relied upon in the complaint, answer or cross claim, in such case the parol evidence rule does not apply and, therefore, oral testimony is competent and admissible to prove that a deed, even though it is complete, *643unambiguous and absolute in its terms, was in fact intended by the parties as a mortgage for the payment of a debt. Section 9-07-05, N.D.C.C.; Schue v. Jacoby, 162 N.W.2d 377 (N.D.1968); Hartford Accident and Indemnity Co. v. Anderson, 155 N.W.2d 728 (N.D.1968); Wilson v. Polsfut, 78 N.D. 204, 49 N.W.2d 102 (1951); Carufel v. Kounts, 60 N.D. 91, 232 N.W. 609 (1930); Jasper v. Hazen, supra; and
(2) That, on the contrary, where, in an action at law or in equity, a deed or other written instrument is complete, unambiguous and absolute in its terms and there is no sufficient or specific allegation of fraud, mistake or accident in the complaint, answer or cross claim, the parol evidence rule, as we have defined it, is applicable, and therefore oral testimony is incompetent and inadmissible to vary, contradict or impeach a deed or other written instrument, or to prove that such a deed was in fact intended by the parties as a mortgage to secure the payment of a debt, for the reason that, in such case, the deed is not only the best but the only evidence that is admissible to establish the true intention of the parties thereto. Sections 9-07-04, 9-06-07 and 9-09-06, N.D.C.C.; Zimmer v. Bellon, 153 N.W.2d 757 (N.D.1967); First National Bank, Bismarck v. O’Callaghan, 143 N.W.2d 104 (N.D.1966); Ives v. Hanson, 66 N.W.2d 802 (N.D.1954); Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606 (1951); Forester v. Van Auken, 12 N.D. 175, 96 N.W. 301 (1903).
In our original decision we found and concluded, in substance:
(1) That although the names of the grantees were left in blank at the time of the delivery, that after their names were written in, pursuant to implied authority, the quitclaim deed in issue was complete, unambiguous and absolute in its terms and, as such, it was valid and binding upon the parties thereto, and their privies. Kittelson v. Collette, supra; and
(2) That where, as here, the deed in issue was complete, unambiguous and absolute in its terms and the answer or cross claim of the defendants did not contain a specific allegation or reliance upon fraud, mistake or accident, in such case the parol evidence rule, as we have defined it, was applicable to the issues presented by the pleadings and the clear weight of the evidence adduced in support thereof, as we correctly held in our original decision.
We are confident, from a critical analysis of our rules, substantive law and decisions cited herein in support thereof, that our original decision on this issue is sound and correct and that the defendants’ claim that we committed prejudicial error with respect thereto is devoid of merit in fact and in law.
ASSIGNMENT OF ERROR NO. 2
On this issue counsel contends that we erred in concluding that the said defendants had failed to prove that the quitclaim deed in issue was executed and delivered for the purpose of security only, by evidence that was clear, satisfactory and convincing, and that the findings of fact of the trial court were against the great weight of the evidence and were clearly erroneous.
Upon review of our conclusion that the findings of the trial court were clearly erroneous, we take notice of the fact that, in our original decision, we set out the facts which we found to have been established by the clear weight of the evidence and we find that the defendants’ counsel has made no claim in his petition for a rehearing, (a) that the evidence upon which we relied did not support the facts we found to be clearly established by the evidence, (b) that we misstated the material testimony of any witness, or (c) that we failed to give to other relevant facts established by the evidence its probative value.
 Furthermore, we desire to emphasize two more sound and decisive reasons to sustain our original decision. They are:
(1) That one of the most decisive tests to determine what the intentions of the par*644ties were is whether there exists a debt from the grantor to the grantee, as there can be no mortgage without a debt or liability to be secured thereby. Miller v. Smith, supra; Ginter v. Ginter, 63 N.W.2d 394 (N.D.1954); Dean v. Smith, 53 N.D. 123, 204 N.W. 987 (1925). The evidence in this case shows, without dispute, (a) that the plaintiffs’ grantors were not indebted to them at the time the deed was delivered, and (b) that no debt was contemporaneously created by the execution and delivery thereof because Exhibits 8, 9 and 13 show, with reasonable certainty, that the $4,000 paid to the grantors was not intended as a loan of money but as a part payment of the purchase price of the land described in the quitclaim deed; and
