Oregon Cases - BFP & Duty to Inquire in Real Estate Transactions

8/6/2019 Oregon Cases - BFP & Duty to Inquire in Real Estate Transactions

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record does not show the name of the realtor involved, if any. On October 11, 1961, payments were completed and the

deed was delivered to plaintiffs, but was not recorded.

Plaintiff Oliver M. Willis, an insurance salesman, testified that he relied on the bank to do "what was necessary to

be done" and did not know that he should have recorded the deed, although he had purchased some property before. He

offered no explanation why the real property [***3] taxes were not paid other than that bills such as tax bills were paidby his wife, who did not testify. On April 28, 1965, a tax foreclosure decree was entered for failure to pay real property

taxes for the years 1960-61, 1961-62, 1962-63 and 1963-64.

Defendant Alma G. Stager, the wife and secretary of defendant Floyd Stager, a Salem attorney, made a practice of

examining tax records for property about to be foreclosed for delinquent real property taxes. In March 1966, she

became interested in this property. The redemption period for payment of the delinquent taxes expired on April 28,

1966. Thus, she had over four weeks to investigate the title to the property.

[*612] Upon checking the deed records Mrs. Stager found that Hazel B. Lemire was the record owner of the

property. She then traced Mrs. Lemire to North Dakota and called her there by telephone. Mrs. Lemire told her that

although "they had owned quite a large amount of property, * * * she thought that she had sold all the property they had

in Oregon," but would check with her son. On Saturday [**81] morning, April 23, 1966, Mrs. Lemire called back andtold Mrs. Stager that "they had turned all the property [***4] over to a realtor in Salem to be sold," and gave her the

name of the realtor.

On the same Saturday morning Mrs. Stager called the realtor (whose name she could not remember at the time of

trial) and found that he was not at his office, but was at home getting ready to go fishing. The realtor told Mrs. Stager

that he had sold the property, and said that he had sold it "to a certain man in Salem." She then called that man, who

said that he had purchased property from Mrs. Lemire, but not in that location.

By then Mrs. Stager had also talked with the purchasers of other property from Mrs. Lemire and had apparently

checked the tax records, as well as the deed records, and had been unable to find the name of any owner other than Mrs.

Lemire. She and her husband also drove by the property, which they found to be overgrown with brush, and inquired of

one neighbor without success. They also saw no signs posted on the property with the name or telephone number of the

owner. (Plaintiffs testified that such signs had been posted on the property in 1965.)

On that same Saturday, and without waiting to check again with the realtor at his office, where further records

might have been available, [***5] Mrs. Stager [*613] again called Mrs. Lemire and "told her it looked as though

there had been a piece of property that had been missed in selling." Her husband then prepared a deed, which was

mailed to Mrs. Lemire. On the same day she also sent $ 650 to Mrs. Lemire by telegram. At that time the property had

an assessed value of $ 2,560, with approximately $ 230 in delinquent taxes, with interest. The assessed value later was

increased to $ 5,260 by the time of trial in September 1969.

On the following Monday, April 25, 1966, the deed was executed by Mrs. Lemire and was mailed back to Mrs.

Stager. On Wednesday, April 27, 1966, the delinquent real property taxes and interest were paid and a "Sheriff's

Certificate of Redemption" was issued to F. P. Stager, who apparently made that payment. On the following day, April

28, 1966, the one-year redemption period for payment of such taxes would have expired. One day later, on April 29,

1966, the deed from Mrs. Lemire to Mrs. Stager was recorded. Five weeks later, on June 3, 1966, Mrs. Stager conveyed

an undivided one-half interest in the property to her husband, Floyd Stager. On the same date that deed was also

recorded.

Plaintiffs [***6] did not record their previous deed until May 3, 1968, and then offered to reimburse defendants for

the payments made by them, in return for a further deed. On defendants' refusal to do so plaintiffs filed this suit to quiet

title.

Defendants were notbona fide purchasers.

Page 2257 Ore. 608, *611; 481 P.2d 78, **80;

1971 Ore. LEXIS 501, ***2


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ORS 93.640 (1) provides:

"Every conveyance affecting the title of real property within this state which is not recorded as

provided by law is void as against any subsequent [*614] purchaser of the same real property, or any

portion thereof, in good faith and for a valuable consideration whose conveyance is first filed for record,

* * *"

Findings of fact were made by the trial court that defendants "were aware of sufficient facts * * * to cause any

reasonable person of comparable experience * * * to believe that she (Hazel B. Lemire) did not own the property" and

that defendants were not bona fide purchasers. We agree.

It may be that the possession of the property by plaintiffs was not sufficiently open and visible so as to give

constructive notice of their claim of ownership. CfBelcher v. La Grande Nat. Bank, 87 Or 665, 171 P 410 (1918), and

Chaffin v. Solomon, 255 Or 141, [***7] 465 P2d 217 (1970). But in this case defendants had actual notice from the

record owner that she did not claim to be the owner and understood [**82] that she had previously sold all of her

interest in the property.

As stated in Merrill on Notice 78, 71 (1952):

"Clearly a statement by a grantor or mortgagor that the property is subject to an outstanding claim

should be heeded. Similar credence should be given to a disclaimer of title by a grantor, or to any

statement by the person with whom one is dealing concerning the business at hand. It is not necessary

generally that the statement should refer to a particular claim, although there are some cases imposing

such a requirement."

and later, at p 82:

"Many decisions hold that information of the existence of some sort of a claim to land constitutes

notice though there is no specification of the nature of the claim."

To the same effect, see 8 Thompson on Real Property 415, 422, 458, 4321, 4323, 4326.

[*615] In Belt v. Matson, 120 Or 313, 252 P 80 (1927), Moore made a contract to sell to Thompson all the timber

on his land, to be removed in five years. Thompson paid the full [***8] purchase price, but did not record the contract.

Moore later sold the land to plaintiff by a deed which reserved to Moore the timber and provided that such timber as

was not removed within five years would "go with the said place." Plaintiff admitted that Moore told him that the timber

had been sold, but testified that Moore did not mention the name of the purchaser. Plaintiff did not, however, inquire

further by insisting upon production of the previous contract for examination. Instead, he proceeded with the purchase

of the land on the assumption that the previous contract was a mere license, revocable at the pleasure of Moore, and that

the sale of the land to him would revoke such a license to cut and remove the timber.

This court rejected that contention and held, at p 324:

"* * * the law is well settled in this state that the plaintiffs having been informed that the timber had

been sold and that a contract existed, though unrecorded, evidencing this sale of the timber, the plaintiffs

are charged with knowledge of the contents of that contract, unless they could show that such knowledge

could not have been acquired by reasonable diligence."

See also Paris [***9] v. Smith, 224 Or 95, 98, 355 P2d 635 (1960), and Merrill, supra, 423-4, 461. 1

Page 3257 Ore. 608, *613; 481 P.2d 78, **81;

1971 Ore. LEXIS 501, ***6


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1 Defendants cite Schroeder et ux v. Toedtmeier et al, 184 Or 561, 582, 200 P2d 606 (1948), as holding that

"all that is required of a party who is put on inquiry is good faith and reasonable care in following up the

inquiry." In that case, however, as in this case, defendants failed to sustain the burden of proving that they had

discharged that duty.

[*616] In this case defendants were told by Mrs. Lemire that she had sold all of her property in Oregon and weregiven the name of the realtor who did so on her behalf. That information constituted actual notice of a disclaimer of

title by Mrs. Lemire. In addition, that information imposed upon defendants the duty to make a diligent inquiry to

either determine the name of the actual owner or to show that his name could not have been discovered by reasonable

diligence. That duty was not discharged by a single telephone call to the broker at his home, without office [***10]

records, as he was preparing to go fishing on a Saturday morning.

It may be true that little time remained before the expiration of the period for redemption by payment of the

delinquent real property taxes. But that fact alone did not excuse defendants from the performance of their duty to

make further inquiry, particularly since they had by then been interested in the property for more than three weeks.

Defendants also offered no evidence to show that such a further inquiry of the realtor at his office would have been

fruitless and would not have disclosed [**83] plaintiffs' name as the purchaser of the property.

Thus, the trial court was correct in finding that defendants did not sustain the burden of proof to establish that they

were bona fide purchasers, as alleged by them as an affirmative defense.

Defendants cannot claim the benefit of the tax foreclosure.

ORS 312.120 (2) provides that:

"During the one year period any person having an interest in the property at the date of the judgment

and decree of foreclosure, or any heir or devisee of such person, * * * may redeem the [*617] property

by payment of the full amount applicable to the property [***11] under the judgment and decree, with

interest thereon as provided by law, plus a penalty of two percent of the total amount applicable to the

property under the judgment and decree * * *"

Thus, under ORS 312.120 (2), in order to redeem property following the entry of a tax foreclosure decree one must

have an "interest" in the property. Conversely, payment of taxes by one who has no interest in the property redounds to

the benefit of the owner of the property. Johnson v. Stein, 6 NY 2d 413, 189 NY S2d 915, 160 NE2d 659, 662 (1950);

Ferguson v. Fields, 208 Ark 839, 188 SW2d 302, 304 (1945).

