Natural Resources, Inc. v. Wineberg, 19367.

• Decision Date: 08 September 1965
• Docket Number: No. 19367.,19367.
• Parties: NATURAL RESOURCES, INC. and A. K. Wilson, Appellants, v. William J. WINEBERG, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

349 F.2d 685 (1965)

NATURAL RESOURCES, INC. and A. K. Wilson, Appellants, v. William J. WINEBERG, Appellee.

No. 19367.

United States Court of Appeals Ninth Circuit.

August 2, 1965.

Rehearing Denied September 8, 1965.

COPYRIGHT MATERIAL OMITTED

James C. Dezendorf, George L. Wagner, Koerner, Young, McColloch & Dezendorf, Portland, Or., for appellants.

Bruce W. Williams, Al J. Laue, Williams, Skopil & Miller, Salem, Or., for appellee.

Before ORR, BARNES and KOELSCH, Circuit Judges.

KOELSCH, Circuit Judge.

This suit was brought by William J. Wineberg against Natural Resources, Inc., A. K. Wilson, its president, (hereinafter referred to as "the defendants") and several others, to quiet title to real property situated in Humboldt County, California, and to recover damages for removing growing timber.¹ Both Wineberg and Resources claimed as vendees under grant deeds executed to them respectively by one O. O. Barker and wife.² The deed to Wineberg antedated those to Resources, but the defendants sought to overcome the effect of this fact by establishing:

1. That the deed to Wineberg, although purporting to be an absolute conveyance of the property was in reality a mortgage given to insure repayment of a loan to Barker, and (in the alternative)

2. That Resources was an innocent purchaser of the property from the Barkers.³

The district court found for Wineberg and against the defendants. This appeal is by the defendants from the judgment and the order of the court denying their motion for a new trial.

The defenses, being entirely factual, the trial court's main and subsidiary findings are conclusive on this appeal, unless we can fairly conclude they are "clearly erroneous" within the well known definition stated in United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). We are firmly convinced that they are not.

The evidence relating to the purported purchase, when carefully analyzed, clearly portrays an elaborately calculated scheme by Wineberg to "avoid" income tax liability by setting up the transaction to appear as a "like for like" trade within the permissive provisions of 26 U.S.C. § 1031.⁴ The methods he employed to carry out the scheme remind us of the profound observation by the poet Scott in Marmion, Introduction to Canto VI, Stanza 17: "Oh, what a tangled web we weave, When first we practise to deceive!⁵ But, in spite of its complexities, the proof is ample that the deed to Wineberg was intended to be and was what it appeared to be — a conveyance in fee simple, and for a valuable consideration.

Although the deed to Wineberg was executed prior to the time Resources "purchased" the property, it was not recorded in the office of the County Recorder until after Resources had recorded its deeds from the Barkers. As a consequence the Wineberg deed, although valid as against the Barkers and those "who had notice thereof" Cal.Civ. Code § 1217 was void if Resources was a subsequent purchaser "in good faith" within the meaning of Cal.Civ.Code § 1214.⁶ Mayhew v. Burke, 206 Cal. 396, 274 P. 517 (Cal.1929).

Wineberg did not contend that Resources had actual knowledge of his earlier deed but rather that Resources had constructive notice of his ownership by reason of his possession.⁷

Since at least 1868, the California courts have held that:

"`When a purchaser has knowledge of any fact sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed to have made the inquiry and ascertained the extent of such prior right or to have been guilty of a degree of negligence equally fatal to his claim to be considered as a bona fide purchaser.\'"

Pell v. McElroy, 36 Cal. 268, 277 (1868). See also, Davis v. Baugh, 59 Cal. 568 (1881) and cases in footnote 19 of 50 Cal.Jur.2d § 369, p. 471. Nor will a purchaser be heard to deny his duty to make a reasonable on-site inspection of the property to ascertain facts leading to inquiry. Pell v. McElroy, supra, 36 Cal. at 271. Thus "it is * * * well settled that where a person who is a stranger to the record title of the vendor is in possession, the purchaser is under a duty to make inquiry of such stranger's rights, and failure to do so deprives him of the status of bona fide purchaser." Manig v. Bachman, 127 Cal.App.2d 216, 273 P.2d 596, 600 (1954).

