Red River Valley Land & Inv. Co. v. Smith

• Decision Date: 27 January 1898
• Court: North Dakota Supreme Court
• Parties: RED RIVER VALLEY LAND & INVESTMENT CO. v. SMITH.

7 N.D. 236

74 N.W. 194

RED RIVER VALLEY LAND & INVESTMENT CO.

v.SMITH.

Supreme Court of North Dakota.

Jan. 27, 1898.

Syllabus by the Court.

1. The rule of law which declares that a purchaser of real estate in possession of another than his grantor is chargeable with knowledge of all the rights of such party in possession has its exceptions. It does not apply where the possession of such party is entirely consistent with the record title, nor where such party was a former vendor of the land, and remained in possession; and when such party in possession holds a lease of the land, and the purchaser knows of the existence of such lease, he may attribute the possession to such lease.

2. Certain evidence examined, and held to have no tendency to establish actual notice on the part of a vendee of real estate of any outstanding equities in the party in possession.

3. In order to charge a corporation vendee of real estate with knowledge of outstanding equities therein, on the sole ground that its managing officer had such knowledge, it is not sufficient to show simply that such officer obtained such knowledge more than three years before the organization of such corporation. It must at least further appear that such knowledge was present in the mind of such officer at the time of the transaction in which the corporation is sought to be charged.

Appeal from district court, Cass county; C. A. Pollock, Judge.

Action by the Red River Valley Land & Investment Company against James H. Smith. From a judgment entered on a verdict directed for plaintiff, defendant appeals. Affirmed.W. C. Resser (A. B. Wright, of counsel), for appellant. Ball, Watson & Maclay and Bartlett & Lovell, for respondent.

BARTHOLOMEW, J.

This action was commenced in March, 1897, in justice court. The object was to obtain possession, under the forcible entry and detainer statute, of a section of land in Cass county. The material allegations in the complaint were to the effect that in the spring of 1896 the plaintiff, by written lease, a copy of which was attached to the complaint, leased the said land to the defendant, the said lease, by its terms, terminating on December 31, 1896, and giving the lessor a right of re-entry; that, after the termination of the lease, due notice to quit and surrender possession was served upon defendant, but that he continued to hold said premises contrary to the terms of his lease, and without the permission of the plaintiff. An answer having been filed setting forth that the title to said land would come in question as a defense to said action, and the proper bond having been filed, the case was transferred to the district court, under the provisions of section 6671, Rev. Codes. In the district court an amended answer was filed. It is very prolix, and we will condense its substance. The ownership of plaintiff and the execution of the lease are denied, and it is affirmatively alleged that in 1884 the defendant and his brother purchased said land from a corporation known as the “Amenia & Sharon Land Company,” which was then the owner of said land, for the sum of $9,000; that said purchase was evidenced by a written contract between said parties, by the terms of which it was agreed that said purchase price should draw interest at the rate of 7 per cent., payable annually, and that one-tenth of the purchase price should be paid in each year, and, after the payment of a certain amount, a deed was to be given, with a mortgage back for the balance; that, under said contract, the defendant went into possession of the land, and paid the annual interest for 1885 and 1886, but paid no part of the principal in those years, and that in the years 1887, 1888, and 1889, he paid neither principal nor interest; that in the fall of 1889 defendant was also indebted in a large amount to other parties, and on this outside indebtedness he was paying interest at the rate of 12 per cent. per annum; that at said time he entered into a contract with the said Amenia & Sharon Land Company, through its president and general manager, one E. W. Chaffee, by which it was agreed that said land company should loan defendant sufficient money to pay off this outside indebtedness, and also to carry on his farming operations for the succeeding year; upon this loan defendant was to pay interest at the rate of 7 per cent. per annum, and, as security for the payment of such loan and interest, defendant surrendered his contract for the purchase of said land, and executed a quitclaim deed for the same back to said land company, and took a lease or farm contract from said company, and that this arrangement should continue from year to year until such time as defendant should have entirely repaid the money so loaned to him, with the interest thereon, and, when that was done, that defendant should receive back his original contract for said land; that, by virtue of such agreement, leases or farm contracts, under which defendant farmed said lands, were executed for the years 1891 to 1894, inclusive, by the terms of which defendant was to have one-half or two-thirds of the crop raised by him, but the land company had a lien upon such share for the repayment of such loan. These leases are entirely silent upon the question of the disposition of the share of the crop which should go to the lessor, but, of course, it is defendant's theory that such share was to be applied upon the original contract of purchase, and he so alleges. The answer further alleges that in the spring of 1895 the said Amenia & Sharon Land Company transferred the legal title of said land to one Guernsey, and the lease or farm contract for that year was made with said Guernsey; but it is alleged that Guernsey took the land with full knowledge of defendant's rights therein, and the lease with him was executed for the same purpose and with the same understanding as the prior leases. In 1895 Guernsey transferred the legal title to the plaintiff herein, the Red River Valley Land & Investment Company, and the lease for 1896 was made with plaintiff; but it is alleged that plaintiff took the land with full knowledge of defendant's rights therein, and the contract with it was made for the same purpose as those preceding. There was no prayer to be allowed to pay up under the original contract. There was no prayer for an accounting. All that was asked, in effect, was the dismissal of the action, with costs, which might with equal propriety have been asked under a general denial. But it is evident that the object of the answer was to show an equitable title in defendant, that entitled him to possession, and thus defeat plaintiff's claim of right to immediate possession. Whether or not these facts might not have been shown under a general denial, we need not stop to discuss.

