Kraft v. Carson County

• Decision Date: 21 October 1946
• Docket Number: 8851
• Citation: 24 N.W.2d 643,71 S.D. 382
• Parties: PETER KRAFT, Respondent, v. CORSON COUNTY, F. A. Amundson, Commissioner of Banks of the State of Minnesota, Trustee of the State Bank of Franklin, Franklin, Minnesota, C. E. Lewis, and Ellis M. Lewis, Appellants.
• Court: South Dakota Supreme Court

71 SD 382, 24 NW2d 643 (1946)

PETER KRAFT,

Respondent,

v. CORSON COUNTY,

F. A. Amundson, Commissioner of Banks of the State of Minnesota,

Trustee of the State Bank of Franklin, Franklin, Minnesota,

C. E. Lewis, and Ellis M. Lewis,

Appellants.

South Dakota Supreme Court

Appeal from Circuit Court, Corson County, SD

Hon. Frank E. Gladstone, Judge

#8851—Reversed

Stanley R. Voas, McIntosh, SD

Morrison & Skaug, Mobridge, SD

Attorneys for Plaintiff and Respondent.

W. M. Potts, Mobridge, SD

Byron S. Payne, Pierre, SD

Attorneys for C. E. Lewis and Ellis M. Lewis, Defendants and Appellants.

Archie R. Moore, McIntosh, SD

Attorney for Defendant.

Opinion Filed Oct 21, 1946

RUDOLPH, Presiding Judge.

Plaintiff brought this action to quiet title to a half section of land in Corson County. For some time prior to 1924 this land was owned by the State Bank of Franklin, Minnesota. In 1924 the bank entered into a contract with the defendant, C. E. Lewis, whereby Lewis agreed to purchase the land under a crop payment plan. Lewis failed to make the payments required by the contract, and failed to pay taxes for the year 1925 and subsequent years. The Franklin bank failed and in May 1940 the land was sold in the liquidation proceeding to one G. P. Smith. Smith, by quitclaim deed dated April 27, 1944, conveyed the land to the defendant, Ellis M. Lewis. On December 13, 1926, the land was sold to Corson County for the delinquent taxes of 1925. In 1932 Corson County took a tax deed to the land. Plaintiff purchased one quarter section of the land from the county in 1941 under a contract of sale whereby he agreed to pay $500 therefor, $100 in cash and the balance in installments. In 1943 he bought the other quarter section under similar terms. Plaintiff took possession of and farmed each quarter section after purchasing it, and on the quarter section purchased in 1941 he made some rather extensive improvements. Plaintiff brought this action in 1944. Defendants C. E. Lewis and Ellis M. Lewis answered asserting that the tax deed to the premises was void and claiming an interest in and ownership of the property. The court did not determine the validity of the tax deed, but by its findings of fact, conclusions of law and judgment determined that the Lewises were estopped by their laches from asserting and relying upon the invalidity of the tax deed. The defense by way of an equitable estoppel is available in an action to quiet title. Kenny et al. v. McKenzie, 25 SD 485, 127 NW 597, 49 LRA, NS, 782.

There are several cases in this state wherein the doctrine of estoppel by laches has been applied to defeat claims to real estate. In the case of Wampol v. Kountz et ux., 14 SD 334, 85 NW 595, 86 AmStRep 765, it was there held, as stated in the syllabus:

“Parties who passively, willfully, and knowingly suffer another to purchase unoccupied land and expended money thereon under an honest, though erroneous, belief, based on the county records, that his vendor’s title is perfect, and that the deed under which the vendor claims is genuine and not a forgery, are estopped from asserting their title, as against the purchaser, after concealing their claim and the forgery for more than 13 years for the purpose of shielding the vendor from the consequences of his crime.”

Another case is Shelby v. Bowden, 16 SD 531, 94 NW 416. In this case it was held that a mortgagor who had executed a mortgage containing a power of sale, acquiesced in the foreclosure thereof, delivered possession to the purchaser and later quit-claimed to the defendants, was estopped to assert title to the premises in reliance upon an alleged invalidity in the foreclosure proceedings. In the case of Kenny et al. v. McKenzie, 23 SD 111, 120 NW 781, 49 LRA, NS, 775; on rehearing, 25 SD 485, 127 NW 597, 49 LRA, NS, 782, it was held on rehearing that an action to recover the possession of land based on a naked legal title, the land having been sold under a mortgage foreclosure invalid because an assignment of the mortgage was not acknowledged so as to be entitled to record, is barred by estoppel where plaintiffs were fully apprised of the foreclosure by one claiming to be an assignee of the mortgage, and that a deed had been executed to such assignee, and possession surrendered to such assignee, and paid no taxes for 12 years and knew that the land had been sold to the defendant, and when plaintiffs did not show when they became advised of their rights nor offer to redeem from the mortgages or repay the taxes. See also Sweatman et al. v. City of Deadwood, 9 SD 380, 69 NW 582; Farr v. Semmler et al., 24 SD 290, 123 NW 835; Grigsby v. Larson, 24 SD 628, 124 NW 856; Harker et al. v. Cowie et al., 42 SD 159, 173 NW 722; McDowell v. Jameson et al., 44 SD 480, 184 NW 251. In the case of Murphy v. Dafoe, 18 SD 42, 99 NW 86, there was the 20 year adverse possession under color of title which was decisive of the issue presented, and all that was said about an estoppel was purely dictum. The case of Burleigh v. Hecht et al., 22 SD 301, 117 NW 367, which held that the doctrine of laches is applicable only to equitable actions and does not apply to legal actions was overruled in the later case of Kenny v. McKenzie, supra.

