Phoenix Title & Trust Co. v. Old Dominion Co.

• Decision Date: 21 February 1927
• Docket Number: Civil 2557
• Citation: 253 P. 435,31 Ariz. 324
• Parties: PHOENIX TITLE & TRUST COMPANY, a Corporation, Appellant, v. OLD DOMINION COMPANY, a Corporation, Appellee
• Court: Arizona Supreme Court

253 P. 435

31 Ariz. 324

PHOENIX TITLE & TRUST COMPANY, a Corporation, Appellant, v. OLD DOMINION COMPANY, a Corporation, Appellee

Civil No. 2557

Supreme Court of Arizona

February 21, 1927

APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Judgment modified and affirmed.

Messrs Armstrong, Lewis & Kramer, for Appellant.

Messrs Morris & Malott, for Appellee.

OPINION

LOCKWOOD, J.

Phoenix Title & Trust Company, a corporation, hereinafter called appellant, brought suit to foreclose a certain mortgage on lot 8, block 5, East Globe, Gila county, Arizona. There were various defendants made parties to the suit, among them Old Dominion Company, a corporation, which we will hereafter call appellee, as the other defendants defaulted or the action was dismissed as to them. There is no dispute as to the facts and, so far as necessary for our consideration, they were found by the trial court to be as follows:

On May 31, 1917, Annie Cadman agreed to sell to Angus McAlpine the premises in question for $500 in cash, and $1,800 to be paid in monthly installments. A warranty deed for the premises was placed in escrow, to be delivered to McAlpine on the payment of the balance of the purchase price, and the agreement itself was recorded on June 4, 1917. February 28, 1918 McAlpine mortgaged the property in question to appellee, but this mortgage was not then recorded. On April 20, 1920, McAlpine gave another mortgage for a valuable consideration to the Hassayampa Creamery Company, hereinafter called the company, on certain parcels of real estate, among which was included the property involved in this suit, which mortgage was recorded in Gila county on the twenty-sixth day of April, 1920. On the twenty-first day of April, 1920, the company assigned the mortgage to appellant, but this assignment was not recorded in Gila county. Appellee herein recorded its mortgage on the twentieth day of June, 1921, and on April 24, 1922, McAlpine completed his payments and the warranty deed was delivered to him and placed on record. On the eight day of June, 1923, the company made another assignment of its mortgage, which was recorded in Gila county on the thirtieth day of August, 1923.

Default having been made in the payment of the mortgage executed by McAlpine to the company, and by the latter assigned to appellant, these proceedings were instituted to foreclose it, and appellee made a party defendant. The case was tried to the court without a jury, and judgment rendered in favor of appellant foreclosing its mortgage as against all of the defendants except appellee, whose mortgage was held to be prior in right to that of appellant, and from this latter portion of the judgment an appeal has been taken to this court.

The question involved is one of law only, and will be determined by the construction of paragraph 2080, Revised Statutes of Arizona of 1913, Civil Code, which reads as follows:

"2080. All bargains, sales and other conveyances whatever, of any lands, tenements and hereditaments, whether they may be made for passing any estate of freehold or inheritance or for a term of years; and deeds of settlement upon marriage, whether land, money or other personal thing, and all deeds of trust and mortgages whatsoever, which shall hereafter be made and executed, shall be void as to all creditors and subsequent purchasers for valuable consideration without notice, unless they shall be acknowledged and filed with the recorder to be recorded, as required by law, or where record is not required, deposited and filed with the recorder; but the same, as between the parties and their heirs, and as to all subsequent purchasers, with notice thereof, or without valuable consideration, shall nevertheless be valid and binding."

It is apparent from the foregoing statement of facts that the mortgage of appellee was prior in time to that of appellant, but was recorded subsequently. If, therefore, appellant be, within the language of the statute, a "subsequent purchaser for valuable consideration without notice," its mortgage was entitled to precedence and the part of judgment appealed from was erroneous.

The trial court found --

"that neither the Hassayampa Creamery Company at the time of the execution and delivery to it of said promissory note and mortgage by the defendants Angus McAlpine and Lillian McAlpine, nor the Phoenix Title & Trust Company, at the time it acquired said note and mortgage by assignment from the Hassayampa Creamery Company, had any knowledge of the prior unrecorded mortgage executed by the defendants Angus McAlpine and Lillian McAlpine to the Old Dominion Company, on said lot 8, block 5, of East Globe, and only such notice thereof as they were chargeable with by the language of said mortgage."

