First National Bank of Van Hook v. Zook

• Decision Date: 08 December 1923
• Docket Number: 358
• Court: North Dakota Supreme Court

196 N.W. 507

50 N.D. 423

FIRST NATIONAL BANK OF VAN HOOK, NORTH DAKOTA, a Corporation, Appellant, v. D. HOMER ZOOK, Citizens Bank of Minot, North Dakota, a Corporation, Respondent

No. 358

Supreme Court of North Dakota

December 8, 1923

Appeal from the District Court in and for Mountrail County, North Dakota, Lowe, J.

Reversed.

Judgment modified.

C. N Cottingham, for appellant.

As a general rule, subject to qualifications, to be stated in subsequent paragraphs, the homestead exemption may be claimed in any estate which the debtor may have and which is liable to seizure and sale on execution for payment of his debts. The homestead law was designed to embrace "all estates liable to such sales." 15 Am. & Eng. Enc. Law, 2d ed 556.

"An entryman acquires by homestead entry the right of possession and occupancy of the land homesteaded, subject to the fulfilment by him of the Federal law requiring his residence upon and cultivated upon and improvement of the land so held. And upon his compliance with the law in such particulars for the period of five years from and after his homestead entry the inchoate right to the legal title becomes in fact a full equitable title to the land so homesteaded. Such equitable title, however, on final proof of his compliance with the homestead law, when made through the proper channels provided for by the Federal government is merged in the government patent to the land, which patent is issued upon the approval of the final proof, and as the last act necessary to be performed to transfer the legal title to the entryman. This act of executing and delivering the patent is held to be but a ministerial act. The foregoing described the legal status of the homesteader's right from the inception of his right by homestead entry until legal title is vested in him by the government patent to the land homesteaded. At no state of these proceedings up until the homesteader fully complied with the homestead act by residence upon, cultivation and improvement of his homestead for the full period of five years has he the full equitable right to the land homesteaded; but upon the expiration of such time, and upon such compliance with the law, he has the full equitable title to his homestead land, subject only to the defeasance by his death before final proof, or failure to make final proof as provided by law." Adams v. McClintock, 21 N.D. 483, 131 N.W. 394.

"Where the holder of a mortgage upon a homestead on which final proof has not been made, in order to protect the security of his mortgage, advanced, on behalf of the homesteader, the government purchase price of the homestead, and where the mortgagor avails himself of the benefits of the payment and receives the patent with full knowledge thereof, the amount so advanced may be added to the mortgage, and the mortgagee becomes subrogated to the right of the government to treat the land as security for the payment." Anderson v. Kain, 40 N.D. 632, 169 N.W. 501.

B. H. Bradford, for respondent.

JOHNSON, J. BRONSON, Ch. J., and CHRISTIANSON, BIRDZELL, and NUESSLE, JJ., concur.

OPINION

JOHNSON, J.

This is an appeal from the district court of Mountrail county. The plaintiff brought an action against the defendant, Zook, joining other persons and corporations as defendants, to foreclose a mortgage upon real property. The defendants, other than the Zooks, are lienholders or holders of mortgages which are claimed by the plaintiff to be liens inferior to that of its mortgage. The court found generally against the plaintiff and in favor of the defendant, the Citizens Bank of Minot, holding that the mortgage of the last-named bank was superior to that of the plaintiff and appellant.

The facts are as follows: On December 5, 1916, the defendant, Zook, purchased a relinquishment from an entryman on the land described in the mortgage involved in this controversy; on the same day, he borrowed $ 1,290 from the assignor of the appellant and executed the mortgage in suit to secure the loan. The money was paid to the vendor of the relinquishment on the same day, and it seems from the evidence that the relinquishment was executed and delivered at the same time. The transaction took place in the offices of the assignor of the plaintiff and the loan was made and the money borrowed for the purpose of purchasing the relinquishment with the intention on the part of the Zooks to establish their home upon and acquire a homestead right in the premises described in the mortgage. This was known and understood at the time by the mortgagor and the mortgagee. The mortgagor was married, but his wife did not join in the execution of the mortgage. At the time of the execution of the mortgage and the procuring of the loan and the purchase of the relinquishment, the mortgagor had not moved upon the land and it appears that he and his wife subsequently established their home upon the premises. The mortgage was recorded in the office of the Register of Deeds on December 20, 1916. On the 28th day of January, 1921, the wife of the mortgagor signed the mortgage and the note.