(2) The grantors must prove by evidence that is clear, satisfactory and convincing that a mistake was made and that it was mutual. Wilson v. Polsfut and Ives v. Hanson, supra. There is no substantial evidence in this case that the mistake was made, much less that it was mutual.
Finally, in Hofer v. W. M. Scott Livestock Company, 201 N.W.2d 410 (N.D.1972), we quoted with approval from the decision of the United States Supreme Court in United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948), to the effect: (1) “ ‘A finding is "clearly erroneous” when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed’ ” or “if the finding is without adequate evi-dentiary support or is induced by an erroneous view of the law.”
Testing the sufficiency of the evidence by this rule, we find and conclude that a careful review of the evidence in its entirety, in the light of the applicable principles of substantive law, has left us with a firm conviction that a serious mistake has been made which warrants and sustains our original decision that the findings of fact of the trial court are clearly erroneous.
ASSIGNMENT OF ERROR NO. 3
On this assignment of error counsel for the defendants claims that Lyle Bratcher, who handled this transaction, was a purchaser in good faith for value, and consequently we erred in our decision that his warranty deed was champertous and void. We set' out the facts established by the clear weight of the evidence, which are not only supported by his conduct but by his solemn admissions under oath. Their accuracy and sufficiency have not been challenged by counsel in his petition for rehearing. They cannot be reconciled with an honest claim that he was a purchaser in good faith in the light of his actual knowledge, and the ample opportunity he had to find out the truth and ascertain the nature of the title under which the plaintiffs were in adverse possession of the premises described in his warranty deed. This he did not do because of the apparent fear that a diligent inquiry of the plaintiffs would have revealed not only the existence of the quitclaim deed but also the agreements (plaintiffs’ exhibits 8 and 13 executed and delivered in connection therewith) .
We are satisfied that the facts we set out in our original decision bring this case clearly within the prohibitory restrictions contained in our penal statute. Section 12-17-14, N.D.C.C. This conclusion is consistent with and justified by our decision in Accola v. Miller, 76 N.W.2d 517, 519 (1956), where we said:
“A conveyance of real estate executed in violation of Section 12-1714, NDRC 1943 is void but its invalidity extends only to the party in adverse possession claiming title
The undisputed evidence shows that the defendant, Lyle Bratcher, did not only have constructive but actual notice that the plaintiffs were in adverse possession, claiming title under a quitclaim deed, which renders his warranty deed champertous and void and, consequently, the defendants have no standing in this action to challenge the *645validity of plaintiffs’ title to the land in issue, as we held in our original decision. It must be self-evident from the facts we have found, the interpretation we have placed upon our pertinent statutes, and the conclusions we have reached herein that we are firmly convinced that our original decision is sound, just and right and is sustained by ample authority. We therefore adhere thereto. Under these circumstances a reargument would serve no useful purpose. Therefore, the petition for rehearing must be and the same is hereby denied.
ERICKSTAD, C. J., and KNUDSON and PAULSON, JJ., concur.

. In which we held, in effect, that this section is not an evidentiary or interpretive rule, but rather one of substantive law.

. Where we also held that a contract in writing may only be altered by a contract in writing or an executed oral agreement, and is not a rule of evidence but of substantive law.

. Where we held, in part: (a) that a deed constitutes a written contract, subject to parol evidence rule, and (b) rule excluding parol evidence to explain, modify or contradict written contract applies only to parties to such contract and their privies. Hull v. Rolfsrud, 65 N.W.2d 94 (N.D.1954); Bolyea v. First Presbyterian Church of Wilton, N.D., 196 N.W.2d 149 (N.D.1972); 72 C.J.S., Privity; Privies; Privy, at 954.