If defendants had been bona fide purchasers upon receiving the deed from Mrs. Lemire they might have acquired

her interest in the property so as to entitle them to pay the delinquent taxes and to claim the benefit of the tax

foreclosure of plaintiffs' interest in the property. It is well established, however, that one who is not a bona fide

purchaser for value can acquire no greater interest in property than the interest, if any, which the grantor had to convey

and thus take subject to the rights of third persons, at least in the absence of estoppel or statute to the contrary, and

[***12] that such a purchaser will be protected only to the extent of payments made prior to notice. See Sequin et al v.

Maloney-Chambers Lumber Company, 198 Or 272, 285-6, 253 P2d 252, 256 P2d 514 (1953). Cf. Scott v. Nygaard,

241 Or 347, 403 P2d 15, 405 P2d 850 (1965). See also McGill v. Shugarts, 58 Wash 2d 203, 361 P2d 645, 646 (1961),

and Pellerito v. Weber, 22 Mich App 242, 177 NW2d 236, 237 (1970).

Thus, in the absence of estoppel, since Mrs. Lemire had no remaining interest in the property, it [*618] follows

that defendants, not being bona fide purchasers for value, acquired no interest in the property as to entitle them to pay

the delinquent taxes and claim the benefit of the tax foreclosure of plaintiffs' interest in the property.

For the same reasons, it follows that the trial court did not err in "failing to give effect to the tax foreclosure" in the

Page 4257 Ore. 608, *615; 481 P.2d 78, **82;

1971 Ore. LEXIS 501, ***9


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manner claimed by defendants, but that on the contrary, payment of the delinquent taxes by defendants had the effect of

clearing the tax foreclosure from the title to the property for the benefit of plaintiffs, as the owners of such property. 2

2 The only authorities cited by defendants to the contrary consist of statutes and cases recognizing the duty of

the owner of property to pay such taxes and to keep the tax collector informed of his name and address ( ORS

312.216; ORS 312.120; ORS 311.555 and Hood River County v. Dabney, 246 Or 14, 28, 423 P2d 954 (1967)).While it may be true that if plaintiffs had performed such duties defendants would not have paid the taxes, it

does not follow that defendants had an "interest in the property," so as to entitle them to make such a payment.

[***13] Plaintiffs' claim not barred by laches or estoppel.

First of all, there is a serious question whether the defense of laches has any possible application under the facts and

circumstances of this case. Assuming, however, that laches may be a defense in such a case, it is well established that

in order to constitute laches it is not sufficient to show that there was a prolonged delay, but there must have been full

knowledge [**84] of all of the facts, concurring with a delay for an unreasonable length of time, and laches does not

start to run until such knowledge is shown to exist. Wills v. Nehalem Coal Co., 52 Or 70, 89, 96 P 528 (1908); Kelly v.

Tracy, 209 Or 153, 172, 305 P2d 411 (1956). In addition, the delay must result in substantial [*619] prejudice to the

defendant to the extent that it would be inequitable to afford the relief sought against the party asserting laches as adefense. Dahlhammer and Roelfs v. Schneider Exec., 197 Or 478, 498, 252 P2d 807 (1953); Hanns v. Hanns, 246 Or

282, 305, 423 P2d 499 (1967). Thus, the doctrine of laches is not an inflexible rule, but its application depends upon the

particular circumstances of each case. [***14] McIver v. Norman, 187 Or 516, 544, 205 P2d 137, 213 P2d 144 (1949).

3

3 The maxim that "equity ministers to the diligent and not to the negligent," as stated by plaintiffs, quoting

from Churchill v. Meade, 92 Or 626, 637, 182 P 368 (1919), is an even less "inflexible rule" and that case is not

in point on its facts.

In this case, defendants failed to show when plaintiffs first acquired a full knowledge of all of the facts relating to

failure to have their deed recorded and their duty to see that it was recorded. Furthermore, since the trial court provided

by its decree that defendants have a lien for the amounts paid by them for their deed and for delinquent taxes, they have

not shown that they will suffer any substantial prejudice or that inequity or injustice to them will result, other than lossof anticipated profits on the transaction.

As for estoppel, it is well established that there can be no estoppel unless there was not only reliance, but a right of

reliance, and that reliance is not justified [***15] where a party has knowledge to the contrary of the fact or

representation allegedly relied upon. Bradford v. Western Oldsmobile, 222 Or 440, 452, 353 P2d 232 (1960). Thus, in

order to establish an estoppel by failure to disclose a claim of title to real property, it must be shown that the party

claiming the estoppel had no knowledge, actual or constructive, [*620] of the real condition of the title to the property

in question. 50 ALR 725 (Anno) 4

4 Defendant quotes from 50 ALR at p 409 to the effect that in such a case the rights of "innocent parties" will

be protected. One who is not a bona fide purchaser, however, as in this case, can hardly claim to be an

"innocent party."

In other words, a purchaser who is not a bona fide purchaser as the result of notice of defective title, as in this

case, has no right to rely upon the failure of the owner of the property to either record his deed or to pay real property

taxes.

Thus, in Fidelity Lumber Co. v. Adams, 230 SW 177, 179 (Tex Civ App 1921), [***16] it was held in a suit to quiet

title that the fact that defendant paid the taxes and that plaintiff did not record his deed and paid no taxes did not raise an

estoppel against him where the defendants were not bona fide purchasers. See also Earnest v. First National Bank, 56

ND 309, 217 NW 169, 171 (1927); Boston & A.R.R. Co. v. Reardon, 226 Mass 286, 115 NE 408, 411 (1917); and

Page 5257 Ore. 608, *618; 481 P.2d 78, **83;

1971 Ore. LEXIS 501, ***12


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Wright v. Webb, 188 Ky 170, 221 SW 510, 511 (1920). Defendants have cited no cases to the contrary.

For all of these reasons we hold that there was ample evidence to support the findings of the trial court in this case

and that the trial court did not err in holding that plaintiffs were entitled to a decree quieting their title to the property,

subject to a lien in favor of defendants for the amounts paid by them. There may be some question whether that lien

should not have been limited by the trial court to the amounts paid by defendants for delinquent taxes and should nothave included the $ 650 paid by defendants for their deed, since they were not bona fide purchasers. That question,

however, was not raised by [*621] either party on this appeal. Thus, our decision affirming the decree [***17] of the

trial court is not to be taken as a decision upon the merits of that question.

[**85] Under the circumstances, however, no costs will be allowed to either party on this appeal.

Affirmed.

CONCUR BY: HOWELL

CONCUR

HOWELL, J. specially concurring.

I concur in the result of the foregoing opinion and in all other aspects, except that I do not believe that the doctrine

of laches could, under any circumstances, be applicable to the plaintiffs in this case.

Page 6257 Ore. 608, *620; 481 P.2d 78, **84;

1971 Ore. LEXIS 501, ***16


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348 of 470 DOCUMENTS

WEBB, Appellant, v. STEWART et al, Respondents

[NO NUMBER IN ORIGINAL]

SUPREME COURT OF OREGON

255 Ore. 523; 469 P.2d 609; 1970 Ore. LEXIS 428

December 11, 1969, Argued

May 13, 1970

PRIOR HISTORY: [***1] Appeal from Circuit Court, Multnomah County. Robert E. Jones, Judge.

DISPOSITION: Decree modified.

COUNSEL: George H. Layman, Newberg, argued the cause and filed briefs for appellant.

David J. Krieger, Portland, argued the cause for respondent Wilson. With him on the brief were Black, Kendall,

Tremaine, Boothe & Higgins and James T. Duncan, Portland.

JUDGES: O'Connell, Justice. Perry, * Chief Justice, and McAllister, Sloan, Denecke and Holman, Justices.

* Perry, C.J., did not participate in this decision.

OPINION BY: O'CONNELL

OPINION

[*525] [**610] Plaintiff Jodie Webb brought this suit in equity to cancel a deed from plaintiff to defendant

Myron J. Stewart covering plaintiff's residence property along with deeds subsequently made by Stewart to defendant

Cascadia Development Incorporated, and also to cancel a trust deed which Cascadia executed to secure a loan from

defendant Ethel M. Wilson.

The trial court entered a decree cancelling the deeds to Stewart and Cascadia but held that the trust deed with Ethel

M. Wilson as beneficiary was a prior lien and superior to plaintiff's claim of title. The effect of the trust deed ischallenged by plaintiff on this appeal.

In [***2] October, 1967 Webb was living alone following the death of his wife. He was 78 years old and retired.

At his request, a contractor sent defendant Myron Stewart to plaintiff's residence to put a new roof on the house.

Stewart noticed a "for sale" sign on the property and offered to purchase the property. Plaintiff accepted the offer and

on October 26 Stewart gave plaintiff a note for $ 4,000 as earnest money in accordance with the terms of an earnest

money receipt prepared by Stewart and which plaintiff signed. Stewart explained that he had considerable business

experience and that there was no need to consult an attorney. Two days later, on October 28, Stewart returned with

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additional papers for plaintiff to sign, explaining that these papers would be put in escrow. One of the papers was a deed

which plaintiff signed in the presence of a notary public. Webb testified that he did not know what he was signing.