On the 24th day of September, 1917, the Zooks executed a promissory note in the sum of $ 2,117.65 to the defendant, the Citizens Bank of Minot, and at the same time executed a mortgage upon the premises occupied by them, securing the same. This mortgage was, on the 3d day of October, 1917, filed for record in the office of the register of deeds. The contest for priority is between these mortgagees.

It appears that sometime during the month of April, 1919, the appellant furnished the money necessary to complete the proof and make the payment required therefor, with the result that the Zooks became entitled to a patent from the government to the premises. The appellant claims a lien upon the premises to secure this advance.

The respondent, the Citizens Bank of Minot, contended in the trial court that the mortgage sought to be foreclosed by the appellant was inferior to the mortgage executed by the Zooks on the 24th of September, 1917, because the wife of the mortgagor did not join in the execution of the first mortgage; it also contended that the advance to the Federal government to make the payment necessary in order to obtain the patent was a voluntary payment, was made without the request or consent of the Zooks, that they received no benefit therefrom, and that the appellant was not entitled to a lien upon the premises as security therefor. The trial court sustained both of these contentions and held that the lien of the respondent bank was superior to that of the appellant.

In the trial court, the appellant invoked the statute of limitations against the respondent bank (Comp. Laws, 1913, §§ 5609, 5610) contending that the Zooks had abandoned the homestead premises more than two years prior to the commencement of the action and that the respondent bank was precluded from attacking the validity of the appellant's mortgage on the ground that it covered homestead property and was of no effect, inasmuch as it was not executed by both husband and wife. The trial court held against the appellant and found that there was no abandonment of the premises by the mortgagors.

Appellant contends, among other things, that the statutory homestead right could not attach, under the circumstances, because the Zooks had not complied with the conditions entitling them to a patent from the Federal government and had, at most, an inchoate right to such a patent, provided they made proof in due form and complied with all the requirements of the Federal government. He then says that, inasmuch as the homestead right did not attach, it was not necessary that the wife join in the mortgage.

There are some legal questions raised on this appeal that have not been heretofore decided by this court. The primary questions seem to be:

(1) May an entryman, who lives with his family, under a certificate of entry, upon government land, for the purpose of ultimately obtaining from the Federal government a patent thereto, acquire a homestead right in the premises under chapter 51 of the Civil Code, Comp. Laws, 1913, before such proof is made or the patent is issued?

(2) Is a loan by a third party to the purchaser of the relinquishment from an entryman, such loan being made for the purpose of purchasing such relinquishment and with the intention and understanding that the borrower will establish a home upon the premises, a debt "created for the purchase price" of a homestead, within the provisions of § 5607, Comp. Laws 1913? To state the matter differently: Is a third person, who furnishes the purchase money with which the relinquishment is purchased from an entryman, and for the purpose of establishing a home on the premises, entitled to the same rights as the vendor, under § 5607, subd. 3, supra?

(3) May the appellant, holder of a preliminary mortgage, under the facts in the record, advance to the mortgagor the amount of money necessary to make complete proof to the Federal government and procure a patent to the land and add such advance to the amount of his lien?

It is urged by the appellant that the Zooks cannot claim a homestead under the circumstances. We are unable to see any merit in this contention. The entryman who holds a homestead certificate from the United States government has a possessory right to the premises which he can successfully maintain against all the world, except against the United States government and "persons claiming by legal and equitable title under it." 32 Cyc. 821, 822. The primary purpose of the government in opening its vast public domain under the homestead laws was to enable individuals to acquire and own homes; the purpose of the state homestead laws was to preserve the home, howsoever acquired, to...