It is the contention of appellee, however, that the language of appellant's mortgage itself was of such a character that as a matter of law it was notice to appellant and its predecessor in interest, the company, of the outstanding mortgage of appellee. The language of the mortgage relied on as giving notice reads as follows:

"Also all the right, title, and interest of the mortgagees in and to that said tract of land in the city of Globe, county of Gila, described as lot eight (8) block five (5), according to map number one of East Globe on file in the office of the county recorder of Gila county. The interest of said mortgagors in said premises being under a contract to purchase from Annie Cadman, dated the 31st day of May, 1917, and recorded in the office of the county recorder of Gila county, Arizona, on the 4th day of June, 1917, in book 4 of Miscellaneous Records at page 132." (Italics ours.)

Briefly stated, it is the claim of appellee that, when a conveyance specifically states it is only the right, title and interest of the mortgagor or grantor, and not the property itself, which is conveyed, it is constructive notice to the mortgagee or purchaser that there are outstanding equities, and he is bound thereby, even though such equities do not appear of record, and he has no actual notice thereof.

It is admitted that section 2080, supra, was taken by us from Texas. For this reason we shall first consider the construction of that statute by the Supreme Court of Texas, prior to its adoption by Arizona. The early case of Rodgers v. Burchard, 34 Tex. 442, 451, 7 Am. Rep. 283, involved a question as to the effect of an unrecorded deed, relied upon as against a subsequent recorded deed conveying all the "right, title, and interest" of the grantors. In considering this case, the court says:

"It is held in this state that a subsequent deed, for a valuable consideration paid, and without notice, which has been duly recorded, shall take precedence of a prior unrecorded deed. . . . The deed from the heirs of Gafford to Rodgers was a quitclaim deed, and could only convey such interest as they had at the time of making the deed. . . . A quitclaim, or deed of release of all one's right, title and interest, purports to convey, and does convey no more than the present, interest of the grantor. . . . 'a deed which simply purports to pass the right, title and interest of the grantor will not exclude the operation of a prior unregistered mortgage.'"

In Harrison v. Boring, 44 Tex. 255, the same question was raised, and the court said:

"A quitclaim or deed of release of all one's right, title, and interest purports to convey and does convey no more than the present interest of the grantor, . . ."

-- and referring to a charge to the jury that lack of actual notice of a prior unrecorded easement would make the purchaser under a later recorded deed a bona fide purchaser, "this charge was erroneous, if their deed was only a quitclaim deed, under the decision of this court and of that of the Supreme Court of the United States."

The Supreme Court of Texas has in later cases qualified and limited the scope of these decisions, but has never directly reversed itself on the main point, which is that, when an instrument, even though recorded, on its face conveys only the "right, title, and interest" of the grantor, the grantee is not a bona fide purchaser without notice within the statute as against a prior unrecorded instrument of which he had no actual notice, in the absence of some special proof or circumstances. This rule is followed in many jurisdictions, and was early laid down by the Supreme Court of the United States in a long series of decisions. Baker v. Humphrey, 101 U.S. 494, 25 L.Ed. 1065 (see, also, Rose's U.S. Notes); Hanrick v. Patrick, 119 U.S. 156, 30 L.Ed. 396, 7 S.Ct. 147; Oliver v. Piatt, 44 U.S. (3 How.) 333, 11 L.Ed. 622; May v. Le Claire, 78 U.S. (11 Wall.) 217, 20 L.Ed. 50; Villa v. Rodriguez, 79 U.S. (12 Wall.) 323, 20 L.Ed. 406.

The matter, however, again came before the court in the case of Moelle v. Sherwood, 148 U.S. 21, 28, 37 L.Ed. 351, 13 S.Ct. 426, 428, and Mr. Justice FIELD in his opinion discussed the rule previously announced, and the reasons pro and con, in the following language:

"The doctrine expressed in many cases that the grantee in a quitclaim deed cannot be treated as a bona fide purchaser does not seem to rest upon any sound principle. It is asserted upon the assumption that the form of the instrument, that the grantor merely releases to the grantee his claim, whatever it may be, without any warranty of its value, or only passes whatever interest he may have at the time, indicates that there may be other and outstanding claims or interests which may possibly affect the title of the property, and, therefore, it is said that the grantee, in accepting a conveyance of that kind, cannot be a bona fide purchaser and entitled to protection as such; and that he...