Stewart took the deed with him. Sometime in November plaintiff received a $ 1,000 payment on the note, but he never

saw [*526] Stewart after the day he signed the deed in the notary's office.

When Stewart failed to return with the promised payments, plaintiff became [***3] impatient and finally on theadvice of his son went to the courthouse where he discovered that he had signed a deed which Stewart had recorded on

October 30. It later developed that Stewart had also executed and recorded a deed to Cascadia Development

Incorporated.

[**611] Before he obtained the deed from the plaintiff, Stewart had entered into negotiations with Rowley, a real

estate loan broker with whom he had previously done business. They discussed a possible loan on the property in

question (the recorded title then being in the name of Webb) and Rowley subsequently met Stewart at the Webb

property where Rowley inspected the contemplated security and at that time had a conversation with plaintiff which,

according to Rowley, indicated that plaintiff was proceeding on the assumption that the property had been sold.

Thereafter, the deed to Stewart was recorded and Rowley arranged a loan of $ 8,500 which was secured by a trust deed.

As Stewart had conveyed to the corporation, the trust deed was executed by Cascadia Development Incorporated as

grantor, Transamerica Title Insurance as trustee, and Ethel Wilson as beneficiary. The trust deed was executed onNovember 7 and recorded [***4] that same day. Stewart signed the trust deed as president of Cascadia Development

Incorporated.

The trial court found that Stewart fraudulently induced the execution and delivery of the deed given by Webb.

Accordingly, the deed to Stewart and the deed from Stewart to the corporation were held voidable and were cancelled as

of December 6, 1967 (the date [*527] the suit was filed). However, the trial court found that Ethel Wilson had acted in

good faith and without notice of Stewart's fraud when she accepted the trust deed as security for her loan. The trust

deed was therefore held to be a prior and valid lien on plaintiff's property.

The trial court also decreed that plaintiff was entitled to $ 5,500 held in escrow by the title insurance company (as

trustee of the trust deed). Webb was also awarded judgment for $ 8,500 against Stewart and the corporation, subject to

an offset of the sum held in escrow.

Plaintiff assigned as error the cancellation of the deed to Stewart as of the filing date of the suit instead of the date

of the instrument. He argues further that the court erred in finding Wilson's trust deed to be a prior lien. He contends

that his deed to Stewart [***5] was void when it was given and therefore could not vest any rights in third parties. In

the alternative, he contends that if the deed was merely voidable until the entry of a judicial decree, Wilson cannot claim

as a bona fide purchaser because Webb was in possession during all the transactions and that his possession was

sufficient to impart notice of his interests adverse to the record title.

Plaintiff contends that there was no delivery of the deed because plaintiff assumed that the paper he was signing

was a contract and not a conveyance, and further that even assuming plaintiff knew that the instrument was a deed it

was handed to Stewart upon the express understanding that it would be placed in escrow and not delivered to the

grantee until the purchase price was paid.

[*528] The trial court, ruling from the bench, made the following finding:

"I * * * make this fact finding, he did know it was a deed; but he thought it was to be held in escrow.

He said * * * 'I didn't know what I was signing,' but I deduced that he, at least, had the gist that he was

signing a paper that was to be held in escrow, and from that I deduce that he realized that he was * * *

signing [***6] a paper that would convey title after the proper prerequisites were met."

We make the same deductions as those made by the trial court. We have, then, a situation in which a grantor hands a

Page 8255 Ore. 523, *525; 469 P.2d 609, **610;

1970 Ore. LEXIS 428, ***2


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completely executed deed to the grantee with the intent that the title is not to pass until the purchase price is paid and

the grantee then records the deed and thereafter purports to convey an interest in the property to a third person who is

unaware of the fact that the purchase price has not been paid. Assuming that plaintiff's possession was not sufficient to

put defendant Wilson on notice of plaintiff's interest in the property, we are of the opinion that plaintiff [**612] is

estopped to assert a claim to the property against Wilson.

It has been said that "[e]ven though a grantor has no intention to deliver, if he or his possessory agent permits the

named grantee to secure possession of the instrument, the grantor will be estopped to deny delivery as against a

subsequent innocent purchaser or encumbrancer for value and without notice. This rule is based upon the principle

that, as between two innocent parties, the one who has made it possible to perpetrate a fraud should [***7] suffer the

loss." 1

1 Burby on Real Property, p. 424 (2d ed 1954). Burby cites as authority, Tutt v. Smith, 201 Iowa 107, 204 NW

294, 48 ALR 394 (1925), a case closely in point with the case before us. The case is summarized in Burby,

supra, as follows:

"* * * An application of this rule is found in Tutt v. Smith, wherein the grantors handed a deed

to their agent with directions that he take it to a named party who was to hold it in escrow. Noescrow was in fact created. The named grantee secured possession of the deed and purported to

convey to an innocent purchaser. The innocent purchaser was protected. Although the

grantors were in possession of the land at the time the fraudulent grantee purported to convey

title, it was held that possession by his grantors was not constructive notice of their claim."

[*529] The Oregon cases leave some doubt as to the circumstances under which the foregoing rule is applicable.

It is quite clear that where the named grantee obtains the deed from [***8] an escrowee, the grantor prevails in the

absence of an estoppel. 2

2 Zoharopulos v. Hamilton, 108 Or 201, 216 P 184 (1923) (chattel mortgagor who assumed vendor's

obligations, placed mortgages and notes with escrowee, bank managing agent, with delivery contingent on

testing of livestock for disease); Sabin v. Phoenix Stone Co., 60 Or 378, 118 P 494, 119 P 724 (1911) (trustcompany escrowee was instructed to deliver deed upon grantee's payment of promissory notes); Tyler v. Cate,

29 Or 515, 45 P 800 (1896) (escrowee, a real estate agent, was to deliver deed when corporate grantee executed

mortgage).

On the other hand, where the third person who is entrusted with the deed is the grantor's agent rather than an

escrowee there are Oregon cases holding that a bona fide purchaser from the agent prevails as against the grantor.

Harth v. Pollock, 97 Or 663, 193 P 202 (1920) is illustrative. A real estate broker informed the owner of a parcel

of land that he had a purchaser for the property. At the broker's [***9] request the owner executed and acknowledged a

deed with the name of the grantee left blank. The deed was handed to the broker upon the express condition that he

would hold it until the conditions of the sale were met. The broker inserted [*530] his own name as grantee, recorded

the deed and then executed a mortgage to a third person who had no knowledge of the transaction between the grantor

and the broker. The court held that the mortgagee prevailed, reasoning as follows:

"* * * When a man leaves with a stranger an instrument executed and acknowledged with every legal

formality necessary to indicate that he has made a conveyance of the property, but with the name of the

grantee left blank, he ought in common prudence to contemplate the possibility that the depositee, if

dishonest, might make an improper use of such instrument, and if such use is made of it he, and not the

person whom he has put it in the power of his agent to defraud, ought to suffer the loss." 97 Or at 678.

Page 9255 Ore. 523, *528; 469 P.2d 609, **611;

1970 Ore. LEXIS 428, ***6


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Other Oregon cases have applied the same principle. 3

3 Bechtel v. Bechtel, 162 Or 211, 91 P2d 529 (1939); Hansen v. Bellman, 161 Or 373, 88 P2d 295 (1939);

Rohrbacher v. Wright, 99 Or 186, 195 P 343 (1921); Rohrbacher v. Strain, 95 Or 1, 176 P 990, 186 P 583

(1920). In some of the foregoing cases the agency is described as an "escrow." The confusion in language is

noted by Lester D. Pederson in an excellent comment entitled Escrows -- Defalcation of Escrow Holder --Allocation of Loss to Vendor or Vendee -- Agency and Trust Theories, 31 Or L Rev 218, 226 (1952):

"The Oregon cases which have considered the escrow holder as an agent have involved the

question of an unauthorized delivery of a deed by the depositary. There are cases in which the

court has referred to the terms of an escrow and in which the holding is based squarely on agency

principles. [Harth v. Pollock, 97 Or 663, 193 P 202 (1920); Rohrbacher v. Wright, 99 Or 186,

195 P 343 (1921); Rohrbacher v. Strain, 95 Or 1, 176 P 990, 186 P 583 (1920).] In each such

case, the grantee's name was not filled in in the deed delivered to the third party, who was to find

a purchaser. A valid escrow was not created in these cases because of the absence of an

underlying contract. However, the language in these cases does indicate a looseness of thought

for the reason that the term 'escrow' was used when in fact a valid escrow could not be found and

for the reason that an escrow problem was confused with an agency problem. A more recentcase, Hansen v. Bellman, [161 Or 373, 88 P2d 295 (1939)] cited these cases for the proposition

that, where a principal places it within the power of his agent to defraud innocent parties, he must

suffer the loss. In this case the court was careful to establish that it was not confronted with an

escrow and therefore the holding was based squarely on the law of agency."

