Guaranty Savings Bank v. Bladow

Citation69 N.W. 41,6 N.D. 108
Decision Date10 November 1896
CourtNorth Dakota Supreme Court

Appeal from District Court, Richland County; Lauder, J.

Action by the Guaranty Savings Bank against Albert Bladow, Charles Anderson and Franklin Hall. From a judgment for defendants plaintiff appeals.


Fred B Morrill, for appellant.

The entry made by Anderson was cancelled by the commissioner on the contest initiated by Bladow, in which case the mortgagee was not made a party defendant or served with any notice whatever. The power vested in the commissioner is not arbitrary, unlimited or discretionary, but must be exercised in accordance with law. Bogan v. Edinburgh, etc Co., 63 F. 192; Cornelius v. Kessel, 128 U.S 456; Lindsey v. Hawes, 2 Black 554; Stimson v Clark, 45 F. 760. Anderson's proof and payment had been accepted by the agents of the government and final receipt issued to him. By such purchase the land became subject to the incidents of private ownership and Anderson could legally mortgage it before issuance of a patent. Carrol v. Safford, 3 How. 450; Witherspoon v. Duncan, 4 Wall. 210; United States v. Budd, 144 U.S. 154. The mortgagee acquired a property interest in the land and the ruling of the commissioner without notice to him was not due process of law. 2 Kent Com. 13; Westervelt v. Greggs, 12 N.Y. 202; Bank v. Akely, 4 Wheat 235; Hurtado v. California, 110 U.S. 516; Leeper v. Texas, 139 U.S. 467. Property rights of an individual cannot be divested without granting him a hearing. Windsor v. McVeigh, 93 U.S. 274; Lewis v. Shaw, 57 F. 516; Hollingsworth v. Barbour, 4 Pet. 466; Woodruff v. Taylor, 20 Vt. 65. The cancellation of Anderson's entry was void and the entry remains as though it had never been cancelled, and patent to the land should have been issued upon application of the plaintiff under § 7 of the Act of March 3rd, 1891 (26 St., At Large 1095.) This statute is remedial and the broadest possible scope towards effecting the object for which it was enacted, that its language will imply, must be given to it. Suth. St. Cr. § 207; Hudler v. Golden, 36 N.Y. 446; Cullerton v. Mead, 22 Cal. 96; Oates v. First Nat. Bank, 100 U.S. 239; Smith v. Stevens, 82 Ill. 554; C., B. & Q. Ry. Co. v. Dunn, 52 Ill. 260; Rockford R. I. & St. L. Ry. Co. v. Heflin, 65 Ill. 366; Hudley v. Morrison, 39 Ill. 392. Where the land department has mistaken the law, courts of justice have power to inquire into and correct mistakes, injustice and errors. Johnson v. Towsley, 13 Wal. 72; Stark v. Starrs, 6 Wal. 402; Lindsey v. Hawes, 2 Black 554; Cornelius v. Kessell, 128 U.S. 456; Widdicombe v. Childers, 124 U.S. 400; Moore v. Robbins, 96 U.S. 530; Bernier v. Bernier, 147 U.S. 242; Perry v. O'Hanlan, 11 Mo. 373; Risdon v. Davenport, 57 N.W. 482. The defendant, Bladow, became the owner by purchase of the title acquired by Anderson subject to the mortgage. He is estopped from setting up any defense to the validity of the mortgage subject to which he purchased the land. Jones on Mortgages, § 736; Johnson v. Thompson, 129 Mass. 393; Luite v. Stevens, 98 Mass. 305; Howard v. Chase, 104 Mass. 249; Hancock v. Fleming, 3 N.E. 254; Atherton v. Toney, 43 Ind. 211; Manwarring v. Powell, 40 Mich. 371; Fuller v. Hunt, 48 Ia. 163; Swertzer v. Jones, 35 Vt. 317; Thredgill v. Pintard, 12 How. 24.

