Selway v. Daut

• Decision Date: 12 May 1923
• Citation: 215 P. 646,67 Mont. 262
• Parties: SELWAY v. DAUT ET AL.
• Court: Montana Supreme Court

215 P. 646

67 Mont. 262

SELWAY v. DAUT ET AL.

Supreme Court of Montana

May 12, 1923

Appeal from District Court, Custer County; Stanley E. Felt, Judge.

Action by R. R. Selway against John Daut and others. Judgment for plaintiff, and defendants appeal. Affirmed.

Loud & Leavitt and Geo. W. Farr, all of Miles City, for appellants.

Walker & Nelstead, of Miles City, for respondent.

GALEN J.

This is an action to foreclose a real estate mortgage. The complaint is in usual form, save that a reformation of the description of the lands is sought. The execution of the note and mortgage is admitted by the defendants John and Lillian Daut but they deny that there is anything due thereon. It appears that at the time of the execution of the note and mortgage November 13, 1909, the lands mortgaged comprised desert land entries made by the Dauts under act of Congress. Act March 3 1877, 19 Stat. 377, amended Act March 3, 1891; F. Stats. Ann. vol. 8, p. 692 (U. S. Comp. St. § 4674 et seq.). The consideration was $12,200 cash paid by the plaintiff to the First National Bank of Miles City on account of the Dauts for their use and benefit. At the time these entries were respectively made, December 5, 1902, and January 17, 1903, the land comprised a portion of the unsurveyed public domain, and there is no question but that the land covered by the mortgage comprised all of both entries. The subsequent extension of the public survey changed the description as made in the original entries in some particulars; however, we need not stop to explain, as it is of no importance to this decision. Suffice it to say: After various delays and extensions, final proofs were made and patent issued to Lillian Daut for the lands embraced in her entry July 16, 1916, and to John Daut for the lands covered by his entry September 21, 1918. On December 8, 1910, John Daut filed a petition in voluntary bankruptcy under the National Bankruptcy Act, and March 8, 1911, Lillian E. Daut filed a like petition. Both included the note in suit in the schedules of indebtedness accompanying their respective petitions. The plaintiff filed proof of his claim in bankruptcy, based upon such indebtedness, with the trustee in bankruptcy of their respective estates; but no amount whatsoever was received or paid thereon in the bankruptcy proceedings. Neither of the desert land entries was listed as assets by the Dauts in their petitions in bankruptcy. On June 12, 1911, Lillian Daut received her final discharge in bankruptcy, and on February 19, 1912, John Daut secured like relief. This action was instituted September 21, 1916. The Dauts seek to avoid the mortgage by reason of the fact that neither final proofs had been made or patents issued for the lands at the time of the execution of the mortgage; and because of their discharge in bankruptcy absolving them of the necessity of paying the debt. The cause was tried before the court without a jury on May 11, 1921, and thereafter findings of fact and conclusions of law were made and filed by the court in favor of the plaintiff, upon which judgment was regularly entered December 21, 1921, reforming the description of the lands mortgaged, and decreeing foreclosure. The appeal is from the judgment.

In our opinion there is involved but a single question decisive of this appeal, viz.: Is a mortgage upon desert land entries given by the entrymen as security for an antecedent debt before final proof made or patent issued enforceable against the mortgagors after patent has been issued to them?

Section 8255, Rev. Codes, 1921, provides:

"Title acquired by the mortgagor subsequent to the execution of the mortgage inures to the mortgagee as security for the debt, in like manner as if acquired before the execution."

The language of the statute is plain and controlling, unless it may be properly held inapplicable to land the legal title to which is vested in the United States government and to which the mortgagor has only a contingent interest at the time of the execution of the mortgage. There does not appear to be any good or sufficient reason why government lands should be excepted, although difference in opinion has been expressed by the courts. The better-reasoned cases, and those which we believe controlling, place government lands in the same category with other lands. Norris v. Heald, 12 Mont. 282, 29 P. 1121, 33 Am. St. Rep. 581; Hafemann v. Gross, 199 U.S. 342, 26 S.Ct. 80, 50 L.Ed. 220; Stewart v. Powers, 98 Cal. 514, 33 P. 486; Kirkaldie v. Larrabee, 31 Cal. 455, 89 Am. Dec. 205; Orr v. Stewart, 67 Cal. 275, 7 P. 693; Wilcox v. John, 21 Colo. 367, 40 P. 880, 52 Am. St. Rep. 246; Reasoner v. Markley, 25 Kan. 635; Gunsch v. Urban Merc. Co., 35 N.D. 390, 160 N.W. 69; Adam v. McClintock, 21 N.D. 483, 131 N.W. 394 (a case quite similar in facts); Forgy v. Merryman, 14 Neb. 513, 16 N.W. 836; Worthington v. Tipton Domestic Co., 24 N.M. 89, 172 P. 1048; Pittsburg Mortgage Inv. Co. v. Mead, 60 Okl. 98, 159 P. 515; Stark v. Duvall, 7 Okl. 213, 54 P. 453; Weber v. Laidler, 26 Wash. 144, 66 P. 400, 90 Am. St. Rep. 726.

