Oregon Mortg. Co. v. Carstens

• Decision Date: 11 December 1896
• Citation: 47 P. 421,16 Wash. 165
• Parties: OREGON MORTG. CO., LIMITED, v. CARSTENS.
• Court: Washington Supreme Court

47 P. 421

16 Wash. 165

OREGON MORTG. CO., LIMITED, v. CARSTENS.

Supreme Court of Washington

December 11, 1896

Appeal from superior court, King county; Richard Osborn, Judge.

Action by the Oregon Mortgage Company, Limited, against Henry Carstens to enforce an agreement for the purchase of land. From a judgment in favor of defendant, plaintiff appeals. Reversed.

Dunbar J., dissenting.

Hastings & Stedman and Crowley & Grosscup, for appellant.

Josiah Collins, for respondent.

SCOTT, J.

This case presents the question of the power and right of an alien corporation to acquire and hold real estate within the state of Washington. The plaintiff loaned a sum of money to one McIntosh, and took a mortgage to secure the payment thereof on certain lands, and, McIntosh being unable to pay the same said parties entered into an agreement whereby he executed a deed of the lands to one Livingstone, as trustee for the plaintiff, and Livingstone subsequently deeded to the plaintiff. Thereafter the plaintiff and the defendant Carstens, entered into an agreement whereby the plaintiff agreed to convey, by good and sufficient deed, to the defendant, the lands in question, and the defendant agreed to pay the plaintiff therefor a sum of money specified. It was further provided that, in case the defendant should fail to accept said deed and pay for the lands, the plaintiff should have the option to proceed to enforce the agreement and recover the purchase price of the land from the defendant. A tender of the deed in pursuance of said agreement was pleaded, and the refusal of the defendant to accept and pay for the same, and that the plaintiff exercised its option and elected to bring suit against the defendant for the purchase price. The answer admitted the making of the agreement and the promise to pay on the part of the defendant, and a tender of a deed sufficient in form as alleged; and for a further defense the defendant set up the fact that the plaintiff was a foreign corporation, the execution of the mortgage from McIntosh to the plaintiff, and the making of the deed by McIntosh to the plaintiff, as aforesaid, in satisfaction of the mortgage; but alleged that the plaintiff acquired no title by virtue of such deed, and for that reason that the defendant refused to accept it or pay the purchase price. Plaintiff filed a demurrer to the affirmative defense, which was overruled, and, declining to plead further, the court rendered a judgment upon the pleadings in favor of the defendant; whereupon this appeal was taken.

The constitutional prohibition against the acquisition of real estate by alien corporations is to be found in article 2, § 33, of the constitution, and is as follows: "The ownership of lands by aliens, other than those who in good faith have declared their intention to become citizens of the United States, is prohibited in this state, except where acquired by inheritance, under mortgage or in good faith in the ordinary course of justice in the collection of debts and all conveyances of lands hereafter made to any alien directly, or in trust for such alien, shall be void provided, that the provisions of this section shall not apply to lands containing valuable deposits of minerals, metals, iron, coal or fire-clay, and the necessary land for mills and machinery to be used in the development thereof and the manufacture of the products therefrom. Every corporation, the majority of the capital stock of which is owned by aliens, shall be considered an alien for the purposes of this prohibition." On March 28, 1890, the legislature enacted a law for the purpose of enforcing this provision, substantially following its language. Gen. St. § 1524. The plaintiff contends that this land was acquired within the exception contained in the constitutional provision; that is, that the title was acquired under mortgage, or in good faith in the ordinary course of justice in the collection of a debt. It is conceded that McIntosh was the owner of the lands in fee simple, and that the deeds were all sufficient in form to convey the title. It is plain that the purpose of the prohibition is to prevent the acquisition of lands in large quantities by alien and nonresident owners. It is apparent by the exception referred to that it was not intended that the provision should be construed so as to prevent the loaning of money by aliens upon real-estate security within this state; but it was contemplated that such loans should be permitted and protected, of course with the limitation that such transactions must be bona fide. In this case there is no claim of any bad faith, but the question is whether, in the case of an actual loan made, an alien can take a direct deed from the mortgagor of the land in satisfaction of the mortgage debt, or whether he must proceed to acquire title by a foreclosure in the courts. It will readily be seen that an agreement such as was here entered into between McIntosh and the plaintiff would usually tend to the advantage of both parties. The costs of the foreclosure suit would be avoided, and as well the liability to a deficiency judgment upon the part of the mortgagor. It would seem that there could be but two objections urged against it as tending to defeat the purpose of the provision. One is that, in case of a foreclosure in the courts, the mortgagor would have a right to redeem the premises. But this is a personal right, which he might or might not exercise, at his option. We presume it will be conceded that he could waive the right to redeem after a judgment of foreclosure, and we see no reason why he should not be permitted to waive this right at any time, if he should deem it to his advantage, in order to avoid costs and a liability for a deficiency. The other objection is that, in case of a foreclosure and public sale thereunder, other parties would be entitled to bid for the lands, and the result might be, in consequence of this, that the alien plaintiff would not become the purchaser. The respondent contends that if a proceeding like this can be sustained, it would be an easy matter for an alien desiring to obtain a tract of land in this state to go...