[***10] [*531] [**613] On the other hand, there are other Oregon cases holding in favor of the grantor where

he has handed the deed to the grantee or the grantor's agent. Thus in Allen v. Ayer, 26 Or 589, 39 P 1 (1895) the court

held that the grantor who remained in possession prevailed where his agent handed the deed to the grantee for

inspection and the grantee then conveyed to a bona fide purchaser.

In Burns v. Kennedy, 49 Or 588, 90 P 1102 (1907) the grantee obtained the deed on the representation that she

wished to show it to her husband. She recorded the deed and then conveyed the property to a third person. The grantor

was in possession of the property. The court held for the grantor, resting the case on the ground that there was no

delivery to the grantee. The court did not discuss the principle of estoppel.

In Telschow v. Quiggle, 74 Or 105, 109, 145 P 11 (1914) the grantor signed and acknowledged a deed leaving the

name of the grantee blank. The grantor handed the deed to his agent authorizing him to trade the land for farm land of

equal value. The agent filled in the name of a third person (who knew of the agent's instructions) and delivered the

[***11] deed in exchange for residential property. The land was then conveyed to a purchaser who had no knowledge

of the grantor's instructions. The grantor had remained in possession. The court held that the purchaser acquired no

title for the reason that "[a] deed that is delivered to the [*532] grantee, without the express or implied consent of the

grantor to the effect that the deed shall pass irrevocably from his control, conveys no title to the grantee. Such a deed

would be of no more force than one with a forged signature." The court stressed the fact that the grantor remained in

possession of the land, indicating that such possession may be sufficient to put third persons on notice of grantor'sclaim.

These latter cases (Allen, Burns, and Telschow) can all be explained on the ground that the ultimate purchaser was

put on notice of grantor's interest by his retention of possession.

However, there is language in each of them which indicates that the court felt that even if the grantor does not

remain in possession, the innocent purchaser does not acquire title because title does not pass from the owner for lack

of delivery. If this is the principle which these [***12] cases purport to apply, they are implicitly overruled by the later

Page 10255 Ore. 523, *530; 469 P.2d 609, **612;

1970 Ore. LEXIS 428, ***9


11/68

cases already mentioned where no delivery was effected and yet the grantor was held estopped to assert his title.

It is of course possible to reconcile some of the earlier cases with the later pronouncements by distinguishing the

circumstances under which the deed left the possession of the grantor, finding an estoppel [**614] where the grantor

acts without due caution for the protection of those who might be misled. This was the manner in which Harth v.

Pollock, supra distinguished Allen v. Ayer, supra. The court said:

"While the case ofAllen v. Ayer, 26 Or 589 (39 Pac 1), cited by counsel for appellant, has some

features in common with the case at bar, there were other circumstances which distinguish it in principle.

In that case the deed was not intrusted by the grantor to a stranger, but to a prominent and trustworthy

[*533] member of the Oregon bar, and was obtained from him by false representations, he being guilty

of no fraud upon the ultimate purchaser. Under all the circumstances the court held that the grantor was

not negligent in depositing the instrument with Judge Chenoweth to [***13] abide the event of the

proposed trade, and, possession of it having been obtained by trick, that there was no delivery to the

alleged grantee. But in that case the grantor was in the actual possession of the property and it does not

appear that the purchaser took any pains to discover the nature of his possession." 97 Or at 679.

Whether or not our previous cases can be reconciled, we are of the opinion that plaintiff's conduct in placing the

fully executed deed in the hands of the grantee was unreasonable under the circumstances. Those who wish to enter

into real estate transactions in which title is to be retained until certain conditions of the bargain are met have available

to them the escrow device as a method of protecting themselves and others. There is, of course, the risk that the

escrowee will violate the escrow instructions and surrender the deed prematurely, but this risk is minimal and if a

grantor puts his deed with a reputable escrowee, he does all that he can reasonably do to protect third persons and

should have his interest protected if the escrowee violates his trust.

If the grantor fails to use this available means of minimizing the fraudulent use of [***14] his deed, he should bear

the loss as against a purchaser who has no knowledge of the fraud or of facts which would put him on inquiry.

It is argued that plaintiff was unfamiliar with property transactions and therefore did not understand what was

necessary in handling the sale of his [*534] property to protect his interest or the interests of others. The standard ofcare required of those who undertake to sell their property must be measured by some objective standard. The

adjustment of the rights of the parties in these cases cannot be made to rest upon the extent to which the particular

grantor understands the mechanics of closing a real estate transaction. The need for an objective test of due care is as

essential in these cases as it is in any other area of the law where reasonable inquiry and circumspection will help to

prevent loss to others.

We must next consider whether plaintiff's possession constituted constructive notice of his claim. There is a

division of authority as to whether a grantor's possession puts third persons on inquiry where the grantor has fully

executed a deed and permitted it to get into the hands of the grantee. 4 After noting this division [***15] of authority

the court, in Exon v. Dancke, 24 Or 110, 32 P 1045 (1893), adopted the view that grantor's possession does not put third

persons on notice of the grantor's claim. The court said:

"We are of the opinion * * * that the reason, as well as the decided preponderance, of the authorities is

to the effect that a purchaser from a vendee whose vendor remains in possession, is not bound to inquire

further as to the title, when he finds on record a deed from such vendor, properly conveying the title to

the person from whom he is about to purchase. Any inquiry suggested by such possession [**615] is

fully answered by the record, and is prosecuted sufficiently far when the examination of the record

discloses a deed from the person in possession to the person who offers to sell, and who is [*535]

claiming and asserting title under such deed." 24 Or at 114-115.

Page 11255 Ore. 523, *532; 469 P.2d 609, **613;

1970 Ore. LEXIS 428, ***12


12/68

4 Cases are collected in 105 ALR 845 (1936). See 1 Merrill on Notice, 126-128, pp. 153-156 (1952), noting

the results in different jurisdictions.

[***16] The view thus expressed was affirmed in La Forest v. Downer, 63 Or 176, 126 P 995 (1912).

However, subsequent Oregon cases contain language indicating a view contrary to that expressed in the Exon andLa Forestcases. Thus, in Telschow v. Quiggle, 74 Or 105, 111, 145 P 11 (1914), discussed above, the court after

holding that there was no delivery of the deed, went on to consider the effect of grantor's continued possession:

"The authorities are inharmonious as to the effect of a grantor's possession of the premises which he

has conveyed after the execution of a deed, and whether his possession under these circumstances is such

that a person contemplating the purchase or acquiring some interest in the land is compelled to take

notice of the rights of such grantor which may exist dehors his deed."

The court then concluded as follows:

"* * * After careful examination of many authorities, we find in no case, where a deed executed and

acknowledged with the name of the grantee left blank, and afterward fraudulently inserted, where the

grantor has remained in the open and notorious possession of the premises, that a deed to a third personclaiming [***17] to be an innocent purchaser has been upheld."

And in Harth v. Pollock, supra, holding that the grantor was estopped to assert his title against an innocent

purchaser for value under the circumstances, the court distinguished Allen v. Ayer, supra, which held in favor of the

grantor, by noting:

"* * * But in that case the grantor was in the actual possession of the property and it does not [*536]

appear that the purchaser took any pains to discover the nature of his possession." 97 Or at 680. 5

5 Note also Allen v. Ayer, 26 Or 589, 39 P 1 (1895) where the court, in holding that grantor was not estopped,

mentions the fact that the grantor remained in possession.

We think that the ambiguity created by the conflicting statements in our cases as noted above should now be

resolved, and in resolving it we adopt the rule that grantor's continued possession after the execution of a deed by him

puts third persons upon inquiry as to the grantor's interest. 6

6 It has been assumed by at least one writer that the rule we now adopt was previously adopted in this state.

See Note, 2 Or L Rev 67, 68 (1922):

"* * * Suppose the property owner remains in actual occupancy of the land throughout. Then

the innocent purchaser should not be protected because the owner's occupancy should have putthe purchaser on his guard. This has been held in Oregon and is the prevailing doctrine in other

states."

[***18] It is well established that the possession of persons other than the grantor will put a purchaser upon

inquiry as to the possessor's interest. 7 As the court in Groff v. State Bank of Minneapolis, 50 Minn 234, 238, 52 NW 651

(1892) observed: "there is no good reason for making a distinction between possession by a stranger to the record title

and possession by a grantor after delivery of his deed. In either case the possession is a fact inconsistent with the record

Page 12255 Ore. 523, *535; 469 P.2d 609, **615;

1970 Ore. LEXIS 428, ***15


13/68

title, and, [**616] if possession by the stranger is sufficient to make it obligatory upon a purchaser to ascertain his

right, [*537] possession by the grantor is a circumstance entitled to equal consideration."

7 Randall v. Lingwall, 43 Or 383, 73 P 1 (1903) (possession of tenant notice of his landlord's title); Hawley v.

Hawley, 43 Or 352, 73 P 3 (1903) (possession of wife notice of her equities upon husband's attempted

assignment of joint contract to purchase the land); Cooper v. Thomason, 30 Or 161, 45 P 296 (1896) (possessionof grantee under unrecorded deed notice of his interest); Petrain v. Kiernan, 23 Or 455, 32 P 158 (1893)

(possession by cestui que trustnotice to grantee from legal owner).

