Miller v. Hennen

• Decision Date: 14 April 1989
• Docket Number: Nos. C3-87-2056,C5-87-2057,s. C3-87-2056
• Citation: 438 N.W.2d 366
• Parties: Robert B. MILLER, Respondent, v. Hazel HENNEN, et al., Defendants, Comet Enterprises, Inc., petitioner, Appellant, Amy O. Johnson, Defendant, Steven Coddon, E.T. Financial, Inc., Respondents.
• Court: Minnesota Supreme Court

Page 366

438 N.W.2d 366

Robert B. MILLER, Respondent, v. Hazel HENNEN, et al., Defendants, Comet Enterprises, Inc., petitioner, Appellant, Amy O. Johnson, Defendant, Steven Coddon, E.T. Financial, Inc., Respondents.

Nos. C3-87-2056, C5-87-2057.

Supreme Court of Minnesota.

April 14, 1989.

Syllabus by the Court

1. A purchaser of a deed, contract, lease or mortgage who has notice of prior unrecorded conveyances must reasonably investigate such conveyances even though the record shows the holders of such instruments are strangers to the record title.

2. The trial court's finding that respondent conducted a reasonable off-record search of the title to the subject property was not clearly erroneous.

3. Respondent is a bona fide purchaser under the Minnesota Recording Act, Minn.Stat. § 507.34 (1986), since he purchased his interest in the property for valuable consideration in good faith and recorded first.

Mark V. Lofstrom, Minneapolis, for appellant.

Reid J. Hansen, Rosemount, for Amy O. Johnson.

Gregory S. Hagge, Mound, for Robert B. Miller.

Steve Coddon, Mound, Timothy Campion, Minneapolis, for E.T. Financial.

Heard, considered and decided by the court en banc.

POPOVICH, Chief Justice.

Respondent Robert Miller initiated this quiet title action in Dakota County to secure title to approximately 16 acres of uninhabitated land located in the City of Burnsville. The case was tried before the Dakota County District Court without a jury. The trial court ruled that Robert Miller was entitled to ownership of the property free and clear of any interests of appellant Comet Enterprises, Inc., subject only to the easement rights existing in the City of Burnsville. ¹ The Minnesota Court of Appeals affirmed the trial court's decision, holding that Miller was a good faith purchaser under the Minnesota Recording Act and that Comet's mortgages are void as to Miller. Miller v. Hennen, 424 N.W.2d 89 (Minn.App.1988). We agree and affirm.

I.

The property in question was owned by George and Hazel Hennen when the first of three separate conveyances were made by the Hennens. On March 23, 1970 the Hennens entered into a contract for deed for the property with Circle Holding Company and Oak View Corporation. This contract for deed was never recorded. On September 10, 1974 a warranty deed was issued by the Hennens to First Guaranty Corporation. ² This deed was lost and never recorded. On January 12, 1987, Hazel Hennen (her husband having died) made a final conveyance of the property via a quitclaim deed to Miller. Miller recorded the quitclaim deed on January 30, 1987.

Circle Holding/Oak View Corporation conveyed the property via three separate quitclaim deeds to the Cedar Holding Company. Only two of these quitclaim deeds were recorded, the first conveying the west 13.2 acres of the property was recorded on August 5, 1986 and the second conveying the east 2.8 acres of the property was recorded on March 18, 1987. Cedar Holding Company had issued seven separate mortgages on the property to First Guaranty and recorded these mortgages on March 24, 1972. Four of these mortgages were later assigned to appellant Comet Enterprises in 1986 and one to respondent Amy O. Johnson in 1978.

A second group of mortgages arose out of the warranty deed issued to First Guaranty by the Hennens. First Guaranty issued four mortgages on the property in 1980. Three of these mortgages were later assigned to Miller, one in 1983 and two in 1985. First Guaranty also issued a quitclaim deed to Investment Sales Diversified. This quitclaim deed was lost and never recorded. Investment Sales Diversified issued three mortgages on the property in 1981 and 1982, one of which was assigned to respondent E.T. Financial, Inc. in 1985. Investment Sales Diversified also issued a quitclaim deed to Park Metropolitan Investment Fund, Inc. This deed was lost and never recorded. As a result of these conveyances there were fourteen mortgages issued on the property totalling over $211,000.