There is no express prohibition in the act, supra, either against alienation or mortgaging of the lands covered by desert entry (United States v. Hammers, 221 U.S. 220, 31 S.Ct. 593, 55 L.Ed. 710), and upon satisfactory proof of reclamation and acreage payment as provided, the entryman is entitled to a patent. Ownership was potentially in existence, for the entryman had actually contracted with the government for the purchase of the particular tract of land. The entryman has an inchoate right to the land, which is property, and can be defeated only by his failure to perform the conditions imposed.

"Any interest in real property which is capable of being transferred may be mortgaged." Section 8262, Rev. Codes 1921. A desert land entry is distinct interest in real estate, a property right capable of transfer; and there is no prohibition against transfer. The right is based on statute, and confers upon the entryman exclusive possession of the land and the right to complete title upon performance of the prescribed conditions. The entryman may sell his improvements on the land, and even the right of entry itself, by relinquishment, or assignment, so as to enable the purchaser to obtain title from the government. Such possessory rights are capable of transfer and furnish a valid consideration. Hills v. Johnson, 52 Mont. 65, 156 P. 122; McConnell v. Blackley (Mont.) 214 P. 64, decided March 22, 1923, and not yet [officially] reported.

The Pre-emption Act (September 4, 1841; sections 2257-2288, Rev. St. U. S.) differed in its provisions from the Desert Act as respects the right of alienation, in that it was therein expressly provided that--

"All assignments and transfers of the right hereby secured, prior to the issuing of the patent, shall be null and void." Section 2263.

Many decisions of the courts are recorded as to the validity of a mortgage on pre-emption claims, which are correctly summarized in Ruling Case Law, in language better than we can employ, as follows:

"The authorities under the pre-emption laws as to the right of a pre-emptor to mortgage his claim have not been uniform. Earlier decisions are to the effect that an outstanding mortgage given by a pre-emptor on the lands embraced in his filing defeated his right of entry, on the ground that such mortgage was a contract or agreement by which title to the lands 'might' inure to some other person than himself, contrary to the provisions of the statutes prohibiting alienations of such right. But by later decisions it is held that the mere possibility of a title resulting for the benefit of another person, as in the case of a mortgage, is not sufficient to prevent the pre-emptor from obtaining patent. And so it is now the general rule that a pre-emptor of public land may, before making final proof, and obtaining a receiver's certificate or a patent, mortgage the land, or, acting in good faith, convey it in trust. Such an instrument is not a prohibited 'grant' or 'conveyance' within the meaning of the law; and it is valid against the mortgagor and those claiming under him though given prior to the issue of the patent, if title is subsequently acquired. In such a case a subsequently acquired title inures to the benefit of the mortgagee, and becomes a lien on the land." 22 R. C. L. § 74, p. 325.

The same rule should be more certain of application in the case of desert entries.

In Hafemann v. Gross, supra, the Supreme Court of the United States, through Mr. Justice Brewer, said:

"There has been some division in the courts upon the question. In Brewster v. Madden, 15 Kan. 249, the Supreme Court of that state, in an opinion delivered by the writer of this, held that a mortgage given by a pre-emptor prior to the entry of the lands was void, reaching this conclusion largely on the proposition that at the time the pre-emption act was passed (1841), mortgages always in form conveyances were then regarded by the profession generally as conditional alienations. To like effect were the early rulings of the Supreme Court of Minnesota. McCue v. Smith, 9 Minn. 252; Woodbury v. Dorman, 15 Minn. 338, though these rulings were subsequently distinctly overruled by the same court. Jones v.

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