[***19] Although there is more likelihood that the grantor's possession would be consistent with the

unencumbered title in the grantee, there is still a sufficient possibility of the grantor retaining an interest in the property

to warrant the imposition of a duty upon the purchaser to make inquiry. The fact that there are a substantial number of

litigated cases in which the grantor in possession has a claim, indicates that inquiry will frequently disclose to the

purchaser an adverse claim. 8

8 In addition to the cases already mentioned involving fraudulent inducement or the transfer of the instrument

before the conditions are fulfilled are the frequently recurring situations where the deed is in fact a mortgage, or

where there is a lien for the unpaid purchase price, or where grantor is a lessee, or where the grantee holds thelegal title upon a resulting or constructive trust, etc.

Some courts have reasoned that the grantor has by his deed, in effect, declared to the world that he has divested

himself of all interest [***20] in the property and that subsequent purchasers may, therefore, assume that grantor

retains possession for some reason consistent with an unqualified title in the grantee. The answer to this reasoning is

well stated in 5 Tiffany, Real Property 1292, pp. 76-77 (3d ed 1939):

"* * * One difficulty, however, with this view is that it imputes to a conveyance an effect as a

declaration by the grantor, for the purpose of raising an estoppel against him, which is not necessarily in

accord with the understanding of the parties or with the legal effect of the conveyance. One executing,

for instance, a conveyance of a fee simple title, may perfectly well acquire, by the same or a subsequent

transaction, an equity against the grantee or a lease for a limited period, and it is difficult to see why his

conveyance should be regarded as a declaration that he has not acquired, [*538] or will not acquire,such an interest, or why a subsequent purchaser should be justified in assuming, for the purpose of being

relieved from any duty ofinquiry, that the grantor's continuance in possession is wrongful rather than

rightful."

After a careful review of the competing rules we believe [***21] that the conclusion reached by 1 Merrill on

Notice, 131, p. 160 (1952) is the most satisfactory and we adopt it:

"Upon the whole, I believe the most desirable solution of the problem is to regard the grantor's

continued possession as a fact provoking inquiry from those subsequently dealing with the land,

regardless of its duration. This seems more in harmony with the general policy of the law that

possession arouses inquiry. It seems hardly sufficient investigation to content one's self with learningfrom the records or from some other source that the possessor has purported to part with his title. Non

constatthat he may have gained another in some way. Inquiry from him will involve little effort or

expense, and should be required ere one can attain to the ancient and honorable position of a bona fide

purchaser."

Having concluded that defendant Wilson was put on inquiry, it is necessary to determine whether adequate inquiry

was made. There is no evidence that Wilson herself attempted to ascertain whether anyone was in possession of the

Page 13255 Ore. 523, *536; 469 P.2d 609, **615;

1970 Ore. LEXIS 428, ***18


14/68

property. Rowley visited the premises and observed that plaintiff was in possession. Rowley testified that he "kind of

jokingly [***22] said" to plaintiff, "'Well, it looks like you've sold your house,'" and that plaintiff "confirmed that he

had sold it." Rowley also asked plaintiff if he intended to sell any of his furniture or appliances when he moved and

plaintiff responded that he would probably dispose of some of the items and would move "'about the first [**617] of

the [*539] month.'" Rowley then said, "'Here's my card, and when you move, be sure and call me because there is

some furniture or appliances that I would be interested in.'"

The conversation Rowley had with plaintiff does not constitute a reasonable inquiry within the meaning of the

rule. The questions put to plaintiff indicated only that Rowley was interested in purchasing plaintiff's household goods.

Such questioning would not invite a grantor to explain the character of the "sale" transaction he had entered into thus

revealing the conditions which the grantee was to meet before title would pass. If, in that conversation, Rowley had

revealed his primary interest in viewing the property, plaintiff would then have had reason to warn Rowley of the

tentative character of the "sale." We hold that the inquiry was inadequate.

The cause is [***23] remanded to the trial court with directions to modify the decree consistent with this opinion.

Page 14255 Ore. 523, *538; 469 P.2d 609, **616;

1970 Ore. LEXIS 428, ***21


15/68


CHAFFIN, Respondent, v. SOLOMON, Appellant



255 Ore. 141; 465 P.2d 217; 1970 Ore. LEXIS 384

January 6, 1970, Argued

February 11, 1970

PRIOR HISTORY: [***1] Appeal from Circuit Court, Lane County. Edward Leavy, Judge.

DISPOSITION: Affirmed.

COUNSEL: E. B. Sahlstrom, Eugene, argued the cause for appellant. With him on the brief were Sahlstrom & Starr,

Eugene.

M. C. Logan, Springfield, argued the cause for respondent. With him on the brief were Moore & Wurtz, Springfield.

JUDGES: In Banc. Tongue, J. O'Connell, J., specially concurring.

OPINION BY: TONGUE

OPINION

[*142] [**217] This is a suit to quiet plaintiff's title to real property. Defendant filed both a general denial and a

cross-complaint to remove a cloud on defendant's title to the same property. The trial court entered a decree quieting

title in plaintiff, from which defendant appeals.

Defendant contends that as a judgment creditor of plaintiff's grantor he obtained and docketed his judgment before

plaintiff recorded her deed, with the result that under ORS 18.370 plaintiff's unrecorded deed is void as against the lien

of defendant's judgment. Plaintiff both denies that contention and also contends that by reason of her possession,

improvements and payment of taxes upon the real property defendant had constructive notice of her claim of title, with

the result that the [***2] lien of defendant's judgment [*143] was [**218] subject to plaintiff's claim of title, despite

plaintiff's failure to record her deed.

Execution of Deeds and Docketing of Judgment

On October 16, 1965, plaintiff purchased three lots in Lane County from A. E. Barnum for the sum of $ 11,500

under a land sale contract, which was never recorded. On the same date, but without the knowledge of plaintiff, Barnum

assigned his vendor's interest to Donna Timber, Inc., followed by deeds, which were recorded on November 12, 1965.

Page 15


16/68

In February, 1966, defendant filed an action as a creditor of Donna Timber, Inc.

On August 3, 1966, plaintiff paid off the contract balance and approximately three weeks later received warranty

deeds from Donna Timber, Inc., as grantor. For some unexplained reason the deeds were not recorded at that time.

On December 9, 1966, defendant obtained a judgment against Donna Timber, Inc., and docketed that judgment inLane County on December 12, 1966.

On January 23, 1967 (following the issuance of a writ of execution) a notice of sheriff's sale of the lots was issued.

Shortly thereafter, on January 31, 1967, upon receiving notice of the sheriff's [***3] sale plaintiff recorded her deeds.

On February 24, 1967, the three lots were sold to defendant at a sheriff's sale for $ 500 each, over objections by

plaintiff, and certificates of sale were issued to defendant. On February 24, 1968, plaintiff's redemption period expired

and sheriff's deeds were then delivered to defendant and recorded by him on February 29, 1968. Meanwhile, on

October 23, 1967, plaintiff filed this suit.

[*144] Possession, Use and Improvement of Property and Other Evidence of Constructive Notice

The three lots, Lots 19, 20 and 24, are located on the shore of Collard Lake, near Florence, Oregon, with three otherlots lying between Lots 19 and 20 and Lot 24.

During the summer and fall of 1966 plaintiff's family and friends and church groups used the property "practically

every week in the summertime" for picnics, swimming and boating. They also visited the property "from time to time"

during the winter.

During the summer a considerable amount of clearing work was done. This work included the clearing of the lake

frontage of Lot 24, so as to provide a picnic and beach area. In addition, a possible cabin site and a forty foot strip was

cleared [***4] along the shoreline of Lots 19 and 20. Trails were also cleared and cedar trees were cut for shakes on

those lots.

Plaintiff was assisted by friends and by a church group in this clearing work. Plaintiff's son, who lived nearby, also

testified that he "went over there and cleared and burnt for week after week". He also cut wood on all three lots, someof which he removed for use at his own home, with the remainder left for use at picnics.

The previously existing boat dock was repaired, improved, and extended by the installation of a new floating dock

and brush was also cleared in that area.

In addition, a previously existing sleeping shelter was relocated and rebuilt and some shrubbery was transplanted in

the cleared area. The previously existing U-shaped roadway from the public road to the shelter was also improved.

[*145] There was also uncontradicted evidence that a "For Sale" sign was posted on Lots 19 and 20, with the

name "Chaffin" and with the plaintiff's telephone number. That sign was visible for some distance along the public road

and was in existence during the summer of 1966 and continuing to the time of trial in 1968.

Finally, on November 9, 1966, plaintiff's [***5] husband (since deceased) paid the 1966-67 real property taxes onthe three lots.

[**219] Decision by Trial Court

After considering the foregoing facts, the trial court entered a decree quieting title in plaintiff, holding that "this

case is controlled by the rule of law set forth in Thompson v. Hendricks, 118 Or 39, 245 P 724 (1926). The trial judge

did not state, however, whether his decision was based (1) upon the interpretation of the judgment lien and recording

statutes by this court in Thompson, or (2) upon the existence of facts sufficient to put defendant on constructive notice

Page 16255 Ore. 141, *143; 465 P.2d 217, **218;

1970 Ore. LEXIS 384, ***2


17/68

of plaintiff's claim of ownership, as recognized in Thompson to constitute a separate and independent basis for the

decision in that case.