Miller's interest in the property derives from his business relations with Steven Coddon, a real estate broker. Coddon first found out about the property in 1983, when he heard from another real estate broker that one Larson, an assignee of the so-called Swenson mortgage, from the second group of mortgages on the property, was not getting paid and wanted to sell his interest. Before making an offer on the property, Coddon went to the county courthouse and began looking through the tract index. He noticed there were a number of instruments related to the property. Of record at the time Coddon made his search were 14 mortgages, all arising out of entities other than the record fee owners, George and Hazel Hennen. Seven of these mortgages arose out of Cedar Holding Company's interest in the property. All seven of these mortgages were recorded in 1972, prior in time to the Swenson mortgage which Coddon contemplated purchasing.

The Swenson mortgage arose out of a group of mortgages issued by First Guaranty Corporation based on an amended 1974 warranty deed from the Hennens to First Guaranty. Along with the assigned Swenson mortgage, there were mortgages held by individuals named Clauson and Rude, and the Richfield Bank issued in 1980. Since the warranty deed from Hennen to First Guaranty was lost and never recorded, Coddon set out to determine if First Guaranty's interest in the property was valid. As part of his investigation, Coddon telephoned Hazel Hennen to ask her if she had sold the property to First Guaranty and if there was still any money owed on the property. Hennen told Coddon that First Guaranty had paid for the property in full and that a warranty deed had been issued to First Guaranty by Hennen for the property. In order to make sure the deed had been given to First Guaranty, Coddon saw an attorney for the Richfield Bank, which also held a mortgage from First Guaranty for part of the property. The attorney provided Coddon with a copy of a warranty deed issued to First Guaranty from George and Hazel Hennen dated September 10, 1974. There was no recording information on the document. Coddon also visited the property to make sure that it was unoccupied.

With this information and a copy of the deed from Hennen to First Guaranty, Coddon concluded that the mortgage was valid. He made no other inquiry regarding the seven recorded mortgages which arose out of Cedar Holding's alleged interest in the property. At the time Coddon conducted his search there was no recorded instrument reflecting a transfer of interest from the Hennens to Cedar Holding.

Coddon obtained an assignment of the Swenson/Larson mortgage for $500 on October 3, 1983, and recorded it on October 13, 1983. He then set out to foreclose on the mortgage. Since the property had a large amount of unpaid taxes on it, Coddon made an arrangement with Robert Miller in which Miller would reimburse Coddon the $5,484 Coddon had already spent, and supply any additional funds in exchange for a half interest in the property. At the time the partnership was formed, Coddon advised Miller that First Guaranty possessed the only rightful interest in the property and that in his opinion the other instruments of record were fraudulently issued.

Once the foreclosure of the Swenson mortgage was completed Coddon and Miller purchased on October 7, 1983 two additional mortgages belonging to Clauson and Rude, which had also been issued by First Guaranty in 1980. Coddon and Miller also purchased the interest of Investment Sales Diversified on November 7, 1983. Coddon considered this deed worthless and never recorded it. He then offered all of his interest in the property to Miller and Miller purchased Coddon's share via a quitclaim deed for $15,000 which was recorded March 12, 1985.

Miller initiated this quiet title action to the property on October 9, 1986. On January 12, 1987, after the commencement of the action, Miller obtained a quitclaim deed for the entire parcel from Hazel Hennen. Miller has invested approximately $65,000 in attempting to obtain ownership of this property with an estimated value of $70,000-$100,000.

II.

This matter was tried before a district court judge sitting without a jury. On review of such a judgment, an appellate court may reverse a finding of fact if, upon a review of the entire record, the appellate court is left with a "firm and definite conviction that a mistake has been made." City of Minnetonka v. Carlson, 298 N.W.2d 763, 766 (Minn.1980).

III.

The trial court and court of appeals' decisions are based on an application of the Minnesota Recording Act, Minn.Stat. § 507.34 (1986). The Recording Act provides, in pertinent part:

Every conveyance of real estate shall be recorded in the office of the county recorder * * *; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part therof, whose conveyance is first duly recorded * * *. The fact that such first recorded conveyance is in the form, or contains the terms of a deed of quitclaim and release shall not affect the question of good faith of such subsequent purchaser or be of itself notice to the subsequent purchaser of any unrecorded conveyance of the same real estate or any part thereof.

Minn.Stat. § 507.34. The goal of the statute is to protect persons who buy real estate in reliance upon the record. Strong v. Lynn, 38 Minn. 315, 317, 37 N.W. 448, 449 (1888). The act allows for a subsequent purchaser in good faith who records title first to obtain rights to the property as against any prior purchaser who fails to record his interest. A purchaser in good faith is one who gives valuable consideration without actual, implied or constructive notice of inconsistent outstanding rights of others. Anderson v. Graham Investment Co., 263 N.W.2d 382, 384 (Minn.1978). The burden is on the party resisting the prior unrecorded title to prove...