Paganelli v. Swendsen

• Decision Date: 16 May 1957
• Docket Number: No. 33852,33852
• Citation: 50 Wn.2d 304,311 P.2d 676
• Parties: Frank PAGANELLI and Pearl I. Paganelli, his wife; and N. R. Byrd and Nellie Byrd, his wife, Respondents, v. Berg S. SWENDSEN, Defendant, Wier Hostetler and Hughbanks, Inc., a corporation, Appellants.
• Court: Washington Supreme Court

Page 304

50 Wn.2d 304

311 P.2d 676

Frank PAGANELLI and Pearl I. Paganelli, his wife; and N. R Byrd and Nellie Byrd, his wife, Respondents, v.Berg S. SWENDSEN, DefendantWier Hostetler and Hughbanks, Inc., a corporation, Appellants.

No. 33852.

Supreme Court of Washington, Department 1.

May 16, 1957.

Burgunder & Flanders, Croson, Johnson & Wheelon Orley H. Solomon, Seattle, for appellants.

Lycette, Diamond & Sylvester, Seattle, for respondents.

HILL, Chief Justice.

In this quiet title action, we are confronted with the questions of whether the defendant, Wier Hostetler, is a good-faith purchaser and whether defendantHughbanks, Incorporated(hereinafter referred to as Hughbanks), is a good-faith mortgagee.

Laws of 1927, chapter 278, § 2(cf.RCW 65.08.070, Rem.Rev.Stat. § 10596-2), provides that an unrecorded deed is void as against any subsequent purchaser or mortgagee in good faith and for a valuable consideration from the same vendor, his heirs, or devisees, whose conveyance is first duly recorded.The reason for such legislation, and the public policy behind it, is stated at some length in Cunningham v. Norwegian Lutheran Church of America, 1947, 28 Wash.2d 953, 184 P.2d 834.

The property to which the plaintiffs seek to quiet title (hereinafter referred to as Tract A) was conveyed to them by warranty deed, dated August 13, 1947, executed by Eugene Swendsen, a single man.Swendsen retained title to an abutting tract (hereinafter referred to as Tract B).This deed was not recorded until January 28, 1955, which was subsequent to the recording of a deed to the defendant Hostetler of Tract A and the recording of a mortgage thereon by Hostetler to Hughbanks.

The plaintiffs, who live in Yakima, had improved Tract A immediately after their acquisition of it by constructing a drainage system, erecting an open-front building of a type in common use for the purpose of displaying fruit and produce, and blacktopping a substantial portion of the tract.The total cost of these improvements was approximately $4,900.There were no subsequent improvements of any consequence.No use was ever made of the property except during the fruit season.The fruit stand has not been used since the fruit season of 1951, with the exception of a three-week period in July, 1954.In August, 1954, Marie Stewart--acting as real estate agent for the plaintiffs--placed two 'For Sale' signs on Tract A that gave her name, telephone number, and address.During 1953 and 1954, Tract A was used for public parking and was regularly used for that purpose by Blacktop Pavers, Inc.In 1952, Eugene Swendsen died testate, leaving all of his property to his father and mother, or the survivor of them.However, both predeceased him, and his brother, Berg (his sole heir), was appointed and qualfied as administrator, with will annexed.As such, he listed Tracts A and B in the inventory of the estate by a description which did not segregate but included both of them.

Hostetler, a personal friend of Berg Swendsen, knew that Swendsen, as administrator, had sold Tract B without the assistance of a real estate agent.At about that time (the summer of 1953), Hostetler discussed with Swendsen the possibility of purchasing Tract A. Somewhere in the negotiations, Swendsen told Hostetler that he'had written over to Yakima to find out about or to clear the title to the property.'Later, Swendsen, individually and for a consideration of six thousand dollars, conveyed Tract A to Hostetler by a warranty deed, dated November 1, 1954, and recorded November 16, 1954.Hostetler was issued a title insurance policy on this property, dated November 16, 1954, but not delivered until December 21, 1954.The delay was to permit the closing of the estate, Tract A being distributed to Berg Swendsen by the decree of distribution.

The trial court found that Hostetler had actual notice of the plaintiffs' interest in Tract A, because he'had been told by defendantBerg Swendsen that he, Berg Swendsen, had written ovr to Yakima to find out about or to clear the title to the property which is the subject matter of this suit.'The trial court further found that Hostetler had constructive notice of plaintiffs' interest in the property, because of the cumulative effect of the following: (1)the plaintiffs improved the property; (2)Blacktop Pavers, Inc., parked its trucks there; (3)Marie Stewart placed two of her 'For Sale' signs on the property; (4) Hostetler knew that Berg Swendsen did not sell Tract B through a real estate agency; (5) the fruit stand was open for three weeks in July, 1954; and (6) the records of the King county treasurer's office showed that tax statements had been maild to Inland Fruit Co., care of Frank Paganelli, at Yakima.

Hostetler appeals from a judgment quieting title in the plaintiffs, contending that the trial court erred in finding that he did not act in good faith.

We do not concern ourselves with the trial court's findings adverse to defendant Hughbanks, or with Hughbanks' appeal, because, if Hostetler was a purchaser in good faith, as we decide that he was, it is evident that the plaintiffs were not entitled to any relief against Hughbanks.Except for the ultimate and decisive fact of whether Hostetler acted in good faith, which is itself a conclusion drawn from probative facts and circumstances, there is little controversy.It is not enough to show that diligent inquiry by Hostetler would have disclosed that the plaintiffs were the owners of the property; the issue is: did the plaintiffs establish circumstances that would raise a duty to inquire?

We stated in Daly v. Rizzutto, 1910, 59 Wash. 62, 65, 109 P. 276, 278, 29 L.R.A.,N.S., 467, that

'It [notice] need not be actual, nor amount to full knowledge, but it should be such 'information from whatever source derived, which would excite apprehension in an ordinary mind and prompt a person of average prudence to make inquiry.'[Citing cases.]It follows, then, that it is not enough to say that diligent inquirty would have led to a discovery, but it must be shown that the purchaser had, or should have had, knowledge of some fact or circumstance which would raise a duty to inquire.'(Italics ours.)

Wee also: Diimmel v. Morse, 1950, 36 Wash.2d 344, 218 P.2d 334;Bernard v. Benson, 1910, 58 Wash. 191, 196, 108 P. 439, 441.In the latter case, the court said:

'What makes inquiry a duty is such a visible state of things as is inconsistent with a perfect right in him who proposes to sell.'

Plaintiffs had the burden of proving actual or constructive notice of their interest (Daly v. Rizzutto, supra;Biles-Coleman Lumber Co. v. Lesamiz, Wash., 1956, 302 P.2d 198), and, if they failed to do so, their prior conveyance was void as against the defendants by virtue of RCW 65.08.070.

In considering whether the plaintiffs sustained that burden, we must remember, as the trial court found, 'that the defendant, Wier Hostetler, was well and intimately acquainted with both the defendant, Berg S. Swendsen, and with Eugene A. Swendsen, during his lifetime.'Hostetler knew that: (a)Eugene Swendsen had owned both Tracts A and B; (b)Eugene Swendsen had died; (c) Berg Swendsen was his sole heir; and (d) Berg Swendsen...