The Judgment Lien and Recording Statutes

ORS 18.350(1) provides as follows:

"From the time of docketing an original or renewed judgment or the transcript thereof, as provided in

ORS 18.320, such judgment shall be a lien upon all the real property of the defendant within the county

or counties where the same is docketed, or which he may afterwards acquire therein, during the time

prescribed in ORS 18.360."

[*146] In addition, [***6] ORS 18.370 provides as follows:

"Priority of lien over unrecorded conveyance. A conveyance of real property, or any portion thereof, or

interest therein, shall be void as against the lien of a judgment, unless such conveyance be recorded at the

time of docketing such judgment, or the transcript thereof, as the case may be."

Both of these statutes were originally adopted in 1862.

In Meier v. Kelly, 22 Or 136, 29 P 265 (1892), a case involving the application of the judgment lien statute to an

equitable interest in real property (no actual deed having been executed, as in this case), this court held that the

conveyance of an equitable interest which is not capable of being recorded is not subject to the terms of Hill's Code

271 (now ORS 18.370) and that where, as a result of such a conveyance, the judgment debtor retains only the bare legal

title, he has retained no "property" upon which the judgment lien under Hill's Code 269 (now ORS 18.350) may

attach. Although not necessary to the result of that decision, this court nevertheless went on to state that Hill's Code

271 (now ORS 18.370) is to be literally applied in cases involving unrecorded deeds and other [***7] conveyances

capable of being recorded (so as to invalidate any such unrecorded deeds), although not applicable to the conveyance of

an equitable interest not capable of being recorded.

Later, in Thompson v. Hendricks, 118 Or 39, 245 P 724 (1926), a case involving the application of the judgment

liens statute to an unrecorded deed, as in this case, the court held, in effect, that when the grantee under such a deed had

gone into possession of the property, the judgment creditor of his grantor was put on such notice as to prevent the lien

of his [*147] judgment attaching to such property. This court also held that there was no reason why O.L. 205 (now

ORS 18.350) "should be extended so as to exclude from its operation prior unrecorded conveyances creating equitable

estates and include prior unrecorded conveyances creating legal estates where the latter were made in good faith for

value". Instead, the court held that O.L. 205 (now ORS 18.350) and O.L. 207 (now ORS 18.370), when properly

construed as parts of the same act, must be read to mean that 205 ( ORS 18.350) is a qualification of 207 ( ORS

18.370) and that when so construed "the statute means that any unrecorded [***8] conveyance of real property is void

as against the lien of a judgment upon whatever real property, if any, the judgment debtor may have at the time the

judgment is [**220] docketed", and that "under this construction * * * if the unrecorded conveyance was one which

was made in good faith and for value, the lien would not attach * * *." ( 118 Or at 46)

The foregoing interpretation of what is now ORS 18.350 and 18.370 in Thompson v. Hendricks, has been criticized

upon the ground that it was "no better than dictum" and that "the legislature intended to do exactly what the court said

there was no reason to do". See Note and Comment in 31 Or L.R. 330 at 344, in which the statutory interpretation as

previously stated by this court in Meier v. Kelly was commended (at p 346) as "more closely following the statutory

language employed". See also Brownley v. Lincoln County, 218 Or 7, 18, 343 P2d 529 (1959).

Page 17255 Ore. 141, *145; 465 P.2d 217, **219;

1970 Ore. LEXIS 384, ***5


18/68

On the other hand, it may be contended, as stated in Thompson v. Hendricks, supra (at p 47) that:

"By merely docketing his judgment, a judgment [*148] creditor parts with nothing, and does not

become entitled to have the property of an innocent purchaser [***9] for value applied in satisfaction

of a debt he does not owe. When properly construed, we think the statute did not so intend."

In this case it is contended by defendant that this court should now overrule what defendant refers to as dictum in

Thompson v. Hendricks and that the court should now adopt and approve the rule as previously stated, (also by dictum)

in Meier v. Kelly. Since, however, it is our view that the decision of the lower court must be affirmed on other grounds,

any further statement on this subject at this time would only add further dictum on this subject.

Requirements for Constructive Notice

It has long been established in Oregon that since the purpose of the legislature was to give a judgment lien creditor

the same standing as the purchaser of property, it follows that when a creditor who resorts to such proceedings is

informed of an outstanding equity, or of facts sufficient to put him on inquiry by which he could ascertain the existence

of such an equity, the lien he secures by the docketing of his judgment will be subject to it. Riddle v. Miller, 19 Or 468,

469-70, 23 P 807 (1890); Rayburn v. Davisson, 22 Or 242, 245, 29 P 738 [***10] (1892); Matsuda v. Noble et al, 184

Or 686, 703, 200 P2d 962 (1948). See also Thompson v. Hendricks, supra, at 41-3.

Thus, appellant very properly concedes that "the application of ORS 18.370 can be defeated by showing that the

judgment-creditor had actual knowledge of outstanding interests or actual notice of facts sufficient to put him on

inquiry, i.e., constructive knowledge." It is also conceded by appellant that possession [*149] by the grantee may be

sufficient to give such constructive notice to the judgment-creditor, at least where, as in Belcher v. La Grande Nat.

Bank, 87 Or 665, 171 P 410 (1918), the grantee took immediate possession of the land and was in open, exclusive and

notorious possession at all times. See also Marvin & Co. v. Piazza, 129 Or 128, 276 P 680 (1929); Petrain v. Kiernan,

23 Or 455, 32 P 158 (1893). And see Thompson v. Hendricks, supra, at 44-5.

Appellant contends, however, that the "casual use and the alleged improvements the plaintiffs made upon the three

lots at Collard Lake" are not sufficient for this purpose, citing adverse possession cases involving somewhat similar

facts. Appellant also contends that there are [***11] no previous Oregon judgment lien cases in which similar facts

have been held sufficient to constitute constructive notice.

Obviously, the reason for the stringency of the requirements in adverse [**221] possession cases is that in such

cases one who has no deed and has paid no consideration may nevertheless acquire title upon satisfying such

requirements. But even in such cases it is now recognized that the nature and extent of the exercise of exclusive

possession may depend somewhat upon the nature of the property involved, such as rough, brushy and uninhabited

lands, at least when other factors are also present. See Knecht v. Spake, 218 Or 601, 611-12, 346 P2d 98 (1959);

Springer v. Durrette, 217 Or 196, 200-01, 342 P2d 132 (1959).

Thus, while it may be true that there are no previous Oregon judgment lien cases involving substantially similarfacts, we hold that the facts of this case, when taken as a whole, including not only the facts relating to the nature and

extent of the possession and [*150] improvements by plaintiff, as described above, but also the payment of taxes by

plaintiff and the posting of a "For Sale" sign, with plaintiff's name and telephone [***12] number, were sufficient to

give defendant constructive notice of plaintiff's claim of ownership. Duane v. Staley (Fla) 98 So 2d 74 (1957); Hatch v.

Bigelow, 39 Ill 546 (1864); Gardom v. Chester, 60 N.J. Eq. 238, 46 A 602 (1900), and Merrill on Notice, 168, 170-71

and 175 140, 141, 142 and 146.

It follows that defendant's judgment lien was subject to plaintiff's claim and that the decree of the lower court,

Page 18255 Ore. 141, *147; 465 P.2d 217, **220;

1970 Ore. LEXIS 384, ***8


19/68

under which title was quieted in plaintiff, must be affirmed.

CONCUR BY: O'CONNELL

CONCUR

O'CONNELL, J., specially concurring.

Thompson v. Hendricks, 118 Or 39, 245 P 724 (1926) was wrong in interpreting ORS 18.350 and 18.370 for the

reasons stated in a note by William E. Love in 31 Or L Rev 330 (1952). I think that we should take this opportunity to

repudiate what was said in the Thompson case and thereby clarify our recording statutes.

Page 19255 Ore. 141, *150; 465 P.2d 217, **221;

1970 Ore. LEXIS 384, ***12


20/68


MARVIN & COMPANY v. JOE PIAZZA. MARVIN & COMPANY v. ANTONINO

PIAZZA.



129 Ore. 128; 276 P. 680; 1929 Ore. LEXIS 112

February 6, 1929, ArguedApril 16, 1929, Decided

PRIOR HISTORY: [***1] From Multnomah: WALTER H. EVANS, Judge.

Department 1.

AFFIRMED.

DISPOSITION: AFFIRMED.

HEADNOTES

Homestead--Homestead Right is Exemption or Privilege in Owner.

1. A homestead right is not an estate in land, but a mere privilege or exemption of such estate as holder has in land;

the term "owner," as used in Section 221, Ore. L., having no reference to the character or extent of estate. 1

Homestead--Homestead Right Exists in Property Held in Common.

2. A tenant in common may acquire homestead exemption in lands of which he is cotenant, if land claimed as

homestead is occupied by him as his actual abode and place of residence.

Homestead--Facts Held to Establish Homestead Right.