This case cannot be controlled by those cases in which a tenant is denied the right to dispute his landlord's title. While these leases or contracts are in the usual form, and contain a stipulation on the part of the defendant to quit and surrender possession at the termination of the contract, with a right of re-entry to the other party, and while defendant admits the execution of all those contracts, yet the central thought of the answer is that, while defendant was a tenant in form, he never was such in fact; that, in fact, he was during all of said years the equitable owner of the land, and entitled to possession as such; and that the quitclaim deed and subsequent leases were all parts of an arrangement by which defendant secured the Amenia & Sharon Land Company for money loaned. The answer seeks to bring the case within that principle which permits a conveyance absolute in form to be shown, by parol, to be a security only. Without objection by either party, the case was tried to a jury, and, after the evidence was all in, defendant moved that the questions whether or not the quitclaim deed and subsequent leases were in fact given and received as security be submitted to the jury for its determination. This the court refused, but, on motion of plaintiff, the court proceeded to make findings upon those points, which findings were adverse to defendant. Plaintiff then moved for a directed verdict upon the law issues; whereupon the court stated to the jury that the only issue for them to decide was whether or not plaintiff was entitled to the immediate possession of the land, and instructed them that the plaintiff was so entitled, and directed a verdict accordingly, which was rendered. Exceptions were saved by defendant to all of these rulings.

It is perfectly clear to us, after a full and thorough examination, that no other result would have been proper under the evidence, and we cannot therefore disturb it, unless we find prejudicial error in the record. It is urged that it was error to refuse to submit all the issues in the case to the jury, and error for the court to make findings in the case, and it is also urged that such findings are not supported by the evidence, but are contrary thereto. We shall not stop to discuss these matters. We shall assume, in the interests of defendant, that the action was a law action, and that there were no “equitable issues,” properly so called, and that all the special matters pleaded in the answer might have been shown in evidence under the general denial. We shall also assume that the action of the court amounted to a direction to the jury to find a general verdict for plaintiff. This gives the defendant the advantage of having everything regarded as proven that his evidence has any legal tendency to establish. Defendant, in his answer, pleaded the conveyances to Guernsey and plaintiff; and inasmuch as whatever equities defendant claimed in the land had their basis in a parol agreement between defendant and the manager of the Amenia & Sharon Land Company, which was made in 1889, it was incumbent upon defendant, under his answer, to show that when Guernsey purchased the land, in 18...