Hanlon v. McLain, 34234

• Decision Date: 01 April 1952
• Docket Number: No. 34234,34234
• Citation: 206 Okla. 227,242 P.2d 732
• Parties: , 1952 OK 127 HANLON et al. v. McLAIN et al.
• Court: Oklahoma Supreme Court

Page 732

242 P.2d 732

206 Okla. 227, 1952 OK 127

HANLON et al. v. McLAIN et al.

No. 34234.

Supreme Court of Oklahoma.

April 1, 1952.

Syllabus by the Court.

1. A title to real estate is neither a perfect title nor a full, legal and equitable title, if it is encumbered by an existing, unreleased mortgage of record.

2. Where a mineral deed, containing a warranty of title, conveying an undivided one-half interest in minerals was subject to an outstanding real estate mortgage from grantors to a third party, and subsequently the mortgage is foreclosed and the property is sold in the foreclosure proceedings and the title is reacquired by the grantors, the after acquired title to one-half the minerals will inquire to the grantee, or to his benefit, under the equitable doctrine of estoppel by deed.

3. The office of a general disclaimer, filed by a defendant in a foreclosure action, is to admit the superior rights of the plaintiff as asserted in his petition therein and to permit disclaimant to be discharged with his costs, and such disclaimer does not operate to estop disclaimant from asserting such claim of title as he may have or acquire later against a codefendant in the foreclosure action, who was also disclaimant's grantor.

Marshall Word, of Arnett, for plaintiffs in error.

Savage, Gibson, Benefield & Hart, of Oklahoma City, for defendants in error.

Horace B. Clay, of Tulsa, W. L. Houts, F. M. Houts, and L. Z. Lasley, all of Alva, W. Perry Dornaus, of Tulsa, Bryan Billings, of Woodward, amici curiae.

GIBSON, Justice.

Plaintiffs in error were defendants in the trial court and will hereinafter be called 'grantors'. Defendants in error were plaintiffs below and will be called 'grantees'.

Grantors held title to land in Ellis County and executed a real estate mortgage in favor of Federal Land Bank of Wichita, Kansas. Thereafter grantors executed mineral deeds to one Blankenship, who in turn conveyed to grantees. Subsequent to such conveyances Federal Land Bank prosecuted to conclusion a foreclosure of its mortgage and became purchaser at the sheriff's sale in the foreclosure proceedings. All grantors and grantees, or those in privity, were named as defendants in the action. The Bank conveyed to another Federal agency, the Federal Farm Mortgage Corporation. On June 13, 1946, and four years after issuance of the sheriff's deed, the Corporation conveyed by warranty deed to the grantors, the former owners, reserving an undivided one-fourth in the minerals. Grantees thereafter began the present action to quiet title as to their combined one-half interest in the minerals which had been conveyed by grantors in the mineral deeds. The trial court rendered judgment for the grantees and grantors appeal.

The case was tried on agreed stipulations of facts. The stipulations do not recite the amounts of consideration paid in any of the foregoing transactions, and we must assume a valuable consideration in each transaction. There is no contention of fraud by any party against the others. The grantors originally held title to the lands by virtue of a patent from the United States.

The mineral deeds contained a warranty of title. In the stipulations the records of the County Clerk, by reference, were admitted in evidence, but no copy of the mineral deeds appears in the record. We shall therefore assume that it was in a form sufficient to meet the requirements of the statute with reference to warranty deeds, 16 O.S.1951 § 19.

In the foreclosure proceedings the grantees filed a disclaimer, hereinafter discussed.

It is conceded that grantees knew and are bound to have known of the existence of the prior mortgage to the Bank.

Solution of all issues raised in this appeal rests on the interpretation and application of the statute with reference to an after acquired title as applied to the factual set-up of the case. The statute, 16 O.S.1951 § 17, reads: 'All rights of a mortgagor or grantor in and to the premises described in the instrument and existing at the time or subsequently accruing, shall accrue to the benefit of the mortgagee or grantee, and be covered by his mortgage or conveyed by his deed, as the case may be.'

All counsel appearing assert that the precise question presented here, involving as it does the judicial sale in foreclosure proceedings and the disclaimer of the grantees, intervening between the first ownership by grantors and the subsequent purchase of the property by them, has not been decided by this court.