"`Possession is notice not only of whatever title the occupant has but also of whatever right he may have in the property, and the knowledge chargeable to a person after he is put on inquiry by possession of land is not limited to such knowledge as would be gained by examination of the public records.\'"

Pacific Gas & Electric Co. v. Minnette, 115 Cal.App.2d 698, 252 P.2d 642, 646 (1953). In short, possession requires a reasonably diligent inquiry into the nature of the right asserted by one in possession and charges the purchaser with knowledge of whatever facts such an inquiry would reveal.

The ultimate question of fact for the district court as fact finder was therefore whether Wineberg's possession of the property was such as to impart notice of his interest to Resources. On this issue too we are satisfied with that court's finding in favor of Wineberg.

The property consisted of an 880 acre tract of timberland situated in a remote section of northern California. Aside from fences, the improvements consisted of a house and several sheds near the south boundary of the property. The principal, if not the only access, was by a road extending from the main highway several miles distant through adjoining privately owned land and ending at a gate near the above mentioned buildings.

There was considerable evidence to the effect that during all times when Resources was negotiating with the Barkers the property was posted with a number of printed signs. These signs, one of which was admitted into evidence as an exhibit, set forth in large printed letters the name and address of Wineberg, together with a "no trespass" warning. Some of the signs were prominently posted along the road and at the gate leading to the property; others were nailed to the house and a nearby tree; still others appeared at points along the river and near the hunting trails leading through the property.

Such signs clearly constitute a recognized means of asserting a possessory claim to property. Kunze v. Rosenzweig, 186 App.Div. 866, 174 N.Y.S. 664 (App. Div. 1919); Hatch v. Bigelow, 39 Ill. 546 (1864); see also, Nolan v. Grant, 51 Iowa 519, 1 N.W. 709 (1879). Resources would surely have seen one or some of them if it had conducted a reasonable examination of the premises.

Whether Wineberg was estopped because of the delay in recording his deed, to assert title against Resources, likewise involved the issues of Wineberg's possession and Resources' constructive notice.

"It has been the rule in California since the case of Boggs v. Merced Mining Co., 14 Cal. 279, that in order to bring about an estoppel against assertion of ownership of real property, four conditions against the owner of real property are necessary:

1. that the party to be estopped was apprised of the true state of his own title;

2. that he made the omission with intent to deceive or with such culpable negligence as to amount to constructive fraud;

3. that the other party was not only destitute of knowledge of the state of the title, but also of the means of acquiring knowledge; and

4. that he relied on the admission to his damage."

Taliaferro v. Colasso, 139 Cal.App.2d 903, 294 P.2d 774, 778 (1956).

The district court's supported determination of the notice issue, adverse to Resources, is fatal to its claim based upon an estoppel.

The defendant Wilson additionally attacks the validity of the judgment so far as it makes him jointly liable with Resources for the value of all timber removed from the property by Resources and its vendees. He points out that he, in directing the logging operations and making sales, did not act for himself but rather acted for Resources, in the honest belief that Resources was the owner.

Section 2343 of the California Civil Code recognizes the common law that,

"One who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency, in any of the following cases, and in no others:

1. * * *

2. * * *

3. When his acts are wrongful in nature."

James v. Marinship Corporation, 25 Cal. 2d 721, 155 P.2d 329, 341 (1944). That rule is applicable here. The particular acts, constituting as they did the exercise of dominion over the property, were not authorized by the true owner. They were wrongful even though Wilson committed them in the honest belief that Resources was owner. Restatement, Torts § 164 (1934); 1 Mechem, Agency § 1456 (2d ed. 1914). The contractual relationship between Wilson and Resources made no difference. Restatement, Agency 2d, §§ 343-344 (1958). It is elementary that a person is personally responsible for his own torts.

Defendant's motion for new trial was based upon several grounds:

(A) Newly discovered evidence.

At the trial Wineberg testified that he purchased the property outright from the Barkers and denied that their deed to him was given as security for a loan. In support of their motion, defendants submitted the affidavit of one Elwood G. Buffum, wherein the affiant stated that he was present at a conference with Wineberg and his lawyer preparatory to trial; that Wineberg there stated he had taken the deed as security and that, after Barker failed to repay the loan he, Wineberg, elected to treat the instrument as a conveyance and recorded it as such.

Defendants were not entitled to a new trial as of right: the decision, whether to grant or deny them one was a matter within the discretion of the district court. True, Buffum's statements, bearing as they do directly upon the central issue in the case, would go beyond mere impeachment, but in view of the considerable...