The essential element of the doctrine of estoppel in this type of case is fraud. 3 Pomeroy’s Equity Jurisprudence, 5th Ed., § 807; Annotation 50 ALR 686. The Supreme Court of the United States in the case of Brant v. Virginia Coal and Iron Co., 93 US 326, 23 LEd 927, stated this essential in apt language as follows:

“For the application of that doctrine (equitable estoppel) there must generally be some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence on his part as to amount to constructive fraud, by which another has been misled to his injury.

‘In all this class of cases,’ says Story, ‘the doctrine proceeds upon the ground of constructive fraud or of gross negligence, which in effect implies fraud. And, therefore, when the circumstances of the case repel any such inference, although there may be some degree of negligence, yet courts of equity will not grant relief. It has been accordingly laid down by a very learned judge that the cases on this subject go to this result only, that there must be positive fraud or concealment, or negligence so gross as to amount to constructive fraud.’

1 Story Eq., 391. To the same purport is the language of the adjudged cases. Thus it is said by the Supreme Court of Pennsylvania, that

‘The primary ground of the doctrine is, that it would be a fraud in a party to assert what his previous conduct had denied when on the faith of that denial others have acted. The element of fraud is essential either in the intention of the party estopped, or in the effect of the evidence which he attempts to set up’

.... And it would seem that to the enforcement of an estoppel of this character with respect to the title of property, such as will prevent a party from asserting his legal rights, and the effect of which will be to transfer the enjoyment of the property to another, the intention to deceive and mislead, or negligence so gross as to be culpable, should be clearly established.”

The facts as found by the trial court fail to show that the Minnesota bank or its grantee Smith ever had any knowledge or information that the plaintiff was in possession of the property and improving it. The bank and Smith simply failed to pay the taxes. There is a finding that Ellis M. Lewis had knowledge of the use and improvement of the property by the plaintiff at the time he took the quitclaim deed from Smith, but it also appears that he proceeded at once to defend this action and assert his ownership. It follows that Ellis M. Lewis acted promptly and cannot be charged with negligence on his own behalf. There was no intended deception on the part of either the Minnesota bank or Smith, its grantee, so the question presented is whether the bank and Smith had been so negligent as to amount to a constructive fraud upon the plaintiff.

In the above South Dakota cases the party held to be estopped had knowledge of the occupation and improvement of the property, or the party had acted in a manner which the court concluded charged him with knowledge, and an intention to mislead. In the Shelby-Bowden case, the Kenny-McKenzie case and the Harker-Cowie case, the party held to be estopped had actually surrendered possession of the property to the plaintiff or those under whom plaintiff claimed, in the Farr-Semmler case the estopped party had negligently withheld from record the deed on foreclosure necessary to show his title. Under the circumstances of the above cases it was held that there was a duty upon the party held to be estopped to speak or act. In this case, as stated above, there is no finding that either the Minnesota bank or Smith had any knowledge of the possession. or improvement of the property by the plaintiff. Neither had the bank or Smith surrendered possession of the property to any one, and under these circumstances, we fail to perceive any duty to speak or act resting upon either of these parties. In the absence of any duty to speak or act it cannot be said that the failure to speak or act could mislead. Rotzien v. Merchants’ Loan & Trust Co., 41 SD 216, 170 NW 128. A holding that either Smith or the bank had constructive knowledge of the use and improvement of the property by the plaintiff and because of this constructive knowledge was duty bound to speak or act, would simply amount, under the circumstances here presented, to a shortening of the statutory period required for adverse possession to ripen into a title. In the absence of some affirmative act or actual fraud we do not believe that the owner of property who has simply failed to pay taxes, and who has no actual knowledge of the possession or improvement of the property by the purchaser at a tax sale should be estopped...