W. E. Purcell and Chas. E. Wolfe, for respondents.

An entryman making a fraudulent entry of public land acquires no vested right of property in it. American Mortgage Co. v. Hopper, 64 F. 557; U. S. v. Peterson, 50 F. 507. The Amistead, 15 Pet, 518; League v. DeYoung, 11 How. 185; Parsons v. Venzke, 4 N.D. 452, 61 N.W. 1036. This court can not question the finding of fact by the commissioner. Mortgage Co. v. Hopper, 64 F. 557; Parsons v. Venzke, 61 N.W. 1036, 4 N.D. 452. Anderson acquired no title and plaintiff could acquire none. The protection of a bona fide purchaser relates to the legal title, or to such a right as is completely determined. So long as something remains to be done affecting the right those purchasing do so at their peril. American Mortgage Co. v. Hopper, 56 Fed. Rep 74, S. C. 64 F. 553; Jordan v. Ward, 64 F. 905. In this case Bladow's land would not be liable to the mortgage even if he had given it himself. Bull v. Shaw, 48 Cal. 455; Anderson v. Carkins, 135 U.S. 483. Bladow is not estopped to defeat the pretended lien of this mortgage. Kraft v. Baxter, 16 Pa. 739; Shoreman v. Eakin, 1 S.W. 559; Bowling v. Roork, 24 S.W. 4. The mortgage in so far as it might affect the real title to this land was void at its inception. Mellison v. Allen, 2 Pa. 97; Brewster v. Maddon, 15 Kan. 249; Webster v. Luther, 52 N.W. 271; Gregory v. Kenyon, 52 N.W. 685. Mulloy v. Cook, 10 S.W. 349. The covenants in the mortgage would estop the mortgagor. Robinson v. Bailey, 26 F. 223; Alt v. Banholzer, 40 N.W. 830; Giles v. Miller, 54 N.W. 551.



As originally instituted, this action had for its sole object the foreclosure of a mortgage. But on the trial it developed into a controversy over the legality of the cancellation by the land department of a homestead entry. The cause has been argued in this court on the theory that the plaintiff was in position to challenge the validity of such cancellation, and to secure the benefits of the patent subsequently issued by the government to a third person, based upon a new entry. The original entry was made by one Anderson in January, 1881. In July, 1881, he executed a mortgage upon his interest in the land to secure the payment of $ 450. This mortgage was in June, 1882, assigned to plaintiff. It is to foreclose this mortgage that this action was commenced. Subsequently to the execution thereof the land was conveyed to the defendant, Bladow. Thereafter such proceedings were had before the land department that on November 14, 1887, the commissioner thereof ordered that the entry made by Anderson be cancelled. In these proceedings the commissioner found as a fact that Anderson had never resided upon the land, as required by law, but that his entry was fraudulent, and the entry was canceled on that ground. Neither the original mortgagee nor the plaintiff was a party to these proceedings; or had any notice of them. So far as they were concerned, such proceedings were ex parte. Notice of the hearing was, however, served on Anderson by publication in accordance with the rules and practice of the land department. It is undisputed that the mortgagee loaned his money and took his mortgage in good faith, and for value, and that he had no actual knowledge of the fact that Anderson's entry was fraudulent. After the original entry was canceled, defendant, Bladow, made a homestead entry upon the same land, and subsequently obtained a patent therefor, based upon such entry. The decree in this case sustains this patent, and adjudges that the mortgage is therefore not a lien upon the land, but is a cloud thereon, and should accordingly be canceled. From this decree the plaintiff appeals.

In deciding this case we will adopt a theory more favorable to the plaintiff than the record will justify. We will assume that it has foreclosed its mortgage, and has secured the rights of the mortgagor in the land. The only feature which distinguishes this case from Parsons v Venzke, 4 N.D. 452, 61 N.W. 1036, is the fact that the holder of the mortgage was not a party to the proceedings in the land department which culminated in the cancellation of Anderson's entry. This fact does not, however, render the cancellation a nullity as to the mortgagee. The land department has, until a patent has been issued, complete control of the question whether it will cancel an entry. Its power is not dependent on jurisdiction over the person of any one, as the authority of a court is. By the issue of a certificate it does not lose control over the land. Such certificate is, in effect, no more than a statement that prima facie the person to whom it is issued appears to be entitled to a patent. Whether subsequent investigation will lead to a different conclusion is left unsettled; and whoever deals with the holder of such certificate is chargeable with knowledge that the proceedings instituted to secure the legal title to the land from the government are in fieri, and that the land department may at any time revoke the certificate, thus destroying the entryman's prima facie right to the patent. What procedure it will adopt, what persons it will notify, or whether it will proceed on notice at all or not, are matters within the discretion of the department, so far as the mere matter of power is concerned, congress not having prescribed any practice in such cases. No matter how arbitrary the land department may act, its cancellation is not a mere nullity. But such arbitrary action will, however, entitle the entryman to a hearing in court; and on this hearing he will be allowed to show that as a matter of fact his entry was not fraudulent. But no such showing was made in this case. Indeed, it is not claimed that the entry was not in fact fraudulent. The land department has in such a case, it is true, in the exercise of its undoubted power, destroyed his prima facie evidence of right to a patent, but because it has acted in an arbitrary manner--has denied him a hearing--the law will permit the entryman to prove in court the facts showing his entry to be valid, because the law regards the rights of an entryman, who has in good faith complied with the statute, as property rights, and will give him an opportunity to defend such rights, either in the land department, or if he is there denied a chance to protect himself, in the proper judicial tribunals. The only effect of the doctrine that an ex parte cancellation of an entry is...

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