Gates v. Kelley

• Court: United States State Supreme Court of North Dakota
• Citation: 15 N.D. 639,110 N.W. 770
• Parties: GATES v. KELLEY.
• Decision Date: 13 February 1907

15 N.D. 639
110 N.W. 770

GATES
v.
KELLEY.

Supreme Court of North Dakota.

Aug. 3, 1906.
Rehearing Denied Feb. 13, 1907.

Syllabus by the Court.

Evidence examined, and held to show that a deed from C. to K. was executed with the intent on C.'s part to cure a defective foreclosure and to perfect the title in the person claiming under the mortgage sale, and that K. induced the execution of the deed to himself by representing himself to be the agent or attorney for the person claiming title under the defective foreclosure.

The grantee in a deed so obtained is a trustee of the legal title for the benefit of the person in whose favor the grantor intended the deed to operate.

Appeal from District Court, Nelson County; C. J. Fisk, Judge.

Action by E. P. Gates against Fred A. Kelley. Judgment for defendant, and plaintiff appeals. Reversed and judgment entered.

[110 N.W. 770]

Frich & Kelly, for appellant. Scott Rex and George A. Bangs, for respondent.

ENGERUD, J.

This is a suit in equity whereby the plaintiff seeks to have the defendant declared to be a trustee ex maleficio of the title of a quarter section of land in Nelson county, and to compel the defendant to convey the legal or record title to plaintiff, who claims to be equitably entitled thereto. The answer is a general denial. The issues were tried without a jury and resulted in a judgment for defendant, from which judgment the plaintiff appeals, demanding a retrial of all the issues.

On July 5, 1884, Chester Cranmer was the owner in fee of the southwest quarter of section 15, township 153, range 59, in Nelson county. On that day he borrowed from Anna Hoagland $450, secured by a first mortgage of said land. The debt was evidenced by a promissory note due November 1, 1889, with coupons attached representing the interest to be paid for the loan. By a mistake of the scrivener the mortgage described the land as being in range 58. This loan was procured through the plaintiff, E. P. Gates, who was then a banker and real estate loan broker in Grand Forks. A second mortgage was at the same time given by Cranmer to Mr. Gates to secure the latter's commissions on the loan. The commissions aggregated $96, payable in annual installments, being the equivalent of 4 per cent. annual interest. The loan was evidently made at the rate of 12 per cent. per annum; the broker reserving one-third of the annual interest as his commission. This second mortgage described the land correctly, and it is expressly stipulated therein that it is subject to the mortgage to Anna Hoagland. Both mortgages contained the usual power of sale in case of default. Cranmer abandoned the land in 1885, and has never since paid any taxes thereon or any of the interest or principal of the mortgages. On July 30, 1886, the Hoagland mortgage was foreclosed by advertisement and the premises sold to Anna Hoagland for the amount of the mortgage. There was no redemption, and a sheriff's deed in due form was issued to the purchaser on August 1, 1887, and duly recorded. This deed, as well as the certificate of sale, which was also recorded, gave the correct description

[110 N.W. 771]

of the premises, but the same misdescription appeared in the notice of sale as that found in the mortgage. It is conceded that the foreclosure is wholly void. Anna Hoagland subsequently executed and delivered a deed of the land to Peter v. Hoagland, and the latter on January 4, 1900, executed a deed thereof to plaintiff, both of which deeds were recorded. There has been no possession taken of the land under any of these deeds, but the premises have been unoccupied until the defendant took possession in 1902, as will hereafter appear. In 1901 Mr. Gates discovered that the title supposed to have been acquired through the foreclosure was invalid by reason of the misdescription of the property. He decided to endeavor to acquire title by a foreclosure of his second mortgage. He was referred to the defendant, who was and is an attorney at law engaged in the practice of his profession at Lakota, in this state. The plaintiff was then a resident of Minneapolis, Minn.

On January 14, 1902, plaintiff wrote to defendant, inclosing his second mortgage against Cranmer, and also another mortgage upon another tract of land. He requested Mr. Kelley to proceed to foreclose both mortgages at once on the terms proposed in the letter, if they were acceptable. A check for $50 was inclosed to apply on the fees. He also requested Mr. Kelley to notify him by telegraph if he would do the work, as he (Gates) intended to start on a journey to California on the morning of January 16th. This letter in the usual course of mail reached Lakota on Wednesday, January 15th, the day after it was mailed, but the defendant asserts that, owing to his absence from Lakota, he did not actually receive it until the afternoon of Thursday, the 16th, too late to comply with Mr. Gates' request for a telegraphic reply. In answer to Mr. Gates' letter the defendant wrote the following letter:

“Lakota, Jany. 17th, 1902.

E. P. Gates, Esq., Los Angeles, Cal.-Dear Sir: Your favor of recent date, inclosing mortgages Cranmer to Gates and Flatin to Gates, at hand, together with draft for $50.00 arrived during my absence, and was therefore unable to wire you as requested. I am sorry to say that I cannot represent you in the Cranmer case, as I am interested adversely, and I return herewith the papers in that case, together with chk. for $25.00. I am willing to foreclose the other one, however, upon the terms named. If, however, you do not wish to separate the foreclosure, wire me upon receipt of this letter at my expenses, and I will return the papers in that case, together with the balance of the money. I regret that my absence has delayed this matter.

Very truly yours, Fred A. Kelley.

Under a recent statute in this state no mortgages over ten years past due can be foreclosed by advertisement so that the Cranmer mortgage will have to be foreclosed by action and may be subject to the defense of the statute of limitations.”

It is admitted that this letter, although dated January 17, 1902, was not mailed until January 18th. We shall have occasion to refer to this circumstance later. Immediately after the receipt of the Gates letter, and before the answer thereto was mailed, the defendant went by train to Willow City, in this state, near which place the mortgagor, Cranmer, lived, and obtained from him a quitclaim deed of the land in question, naming said defendant as grantee and reciting a consideration of $500. It is admitted that the actual sum paid by defendant for this deed was $75. The deed is dated and acknowledged January 18, 1902. Defendant returned to Lakota immediately after obtaining the deed and mailed the above letter to Gates, and on January 20, 1902, recorded the deed from Cranmer to himself. The following spring he took possession of the farm and has held possession since, claiming title under said deed. We will add that Gates, after receiving the answer to his letter transmitting the Cranmer papers, declined Mr. Kelley's services in the foreclosure of the other mortgage, and the papers relating thereto and the remaining $25 were returned to him by defendant. Such, in brief, are the undisputed facts out of which this controversy arises.

Plaintiff alleges and claims that the evidence proves (1) that the relation of attorney and client existed between defendant and plaintiff when the deed was obtained by Kelley, and that the transaction was a betrayal by the latter of his trust; (2) that Kelley secured the deed to himself by inducing Cranmer to believe that it was to operate as a conveyance to plaintiff so as to cure the latter's defective title. We are convinced that the second proposition just stated is true, and that it is decisive of the case, without considering the first one. Throughout this opinion, therefore, we shall assume in favor of the defendant that the relation of attorney and client had never existed between himself and the plaintiff.

There were no witnesses present at the interview between Cranmer and Kelley at Willow City, which resulted in the execution of the deed. The decision of the case hinges altogether upon what was really said and done at this interview, and upon the circumstances which...