3. Possession and occupancy for residence purposes, by respective cotenants of the several tracts pursuant to

division or partition, heldsufficient to establish the homestead character of each cotenant exempting such homestead

from execution sale.

Homestead--Proper Assertion of Homestead Right Prevents Confirmation of Sale on Execution.

4. Execution sale of defendants' undivided interests as tenants in common of real estate must be confirmed, or

rejected as a whole, and, where such undivided interests were affected by homestead exemption properly asserted by

defendants, confirmation must be refused.

Page 20


21/68

Partition--Evidence Held to Establish Partition and Residence by Cotenants.

5. Evidence heldto show voluntary partition of cotenancy lands, pursuant to which each cotenant took possession

of the part apportioned him and resided thereon, claiming same as his homestead, particularly in view of permanent

repairs and improvements by one of such cotenants.

Frauds, Statute of--Possession and Expenditures for Improvements Held to Take Parol Partition Out of

Statute of Frauds.

6. Individual expenditure for permanent repairs and improvements by cotenant, when coupled with the taking of

possession and holding in severalty by respective cotenants, constituted sufficient part performance of parol agreement

of partition to take case out of statute of frauds, and to vest in tenants equitable title to parts allotted them which would

entitle them to specific performance. 6

Homestead--Equitable Title to Land Sufficient to Support Homestead Claim.

7. An equitable title to land is sufficient to support homestead claim. 7

Attachment--Purchaser in Good Faith--Notice by Possession of Debtor Claiming Homestead Exemption.

8. Under Sections 301, 302, Ore. L., providing that plaintiff in attachment may be deemed purchaser in good

faith, and for valuable consideration, attaching creditor heldnot entitled to be regarded as good faith purchaser, where

premises attached were in possession of debtor claiming homestead exemption.

1 Scope and import of term "owner," in homestead exemption statutes, see note in 2 A. L. R. 793. See, also,

13 R. C. L. 566.

6 See 20 R. C. L. 721.

7 See 13 R. C. L. 569.

COUNSEL: For appellant there was a brief over the name of Mr. Bert S. Gooding, with an oral argument by Mr.

Robert R. Rankin.

For respondents there was a brief over the name of Messrs. Lord & Moulton, with an oral argument by Mr. Arthur I.

Moulton.

JUDGES: RAND, J. COSHOW, C. J., and McBRIDE and ROSSMAN, JJ., concur.

OPINION BY: RAND

OPINION

[*130] [**680] RAND, J.--Plaintiff commenced two actions in the Circuit Court for Multnomah County, one

against Joe Piazza, the other against Antonino Piazza, each seeking to recover a money judgment. A writ of attachment

in each case was issued and the alleged interests of defendants as tenants in common in two lots in the City of Portland

were attached. Defendants made default and plaintiff had judgment and order for the sale of the attached property in

each action. Execution was thereafter issued and the property sold but before the sale thereof the defendants notified the

sheriff that the two lots had been partitioned under a parole agreement of the owners and that each defendant claimed

the part allotted to him as a homestead and exempt from execution. After the [***2] receipt of the notice, the sheriff

refused to proceed further in the sale of the property until he had been indemnified by an undertaking executed by

plaintiff. The property was then sold and after the expiration of the time provided by law, plaintiff applied to the court

for an order confirming the sales. Defendants objected thereto and, after a hearing thereon, the court refused to confirm

either sale. From these orders plaintiff has appealed and the two cases on appeal have been consolidated by stipulation

Page 21129 Ore. 128, *; 276 P. 680, **;

1929 Ore. LEXIS 112, ***1


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of the parties. Except for the difference in the description of the properties claimed as exempt, the facts are substantially

identical in each case.

The lots in question, parts of which are claimed as homesteads, are lots 5 and 6, block 19, [**681] Tibbitt's

Addition in the City of Portland, and comprise a tract of [*131] land one hundred feet square located on the corner of

the block fronting on East 17th and Clinton Streets. There are four dwelling-houses on said lots, two of which are in theseparate occupancy of the defendants. These lots, together with the four dwelling-houses, were purchased many years

ago by defendants' deceased father and his brother, Ignazio [***3] Piazza. The father died on December 2, 1918,

leaving a widow, Marina Piazza, a daughter, Dorothy Piazza, and the two defendants as his sole heirs at law, who, upon

his death, became vested with an undivided one-half interest in the property by operation of law. Subsequently and

about January, 1923, Ignazio Piazza conveyed the other undivided one-half interest in the lots to the four Piazzas.

Shortly thereafter, the mother and her three children entered into a parol agreement to partition the property among

themselves and carried said agreement into execution by allotting to the mother the house which fronts on East 17th

Street, together with a strip of ground 100 feet in depth and 37 feet in width along the south boundary of the tract, and

allotting to Joe Piazza the corner house facing on Clinton Street together with a tract of land 33 1/3 feet in width and 63

feet in depth, and to Antonino Piazza the middle house fronting on Clinton Street, together with a strip of land 33 1/3

feet in width and 63 feet in depth, and to Dorothy Piazza the remainder of the tract together with the dwelling-house

thereon.

The evidence shows that each of said allottees took possession of the particular [***4] house and premises allotted

to him, and has ever since remained in the possession thereof and exercised exclusive dominion thereover, and that both

defendants are residing with their families upon the respective premises allotted [*132] to them and have been so

residing and using the same as their actual place of abode since long prior to the commencement of the actions referred

to and that ever since said parole partition they have been holding their respective premises in severalty. The evidence

further showed that one of said defendants had expended money in the permanent repair and improvement of the house

which had been allotted to him.

It is not contended that the premises allotted to either of the defendants or to the mother or daughter exceeds in

value the sum of $ 3,000 or that the premises allotted to defendants are not the actual abodes of defendants and their

families, but it is contended that the entering into by the Piazzas of a parol agreement to partition the land, even though

followed by a part performance sufficient to take the case out of the statute of frauds, was not sufficient to change

defendants' legal title as tenants in common in the entire tract into [***5] a several ownership of a part and it is also

claimed that a tenancy in common in lands is not a sufficient estate or interest in the land to support a homestead and

from this it is argued that defendants' interest or estate in the two lots as tenants in common was not exempt from

execution. We think that this contention cannot be sustained.

1, 2. A homestead right is not an estate in land but a mere privilege or exemption of such an estate as the holder has

in the land: Mansfield v. Hill, 56 Ore. 400 (107 P. 471, 108 P. 1007). Our statute, Section 221, Ore. L., uses the term

"owner" in defining the person who shall be entitled to a homestead exemption but it does not define the word "owner"

or require that the homestead claimant shall be the [*133] absolute owner in fee of the land. There is abundant

authority for holding, and we think that the rule is supported by the great weight of authority, that under a statute as

broad as ours a tenant in common may acquire a homestead exemption in lands of which he is a cotenant only if the

land claimed as a homestead is occupied by him as his actual abode and place of residence and that his homestead rightdoes not [***6] depend upon the character or extent of the estate owned by him, provided he is not a mere intruder: 29

C. J., p. 848, 164, and authorities there cited; 13 R. C. L., p. 566, 30; Freeman on Cotenancy and Partition (2 ed.),

54; Thompson on Homesteads and Exemptions, 1878 ed., 180.

3, 4. That defendants were in the several possession and occupancy of the parts allotted to them as the actual abodes

of themselves and families prior to the commencement of the actions in question was not disputed. Such possession and

occupancy was sufficient to make the premises so possessed and occupied a homestead, and, being homesteads, such

parts were exempt from execution. The sales in question were defendants' undivided interests as tenants in common in

Page 22129 Ore. 128, *130; 276 P. 680, **680;

1929 Ore. LEXIS 112, ***2


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all or both lots and hence, include their homesteads. It could not have been confirmed without including the parts of the

two lots which constituted the homesteads of the defendants. When application was made to the court to confirm the

sales, the only action the court could have taken was either to reject or confirm the sales. It could not modify the terms

of the sale or confirm the sales as to a part and reject it as to the remainder. It [***7] was obliged either to accept and

confirm as a whole or to reject as a whole and if vacated to direct that another [*134] sale be made. See 2 Freeman on

Executions (2 ed.), 311.

5. But we do not base our decision upon those grounds alone for we are satisfied from the evidence that a voluntary

parol contract to partition the land was actually entered into and that, in pursuance thereof, the land was partitioned and

each of the owners, with the full knowledge and consent [**682] of the others, entered into possession of the parts

allotted to him and has ever since held the same in severalty and that, in reliance upon said parol partition, one of such

allottees has expended money in making permanent repairs and improvements upon the dwelling-house which had been

allotted to him.