Probably the most accurate summary of the problems before us is stated as a proposition by one group of attorneys appearing Amici Curiae, as follows: 'Where land is purchased after foreclosure by a mortgagee who thereafter conveys to the mortgagor, does the title so acquired operate as a new, separate and independent title in the mortgagor, or is it an after-acquired title accruing to the benefit of a prior grantee of mortgagor?'

Grantors say that there are two divergent and conflicting theories pertaining to the effect of a real estate mortgage, one being the theory that the mortgage constitutes a lien upon the property with the legal and equitable title remaining in the grantors and the other, the title theory, wherein the legal title is regarded as vested in the mortgagee, and that in such jurisdictions the grantor in a subsequent deed conveys only the equitable title until the legal title is revested in him or his grantor by redemption of the mortgage. Therefore it is said that cases from courts following the title theory hold that an after-acquired title vests in the owner's grantee, since the owner at the time of his conveyance did not have a full legal title. And it is further said that no decisions from such states are applicable here since Oklahoma has adopted the lien theory. It is further said that grantors held full legal and equitable title at the time that they executed the mineral deeds and hence there was no other title to be acquired and the statute cannot apply in this case. They further say that following the foreclosure sale in which the titles of both grantors and grantees were cut off, the title acquired by grantors from the Bank's grantee was a new, separate and independent title and was not to be disturbed by the statute with reference to an after acquired title.

This argument is intriguing but not persuasive. If we were inclined to follow it we could not do so in this case because it is predicated upon an inaccurate premise. One of the counsel asserts that the grantors held a 'perfect' title because they held a patent from the Government. Another counsel says grantors had a full legal and equitable title for the same reason.

We cannot agree that the grantors held either a 'perfect title' or a 'full legal and equitable title' at the time they executed the mineral deeds.

'A perfect title is one free from litigation, palpable defects, and grave doubts, and consists of both legal and equitable title fairly deducible of record.' Campbell v. Harsh, 31 Okl. 436, 122 P. 127. See Pearce v. Freeman, 122 Okl. 285, 254 P. 719.

'The defendant is guilty of a breach of his written contract to convey a good title to an undivided royalty interest, created by an oil and gas lease, where the defendant tenders such royalty interest subject to a prior, valid, existing real estate mortgage.' Sipe v. Greenfield, 116 Okl. 241, 244 P. 424.

We agree that Oklahoma is committed to the 'lien theory' of mortgages but the lien of a real estate mortgage is an encumbrance; it is a subject of litigation; it would prevent an owner from conveying a perfect title on any given day. In this case it was a sufficient encumbrance or a lack of title of such magnitude as to cause both grantors and grantees to lose their property in the subsequent foreclosure.

Grantors cite cases wherein we have upheld the application of the statute in various situations: Brown v. Barker, 1912, 35 Okl. 498, 130 P. 155; Weaver v. Drake, 1920, 79 Okl. 277, 193 P. 45; Holleman v. Cushing, Ex'x, 1921, 84 Okl. 156, 202 P. 1029; Barnes v. Morris, 1924, 105 Okl. 17, 231 P. 466; Brady v. McCrory, 1925, 108 Okl. 40, 233 P. 734.

Conceding that the after acquired statute was interpreted in favor of the grantee or mortgagee, the grantors say that in all these cases the grantor had an imperfect title or less than a full title and the statute was applicable in such cases. To us all such cases are significant in that they establish that this court has consistently invoked the doctrine of estoppel against one asserting an after acquired title as being superior to the title which he had warranted and covenanted to defend.

Grantors as plaintiffs in error place great reliance on the case of Schultz v. Cities Service Oil Co., 149 Kan. 148, 86 P.2d 533. The facts of that case are practically identical with those in the case before us, and the covenants of warranty nearly the same. The Kansas court held that where a mortgagor executed a mineral deed with a covenant of warranty to an oil company and the mortgage was foreclosed forever barring all rights of the mortgagor and oil company and a sheriff's deed went to a third person, the mortgagor obtaining title from such third person is not estopped in an action to quiet title by the covenant of warranty in the mineral deed from claiming full title to the property as against the oil company. It was further held that the statute with reference to an after acquired title does not apply to the title acquired from an independent source after the conveyance containing the warranty is set aside or rendered nugatory by judicial decree.

The Supreme Court of Montana in Rowell v. Rowell, 119 Mont. 201, 174 P.2d 223, 168 A.L.R. 1141, followed the rule of the Schultz case in holding that the subsequent acquisition of title was a new and independent title and that the statute did not apply in such case.

We think that the Kansas and Montana decisions express the minority view. In view of what we conceive...