6. While it is true that the parties to this contract were near relatives, a mother and her children, and that his

relationship in the absence of a contract of the character claimed might be sufficient to explain a separate occupancy by

the parties to the contract of the parts of the joint property, it is not sufficient to explain an individual expenditure made

by one without a charge being made against [***8] the others in the permanent improvement and repair of one of thebuildings if the same was held in joint ownership. Such an individual expenditure is inconsistent with a joint ownership

and is referable only to a contract of the kind and character claimed and, when coupled with the taking of possession

and a holding in severalty by the parties, it constitutes we think a sufficient part performance of the parol agreement to

take the case out of the operation of the statute of frauds and to vest in the allottees the equitable title to the parts

allotted to them and would entitle them to a specific performance of the contract. In deciding the rights growing out of a

parol partition of land, [*135] the court, in Tomlin v. Hilyard, 43 Ill. 300 (92 Am. Dec. 118, 119), said:

"A parol partition between tenants in common, when followed by a possession in conformity therewith, will so far

bind the possession as to give to each co-tenant the rights and incidents of an exclusive possession of his property: 1

Washburn on Real Property, 2d ed., 450; Jackson v. Harder, 4 Johns. [N.Y.] 202 (4 Am. Dec. 262); Jackson v.

Vosburgh, 9 Johns. [N.Y.] 276 (6 Am. Dec. 276); [***9] Slice v. Derrick, 2 Rich. 627; Coles v. Wooding, 2 Pat. & H.

[Va.] 189; Wildey v. Bonney, 31 Miss. 644; Manly v. Pettee, 38 Ill. 128. While the legal title might not perhaps be

considered as passing by such parol partition, unless after a possession sufficiently long to justify the presumption of a

deed, yet the parol partition followed by a several possession would leave each co-tenant seized of the legal title of

one-half of his allotment, and the equitable title to the other half, and by a bill in chancery he could compel from his

co-tenant a conveyance of the legal title, according to the terms of the partition. The homestead law protects a

possession held under an equitable as well as a legal title: Blue v. Blue, 38 Ill. 9 (87 Am. Dec. 267). If, then, in the case

before us, there has been a parol partition before the judgment lien attached, and a several possession in conformity

thereto, the homestead right can be claimed by Hilyard, even if the legal title to one-half of his allotment is still in his

co-tenant. He has held it since the partition merely as trustee for Hilyard. [***10] "

7, 8. It follows from what has been said that not only are the defendants the equitable owners of the parts allotted to

them but also that Marino Piazza, the mother, and Dorothy Piazza, the daughter, are likewise equitable owners of the

parts allotted to them and are entitled, as against the others, to a conveyance of the legal title. Under such circumstances

none of the Piazzas had any beneficial ownership in [*136] any part of the two lots except in the particular part allottedto him. That an equitable title to land is sufficient to support a homestead seems to be settled with but little, if any,

conflict of authority. It was held in Tomlin v. Hilyard, supra, Blue v. Blue, 38 Ill. 9 (87 Am. Dec. 267), and Perry v.

Adams, 179 Iowa 1215 (162 N.W. 817), that the homestead law protects a possession held under an equitable as well as

a legal title. To the same effect see 13 R. C. L., p. 569, 32; 29 C. J., p. 843, 147, and cases there cited; Thompson on

Homesteads and Exemptions, 170-173; Freeman on Cotenancy, 255. Hence, no part of these two lots, whether in

the possession of the defendants or otherwise, was [***11] subject to attachment unless the plaintiff, at the time of the

attachment, would have been an innocent purchaser for value and without notice if he had bought the property outright

instead of attaching the same. Under Section 301, Ore. L., from the date of the attachment until it be discharged and the

Page 23129 Ore. 128, *133; 276 P. 680, **681;

1929 Ore. LEXIS 112, ***6


24/68

writ executed, the plaintiff as against third persons shall be deemed a purchaser in good faith and for a valuable

consideration of the property attached, subject to the conditions prescribed in Section 302, Ore. L. While, as we have

stated, there was nothing of record to give notice that the Piazzas were holding the property in severalty, yet under the

circumstances shown the plaintiff could not have been a purchaser in good faith and for value at the time the

attachment was made for the very occupancy of the premises was constructive notice of the rights and equities of the

parties, and the simplest inquiry upon the part of either the sheriff or plaintiff of the persons in possession of the

premises would have disclosed the separate equitable ownership of each. The Piazzas [*137] at the time were in the

actual, open, visible and exclusive possession of their respective parts of[***12] the two lots in question and were at

the time rightfully in possession and this possession was constructive notice to plaintiff of whatever estate or interest in

the land the occupants had to the parts they were occupying. Under such circumstances, the rule is:

"* * Whenever a party, dealing as purchaser or encumbrancer with respect to a parcel of land, is informed or

knows, or is in a condition which prevents him from denying that he knows, [**683] that the premises are in the

possession of a third person, other than the one with whom he is dealing as owner, he is thereby put upon an inquiry,

and is charged with constructive notice of all the facts concerning the occupant's right, title, and interest which he might

have ascertained by means of a due inquiry." 2 Pomeroy's Equity Jurisprudence (3 ed.), 615.

But independently of constructive notice, the evidence very strongly shows that plaintiff had actual knowledgebefore the commencement of the actions of defendants' several possession and occupancy of the premises as well as that

of their mother and sister for the evidence shows that one of plaintiff's officers and managing agents was a frequent

visitor in the homes of the [***13] Piazzas and that he had been informed that the two lots had been partitioned and

that these lots were being held in severalty by the Piazzas.

For these reasons, the orders appealed from must be affirmed.

AFFIRMED.

COSHOW, C. J., and McBRIDE and ROSSMAN, JJ., concur.

Page 24129 Ore. 128, *136; 276 P. 680, **682;

1929 Ore. LEXIS 112, ***11


25/68


TELSCHOW v. QUIGGLE. *

* As to the necessity and sufficiency of delivery of a deed, see note in 10 L. Ed.

(U.S.) 903.For the title of a bona fide purchaser from a fraudulent grantee, see

note in 67 L. R. A. 891, 898.The authorities passing upon possession of land as

notice of title are reviewed in a note in 13 L. R. A. (N. S.) 49. REPORTER.



74 Ore. 105; 145 P. 11; 1914 Ore. LEXIS 405

December 4, 1914, Argued

December 29, 1914, Decided

PRIOR HISTORY: [***1] From Lane: LAWRENCE T. HARRIS, Judge.

Department 2. Statement by MR. JUSTICE BEAN.

This is a suit by August Telschow against George E. Quiggle, F. L. Kelly and Carl Tucker, to set aside two deeds of

a quarter section of land in Lane County, for the reason that the one from plaintiff was obtained and delivered by means

of a fraudulent scheme, and was void, and the other to defendant Kelly passed no title. From a decree rendered in favorof plaintiff, and against defendants, George E. Quiggle, F. L. Kelly and Carl Tucker, defendant Kelly appeals.

AFFIRMED.

DISPOSITION: AFFIRMED.

HEADNOTES

Vendor and Purchaser--Bona Fide Purchaser--Notice.

1. Where a grantor, executing a deed with the grantee in blank, remained in possession of the property, and a third

person, obtaining the deed without authority to fill in the name of the grantee, except on specified conditions, insertedthe name of the grantee without the performance of the conditions, and the grantee conveyed the property to another,

who relied on the grantee's representations, the latter was not a bona fide purchaser, and acquired no title as against the

grantor.

Vendor and Purchaser--Bona Fide Purchaser--Who is.

2. Where a deed executed by a grantor, with a blank for the grantee, is surreptitiously and fraudulently taken from

the grantor's house and the blank filled up, no title passes, and a bona fide purchaser for a valuable consideration from

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the grantee in the deed acquires no title, especially if the grantor remains in possession of the property.

[As to what constitutes delivery of deed, see notes in 16 Am. Dec. 35; 58 Am. Rep. 289; 53 Am. St. Rep. 537. As

to validity of deed to blank grantee, see note in Ann. Cas. 1912A, 538.]

Deeds--Delivery--Effect.

3. A deed delivered to the grantee without the express or implied consent of the grantor that the deed shall pass

irrevocably from his control conveys no title to the grantee.

Deeds--Delivery--Effect.

4. A deed with a blank for a grantee is a conveyance only where the blank is filled by one authorized to fill it,

before or at the time of delivery to the grantee, and on compliance with the conditions imposed by the grantor.

Deeds--Mutual Assent of Parties.

5. The force of a deed depends on the mutual assent of the parties to it, without which there can be no delivery.

Vendor and Purchaser--Bona Fide Purchaser--Notice.

6. One contemplating the purchase of land from a grantee while the grantor remains in possession must take notice

of the rights of the grantor which may exist outside the deed.

COUNSEL: For appellants there was a brief over the name of Messrs. Jeffrey & Lenon, with an oral argument by Mr.

Charles E. Lenon.

For respondent there was a grief over the names of Mr. Richard S. Smith and Messrs. Woodcock & Bryson, with an oral

argument by Mr. Smith.

JUDGES: MR. JUSTICE BEAN. MR. CHIEF JUSTICE McBRIDE, MR. JUSTICE EAKIN and MR. JUSTICE

McNARY concur.

OPINION BY: BEAN

OPINION

[*107] [**12] MR. JUSTICE BEAN delivered the opinion of the court.

It appears that the plaintiff, August Telschow, was a man of advanced years, uneducated and ignorant of business

ways. He obtained title under the homestead [***2] laws to a quarter section of land in a remote part of Lane County.

He had been li

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Oregon Cases - BFP & Duty to Inquire in Real Estate Transactions